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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 8, 1999
REGISTRATION NO. 333-58819.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INTRACEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2834 04-2980325
(I.R.S. EMPLOYER IDENTIFICATION
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL NUMBER)
CLASSIFICATION CODE NUMBER)
</TABLE>
2005 NW SAMMAMISH ROAD, SUITE 107
ISSAQUAH, WASHINGTON 98027
(425) 392-2992
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SIMON R. MCKENZIE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INTRACEL CORPORATION
2005 NW SAMMAMISH ROAD, SUITE 107
ISSAQUAH, WASHINGTON 98027
(425) 392-2992
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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JOSEPH W. BARTLETT, ESQ. ALAN L. JAKIMO, ESQ.
ALLEN L. WEINGARTEN, ESQ. BROWN & WOOD LLP
MORRISON & FOERSTER LLP ONE WORLD TRADE CENTER
1290 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10048
NEW YORK, NEW YORK 10104 (212) 839-5300
(212) 468-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
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Common Stock, $.0001 par value.............. $59,800,000 $17,602
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</TABLE>
(1) Estimated pursuant to Rule 457(o) under the Securities Act solely for the
purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 8, 1999
PROSPECTUS
, 1999
4,000,000 SHARES
LOGO
COMMON STOCK
All of the shares of common stock offered hereby are being sold by Intracel
Corporation ("Intracel" or the "Company"). Prior to this offering, there has
been no public market for the common stock of the Company. It is currently
estimated that the initial public offering price will be between $12.00 and
$14.00 per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price.
The common stock has been approved for quotation on the Nasdaq National
Market under the symbol "ICEL," subject to official notice of issuance.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share...................... $ $ $
Total(3)....................... $ $ $
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</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses estimated at $ , which will be paid by
the Company.
(3) The Company and Michael G. Hanna, Ph.D., the Chairman of the Board and Chief
Scientific Officer of the Company (the "Selling Stockholder"), have granted
to the Underwriters a 30-day option to purchase up to 300,000 and 300,000
additional shares, respectively, at the Price to the Public less
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions, Proceeds to the Company, and
proceeds to the Selling Stockholder will be $ , $ , $ , and
$ , respectively. See "Underwriting."
The shares of common stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of share
certificates will be made in New York, New York on or about
, 1999.
DONALDSON, LUFKIN & JENRETTE PIPER JAFFRAY INC.
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
------------------------
ZYMMUNE(R) is a registered United States trademark of the Company.
ASI(BCL), HumaRAD(16.88), HumaRAD(88BV59), Apo-Tek Lp(a) and Accu-D(x) are
trademarks of the Company. Other trademarks used herein belong to various other
parties. As used herein, "OncoVAX(CL)" means OncoVAX(CL)(R), "HumaSPECT" means
HumaSPECT(R) and "ZYMMUNE" means ZYMMUNE(R).
------------------------
All references to Stage I, Stage II, Stage III and Stage IV colon cancer
set forth herein refer to different stages of the disease based upon the status
of a patient's tumor nodes and metastases.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus, including "Risk Factors" and
the consolidated financial statements and notes thereto. Unless otherwise
indicated, all information in this Prospectus assumes (i) no exercise of the
Underwriters' over-allotment option, or currently outstanding stock options,
granted by the Company, (ii) the conversion of all shares of the Company's
Series A, A-1, A-3, B-1 and B-2 preferred stock into shares of common stock
effective upon the closing of this offering (the "Preferred Stock Conversion")
and (iii) a 2-for-3 reverse split of the common stock effected on February 8,
1999. All references to the "Company" or "Intracel" herein include Intracel
Corporation, its predecessor Massachusetts corporation and their respective
subsidiaries. Unless otherwise indicated, all references to years refer to the
fiscal years of the Company ending December 31.
THE COMPANY
Intracel is an integrated biopharmaceutical company focused on the
development and commercialization of cancer vaccines and immunotherapeutic and
diagnostic products for cancers and infectious diseases. Based upon the results
of Phase III clinical trials, the Company is preparing a Biologics License
Application ("BLA") for its OncoVAX(CL) cancer vaccine for the post-surgical
treatment of Stage II colon cancer, the most common form of colon cancer. The
Company is also planning to initiate Phase III clinical trials for OncoVAX(CL)
in combination with chemotherapy for Stage III colon cancer, has initiated Phase
III clinical trials for its proprietary formulation of keyhole limpet hemocyanin
("KLH") for the treatment of refractory bladder cancer, and is planning to
initiate a Phase II/III clinical trial for its ASI(BCL) vaccine for the
treatment of low-grade B-cell lymphoma. In addition, the Company markets a
portfolio of in vitro diagnostic products and is introducing a number of new
diagnostic products for detecting and monitoring various cancers, AIDS and heart
disease.
The Company believes that OncoVAX(CL) is the first vaccine to demonstrate
efficacy for the post-surgical treatment of Stage II colon cancer, and has
recently announced the results of a ten-year Phase III clinical trial for
OncoVAX(CL) conducted at University Hospital, Vrije Universiteit, Amsterdam (the
"Amsterdam" trial). This randomized, multi-centered 254-patient clinical trial
was the third in a series of clinical trials of OncoVAX(CL) conducted in the
United States and Europe. The series included a Phase III clinical trial
conducted by the Eastern Cooperative Oncology Group (the "ECOG" trial) and a
Phase II/III clinical trial conducted by Dr. Herbert C. Hoover, Jr. (the
"Hoover" trial). In the Amsterdam trial, which added a fourth booster
vaccination to the regimen, the Company believes that OncoVAX(CL) demonstrated a
61% reduction in the rate of recurrences and a 50% improvement in the survival
rate for patients with Stage II colon cancer when compared to surgery alone. The
Company believes that the results of the Amsterdam trial are supported by
positive trends shown in the ECOG and Hoover trials. Stage II colon cancer
accounts for approximately 120,000 of the more than 200,000 new cases of colon
cancer diagnosed in the United States and Europe each year. There is currently
no product approved by the United States Food and Drug Administration (the
"FDA") for patients with Stage II colon cancer, and surgery is the principal
means of treatment. The Company plans to file a BLA for OncoVAX(CL) with the FDA
in 1999 and is presently seeking the necessary regulatory and reimbursement
approvals in certain countries in Europe. If the FDA does not consider the
trials discussed above as relevant or supporting to the efficacy of OncoVAX(CL),
the FDA may require additional clinical trials of OncoVAX(CL) prior to or after
the FDA's approval of the product. There can be no assurance that the Company
will obtain FDA approval for OncoVAX(CL) on a timely basis, if at all.
OncoVAX(CL) is a multivalent vaccine produced from a patient's own
surgically removed tumor. The tumor is collected immediately after surgery and
delivered to one of the Company's OncoVAX treatment centers ("OncoVAX Centers")
for manufacture and subsequent administration of the vaccine. Each OncoVAX
Center has been designed to treat up to 2,000 patients per year. The Company
plans to establish OncoVAX Centers at or near hospitals with established surgery
practices, serving areas characterized by high population density and high
incidence of colon cancer. The Company expects that each OncoVAX Center will
require less than 3,000 square feet and will employ a staff of production
technicians and a supervising physician. Facilities for the first OncoVAX Center
in the United States have been established at Lehigh
3
<PAGE> 5
Valley Hospital in Allentown, Pennsylvania, and the terms of the Company's
ownership in, and operation of, the center are being developed pursuant to a
joint venture with Lehigh Valley Hospital. A second OncoVAX Center in the United
States is being established at the Company's therapeutic manufacturing facility
in Rockville, Maryland. Future OncoVAX Centers may also be structured as joint
ventures with established healthcare providers. The OncoVAX Centers located in
the United States will be considered to be manufacturing facilities by the FDA
and will be regulated accordingly. The first OncoVAX Center in Europe is being
established at University Hospital, Vrije Universiteit, Amsterdam. The Company
plans to establish more than 25 OncoVAX Centers in the United States and more
than 15 OncoVAX Centers in Europe. The Company estimates that each OncoVAX
Center will cost approximately $1.0 to $3.0 million dollars to build. The
Company expects revenues from operating OncoVAX Centers to offset the cost of
new centers.
The Company plans to leverage its OncoVAX Centers to perform expedited
clinical trials and to launch other products, such as its in vivo imaging agent,
HumaSPECT, and its B-cell lymphoma vaccine ASI(BCL). The Company has filed an
amendment to the Investigational New Drug application ("IND") for OncoVAX(CL)
with the FDA to commence a Phase III clinical trial for the use of OncoVAX(CL)
in combination with chemotherapy for the treatment of Stage III colon cancer.
The Company believes that this combination therapy will be more effective in the
treatment of Stage III colon cancer than either OncoVAX(CL) or chemotherapy
administered alone. The Company is currently in discussions with the FDA
regarding the commencement of the Phase III clinical trial for this combination
therapy. No assurance can be given that the Company will be given clearance to
commence this Phase III clinical trial in a timely manner, if at all.
The Company has initiated a Phase III clinical trial for KLH for the
treatment of refractory bladder cancer. In Phase II clinical trials, the Company
believes that KLH demonstrated significantly less toxicity than the leading
FDA-approved product for the treatment of bladder cancer. The Company has
entered into a strategic partnership with Mentor Corporation ("Mentor"), a
leading urology company, under which Mentor has been funding research and
development, is required to make milestone payments to the Company and will
market KLH worldwide. Mentor also markets Accu-D(x), the Company's rapid bladder
cancer test.
The Company plans to file an amendment to the IND for its ASI(BCL) vaccine
with the FDA to commence a Phase II/III clinical trial for such vaccine in the
first half of 1999. ASI(BCL) is designed to prevent recurrence of low-grade
non-Hodgkin's B-cell lymphoma, the most common type of B-cell lymphoma, in
patients who have achieved remission through chemotherapy and/or immunotherapy.
ASI(BCL), like OncoVAX(CL), is an autologous vaccine and is produced using a
unique antigen derived from a patient's own cancerous cells. The Company
believes that a Phase I clinical trial has demonstrated that ASI(BCL) can
stimulate a specific immune response and is associated with improved clinical
outcomes.
The Company has substantial expertise in the development and manufacturing
of totally human antibodies. In April 1998, the Company commenced enrollment in
its Phase I clinical trial for its totally human antibody HumaRAD(16.88) for the
treatment of head and neck cancer and plans to submit an IND with the FDA to
commence a Phase I clinical trial of a related product, HumaRAD(88BV59) for the
treatment of ovarian cancer, in the first half of 1999. In addition, the Company
is developing several antibody products to treat life-threatening infectious
diseases.
Through its wholly owned subsidiary, Bartels, Inc. ("Bartels"), the Company
also markets a portfolio of innovative in vitro diagnostic products for the
confirmation of viral and bacterial diseases. The Company markets these
diagnostic products domestically to approximately 1,500 hospitals and clinical
laboratories through its internal sales force. Internationally, the Company
relies upon third-party distributors to market its diagnostic products. In 16
foreign countries, the Company is marketing a one-minute test for HIV/AIDS based
on its proprietary INSTI technology. In addition, the Company is introducing a
number of new diagnostic products, including its Apo-Tek Lp(a) test kit to
monitor an important indicator of heart disease, its Accu-D(x) test to monitor
the recurrence of bladder cancer and its ZYMMUNE test to monitor CD4/CD8 levels
in patients with HIV/AIDS. As a complementary product for OncoVAX(CL), the
Company has developed an in vivo diagnostic product, HumaSPECT, to monitor
recurrence and metastic spread of colon cancer. For a Phase III clinical trial,
the Company believes that HumaSPECT demonstrated significant advantages over CT
scans, the current standard for detecting recurrence and metastic spread of
colon cancer.
4
<PAGE> 6
The Company has filed a BLA in the United States and in December 1998 received
marketing authorization for HumaSPECT in Europe. Syncor International
Corporation ("Syncor") currently holds world-wide distribution rights for the
Company's HumaSPECT product. While the Company is currently in negotiations to
terminate the agreement providing for such rights, there can be no assurances
that the agreement will be terminated on a timely basis, if at all.
The Company's technology foundation in cancer vaccines and human antibodies
is supported by a clinical trial group with expertise in designing and
implementing complex clinical trials and by state-of-the-art manufacturing
facilities capable of producing commercial quantities of its therapeutic,
diagnostic and prognostic products. To conduct research, development,
manufacturing and marketing of its products, the Company employs over 220 people
in multiple facilities, including its corporate headquarters in Issaquah,
Washington, a therapeutic product facility located in Rockville, Maryland and
diagnostic product facilities in Issaquah, Washington and Richmond, British
Columbia, Canada.
5
<PAGE> 7
THE OFFERING
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Common Stock Offered by the Company.......... 4,000,000 shares
Common Stock to be Outstanding After the
Offering................................... 15,521,694 shares(1)
Use of Proceeds.............................. To support the establishment and early
operation of OncoVAX Centers, to repay
existing indebtedness, and the balance for
the Company's other research and development
programs, to conduct clinical trials for the
Company's cancer and infectious disease
products and for working capital and other
general corporate purposes. The Company may
also use a portion of the net proceeds to
acquire technologies or products com-
plementary to its business. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol....... ICEL
</TABLE>
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(1) The foregoing computations exclude: (i) 1,313,845 shares of common stock
issuable upon exercise of stock options outstanding as of December 31, 1998,
at a weighted-average exercise price of $4.32 per share; and (ii) 1,727,004
shares of common stock issuable upon exercise of warrants expected to remain
outstanding after this offering, of which 643,665 are at a weighted-average
exercise price of $7.96 per share, and 1,083,339 shares which are
exercisable at $15.00 per share.
RISK FACTORS
This offering involves a high degree of risk. See "Risk Factors."
6
<PAGE> 8
SUMMARY FINANCIAL DATA
The following Summary Consolidated Financial and Operating Data of the
Company is qualified by reference to and should be read in connection with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto which
are included elsewhere in this Prospectus.
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<CAPTION>
SIX MONTHS YEAR ENDED PRO FORMA
YEAR ENDED JUNE 30, ENDED DECEMBER 31, YEAR ENDED
------------------------- DECEMBER 31, ----------------- DECEMBER 31,
1993 1994 1995 1995 1996 1997 1997(1)
------ ------ ------- ------------ ------- ------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
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STATEMENT OF OPERATIONS DATA:
Revenue...................... $1,776 $1,618 $ 1,566 $ 2,426 $14,718 $13,452 $ 21,341
Cost of revenue.............. 533 449 824 1,779 8,265 8,661 15,277
Selling, general and
administrative............. 962 801 1,580 2,593 5,740 8,478 12,922
Research and development..... 785 1,078 1,174 1,118 1,043 556 8,633
Acquired research and
development................ 2,100
Amortization of cost in
excess of net assets
acquired................... 151 908 908 1,140
Reorganization expense....... 917
------ ------ ------- ------- ------- ------- --------
Total operating expense.... 2,280 2,328 3,578 7,741 16,873 18,603 37,972
------ ------ ------- ------- ------- ------- --------
Loss from operations......... (504) (710) (2,012) (5,315) (2,155) (5,151) (16,631)
Interest income (expense),
net........................ 47 22 68 (135) (2,235) (2,913) (3,750)
Gain on pension
curtailment................
Other income.................
Loss on sale-leaseback
transaction................ (335)
------ ------ ------- ------- ------- ------- --------
Loss before extraordinary
item....................... (457) (688) (1,944) (5,450) (4,390) (8,064) (20,716)
Extraordinary gain on early
extinguishment of debt..... 1,367
------ ------ ------- ------- ------- ------- --------
Net loss................... $ (457) $ (688) $(1,944) $(4,083) $(4,390) $(8,064) $(20,716)
====== ====== ======= ======= ======= ======= ========
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NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1998(2)
----------- -----------
(UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Revenue...................... $10,231 $ 14,244
Cost of revenue.............. 5,909 9,588
Selling, general and
administrative............. 5,912 11,101
Research and development..... 523 8,420
Acquired research and
development................ 37,718
Amortization of cost in
excess of net assets
acquired................... 681 744
Reorganization expense.......
------- --------
Total operating expense.... 13,025 67,571
------- --------
Loss from operations......... (2,794) (53,327)
Interest income (expense),
net........................ (2,100) (3,293)
Gain on pension
curtailment................ 800
Other income................. 1,273
Loss on sale-leaseback
transaction................
------- --------
Loss before extraordinary
item....................... (4,894) (54,547)
Extraordinary gain on early
extinguishment of debt..... 785
------- --------
Net loss................... $(4,894) $(53,762)
======= ========
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<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
----------- ------------- --------------
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BALANCE SHEET DATA:
Cash, cash equivalents, pledged securities and restricted
cash(3)................................................. $ 11,392 $ 17,400 $ 58,760
Working capital........................................... 4,817 11,392 52,752
Total assets.............................................. 51,960 57,968 99,328
Long-term debt, non-convertible, including current
portion................................................. 35,038 37,038 30,038
Long-term debt, convertible, including current portion.... 11,035 10,802 10,802
Redeemable, convertible preferred stock................... 21,159
Accumulated deficit....................................... (74,942) (74,942) (74,942)
Total stockholders' equity (deficit)...................... (27,097) (868) 47,492
</TABLE>
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(1) Gives effect to the acquisition of PerImmune Holdings, Inc. and Subsidiary
("PerImmune Holdings") as if it had occurred on January 1, 1997. See "Pro
Forma Consolidated Financial Information."
(2) Represents the Company as consolidated with PerImmune Holdings.
(3) $6.0 million of the cash, cash equivalents, pledged securities and
restricted cash are maintained in segregated accounts from which the Company
is permitted to obtain funds upon request to the lender. Of the $6.0
million, $4.0 million is invested in pledged securities. $4.92 million of
the cash, cash equivalents, pledged securities and restricted cash is
maintained in a segregated "interest escrow account" which is restricted for
the payment of interest under certain outstanding debt obligations. See Note
14 to the Company's consolidated financial statements contained elsewhere in
this Prospectus.
(4) Gives effect to the automatic mandatory conversion of 1,488,771 shares of
outstanding preferred stock into 3,426,953 shares of common stock, and the
conversion of $232,500 of short-term notes payable which will automatically
convert into 36,432 shares of common stock at the conclusion of this
offering, and the issuance of 493,786 shares of common stock for the
exercise of warrants at a weighted-average price of $8.12 per share which
will automatically expire ten days after the date of this offering. Also
reflects $2.0 million of non-convertible debt securities which the Company
issued on January 27, 1999. See "Business -- Recent Debt Refinancings."
(5) Adjusted to reflect the sale of 4,000,000 shares of common stock offered
hereby assuming a public offering price of $13.00 per share less estimated
underwriting discounts and commissions and other expenses of this offering,
resulting in net proceeds of $48,360,000, and the $7,000,000 repayment of
various indebtedness that must be redeemed upon completion of this offering.
7
<PAGE> 9
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information in this
Prospectus before purchasing the shares of common stock offered hereby.
DEPENDENCE ON ONCOVAX(CL)
The Company's future growth and profitability will depend on its ability to
introduce and market OncoVAX(CL) and establish OncoVAX Centers. There can be no
assurance that the Company will be able to obtain necessary regulatory approvals
for OncoVAX(CL) in a timely manner, if at all. The failure of the Company to
introduce and market OncoVAX(CL) and establish OncoVAX Centers in a timely
manner would have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company believes that the results of the Amsterdam, ECOG and Hoover
trials of OncoVAX(CL) will provide sufficient evidence to support the approval
by the FDA of the Company's BLA for OncoVAX(CL) being prepared for submission.
However, based upon a summary data package submitted to the FDA by the Company,
the FDA recently raised the question of whether these trials met the criteria
for Phase III clinical trials or should rather be considered as an ongoing
series of Phase II clinical trials. The Company believes that, if this issue
remains current, the BLA will clearly demonstrate that both the ECOG and
Amsterdam Trials meet all the criteria for Phase III clinical trials. If the FDA
does not consider the ECOG and Hoover trials as relevant or supporting to the
efficacy of OncoVAX(CL), there can be no assurance that the FDA will consider
the Amsterdam trial alone as a sufficient basis for approval. Given the May 1998
FDA Guidance Document entitled "Providing Clinical Evidence of Effectiveness of
Human Drug and Biological Products," which discusses the use and limitations of
a single clinical trial to form the basis for approval of a BLA, and the views
the FDA has expressed on this subject with respect to OncoVAX(CL) combined with
chemotherapy for the treatment of Stage III colon cancer discussed below, there
can be no assurance that the FDA will not require additional clinical trials of
OncoVAX(CL) prior to FDA acceptance of the Company's BLA for filing or,
ultimately, for approval. Any such requirement to conduct additional clinical
trials could result in a substantial delay or failure to achieve regulatory
approval for OncoVAX(CL). The FDA has raised questions regarding the manufacture
of OncoVAX(CL) in accordance with the FDA's requirements for, among other
things, sterility that are relevant for both the Phase III clinical trial on
OncoVAX(CL) combined with chemotherapy and the BLA for OncoVAX(CL) for Stage II
colon cancer. However, there can be no assurance that the Company's submissions
on these issues will be sufficient to convince the FDA to accept the BLA for
filing and approval. There can be no assurance that the Company will obtain FDA
approval for OncoVAX(CL) on a timely basis.
The Company may elect to seek approval of OncoVAX(CL) under the accelerated
approval provisions of the Food and Drug Administration Modernization Act of
1997 (the "FDA Modernization Act"). The accelerated approval regulations apply
to products used in the treatment of serious or life-threatening illnesses that
appear to provide meaningful therapeutic benefits over existing treatments.
These requirements permit approval of such products based on the product's
effect on a clinical endpoint or surrogate endpoint that is likely to predict
clinical benefit. When a product is approved under the accelerated approval
regulations, the sponsor may be required to conduct additional adequate and
well-controlled studies to verify that the effect on the surrogate endpoint
correlates with improved clinical outcome or to otherwise verify the clinical
benefit. In the event such postmarketing studies do not verify the drug's
anticipated clinical benefit, or if there is other evidence that the drug
product is not shown to be safe and effective, expedited withdrawal procedures
permit the FDA, after a hearing, to remove a product from the market.
Significant uncertainty exists as to the extent to which these accelerated
approval regulations will result in accelerated review and approval.
Furthermore, the FDA has considerable discretion to determine eligibility for
accelerated review and approval. Accordingly, the FDA could employ such
discretion to deny eligibility of OncoVAX(CL) as a candidate for accelerated
review or to require additional clinical trials or other information before
approving OncoVAX(CL). A determination that OncoVAX(CL) is not eligible for
accelerated review and delays and additional expenses associated with generating
a response to any such request for additional trials could have a material
adverse effect on the
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Company's business, financial condition and results of operations. See
"-- Government Regulation: No Assurance of Regulatory Approvals" and
"Business -- Government Regulation."
Even if OncoVAX(CL) is approved for marketing by the FDA and other
regulatory authorities, there can be no assurance that it will be commercially
successful or that the Company will be successful in establishing and operating
OncoVAX Centers and manufacturing OncoVAX(CL) on a commercial scale at a cost
that will enable the Company to realize a profit. If OncoVAX(CL) is approved,
its commercialization through the Company's OncoVAX Centers would be
substantially different from the manner in which most anti-cancer treatments,
including chemotherapeutics, are now manufactured and distributed. Furthermore,
the OncoVAX centers located in the United States will be considered to be
manufacturing facilities by the FDA and must comply with all applicable
requirements. See "-- Government Regulation: No Assurance of Regulatory
Approvals." Despite the results of the clinical trials of OncoVAX(CL) and the
absence of any therapeutic products currently approved by the FDA for
post-surgical treatment of Stage II colon cancer, there can be no assurance that
oncologists and other physicians will refer patients for treatment with
OncoVAX(CL). Market acceptance also could be affected by the availability of
third-party reimbursement. Failure of OncoVAX(CL) to achieve significant market
acceptance could have a material adverse effect on the Company's business,
financial condition and results of operations. See "-- Uncertainty Related to
Health Care Reform and Third-Party Reimbursement" and "Business -- Competition."
On May 26, July 24, September 16, and November 27, 1998, the FDA's Center
for Biologics Evaluation and Research ("CBER") advised the Company in writing
that its proposed Phase III clinical trial relating to the use of OncoVAX(CL) in
combination with chemotherapy for the treatment of Stage III colon cancer had
been placed on clinical hold and, therefore, may not begin until certain
manufacturing information is provided to CBER. The Company believes it has fully
responded to CBER's May 26, July 24 and September 16, 1998 letters. As a result
of these letters, a number of concerns have been resolved and the Company is
continuing to negotiate the outstanding issues. The Company believes that upon
evaluation of the information the Company has provided and will provide to the
FDA, CBER will remove the clinical hold and allow the clinical trial to begin.
CBER also asked questions regarding the study to determine whether it would
constitute a "pivotal" Phase III trial sufficient to support approval. In
addition, the FDA questioned whether a single pivotal study would be sufficient
to approve a product for this indication and requested further information on
this issue. The Company intends to provide all requested information. There can
be no assurance at this time that the FDA will allow the study to commence or
will consider this clinical trial to be sufficient to support approval. The
Company met with FDA officials on September 22, 1998, to discuss these issues.
The FDA reiterated that information regarding manufacturing of the product must
be submitted to and found acceptable by the FDA before this Phase III clinical
trial may begin. These issues must also be resolved with respect to the Stage II
product before the FDA will accept the BLA for filing. On October 17, 1998, the
Company responded to FDA concerns regarding the manufacturing issues. There was
an FDA public meeting on December 10, 1998 to review a variety of issues
regarding cancer vaccines, including the development of potency assays, which
the Company's Chairman attended as a panelist in the Autologous and Allogeneic
Tumor Cells as Tumor Vaccines Session. The Company plans to file additional
information to respond to the FDA's concerns. The Company believes that its
submissions on manufacturing and potency assays will be sufficient to allow the
FDA to permit the clinical trial to commence in 1999. However, there can be no
assurance that the Company's submissions on these issues will be sufficient to
convince the FDA to allow the Company's Phase III study of OncoVAX(CL) to treat
Stage III colon cancer to commence or to accept for filing the Company's BLA for
OncoVAX(CL) for treatment of Stage II colon cancer.
HISTORY OF OPERATING LOSSES; ANTICIPATED FUTURE LOSSES
The Company has experienced significant losses since inception. The
Company's net losses were $20.7 million for the year ended December 31, 1997 (on
a pro-forma basis after giving effect to the acquisition of PerImmune Holdings
as if it had occurred on January 1, 1997) and $4.4 million, $8.1 million and
$53.8 million for the years ended December 31, 1996, 1997 and the nine months
ended September 30, 1998, respectively. The loss for the nine months ended
September 30, 1998 includes a one-time expense of $37.7 million related to the
acquired in-process research and development in connection with the Company's
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acquisition of PerImmune Holdings on January 2, 1998. As of September 30, 1998,
the Company's accumulated deficit was approximately $74.9 million. The Company
expects to incur significant additional operating losses primarily in connection
with the establishment and operation of its OncoVAX Centers, ongoing and
expanded research and development and expanded and later stage clinical trials.
The Company expects that losses will fluctuate from quarter to quarter and that
such fluctuations may be substantial. Most of the Company's product candidates
are in development in preclinical studies and clinical trials and have not
generated product revenues. To achieve and sustain profitable operations, the
Company, alone or with others, must develop successfully, obtain regulatory
approval for, manufacture, introduce, market and sell its products. The time
frame necessary to achieve market success is long and uncertain. There can be no
assurance that the Company will ever generate sufficient product revenues to
become profitable or to sustain profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Pro Forma
Consolidated Financial Information."
SUBSTANTIAL LEVERAGE
Following the consummation of the offering of common stock pursuant to this
Prospectus, the Company will have indebtedness that is substantial in relation
to its stockholders' equity, as well as interest and debt service requirements
that are significant compared to its income and cash flow from operations. Such
indebtedness is secured by substantially all of the Company's assets. At
September 30, 1998, the Company's total indebtedness was approximately $46.1
million.
The degree to which the Company is leveraged could have important
consequences to holders of the common stock, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or general corporate purposes may be
impaired, (ii) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of interest on its debt and its other
indebtedness, thereby reducing funds available to the Company for other
purposes, (iii) the agreements governing the Company's long-term indebtedness
contain certain restrictive financial and operating covenants, (iv) certain of
the Company's long-term indebtedness is secured by substantially all the assets
of the Company and (v) the Company's substantial degree of leverage may limit
its flexibility to adjust to changing market conditions, reduce its ability to
withstand competitive pressures and make it more vulnerable to a downturn in
general economic conditions or its business. See "Business -- Recent Debt
Refinancings."
The Company's ability to pay interest on its long-term indebtedness and
satisfy its other obligations will depend on its future operating performance,
which will be affected by prevailing economic conditions and financial, business
and other factors, many of which are beyond its control. Although the Company
believes it will be able to pay its obligations as they come due, there can be
no assurance that the Company will generate earnings in any future period
sufficient to cover its fixed charges. In the absence of adequate operating
results and cash flows, the Company may be required to adopt alternative
strategies that include reducing or delaying capital expenditures, disposing of
material assets or operations, refinancing its indebtedness or seeking
additional equity capital to meet its debt service obligations. Certain of the
Company's long-term debt instruments contain covenants that restrict the
Company's ability to take certain of the foregoing actions, including selling
assets and using proceeds therefrom. There can be no assurance as to the timing
of such actions, the ability of the Company to consummate such actions under its
existing financial agreements or the proceeds that the Company could realize
therefrom, and there can be no assurance that any such refinancing would be
feasible at the time or that such proceeds would be adequate to meet the
obligations then due.
DEVELOPMENT, INTRODUCTION AND MARKETING OF NEW PRODUCTS
The Company's future growth and profitability will depend, in part, on its
ability to develop, introduce and market new products based on its proprietary
technologies. Many of the Company's products are currently under development,
either in preclinical testing or clinical trials. Other products are planned for
future development. The time period required for such development is extensive
and highly uncertain and such development requires substantial expense. The new
products developed by the Company may prove to be ineffective or unreliable.
They may be difficult to manufacture in a cost-effective manner, may fail to
receive
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necessary regulatory clearances, may not achieve market acceptance or may
encounter other unanticipated difficulties. The failure of the Company to
develop, introduce and market new products in a timely manner, if at all, could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business."
UNCERTAINTIES ASSOCIATED WITH CLINICAL TRIALS
The Company has conducted and plans to continue to undertake extensive and
costly clinical trials to assess the safety and efficacy of its product
candidates. Such trials are often subject to setbacks and delays. The rate of
completion of the Company's clinical trials is dependent upon, among other
factors, the rate of patient enrollment. Patient enrollment is a function of
many factors, including the nature of the Company's clinical trial protocols,
existence of competing protocols, size of the patient population, proximity of
patients to clinical sites and eligibility criteria for the study. Delays in
patient enrollment will result in increased expenses and delays, which could
have a material adverse effect on the Company's business, results of operations
and financial condition. The Company cannot assure that patients enrolled in the
Company's clinical trials will respond to the Company's product candidates.
Failure to comply with FDA regulations applicable to clinical trials could
result in delay, suspension or cancellation of such trials (e.g., clinical hold)
and/or refusal by the FDA to accept the results of such trials. In addition, the
FDA may suspend clinical trials at any time if it concludes that the
participants in such trials are being exposed to unacceptable risks. Thus, there
can be no assurance that any clinical trials will be completed successfully
within any specific time period, if at all, with respect to any of the Company's
product candidates. Furthermore, there can be no assurance that human clinical
trials will show any current or future product candidate to be safe and
effective or that data derived therefrom will be suitable for submission to the
FDA or will support the Company's submission of a BLA, Product License
Application ("PLA") or New Drug Application ("NDA"). See "-- Dependence on
OncoVAX(CL)" for a description of certain issues relating to the clinical trials
of OncoVAX(CL), "Business -- Diagnostic Products -- In Vivo Diagnostics" for a
description of certain issues relating to the Company's BLA for HumaSPECT and
"Business -- Government Regulation."
GOVERNMENT REGULATION: NO ASSURANCE OF REGULATORY APPROVALS
All new drugs, biologics and diagnostic products, including the Company's
products under development, are subject to extensive and rigorous government
regulation in the United States and elsewhere. The requirements imposed by
regulators of pharmaceuticals and medical devices vary from country to country.
In the United States, regulation is administered by the federal government,
principally the FDA under the Federal Food, Drug and Cosmetic Act (the "FDC
Act") and other laws including, in the case of biologics, the Public Health
Service Act (the "PHS Act"), and by state and local governments. Such
regulations govern, among other things, the development, testing, manufacture,
labeling, storage, premarket approval, advertising, promotion, sales and
distribution of such products and post-approval monitoring of safety and
efficacy.
In the European Union, the European Medicines Evaluation Agency ("EMEA") is
responsible for administering a centralized assessment procedure for European
Union-wide authorizations valid in Britain, France, Germany, Italy, Spain and
Greece ("Member States") for medicinal products of significant therapeutic
interest or comprising a significant innovation.
In addition, regulatory approval of prices is required in most countries
other than the United States. For example, regulators in certain European
countries condition their approval of a pharmaceutical product on the agreement
of the seller not to sell the product for more than a certain price in their
respective countries. In some cases, the price established in any of these
countries may serve as a benchmark in the other countries. As such, the price
approved in connection with the first approval obtained in any of these European
countries may serve as the maximum price that may be approved in the other
European countries. Also, a price approved in one of these European countries
that is lower than the price previously approved in the other European countries
may require a reduction in the prices in those other European countries. In such
an event, there can be no assurance that the resulting prices would be
sufficient to generate an acceptable return on the Company's investment in its
products.
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The regulatory process, which includes preclinical studies and clinical
trials of each potential product, is lengthy, expensive and uncertain. Prior to
commercial sale in the United States, most new drugs, biologics and diagnostic
products, including the Company's products under development, must be approved
by the FDA. Securing FDA marketing approvals often requires the submission of
extensive preclinical and clinical data and supporting information to the FDA.
Product approvals, if granted, can be withdrawn for failure to comply with
regulatory requirements or upon the occurrence of unforeseen problems following
initial marketing. Moreover, regulatory approvals for products such as new
drugs, biologics and diagnostic products, even if granted, may require that the
labeling for such products include significant limitations on the uses for which
such products may be marketed. There can be no assurance that the Company will
be able to obtain necessary regulatory approvals in a timely manner, if at all,
for any of its product candidates, and delays in receipt or failures to receive
such approvals or failures to comply with existing or future regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
Failure to comply with applicable FDA and other regulatory requirements can
result in sanctions being imposed on the Company or the manufacturers of its
products, including warning letters, fines, product recalls or seizures,
injunctions, refusals to permit products to be imported into or exported out of
the United States, refusals of the FDA to grant premarket approval of drugs,
biologics or devices, refusals of the FDA to allow the Company to enter into
government supply contracts, withdrawals of previously approved marketing
applications and criminal prosecutions.
The pharmaceutical legislation of the European Union requires any person
seeking to market a medicinal product for human use to obtain approval of a
Marketing Authorization Application ("MAA"). While procedures for approval of
MAAs have been harmonized within the European Union through directives for
implementation into the domestic law of each Member State and by regulations
having direct effect, the specific approvals and the time required for approval
varies from country to country and may, in some instances, involve additional
testing. Drugs which fall within the definition of "high technology medicines"
under the Annex to Council Regulation 2309/93 undergo the centralized approval
system under which the Committee for Proprietary Medicinal Products ("CPMP") is
obliged to give an opinion as to whether a marketing authorization has been
granted within 210 days (although the "clock" may be stopped if further
information is required).
Manufacturers of drugs, biologics and devices also are required to comply
with the FDA current Good Manufacturing Practice ("cGMP") regulations or similar
foreign regulations, which include requirements relating to quality control and
quality assurance as well as the corresponding maintenance of records and
documentation. The OncoVAX centers located in the United States will be
considered to be manufacturing facilities by the FDA and will be regulated
accordingly. Manufacturing facilities are subject to inspection by the FDA and
other government regulators, including unannounced inspection in their own and
other jurisdictions. Certain material manufacturing changes to approved drugs,
biologics and diagnostic products also are subject to FDA and foreign regulatory
review and approval. There can be no assurance that the Company or its suppliers
will be able to comply with the applicable cGMP regulations and other FDA or
other post-approval regulatory requirements such as adverse event reporting.
Failure to comply with the post-approval regulatory requirements can lead to
product withdrawal and/or other regulatory action by the FDA. Such failure could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Governmental Regulation."
In addition to regulation by the FDA, the Nuclear Regulatory Commission
(the "NRC") and some individual states (referred to as "Agreement States") also
regulate companies that possess radioactive material and those that manufacture,
prepare or transfer radioactive drugs for commercial distribution. Agreement
States typically regulate in a manner similar to the NRC. The Company's
incorporation of radioactive materials in its labeled products, HumaSPECT,
HumaRAD(16.88) and HumaRAD(88BV59), will subject it to these NRC requirements.
To comply, the Company must apply for and maintain appropriate licenses and
comply with reporting, recordkeeping and other regulatory requirements. The
Company's failure to comply with the regulatory requirements could subject it to
enforcement actions including civil penalties and orders to modify, suspend, or
revoke its licenses. With a suspended or revoked license, the Company would need
to
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cease and desist from possessing the radioactive material necessary for
producing its products and from distributing its products.
GOVERNMENT REGULATION; FRAUD AND ABUSE, FACILITY LICENSURE AND CORPORATE
PRACTICE
The Company has established, or may establish in the future, various
financial relationships with potential purchasers of the Company's products and
with sources of referral, including hospitals, clinical laboratories and
physicians. In addition, the Company provides coding advice to customers and,
operating through its OncoVAX Centers, expects to seek reimbursement for its
products and services from patients and/or third-party payers (including
Medicare, Medicaid and private health insurers). Consequently, the Company is
subject to various federal and state laws pertaining to health care fraud and
abuse, including anti-kickback laws, physician self-referral laws and false
claims laws. Anti-kickback laws make it illegal to solicit, offer, receive, or
pay any remuneration in exchange for, or to induce, the referral of business.
Physician self-referral laws restrict the ability of a physician to refer
patients to entities with which the physician has a financial relationship.
False claims laws prohibit anyone from knowingly and willfully presenting, or
causing to be presented, claims for payment that contain false or fraudulent
information. Violations of these laws are punishable by criminal and/or civil
sanctions and may render the Company ineligible for reimbursement for its
products and services. Although the Company intends to operate in compliance
with these laws, because of the broad scope of some of these laws, there can be
no assurance that one or more of the Company's practices will not be challenged
by governmental authorities under certain of these laws, that the Company will
not be required to alter its practices as a result or that the occurrence of one
or more of these events will not have a material adverse effect on the Company's
business. See "Business -- Government Regulation."
The Company's OncoVAX Centers will be subject to state laws regulating the
licensure and operation of healthcare facilities and clinics where patients
receive treatment. The structure and operation of the OncoVAX Centers and each
OncoVAX Center's relationship to supervising physicians and other healthcare
professionals also must comply with laws existing in some states that prohibit
the corporate practice of medicine and other healthcare professions. These laws
vary from state to state and are enforced by the courts and regulatory
authorities with broad discretion. The Company intends to structure and operate
its OncoVAX Centers in compliance with these laws, but a failure to meet these
requirements could have a material adverse effect on the Company's ability to
market OncoVAX(CL) and this, in turn, could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Government Regulation."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company's operations to date have consumed substantial and increasing
amounts of cash. The Company's negative cash flow from operations is expected to
continue and to accelerate in the foreseeable future. The development of the
Company's technology and potential products, including the establishment of
OncoVAX Centers in the United States and Europe, will continue to require a
commitment of substantial funds. The Company expects that its existing capital
resources, including the net proceeds of the Offering and interest thereon, will
be adequate to satisfy the requirements of its current and planned operations
until the end of 1999. However, the rate at which the Company expends its
resources is variable, may be accelerated and will depend on many factors,
including the scope and results of preclinical studies and clinical trials,
continued progress of the Company's research and development of product
candidates, the cost, timing and outcome of regulatory approvals, the expenses
of establishing a sales and marketing force, the cost of establishing and
operating OncoVAX Centers, the cost of manufacturing, the cost involved in
preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims, the acquisition of technology licenses, the status of competitive
products and the availability of other financing.
The Company may need to raise substantial additional capital to fund its
operations and may seek such additional funding through public or private equity
or debt financings, as well as through collaborative arrangements. There can be
no assurance that such additional funding will be available on acceptable terms,
if at all. If additional funds are raised by issuing equity securities,
substantial equity dilution to stockholders may result. If adequate funds are
not available, the Company may be required to delay, reduce the scope of, or
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<PAGE> 15
eliminate one or more of its research and development programs, curtail its
operations or obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain of its
technologies, product candidates or products that the Company would otherwise
seek to develop or commercialize on its own. See "Pro Forma Consolidated
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DEPENDENCE UPON PROPRIETARY TECHNOLOGY; UNCERTAINTY OF INTELLECTUAL PROPERTY
RIGHTS
Extensive research has been conducted in the cancer vaccine and monoclonal
antibody fields by pharmaceutical and biotechnology companies and other
organizations and a substantial number of patents in these fields have been
issued to other pharmaceutical and biotechnology companies. In addition,
competitors may have applications for additional patents pending and may obtain
additional patents and proprietary rights related to products or processes
competitive with or similar to those of the Company. Patent applications are
maintained in secrecy for a period after filing and, in the United States,
patent applications are confidential until the patent is issued. Publication of
discoveries in the scientific or patent literature tends to lag behind actual
discoveries and the filing of related patent applications. The Company may not
be aware of all of the patents potentially adverse to the Company's interests
that may have been issued to other companies, research or academic institutions,
or others. No assurance can be given that such patents do not exist, have not
been filed, or could not be filed or issued, which contain claims relating to
the Company's technology, products or processes. To date, no consistent policy
has emerged regarding the breadth of claims allowable in pharmaceutical and
biotechnology patents.
The Company is aware of various patents that have been issued to others
that pertain to a portion of the Company's prospective business. The Company is
aware, in particular, of the existence of at least one United States patent
owned by another party that may interfere with the manufacture and marketing of
HumaSPECT in the United States. There can be no assurance that other patents do
not exist in the United States or in other countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to OncoVAX(CL) or any of the Company's other product candidates or
programs. Commercialization of cancer vaccines and monoclonal antibody-based
products may require licensing and/or cross-licensing of one or more patents
with other organizations in the field. There can be no assurance that the
licenses that might be required for the Company's processes or products would be
available on commercially acceptable terms, if at all.
The Company's breach of an existing license or failure to obtain a license
to technology required to commercialize its product candidates may have a
material adverse effect on the Company's business, financial condition and
results of operations. Litigation, which could result in substantial costs to
the Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the United States Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome could subject the Company to significant
liabilities to third parties and require the Company to license disputed rights
from third parties or to cease using such technology.
Patents issued and patent applications filed internationally relating to
biologics are numerous and there can be no assurance that current and potential
competitors and other third parties have not filed or in the future will not
file applications for, or have not received or in the future will not receive,
patents or obtain additional proprietary rights relating to products or
processes used or proposed to be used by the Company. Many non-United States
jurisdictions allow oppositions by third parties to granted patents and/or
issued patents. The Company may have to participate in opposition proceedings in
non-United States jurisdictions to prevent a third party from obtaining a patent
that may be adverse to the Company's interests. Also, the Company may have to
defend against a third party's opposition to a patent granted and/or issued to
the Company. There can be no assurance that the Company will be successful in an
opposition proceeding, and participation in such a proceeding could result in
substantial cost to the Company whether or not the eventual outcome is favorable
to the Company. Moreover, there is certain subject matter which is patentable in
the
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United States and not generally patentable outside of the United States and this
may limit the protection the Company can obtain on some of its inventions
outside of the United States. For example, methods of treating humans are not
patentable in many countries outside of the United States. These and/or other
issues may prevent the Company from obtaining patent protection outside of the
United States, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Patents and Other Intellectual Property."
The Company also relies on trade secrets and trademarks to protect its
technology, especially where patent protection is not believed to be appropriate
or obtainable. The Company protects its proprietary technology and processes, in
part, by confidentiality agreements with its key employees, consultants, medical
advisory board members, collaborators and contractors. There can be no assurance
that these agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets and trademarks or
those of its collaborators or contractors will not otherwise become known or be
discovered independently by competitors. All of the Company's material patents,
including those which relate to the Company's OncoVAX(CL), HumaSPECT and the
Company's HumaRAD products, have been pledged to secure certain of the Company's
existing debt obligations. See "Business -- Recent Debt Refinancings."
HIGHLY COMPETITIVE INDUSTRY; RISK OF TECHNOLOGICAL OBSOLESCENCE
The pharmaceutical and biotechnology industries are intensely competitive.
Many of the product candidates being developed by the Company, if approved,
would compete with existing drugs, therapies and diagnostic products and with
new drugs, therapies and diagnostic products under development, including, in
the case of cancer treatments, angiogenesis inhibitors, gene therapy, advanced
hormonal replacement therapy and new chemotherapeutics. There are many
pharmaceutical companies, diagnostic companies, biotechnology companies, public
and private universities and research organizations actively engaged in research
and development of products for the treatment of people with cancer. Many of
these organizations have financial, technical, manufacturing and marketing
resources greater than those of the Company. Several of them may have developed
or are developing therapies or diagnostic products that could be used for
treatment or diagnosis of the same diseases targeted by the Company. If a
competing company were to develop or acquire rights to a safer or more
efficacious treatment of or diagnostic products for the same diseases targeted
by the Company, or one which offers significantly lower costs of treatment or
diagnosis, the Company's business, financial condition and results of operations
could be materially adversely affected.
The Company believes that its product development programs will be subject
to significant competition from companies utilizing alternative technologies as
well as to increasing competition from companies that develop and apply
technologies similar to the Company's technologies. Other companies may succeed
in developing products earlier than the Company, obtaining approvals for such
products from the FDA more rapidly than the Company or developing products that
are safer or more effective than those under development or proposed to be
developed by the Company. There can be no assurance that research and
development by others will not render the Company's technology or product
candidates obsolete or non-competitive or result in treatments superior to any
therapy developed by the Company, or that any therapy developed by the Company
will be preferred to any existing or newly developed technologies. See
"Business -- Competition."
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL
The Company is dependent upon a limited number of key management and
technical personnel, including Michael G. Hanna, Ph.D., the Chairman of the
Board and Chief Scientific Officer of the Company, and Simon R. McKenzie, the
President and Chief Executive Officer of the Company. The Company does not
maintain any life insurance coverage protecting it from the loss of any key
employees. The loss of the services of one or more of such key employees could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the Company's success will be dependent
upon its ability to attract and retain additional highly qualified personnel.
The Company faces intense competition in its recruiting activities, and there
can be no assurance that the Company will be able to attract and/or retain
qualified personnel. See "Management."
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EXPOSURE TO PRODUCT LIABILITY
The manufacture and sale of human therapeutic and diagnostic products
involve an inherent risk of product liability claims and associated adverse
publicity. The Company has only limited commercial product liability insurance.
There can be no assurance that the Company will be able to maintain existing
insurance or obtain additional product liability insurance on acceptable terms
or with adequate coverage against potential liabilities. Such insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms, if at all. An inability to obtain sufficient insurance
coverage on reasonable terms or to otherwise protect against potential product
liability claims brought against the Company in excess of its insurance
coverage, if any, or a product recall could have a material adverse effect upon
the Company's business, financial condition and results of operations.
UNCERTAINTY RELATED TO HEALTH CARE REFORM AND THIRD-PARTY REIMBURSEMENT
Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. Initiatives to reform
health care financing continue to be dominated by cost-containment efforts. The
Company anticipates that Congress, state legislatures and the private sector
will continue to review and assess controls on health care spending through
limitations on the growth of private health insurance premiums and Medicare and
Medicaid spending, the increased use of capitated managed care contractors by
government payers, price controls on pharmaceuticals and other fundamental
changes to the health care delivery system. Any such proposed or actual changes
could affect the Company's revenues or could cause the Company to limit or
eliminate spending on development projects. In anticipation of the impending
demographic shifts brought about by the "baby boom" generation, legislative
debate concerning potential reform to Medicare, the government's health
financing program for persons over age 65, is expected to continue, and market
forces are expected to drive reductions in health care costs. The Company cannot
predict what impact the adoption of any federal or state health care reform
measures or future private sector reforms may have on its business.
In the United States and foreign markets, sales of the Company's proposed
products will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations. The
Company has very limited experience obtaining coverage and reimbursement for its
products in the United States. Third-party payors are increasingly challenging
the price and cost effectiveness of medical products and services. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products. OncoVAX(CL), as potentially the first vaccine to treat colon cancer
approved for marketing by government regulators, faces particular uncertainties
due to the absence of a comparable, approved therapy to serve as a model for
pricing and reimbursement decisions.
As an autologous product that will not generally be sold through
traditional commercial channels, OncoVAX(CL) may present unique coverage and
payment issues for Medicare. Because the Company's plans concerning the
production, distribution and administration of OncoVAX(CL) do not precisely fit
the models established for drug coverage and payment by Medicare, the Company
cannot predict whether Medicare will cover and pay for the biologic under its
established rules for drugs and biologics. Failure to obtain coverage and
adequate reimbursement could have a material adverse effect on the Company's
ability to market OncoVAX(CL). With respect to private payors, there can be no
assurance that the Company's product candidates will be considered cost
effective or that adequate third-party reimbursement will be available to enable
the Company to maintain price levels sufficient to realize an appropriate return
on its investment in product development. If adequate coverage and reimbursement
rates are not provided by the government and third-party payors for the
Company's products, the market acceptance of these products could be adversely
affected, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Reimbursement."
16
<PAGE> 18
RADIOACTIVE AND OTHER HAZARDOUS MATERIALS
The manufacturing and administration of the Company's HumaRAD products and
HumaSPECT require the handling, use and disposal of (90)Yttrium and Technetium
Tc 99m, respectively, each a radioactive isotope. These activities must comply
with various state and federal regulations. Violations of these regulations
could delay significantly completion of clinical trials and commercialization of
these products.
The Company expects to continue using hazardous chemicals and radioactive
compounds in its ongoing research activities. Although the Company believes that
safety procedures for handling and disposing of such materials will comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. The Company could be held liable for any damages that result from
such an accident, contamination or injury from the handling and disposal of
these materials, as well as for unexpected remedial costs and penalties that may
result from any violation of applicable regulations, which could result in a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company may incur substantial costs to
comply with environmental regulations. See "Business -- Radioactive and Other
Hazardous Materials."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS
The Company's international operations are anticipated to comprise a
substantial percentage of the Company's net revenue in the future and,
accordingly, the Company will be subject to risks associated with international
operations. Such risks include managing a multinational organization,
fluctuations in currency exchange rates, the burden of complying with
international laws and other regulatory and product certification requirements
and changes in such laws and requirements, tariffs and other trade barriers,
import and export controls, restrictions on the repatriation of funds,
inflationary conditions, staffing, employment and severance issues, political
and economic instability and longer payment cycles in certain countries. The
inability to effectively manage these and other risks could adversely affect the
Company's business, financial condition and results of operations.
TAX LOSS CARRYFORWARDS
The Company's net operating loss carryforwards ("NOLs") expire through the
year 2012. Under Section 382 of the Internal Revenue Code of 1986, as amended,
utilization of prior NOLs is limited after an ownership change, as defined in
Section 382, to an annual amount equal to the value of the corporation's
outstanding stock immediately before the date of the ownership change multiplied
by the federal long-term exempt tax rate. Each of the Company and PerImmune
Holdings has experienced an ownership change, and is limited in its use of its
prior NOLs. In the event the Company or PerImmune Holdings achieves profitable
operations, these limitations would have the effect of increasing the Company's
consolidated tax liability and reducing net income and available cash reserves.
See Note 8 to the consolidated financial statements of the Company and Note 13
to the consolidated financial statements of PerImmune Holdings.
CONTROL BY OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS
Following consummation of this offering, directors, executive officers and
principal stockholders of the Company will beneficially own approximately 26.42%
of the outstanding shares of the Company's common stock. Accordingly, these
stockholders, individually and as a group, may be able to control the Company
and direct its affairs and business, including any determination with respect to
a change in control of the Company, future issuances of common stock or other
securities by the Company, declaration of dividends on the common stock and the
election of directors. See "Principal and Selling Stockholders."
FUTURE MERGERS AND ACQUISITIONS
The Company may acquire complementary businesses, products or technologies
in the future although the Company has no pending agreements or commitments. No
assurance can be given that the Company will not incur problems in integrating
any future acquisition and there can be no assurance that any future acquisition
will result in the Company's becoming profitable or, if the Company achieves
profitability, that
17
<PAGE> 19
such profitability will be sustainable. Furthermore, there can be no assurance
that the Company will realize value from any such acquisition which equals or
exceeds the consideration paid. Any such problem could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, future acquisitions by the Company may result in dilutive issuances
of equity securities, the incurrence of additional debt, large one-time
write-offs and the creation of goodwill or other intangible assets that could
result in amortization expense. These factors could have a material adverse
effect on the Company's business, financial condition and results of operations.
ABSENCE OF PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the common
stock and there is no assurance that an active market will develop or be
sustained after this offering. The initial public offering price will be
determined through negotiations among the Company and the Underwriters and may
bear no relationship to the price at which the common stock will trade upon
consummation of this offering. The securities markets have from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. The market prices of the common
stock of many publicly held biotechnology and pharmaceutical companies have in
the past been, and can in the future be expected to be, especially volatile.
Announcements of technological innovations or new products by the Company or its
competitors, release of reports by securities analysts, developments or disputes
concerning patents or proprietary rights, regulatory developments, changes in
regulatory or medical reimbursement policies, economic and other external
factors, as well as period-to-period fluctuations in the Company's financial
results, may have a significant and adverse impact on the market price of the
common stock. See "Underwriting."
POTENTIAL ADVERSE IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
All of the shares of common stock to be sold in this offering will be
freely tradable, except for shares purchased by or issued to any "affiliate" of
the Company (within the meaning of the Securities Act). The remaining shares of
common stock, representing approximately 74.23% of the outstanding common stock
upon consummation of this offering, will be deemed "restricted securities" under
the Securities Act, and, as such, will be subject to restrictions on the timing,
manner and volume of sales of such shares. Certain holders of those shares will
have the right to request the registration of their shares under the Securities
Act following the completion of a period of one year, in the case of directors
and executive officers, and a period of 180 days, in the case of certain other
stockholders, after the date of this Prospectus, which, upon the effectiveness
of such registration, would permit the free transferability of such shares. In
addition, the Company intends to file a registration statement on Form S-8 for
the shares held pursuant to its stock option plans, which may make these shares
freely tradeable. See "Shares Eligible for Future Sale."
The Company, its executive officers and directors and certain of its
current stockholders have agreed that, subject to certain limited exceptions,
for a period of one year, in the case of directors and executive officers, and a
period of 180 days, in the case of such other stockholders, after the date of
this Prospectus, without the prior written consent of the Underwriters, they
will not, directly or indirectly, offer to sell, sell or otherwise dispose of
any shares of common stock. See "Underwriting."
No predictions can be made as to the effect, if any, that future sales of
shares or the availability of shares for future sale, will have on the market
price for common stock prevailing from time to time. The sale of a substantial
number of shares held by existing stockholders, whether pursuant to a subsequent
public offering or otherwise, or the perception that such sales could occur,
could adversely affect the market price of the common stock and could materially
impair the Company's future ability to raise capital through an offering of
equity securities.
DILUTION
Purchasers of the shares of common stock offered hereby will experience
immediate dilution of $11.78 per share in net tangible book value (deficit) per
share after deducting the underwriting discounts and
18
<PAGE> 20
estimated offering expenses. Such investors will experience additional dilution
upon the exercise of outstanding options. See "Dilution."
ADVERSE IMPACT OF POSSIBLE ISSUANCES OF PREFERRED STOCK;
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Board of Directors has authority to issue up to 5,000,000 shares of
preferred stock and to fix the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock could affect adversely the voting power of the holders of common stock and
the likelihood that such holders will receive dividend payments and payments
upon liquidation. Additionally, the issuance of preferred stock and certain
provisions in the Company's Amended and Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation"), and Bylaws may have the effect
of delaying, deferring or preventing a change in control of the Company, may
discourage bids for the common stock at a premium over the market price of the
common stock and may affect adversely the market price of and the voting and
other rights of the holders of the common stock.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than one year, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements.
Management has initiated a program to prepare the Company's computer
systems and other electronic applications for the year 2000 (the "Year 2000
Program"). Through the Year 2000 Program, management is currently reviewing the
Company's computer systems and other electronic applications in order to
identify potential Year 2000 problems. Based upon preliminary results of the
Year 2000 Program, management anticipates that the Company's Year 2000
compliance expenses will not be material and that the Company's Year 2000
Program will be completed before January 1, 2000. The Company's failure to
successfully complete its Year 2000 Program could have a material adverse effect
on the Company's business, financial condition and results of operations.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements, which may be deemed to
include the Company's plans to commercialize OncoVAX(CL) and other product
candidates, conduct clinical trials with respect to OncoVAX(CL) and other
product candidates, seek regulatory approvals, open OncoVAX Centers, expand its
sales and marketing capability, use OncoVAX Centers to conduct clinical trials,
evaluate additional product candidates for subsequent clinical and commercial
development and apply the proceeds of this offering. In addition, this
Prospectus states the Company's belief that its existing capital resources,
including the net proceeds of this offering and interest thereon, will be
adequate to satisfy the requirements of its current and planned operations until
the end of 1999. Actual results could differ materially from those projected in
any forward-looking statements for a variety of reasons, including those
detailed above in this "Risk Factors" section or elsewhere in this Prospectus.
19
<PAGE> 21
THE COMPANY
The Company is an integrated biopharmaceutical company focused on the
development and commercialization of cancer vaccines and of immunotherapeutic
and diagnostic products for cancers and infectious diseases. Since its formation
in 1987, the Company has grown in part as a result of various strategic mergers
and acquisitions.
On January 2, 1998, the Company acquired in a tax-free merger (the
"Merger") all of the capital stock of PerImmune Holdings, which conducts
operations through PerImmune, Inc., its wholly owned subsidiary ("PerImmune").
PerImmune's core research and development expertise in cancer and infectious
diseases complements those previously developed by the Company. The Company's
expanded resources and greater management depth resulting from the Merger have
increased the Company's ability to offer a broader spectrum of diagnostic,
prognostic and immunotherapeutic products targeted at cancer and infectious
diseases. In particular, the addition of PerImmune's large clinical development
group has augmented development of the Company's therapeutic products and the
Company's sales and marketing organization has enabled the direct launch of many
of PerImmune's diagnostic products. PerImmune Holdings was incorporated in 1996
by the management of PerImmune to acquire all of the common stock of PerImmune
from Organon Teknika Corporation, an indirect wholly owned subsidiary of Akzo
Nobel, NV ("Organon Teknika").
In November 1995, the Company entered into a Stock Purchase Agreement with
Dade International, Inc. ("Dade") by which the Company acquired all of the
common stock of Bartels held by Dade. This acquisition provided the Company with
entry into the diagnostic products retail market.
The Company has historically used significant amounts of debt to finance
its operations. In 1998, the Company completed a comprehensive refinancing of
its outstanding debt securities. See "Business -- Recent Debt Refinancings."
The Company was incorporated under the laws of Massachusetts in 1987 and
reincorporated under the laws of Delaware in 1997. The Company's principal
executive offices are located at 2005 NW Sammamish Road, Suite 107, Issaquah,
Washington 98027 and its telephone number is (425) 392-2992.
20
<PAGE> 22
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,000,000 shares of
common stock offered hereby, after deducting underwriting discounts and
commissions and estimated offering expenses, are estimated to be approximately
$48,360,000 ($51,987,000 if the over-allotment option granted by the Company to
the Underwriters is exercised in full) based upon an assumed initial public
offering price of $13.00 per share.
The Company anticipates that such net proceeds, together with its other
available cash and cash equivalents, will be used as follows: (i) approximately
$25.0 million to support the establishment and early operation of OncoVAX
Centers; (ii) $5.0 million to repay existing indebtedness bearing interest at a
rate of 12% per annum due when the Company receives the proceeds of this
offering; (iii) approximately $5.0 million for the Company's other research and
development programs and to conduct clinical trials for the Company's cancer and
infectious disease products; (iv) approximately $2.0 million to repay
indebtedness bearing interest at a rate of 15% per annum due when the Company
receives the proceeds from this offering and (v) the balance for working capital
and other general corporate purposes. The Company may also use a portion of the
net proceeds to acquire technologies or products complementary to its business,
although no material expenditures in connection with any such acquisitions are
anticipated as of the date of this Prospectus. Pending application as described
above, the Company intends to invest the net proceeds from this offering in
short-term investment-grade, interest-bearing instruments.
The amounts and timing of the Company's actual expenditures for the
purposes described above will depend upon a number of factors, including: the
scope and results of preclinical studies and clinical trials; continued progress
of the Company's research and development of product candidates; the cost,
timing and outcome of regulatory approvals; the adequacy of manufacturing and
other facilities; the expenses of expanding the Company's sales and marketing
force; the cost involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims; the acquisition of technology licenses;
the status of competitive products and the availability of other financing. The
Company will require substantial additional funds to conduct its operations in
the future, and there can be no assurance that such funding will be available on
acceptable terms, if at all. The Company expects that its existing capital
resources, including the net proceeds of this offering and interest thereon,
will be adequate to satisfy the requirements of its current and planned
operations until the end of 1999. The occurrence of certain unforeseen events or
changed business conditions, however, could result in the application of the
proceeds of this offering in a manner other than as described in this
Prospectus.
DIVIDEND POLICY
The Company has never paid a cash dividend on its common stock and does not
anticipate paying any cash dividends in the foreseeable future.
21
<PAGE> 23
CAPITALIZATION
The following table sets forth at September 30, 1998: (a) the actual
capitalization of the Company; (b) the pro forma capitalization of the Company
giving effect to the mandatory conversion of all outstanding preferred stock,
automatic conversion of certain convertible notes payable into common stock
effective on the closing of this offering, and the exercise of certain warrants
and (c) the pro forma as adjusted to give effect to the receipt of the estimated
net proceeds from the sale of the 4,000,000 shares of common stock offered
hereby at an assumed initial public offering price of $13.00, and after
deducting the underwriting discounts and commissions and offering expenses
payable by the Company. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company and notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-------------------------------------
PRO PRO FORMA AS
ACTUAL FORMA(1) ADJUSTED(2)
-------- ---------- ------------
(DOLLAR IN THOUSANDS)
<S> <C> <C> <C>
Cash, cash equivalents, pledged securities and restricted
cash(3)................................................... $ 11,392 $ 17,400 $ 58,760
======== ========== ============
Long-term debt, non-convertible, including current
portion................................................... $ 35,038 $ 37,038 $ 30,038
Long-term debt, convertible, including current portion(4)... 11,035 10,802 10,802
Redeemable and convertible preferred stock, $0.0001 par
value; 5,000,000 shares authorized; of which 1,780,220
shares have been authorized for issue in five series
subject to mandatory redemption, of which 1,488,771 shares
are issued and outstanding, actual; none pro forma and pro
forma as adjusted(5)...................................... 21,159
Stockholder's equity (deficit):
Common stock, $0.0001 par value; 50,000,000 shares
authorized; 7,440,365 shares issued and outstanding,
actual; 11,397,533 shares issued and outstanding, pro
forma; and 15,397,533 shares issued and outstanding,
pro forma as adjusted(6)............................... 1 1 2
Additional paid-in capital................................ 48,145 74,373 122,732
Accumulated deficit....................................... (74,942) (74,942) (74,942)
Note receivable due from stockholder...................... (300) (300) (300)
-------- ---------- ------------
Total stockholders' equity (deficit).............. (27,097) (868) 47,492
-------- ---------- ------------
Total capitalization.............................. $ 40,136 $ 46,972 $ 88,332
======== ========== ============
</TABLE>
- ---------------
(1) Gives effect to the automatic mandatory conversion of 1,488,771 shares of
outstanding preferred stock into 3,426,953 shares of common stock, and the
conversion of $232,500 of short-term notes payable which will automatically
convert into 36,432 shares of common stock at the conclusion of this
offering, and the issuance of 493,786 shares of common stock for the
exercise of warrants at a weighted average price of $8.12 per share which
will automatically expire ten days after the date of this offering. Reflects
$2.0 million of non-convertible debt securities which the Company issued on
January 27, 1999. See "Business -- Recent Debt Refinancings."
(2) Adjusted to reflect the sale of 4,000,000 shares of common stock offered
hereby assuming a public offering price of $13.00 per share less estimated
underwriting discounts and commissions and other expenses of this offering,
resulting in net proceeds of $48,360,000, and the repayment of $7,000,000 of
various indebtedness that must be redeemed upon completion of this offering.
(3) $6.0 million of the cash, cash equivalents, pledged securities and
restricted cash is maintained in segregated accounts from which the Company
is permitted to obtain funds upon request to the lender. Of the $6.0
million, $4.0 million is invested in pledged securities. $4.92 million of
the cash, cash equivalents, pledged securities and restricted cash is
maintained in a segregated "interest escrow account" which is restricted for
the payment of interest under certain outstanding debt obligations. See Note
14 to the Company's consolidated financial statements contained elsewhere in
this Prospectus.
(4) Actual includes $232,500 in short-term notes payable which will
automatically be converted into 36,432 shares of common stock upon
consummation of this offering, and pro forma includes approximately
$10,802,000 in notes payable which may be converted at anytime prior to the
maturity date of January 15, 2000, at the payee's option into common stock
calculated by the sum of the then outstanding principal amount and all
accrued interest divided by the price to the public per share set forth on
the cover page of this Prospectus.
(5) On an actual basis, includes Series A, 730,000 shares authorized, 640,639
shares issued and outstanding; Series A-1, 850,000 shares authorized,
690,951 shares issued and outstanding; Series A-3, 200,000 shares
authorized, 156,961 shares issued and outstanding; Series B-1, 100 shares
authorized, issued and outstanding; and Series B-2, 120 shares authorized,
issued and outstanding. None of such shares will be outstanding on a pro
forma and pro forma as adjusted basis.
(6) The foregoing computations exclude (i) 1,368,267 shares of common stock
issuable upon exercise of stock options outstanding as of September 30,
1998, at a weighted-average exercise price of $3.66 per share; (ii)
1,727,004 shares of common stock issuable upon exercise of warrants expected
to remain outstanding after this offering, of which 643,665 are at a
weighted-average price of $7.96 per share and 1,083,339 shares which are
exercisable at $15.00 per share.
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<PAGE> 24
DILUTION
The pro forma net tangible book value (deficit) of the Company as of
September 30, 1998, was $(29,566,387), or $(2.59) per share of common stock. Pro
forma net tangible book value (deficit) per share represents the Company's total
tangible assets less total liabilities divided by 11,397,536 shares of common
stock outstanding (after reflecting the automatic mandatory conversion of
preferred stock into 3,426,953 shares of common stock, the automatic conversion
of notes into 36,432 shares of common stock, which notes automatically convert
upon consummation of this offering, and the exercise of warrants to purchase
493,786 shares of common stock, which warrants automatically expire ten days
after consummation of this offering). Without taking into account any other
changes in the net tangible book value after September 30, 1998, other than to
give effect to the sale of 4,000,000 shares of common stock by the Company in
this offering (assuming a public offering price of $13.00 per share and after
deducting the underwriting discounts and commissions and estimated offering
expenses) and the application of the estimated proceeds thereof, the pro forma
net tangible book value of the Company as of September 30, 1998, would have been
$18,793,613, or $1.22 per share. This amount represents an immediate improvement
in pro forma net tangible book value of $3.81 per share to existing stockholders
and immediate dilution of $11.78 per share to new investors purchasing common
stock in this offering. Dilution per share to new investors represents the
difference between the pro forma net tangible book value per share of common
stock immediately upon consummation of this offering and the amount per share
paid by purchasers of common stock of the Company in this offering. The
following table illustrates this per share dilution as of September 30, 1998:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Pro forma net tangible book value per share at September
30, 1998............................................... $(2.59)
Improvement per share attributable to new investors....... 3.81
------
Pro forma net tangible book value per share after this
offering.................................................. 1.22
------
Dilution per share to new investors......................... $11.78
======
</TABLE>
23
<PAGE> 25
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited consolidated pro forma statement of operations (the
"Pro Forma Consolidated Financial Information") gives pro forma effect to the
completion of the Merger of PerImmune Holdings on January 2, 1998, after giving
effect to the pro forma adjustments described in the accompanying notes as if
the Merger had occurred on January 1, 1997. The Pro Forma Consolidated Financial
Information has been prepared from, and should be read in conjunction with, the
historical consolidated financial statements and notes thereto of each of the
Company and PerImmune Holdings.
The Pro Forma Consolidated Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
results of operations of the Company would have been had the Merger occurred on
the date assumed, nor is it necessarily indicative of the Company's future
operating results. The following table enumerates the unaudited pro forma
consolidated statement of operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------
ACQUIRED PRO FORMA PRO FORMA
COMPANY BUSINESS ADJUSTMENTS CONSOLIDATED
---------- -------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue
Product.................................... $ 13,452 $ 2,111 $ 15,563
Contract................................... 5,778 5,778
---------- -------- ------- -----------
Total revenue............................ 13,452 7,889 21,341
Cost of revenue
Product.................................... 8,661 1,600 10,261
Contract................................... 5,016 5,016
---------- -------- ------- -----------
Total cost of revenue.................... 8,661 6,616 15,277
Selling, general and administrative.......... 8,478 2,849 $ 1,595(1) 12,922
Research and development..................... 556 8,077 8,633
Amortization of cost in excess of net assets
acquired................................... 908 232(1) 1,140
---------- -------- ------- -----------
Total operating expense................. 18,603 17,542 1,827 37,972
---------- -------- ------- -----------
Loss from operations.................... (5,151) (9,653) (1,827) (16,631)
Interest income (expense), net............... (2,913) (837) (3,750)
Loss on sale-leaseback transaction........... (335) (335)
---------- -------- ------- -----------
Net loss................................ (8,064) (10,825) (1,827) (20,716)
Preferred stock dividends/accretion.......... (1,261) (32) 32(2) (1,261)
---------- -------- ------- -----------
Net loss used in calculating loss per
share................................. $ (9,325) $(10,857) $(1,795) $ (21,977)
========== ======== ======= ===========
Basic and diluted net loss per share......... $ (3.43)
==========
Pro forma net loss per share................. $ (3.45)
===========
Shares used in calculating per share data.... 2,715,599 6,368,035
========== ===========
</TABLE>
- ---------------
(1) Represents the pro forma effects of amortization expenses recognized on
intangible assets on which a portion of the purchase price was allocated in
conjunction with the Merger. The allocation of the purchase price, the
amortization periods of the intangible assets and the annual amortization
expense to be recognized on those assets are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
PURCHASE AMORTIZATION ANNUAL
PRICE PERIOD AMORTIZATION
ALLOCATION (YEARS) EXPENSE
---------- ------------ ------------
<S> <C> <C> <C>
Working capital (deficit) acquired.......................... $ (145)
Other long-term assets...................................... 3,968
Workforce in progress....................................... 144 3 $ 48
Product technology.......................................... 6,861 10 686
Patents..................................................... 8,608 10 861
Cost in excess of net assets acquired....................... 2,317 10 232
Acquired in-process research and development................ 37,718
------- ------
$59,471 $1,827
======= ======
</TABLE>
(2) Represents the pro forma effect of the Merger. The acquired business' Series
A and Series B redeemable and convertible preferred stock was exchanged for
Intracel Series B-1 and Series B-2 preferred stock. Accordingly, the
acquired business' preferred stock dividends/accretion is eliminated.
24
<PAGE> 26
SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA FOR INTRACEL CORPORATION
The selected financial data below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," the consolidated financial statements of the Company and the notes
thereto included elsewhere in this Prospectus. The statement of operations data
for the years ended June 30, 1993 and June 30, 1994 and the balance sheet data
at June 30, 1993, June 30, 1994, June 30, 1995 and December 31, 1995 are derived
from the financial statements of the Company not included in this Prospectus.
The statement of operations data for the year ended June 30, 1995, the six
months ended December 31, 1995 and the year ended December 31, 1996 and the
balance sheet data as of December 31, 1996 are derived from the consolidated
financial statements of the Company included elsewhere in this Prospectus and
have been audited by Ernst & Young LLP, independent auditors. The financial
statement data as of and for the year ended December 31, 1997 is derived from
the financial statements of the Company included elsewhere in this Prospectus
and has been audited by PricewaterhouseCoopers LLP, independent accountants. The
pro forma financial data for the year ended December 31, 1997 and the financial
data as of and for the periods ended September 30, 1997 and 1998 are unaudited
but have been prepared on a basis consistent with the audited consolidated
financial statements of the Company and the notes thereto and included all
adjustments (constituting only normal recurring adjustments), which the Company
considered necessary for a fair presentation of the information. The results of
operation for the nine months ended September 30, 1998 are not necessarily
indicative of results to be expected for the year or for any future periods.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
YEAR ENDED JUNE 30, ENDED DECEMBER 31,
-------------------------- DECEMBER 31, -------------------
1993 1994 1995 1995(2) 1996 1997
------ ------- ------- ------------ -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue
Product....................................... $1,776 $ 1,618 $ 1,566 $ 2,426 $ 14,718 $ 13,452
Contract......................................
------ ------- ------- ------- -------- --------
Total revenue............................... 1,776 1,618 1,566 2,426 14,718 13,452
------ ------- ------- ------- -------- --------
Cost of revenue
Product....................................... 533 449 824 1,779 8,265 8,661
Contract......................................
------ ------- ------- ------- -------- --------
Total cost of revenue....................... 533 449 824 1,779 8,265 8,661
Selling, general and administrative............. 962 801 1,580 2,593 5,740 8,478
Research and development........................ 785 1,078 1,174 1,118 1,043 556
Acquired research and development............... 2,100
Amortization of costs in excess of net assets
acquired...................................... 151 908 908
Reorganization expense.......................... 917
------ ------- ------- ------- -------- --------
Total operating expense..................... 2,280 2,328 3,578 7,741 16,873 18,603
------ ------- ------- ------- -------- --------
Loss from operations.......................... (504) (710) (2,012) (5,315) (2,155) (5,151)
Interest income (expense), net.................. 47 22 68 (135) (2,235) (2,913)
Gain on pension curtailment.....................
Other income....................................
Loss on sale-leaseback transaction..............
------ ------- ------- ------- -------- --------
Loss before extraordinary item................ (457) (688) (1,944) (5,450) (4,390) (8,064)
Extraordinary gain on early extinguishment of
debt.......................................... 1,367
------ ------- ------- ------- -------- --------
Net loss...................................... (457) (688) (1,944) (4,083) (4,390) (8,064)
Preferred stock dividends/accretion............. (211) (266) (790) (1,261)
------ ------- ------- ------- -------- --------
Net loss used in calculating loss per share... $ (457) $ (688) $(2,155) $(4,349) $ (5,180) $ (9,325)
====== ======= ======= ======= ======== ========
Net loss basic and diluted per share(3)....... $(0.18) $ (0.26) $ (0.82) $ (1.68) $ (1.99) $ (3.43)
====== ======= ======= ======= ======== ========
Shares used in computing net loss per share..... 2,610 2,631 2,642 2,591 2,597 2,716
====== ======= ======= ======= ======== ========
BALANCE SHEET DATA:
Cash, cash equivalents, pledged securities and
restricted cash(4)............................ $ 648 $ 421 $ 2,370 $ 4,072 $ 3,145 $ 3,975
Working capital (deficit)....................... 1,072 569 2,273 1,986 1,525 (270)
Total assets.................................... 1,912 1,632 3,728 25,646 26,523 28,042
Long-term debt, including current portion....... 102 281 193 18,047 22,744 20,275
Redeemable, convertible preferred stock......... 3,961 9,578 10,367 11,222
Accumulated deficit............................. (537) (1,226) (3,381) (7,730) (12,909) (21,180)
Total stockholders' equity (deficit)............ 1,422 834 (1,314) (5,624) (10,605) (9,778)
<CAPTION>
PRO FORMA NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -------------------------
1997(1) 1997 1998(2)
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue
Product....................................... $ 15,563 $ 10,231 $ 10,862
Contract...................................... 5,778 3,382
-------- -------- --------
Total revenue............................... 21,341 10,231 14,244
-------- -------- --------
Cost of revenue
Product....................................... 10,261 5,909 7,678
Contract...................................... 5,016 1,910
-------- -------- --------
Total cost of revenue....................... 15,277 5,909 9,588
Selling, general and administrative............. 12,922 5,912 11,101
Research and development........................ 8,633 523 8,420
Acquired research and development............... 37,718
Amortization of costs in excess of net assets
acquired...................................... 1,140 681 744
Reorganization expense..........................
-------- -------- --------
Total operating expense..................... 37,972 13,025 67,571
-------- -------- --------
Loss from operations.......................... (16,631) (2,794) (53,327)
Interest income (expense), net.................. (3,750) (2,100) (3,293)
Gain on pension curtailment..................... 800
Other income.................................... 1,273
Loss on sale-leaseback transaction.............. (335)
-------- -------- --------
Loss before extraordinary item................ (20,716) (4,894) (54,547)
Extraordinary gain on early extinguishment of
debt.......................................... 785
-------- -------- --------
Net loss...................................... (20,716) (4,894) (53,762)
Preferred stock dividends/accretion............. (1,261) (897) (1,958)
-------- -------- --------
Net loss used in calculating loss per share... $(21,977) $ (5,791) $(55,720)
======== ======== ========
Net loss basic and diluted per share(3)....... $ (3.45) $ (2.23) $ (7.64)
======== ======== ========
Shares used in computing net loss per share..... 6,368 2,596 7,291
======== ======== ========
BALANCE SHEET DATA:
Cash, cash equivalents, pledged securities and
restricted cash(4)............................ $ -- $ 11,392
Working capital (deficit)....................... 26 4,817
Total assets.................................... 22,427 51,960
Long-term debt, including current portion....... 20,281 46,073
Redeemable, convertible preferred stock......... 11,002 21,159
Accumulated deficit............................. (18,011) (74,942)
Total stockholders' equity (deficit)............ (12,175) (27,097)
</TABLE>
- ---------------
(1) Gives effect to the acquisition of PerImmune Holdings as if it had occurred
on January 1, 1997. See "Pro Forma Consolidated Financial Information."
(2) The six months ended December 31, 1995 and the subsequent periods include
the operations of Bartels, which was acquired by the Company in November
1995. The 1998 results include the operations of PerImmune Holdings, which
the Company acquired in January 1998. See Note 11 to the Company's
consolidated financial statements.
(3) See Note 2 to the Company's consolidated financial statements contained
elsewhere in this Prospectus for an explanation of earnings per share
calculations.
(4) The balance at December 31, 1997 includes $2,000,000 placed in a restricted
escrow in connection with the acquisition of PerImmune Holdings to satisfy
requirements of the senior note holder. See Note 11 to the Company's
Consolidated Financial Statements contained elsewhere in this Prospectus.
The 1998 amount includes $6.0 million maintained in segregated accounts from
which the Company is permitted to obtain funds upon requests to the lender,
and $4.92 million maintained in a segregated "interest escrow account" which
is restricted for the payment of interest under certain outstanding debt
obligations. Of the $6.0 million in the segregated accounts, $4.0 million is
invested in pledged securities. See Note 14 to the Company's consolidated
financial statements contained elsewhere in this Prospectus.
25
<PAGE> 27
SELECTED FINANCIAL DATA FOR PERIMMUNE HOLDINGS AND PREDECESSOR COMPANIES
The selected financial data below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements of PerImmune Holdings and the
notes thereto included elsewhere in this Prospectus. The balance sheet data as
of December 31, 1993 and the statement of operations data for the year then
ended and for the year ended December 31, 1994 are derived from the financial
statements of OT Biotechnology Research Institute ("BRI"), a predecessor company
to PerImmune which operated as a division of Organon Teknika, an indirect wholly
owned subsidiary of Akzo Nobel, NV. Such financial statements are not included
in this Prospectus but have been audited by KPMG LLP, independent certified
public accountants. The balance sheet data as of December 31, 1994 and 1995 are
derived from the financial statements of PerImmune, which was incorporated as a
wholly owned subsidiary of Organon Teknika in December 1994 (BRI and PerImmune,
collectively, are referred to as the "Predecessor Companies"). Such financial
statements are not included in this Prospectus but have been audited by KPMG
LLP, independent certified public accountants. The statement of operations data
for the year ended December 31, 1995 is derived from the statement of operations
of PerImmune, which is included elsewhere in this Prospectus and which was
audited by KPMG LLP, independent certified public accountants. The balance sheet
data as of August 2, 1996 have been derived from the unaudited financial
statements of PerImmune and have been prepared on a basis consistent with the
audited financial statements of PerImmune and the notes thereto and include all
adjustments (constituting only normal recurring adjustments) necessary for a
fair presentation of the information. The statement of operations data for the
period ended August 2, 1996 is derived from the financial statements of
PerImmune included elsewhere in this Prospectus and has been audited by KPMG
LLP, independent certified public accountants. The balance sheet data as of
December 31, 1996 and the statement of operations data for the period then ended
were derived from the consolidated financial statements of PerImmune Holdings
included elsewhere in this Prospectus and have been audited by KPMG LLP,
independent certified public accountants. The balance sheet data as of December
31, 1997 and the statement of operations data for the year then ended are
derived from the consolidated financial statements of PerImmune Holdings
included elsewhere in this Prospectus, and have been audited by
PricewaterhouseCoopers LLP, independent accountants.
<TABLE>
<CAPTION>
PREDECESSOR COMPANIES (1) PERIMMUNE HOLDINGS
------------------------------------------ ---------------------------
JANUARY 1 AUGUST 3
YEAR ENDED DECEMBER 31, THROUGH THROUGH YEAR ENDED
----------------------------- AUGUST 2, DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1996 1997
-------- ------- -------- ---------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Government contracts............................... $ 3,947 $ 6,005 $ 6,578 $ 3,420 $ 2,751 $ 1,869
Commercial and affiliate contracts................. 485 776 2,152 1,106 3,909
Product sales...................................... 821 1,247 1,407 1,632 594 2,111
-------- ------- -------- ------- ------- --------
Total revenue.................................. 4,768 7,737 8,761 7,204 4,451 7,889
-------- ------- -------- ------- ------- --------
Operating expenses:
Cost of contracts and sales:
Government contracts............................... 3,469 5,173 5,779 3,375 1,968 1,585
Commercial and affiliate contracts................. 9,996 9,796 10,189 6,299 886 3,431
Product sales...................................... 609 822 1,124 1,102 325 1,600
-------- ------- -------- ------- ------- --------
Total cost of contracts and sales.............. 14,074 15,791 17,092 10,776 3,179 6,616
Selling, general and administrative.................. 1,034 1,264 1,283 740 708 2,241
Research and development............................. 467 239 360 189 4,683 8,077
Other................................................ 50 29 14 10 608
-------- ------- -------- ------- ------- --------
Total operating expenses....................... 15,575 17,344 18,764 11,719 8,580 17,542
-------- ------- -------- ------- ------- --------
Loss from operations........................... (10,807) (9,607) (10,003) (4,515) (4,129) (9,653)
Interest (expense), net................................ (446) (837)
Loss on sale-leaseback transaction..................... (335)
-------- ------- -------- ------- ------- --------
Loss before income taxes....................... (10,807) (9,607) (10,003) (4,515) (4,575) (10,825)
Provision for income taxes............................. -- -- -- --
-------- ------- -------- ------- ------- --------
Net loss....................................... $(10,807) $(9,607) $(10,003) $(4,515) $(4,575) $(10,825)
======== ======= ======== ======= ======= ========
BALANCE SHEET DATA: (UNAUDITED)
Cash and cash equivalents.............................. $ 2 $ 2 $ 2 $ 193 $ 2,424 $ 2,504
Working capital (deficit).............................. 3,123 3,244 3,014 (18) (3,835) (8,871)
Total assets........................................... 7,506 12,694 12,829 12,650 13,624 8,030
Long-term debt, including current portion.............. 14,835 10,393
Redeemable, convertible preferred stock................ 9,786
Accumulated deficit.................................... (10,003) (14,518) (5,485) (16,310)
Total stockholders' equity (deficit)................... 5,844 10,242 10,521 9,161 (5,485) (16,027)
</TABLE>
- ---------------
(1) Effective August 3, 1996, 100% of PerImmune's common stock was acquired by
PerImmune Holdings from Organon Teknika in exchange for a $9,234,935 note
payable. Prior to the acquisition, the Predecessor Companies performed
certain research and development activities for, and were reimbursed by,
Organon Teknika and other affiliates under contractual agreements. The cost
related to those activities prior to the acquisition were presented as part
of "Cost of contacts and sales -- Commercial and affiliate contracts" in the
above selected financial data. Subsequent to the acquisition by PerImmune
Holdings, costs incurred in research and development activities were
presented as "Research and development" expenses as those activities were
primarily performed for PerImmune's own benefit and were not reimbursed.
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations may contain forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere in
this Prospectus. This discussion and analysis should be read in conjunction with
the financial statements and the notes thereto included elsewhere in this
Prospectus.
OVERVIEW
The Company is an integrated biopharmaceutical company, focused on the
development and commercialization of cancer vaccines and of immunotherapeutic
and diagnostic products for cancers and infectious diseases. The Company is
applying its extensive expertise in immunology and its clinical, regulatory,
manufacturing and marketing experience to develop a portfolio of innovative
therapeutic, prognostic and diagnostic products.
On January 2, 1998, the Company acquired all of the capital stock of
PerImmune Holdings. With the consummation of the Merger, PerImmune Holdings
became a subsidiary of Intracel. Management's Discussion and Analysis of
Financial Condition and Results of Operations for each of Intracel and PerImmune
Holdings for 1997, 1996 and 1995 will be presented, as appropriate, on a
separate basis. The results of operations for the nine-month period ended
September 30, 1998 and forward-looking liquidity and capital resources will be
discussed on a consolidated basis.
INTRACEL -- RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
Revenues increased $4.0 million or 39.2% to $14.2 million as compared to
$10.2 million for the nine months ended September 30, 1998 and 1997,
respectively. Product revenues generated by the Company's portfolio of
diagnostic products, which are used for the confirmation of viral and bacterial
diseases, increased by $0.7 million, or 6.9%, to $10.9 million as compared to
$10.2 million for the nine months ended September 30, 1997. This increase is
primarily the result of $1.5 million of product revenues arising from the
acquisition of PerImmune Holdings offset by a decline of $0.9 million of product
revenues as compared to the nine months ended September 30, 1997. This decline
is due to eroding sales prices of certain of the Company's product lines due to
increased competition, the loss of a distributing right to a high sales volume
product and the Company's decision at the end of 1997 to move its manufacturing
for the INSTI product to Canada, which came on line in March 1998. Contract
revenues for the nine months ended September 30, 1998 were $3.4 million, all
associated with the acquisition of PerImmune Holdings. Approximately $1.0
million is attributable to non-recurring revenue from a commercial contract for
the treatment of refractory bladder cancer, and the remaining $2.4 million is
associated with recurring government and commercial projects.
Cost of revenues increased $3.7 million, or 62.7%, to $9.6 million as
compared to $5.9 million for the nine months ended September 30, 1998 and 1997,
respectively. This increase was primarily comprised of $1.9 million for cost of
contract revenue and $1.1 million of cost of product revenues wholly
attributable to the acquisition of PerImmune Holdings for the nine months ended
September 30, 1998 as compared to the nine months ended September 30, 1997.
Selling, general and administrative expenses increased $5.2 million, or
88.1%, to $11.1 million as compared to $5.9 million for the nine months ended
September 30, 1998 and 1997, respectively. This increase is primarily comprised
of $2.0 million of expenses associated with the hiring of additional personnel,
primarily resulting from the Company's continued expansion of its internal
marketing and sales organization, $1.9 million of related expenses attributable
to the acquisition of PerImmune Holdings and $1.3 million of amortization
expense pertaining to the assets acquired from PerImmune Holdings.
27
<PAGE> 29
Research and development expense increased $7.9 million, or 1,580.0%, to
$8.4 million as compared to $0.5 million for the nine months ended September 30,
1998 and 1997, respectively. $8.2 million of this increase is attributable to
the acquisition of PerImmune Holdings.
Interest expense increased by $1.2 million, or 57.1%, to $3.3 million as
compared to $2.1 million for the nine months ended September 30, 1998 and 1997,
respectively. This increase is primarily attributable to the overall increase in
the Company's debt obligations as a result of the debt refinancings that took
place in 1998. See "Business -- Recent Debt Refinancings."
A gain of $0.8 million was recognized in conjunction with the curtailment
of the PerImmune Holdings pension plan. Other income in the amount of $1.3
million was recognized of which $1.1 million was attributable to the settlement
of a contingency for which the Company had previously recorded a liability, and
$0.2 million was attributable to the recovery of an investment previously
written off.
Extraordinary gain on the extinguishment of debt in the amount of $0.8
million was recognized of which $0.4 million was attributable to the settlement
of a note payable previously in dispute for the purchase of certain assets, and
$0.9 million was in connection with the Company's August 1998 refinancing
whereby a noteholder as a condition of early extinguishment agreed to waive a
"make-whole" guarantee provision of its note, resulting in a reversal by the
Company of all accumulated accrued interest recorded through the date of the
refinancing. Offsetting the gain in connection with the refinancing was
approximately $0.5 million of loss on the extinguishment of debt attributable to
the write-off of the then unamortized balance of debt issue costs associated
with the obligations that were refinanced.
1997 COMPARED TO 1996
Diagnostics revenue decreased $1.2 million, or 8.2%, to $13.5 million in
1997 as compared to $14.7 million for the twelve months ended December 31, 1996.
The Company believed the decline was in part related to the ineffectiveness of a
third-party distributor agreement. In response, the Company decided to establish
its own internal marketing and sales organization and terminated such agreement
during 1997. During 1997, the Company's INSTI product for HIV/AIDS testing was
introduced to international markets at a price designed to facilitate market
penetration. This pricing strategy resulted in an increase of revenues from $0.1
million to $0.5 million.
Cost of product sales increased $0.4 million, or 4.8%, to $8.7 million in
1997. The increase is a combination of several items. During 1996 and 1997 the
Company evaluated its research-related inventory, ("RUO Inventory") to determine
obsolete inventory quantities. As a result the Company recorded adjustments in
1996 and 1997 to Cost of Sales in the amounts of $1.1 million and $0.3 million,
respectively. After adjusting for obsolescence the Company's cost of products
sales increased approximately $1.2 million primarily due to the Company's cost
of products sales for INSTI products exceeding product revenues by $0.8 million.
Selling, general and administrative expenses increased by $2.8 million, or
49.1%, to $8.5 million. The increase was due to several factors. The Company
established its own internal marketing and sales organization in 1997. In
addition, the Company formed a regulatory department to provide quality control
in compliance with regulatory requirements to support Bartel's lines of
production and newly emerging products such as INSTI and ZYMMUNE. The Company
also incurred costs in connection with the Company's merger and acquisition
program, which included the Merger on January 2, 1998. A lease for a fully
developed diagnostic manufacturing facility was acquired in September 1996 with
associated costs included for all in 1997.
Research and development expenses decreased $0.4 million, or 40.0%, to $0.6
million in 1997 as a result of reduced payments under a specific contract.
Reorganization expense of $0.9 million was incurred in 1996, in connection with
the Company's relocation from Cambridge, Massachusetts to Issaquah, Washington.
Interest expense increased $0.7 million, or 31.8%, to $2.9 million in 1997
primarily related to interest rate increases associated with certain debt
instruments and $0.4 million for the Company's make whole provision associated
with a certain debt instrument.
28
<PAGE> 30
SIX MONTHS ENDED DECEMBER 31, 1995
Due to a change in the Company's fiscal year end from June 30 to December
31 during 1995, all information in the following paragraphs under this section
applies to the six months ended December 31, 1995.
Product sales for the six months ended December 31, 1995 were $2.4 million,
primarily comprised of $1.8 million from diagnostic product sales generated by
Bartels from the date of its acquisition.
For the six-month period ended December 31, 1995, cost of product sales was
$1.8 million, primarily comprised of $1.2 million pertaining to Bartels' cost of
product sales. Selling, general and administrative expenses for the six months
ended December 31, 1995 totaled $2.6 million.
Research and development expenses of $1.1 million for the six-month period
ended December 31, 1995 were associated with a specific contract. An additional
$2.1 million was expensed in the six months ended December 31, 1995 for acquired
in-process research and development associated with the acquisition of Bartels.
The Company recognized an extraordinary gain for the six months ended
December 31, 1995 of $1.4 million, pertaining to the Company's early retirement
of debt.
TWELVE MONTHS ENDED JUNE 30, 1995
Net revenues of $1.6 million for the year ended June 30, 1995 were
comprised of sales of proteins and antibodies for use in diagnostic and research
applications.
Cost of sales of $0.8 million consisted of the cost to manufacture the
various proteins and antibodies for the year ended June 30, 1995. Selling,
general and administrative expenses were $1.6 million for the year ended June
30, 1995.
Research and development expenses of $1.2 million for the year ended June
30, 1995 were associated with a specific contract.
INTRACEL -- LIQUIDITY
The Company's operating activities used $2.5 million in 1997 resulting from
the net loss of $2.9 million (adjusted for non-cash items) offset by a $0.4
million reduction in investment in working capital. Investing activities used
$4.2 million of which $2.0 million represented the deposit in escrow of
restricted cash associated with a debt issue. Additionally, $1.4 million was
invested in the purchase of property and equipment and $0.8 million was invested
or advanced to Bartels Prognostics, Inc., an unconsolidated subsidiary in which
the Company has a minority interest ("Bartels Prognostics"). Net cash from
financing activities of $5.5 million was primarily comprised of $1.7 million
from the sale of preferred stock and $6.0 million net from the sale of common
stock and the exercise of warrants and options, offset by $2.3 million of
payments on long-term debt net of proceeds of new issuances and associated
costs.
PERIMMUNE HOLDINGS -- RESULTS OF OPERATIONS
PerImmune Holdings' operations are conducted in one business segment which
applies biotechnology and other life sciences technologies to develop and
provide products and services. PerImmune Holdings groups these activities into
three operating activities: Government Contracts, Commercial Contracts and
Product Sales.
PerImmune Holdings' operations began on August 3, 1996 with its acquisition
of PerImmune from Organon Teknika, an indirect wholly owned subsidiary of Akzo
Nobel, NV, in a leveraged buyout. Therefore, all comparisons are for the full
year of 1997 as compared to approximately five months of 1996.
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH THE FIVE MONTHS ENDED
DECEMBER 31, 1996
Revenues increased $3.4 million, or 75.6%, to $7.9 million in the 1997
period. Government contracts revenues decreased $0.9 million, or 32.1%, to $1.9
million. This decrease was the result of several contracts which ended during
the United States government fiscal year, October 1996 to September 1997, with
only one
29
<PAGE> 31
of those contracts being renewed, at a much lower dollar value than in prior
years. Management decided to de-emphasize the government contract business and
instead focus on future products and services. Commercial contract revenues
increased by $2.8 million, or 254.5%, to $3.9 million in the 1997 period. This
increase was due to the start of a research and development contract with Baxter
Healthcare Corporation ("Baxter") and the difference in the length of the two
reporting periods. Product sales increased by $1.5 million, or 250.0%, to $2.1
million in the 1997 period due entirely to the difference in the length of the
two reporting periods. There was also a decrease of $0.3 million in 1997 sales
due to the completion of research and development for PerImmune's previous
parent in 1996.
Gross profit was approximately the same for both years. Government contract
gross profits declined from 28.5% of sales to 15.2% of sales due to the start-up
of new contracts and additional costs not expected on contracts completed.
Commercial contract gross profits declined from 19.9% of sales in the 1996
period to 12.2% in the 1997 period of sales due to non-billable overruns on
various fixed price research and development contracts. Product sales gross
profits decreased from 45.3% in the 1996 period to 24.2% in 1997 of sales due to
start-up and validation expenses related to products that received marketing
clearance from the FDA in late 1997.
Selling, general administrative expense increased by $1.5 million in the
1997 period, or 214.3%, due to the change in reporting periods and the initial
payment of over $0.3 million in connection with marketing studies prior to the
launch of the HumaSPECT product line. Previously, PerImmune's former parent had
paid marketing costs for this product line.
Research and development costs increased $3.4 million, or 72.3%, in 1997
due to the change in reporting periods, introduction of several clinical trials
and filing of applications for approval with the FDA, offset by lower research
and development activity as PerImmune Holdings placed more emphasis on its
largest projects while eliminating others. Other expense increased by $0.6
million due in part to facility costs that in the past had been allocated to
government contracts that were completed in 1996.
Interest expense increased by $0.6 million, or 150.0%, to $1.0 million in
1997, due to the change in reporting periods. Interest income of $0.2 million in
1997 was due to the earnings on excess cash received from the sale-leaseback of
PerImmune's corporate headquarters building in January 1997, which also resulted
in a $0.3 million loss.
PERIMMUNE HOLDINGS -- LIQUIDITY
PerImmune Holdings' operating activities used $8.5 million in 1997
resulting from the net loss of $9.9 million (adjusted for non-cash items) offset
by a $1.4 million in reduction in investment in working capital. Investing
activities generated $3.6 million of which $5.1 million related to the purchase
and sale-leaseback transaction referred to above and leaseback improvements
offset by capital expenditures of $0.3 million and $1.2 million paid to an
investment bank. Net cash from financing activities of $5.0 million included
$9.8 million from issuance of convertible preferred stock, $0.3 million from
issuance of common stock and $0.9 million from issuance of notes payable offset
by $5.6 million in payment of notes payable and $0.4 million of increase in
restricted cash.
CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES
As stated earlier, the future liquidity and capital resources of the
Company will be discussed on a post-Merger consolidated basis.
The Company's operating activities used $8.9 million for the nine months
ended September 30, 1998, resulting from the net loss of $12.4 million (adjusted
for non-cash and non-operating items) offset by a $3.5 million reduction in
investment in working capital. Investing activities for the nine months ended
September 30, 1998 used $8.1 million, as a result of $4.0 million invested in
pledged securities, $7.0 million deposited as restricted cash, $1.3 million paid
in conjunction with the merger of PerImmune Holdings and $0.5 million used for
the acquisition of property and equipment, offset by $2.5 million cash acquired
in conjunction with the merger, $2.0 million from the release of restricted cash
in escrow and a $0.2 million recovery of an investment in GAIFAR. Financing
activities for the nine months ended September 30, 1998
30
<PAGE> 32
provided $15.4 million primarily from the issuance of new debt and warrants of
$50.1 million, net of issuance costs, offset by payments of long-term debt
obligations, a line of credit and pension liability, and redemption of Series
A-2 preferred stock in the aggregate amount of $34.3 million and $0.8 million
paid in conjunction with the initial public offering of the Company's common
stock.
During the first quarter of 1998, the Company announced the results of a
ten-year Phase III clinical trial for OncoVAX(CL), which the Company believes is
the first vaccine to demonstrate efficacy for the post-surgical treatment of
Stage II colon cancer. The Company plans to begin treatment of patients using
the OncoVAX(CL) vaccine by establishing OncoVAX Centers in Europe and the United
States. If regulatory approvals are received, over 40 OncoVax Centers are
expected to be established in the next several years. The Company expects
capital expenditures to increase over the next several years as the OncoVAX
Centers are established. Currently, the Company is investigating various options
for funding the OncoVAX Center capital expenditures which are estimated to
require an investment between $1.0 and $3.0 million per site. This may include,
but is not limited to, capital equipment vendor financing, lease lines, and
strategic alliances with the hospitals associated with the OncoVAX Centers.
Currently the Company has no material commitments for such capital expenditures.
In addition to the capital expenditures required for each OncoVAX Center,
working capital requirements of the Company will increase in association with
the build-up of patient receivables as each OncoVAX Center becomes operational.
As of September 30, 1998, the Company's accumulated deficit was
approximately $74.9 million. Included in the accumulated deficit is a one-time
expense of $37.7 million which was incurred in the first quarter of 1998 related
to acquired in-process research and development consisting of the following
projects which were undergoing continuing development and/or clinical trials as
they approached approval by the FDA:
(1) HumaSPECT CR -- A product for detecting colorectal cancer
metastasis by radioimmunoscintigraphy. At the merger date of January 2,
1998, this product was in the registration process in Europe and in the
United States after having completed Phase III clinical trials.
(2) HumaSPECT BR -- A product for detecting breast cancer metastasis
by radioimmunoscintigraphy. At the merger date, this product had completed
Phase II clinical trials.
(3) HumaSPECT OV -- A product for detecting ovarian cancer metastasis
by radioimmunoscintigraphy. At the merger date, this product was in Phase I
clinical trials.
(4) HumaSPECT ID -- A product for detecting infectious disease
(bacteria). At the merger date, this product was in Phase I clinical
trials.
(5) Oncology Management ASI; (a) OncoVAX(CL) -- A product designed to
prevent tumor recurrence in colon cancer patients. At the date of merger,
this product had completed Phase II and two Phase III clinical trials.
Although the clinical data in the definitive Phase III trial was not
complete, there was evidence that the trial would be successful upon
completion. As of today's date, the registration process is currently
underway in Europe and the United States.
(b) OncoVAX(BCL) -- A product designed to prevent tumor recurrence
in B-cell lymphoma patients.
(6) Generic Vaccine -- A product designed to employ the HumaSPECT
product to detect and isolate from tumor cells those functional antigens
that can be used for protective immunity. At the date of merger, this
product was in basic research.
(7) KLH Therapeutic -- The Keyhole Limpet is a marine animal that
exists in the ocean range from Monterey, California to Mexico. PerImmune's
proprietary technology is the purification of a particularly active
component of KLH isolated from the blood of these animals. This component
has proven safety and efficacy in treating bladder cancer and might apply
to other cancers. It is also used in the vaccine for B-cell lymphoma.
31
<PAGE> 33
As each of these projects was in development at the date of the Merger with
PerImmune, technological feasibility for the projects was not established. The
research projects acquired were all specifically designed to address specific
indications with focused therapies, which may or may not lead to the development
of "platform technologies," having alternative future uses outside of the
contemplated indications.
The following tables set forth the fair value assigned to each project, the
expected cost and time required to complete such projects:
<TABLE>
<CAPTION>
FUTURE R&D TO
ACHIEVE APPROVALS
---------------------
PROJECT ($000)
-------
<S> <C>
HumaSPECT CR, BR, OV, ID................................. $2,640
Oncology Management ASI.................................. 4,744
Generic Vaccine..........................................
KLH Therapeutic.......................................... 750
</TABLE>
<TABLE>
<CAPTION>
PROJECT ASSIGNED FAIR VALUE
------- -------------------
<S> <C>
HumaSPECT CR................................................ $10,153
HumaSPECT BR................................................ 3,924
HumaSPECT OV................................................ 1,372
HumaSPECT ID................................................ 1,038
Oncology Management ASI..................................... 21,141
Generic Vaccine............................................. --
KLH Therapeutic............................................. 90
</TABLE>
<TABLE>
<CAPTION>
REGULATORY APPROVAL MARKET INTRODUCTION
------------------- -------------------
PROJECT US EUROPE US EUROPE
------- ------- -------- ------- --------
<S> <C> <C> <C> <C>
HumaSPECT CR............................ 1999 1998 2000 1999
HumaSPECT BR............................ 2001 2001 2002 2002
HumaSPECT OV............................ 2000 2000 2000 2000
HumaSPECT ID............................ 2001 2001 2001 2001
Oncology Management ASI
OncoVAX(CL)........................... 2000 1999 2000 1999
OncoVAX(BCL).......................... 2005 2005 2005 2005
Genvax Generic Vaccine.................. *2009 *2009 *2009 *2009
KLH Therapeutic......................... 2002 2002 2002 2002
</TABLE>
The material risks affecting timely completion and commercialization for
each of these projects include uncertainties associated with clinical trials and
obtaining necessary regulatory approvals, uncertainty of intellectual property
rights and additional funding required to complete and bring these products to
market. Successful clinical trials depend upon the rate of patient enrollment
which can be affected by, among other things, the size of patient population,
eligibility criteria and proximity of patients to clinical sites. In addition,
all clinical trials are subject to regulation by the Food and Drug
Administration ("FDA") and the FDA may suspend clinical trials at any time if it
concludes that the participants in such trials are being exposed to unacceptable
risks. The above projects, as with all new drugs, biologics and diagnostic
products, are subject to extensive and rigorous regulation in the United States
and elsewhere and must receive approval from the FDA in the United States and
other regulatory agencies outside the United States prior to commercial sale.
These regulatory processes are lengthy, expensive and uncertain. Production with
respect to each of the above projects depends upon proprietary technology for
which competitors may have patents similar to those of the Company. The Company
is aware, in particular, of the existence of at least one United States patent
owned by another party which may interfere with the manufacture and marketing of
HumaSPECT in the United States. In addition, litigation to defend against, or
prosecute for, patent infringement claims could result in substantial costs to
the Company and delay completion of such projects. Continued development for
each of these projects will require additional capital which the Company may
need to raise from outside sources. Failure to obtain funding on acceptable
terms could require the Company to delay, reduce the scope of, or eliminate one
of more of the above projects.
32
<PAGE> 34
At September 30, 1998, the Company had working capital of approximately
$4.8 million with approximately $11.4 million in cash, cash equivalents, pledged
securities and restricted cash as its principal source of liquidity. As all of
PerImmune's contracts and commitments survived the Merger, the Company is now
responsible for honoring the terms and conditions of these agreements. The
Company considers all such contracts and agreements to be of a normal, recurring
nature and consistent with the operational functions of the Company. The
material contracts are discussed in further detail in the notes to the financial
statements of PerImmune Holdings, Inc. and Subsidiary and elsewhere in this
Prospectus.
During 1997, the Company received certain amendments and waivers to a debt
agreement and its covenants. These amendments and waivers were retroactive to
January 1, 1997 and remained in effect until June 30, 1998. The amendments and
waivers became effective upon the consummation of the Merger. On April 1, 1998,
the Company repaid all amounts outstanding under the debt agreement associated
with the amendments and waivers.
On August 25, 1998, the Company obtained additional financing of
approximately $41.0 million through the issuance of equity securities and
additional debt instruments. Of this amount, approximately $27.3 million was
used for the retirement of existing debt or to redeem outstanding shares of
preferred stock, approximately $4.9 million was deposited into an escrow account
which is equivalent to four scheduled interest payments on the new debt
agreement and $6.0 million was deposited into a segregated bank account from
which the Company is permitted to obtain funds upon request to the lender, with
the balance applied to meeting the working capital needs of the Company. The
Company's current material indebtedness consists of a 12% Guaranteed Senior
Secured Primary Note due August 25, 2003 in the aggregate original principal
amount of $35.0 million and a 12% Guaranteed Senior Secured Escrow Note due
August 25, 2003 in the aggregate original principal amount of $6.0 million. The
Company has amended the terms of these notes in 1999. In January 1999, the
Company issued $2.0 million of non-convertible debt securities. See further
discussion of the outstanding indebtedness of the Company as set forth under
"Business -- Recent Debt Refinancings" and elsewhere in this Prospectus.
The Company believes that its sources of liquidity, together with net
proceeds from its private placements and borrowings, as well as the proceeds
from this offering will be sufficient to satisfy its funding needs for
operations through the end of 1999. Since June 30, 1995, the Company has
incurred negative cash flow from operations and does not expect to generate
positive cash flow to fund its operations for the next few years. This estimate
of the period for which the Company expects its available sources of liquidity
to be sufficient to meet its capital requirements is a forward-looking statement
that involves risks and uncertainties. There can be no assurance that the
Company will be able to meet its capital requirements for this period as a
result of certain factors set forth under "Risk Factors -- Future Capital
Requirements: Uncertainty of Additional Funding" and elsewhere in this
Prospectus. In the event the Company's capital requirements are greater than
estimated, the Company may need to raise additional capital to fund its research
and development and to expand its sales and marketing efforts to support the
commercialization of its products under development. The Company's future
liquidity and capital funding requirements will depend on numerous factors,
including the extent to which the Company's products under development are
successfully developed and gain market acceptance, the timing of regulatory
actions regarding the Company's products under development, the costs and timing
of expansion of sales, marketing and manufacturing activities, procurement and
enforcement of patents important to the Company's business and results of
clinical trials, regulatory approvals and competition. There can be no assurance
that additional capital will be available on terms acceptable to the Company, if
at all. Furthermore, any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may include restrictive
covenants. If adequate funds are not available, the Company may be required to
curtail certain Company operations or to obtain funds through entering into
collaborative agreements or other arrangements on unfavorable terms. The failure
by the Company to raise capital on acceptable terms when needed could have a
material adverse effect on the Company's business, financial condition or
results of operations.
The Company may incur additional operating losses over the next few years
in connection with the establishment and operation of its OncoVAX Centers.
Historically, such losses have been principally the result of the various costs
associated with the Company's research and development programs and pre-clinical
33
<PAGE> 35
and clinical activities. The Company expects that losses will fluctuate from
quarter to quarter and that such fluctuations may be substantial. To date the
Company's revenues have primarily resulted from product sales of diagnostic test
kits. The Company's ability to achieve a consistent, profitable level of
operations is dependent in large part upon continued product research and
development, obtaining regulatory approvals for its existing identified products
and successfully manufacturing and marketing such products.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than one year, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements.
Management has initiated a program to prepare the Company's computer
systems and other electronic applications for the year 2000 (the "Year 2000
Program"). Through the Year 2000 Program, management is currently reviewing the
Company's computer systems and other electronic applications in order to
identify potential Year 2000 problems. Based upon preliminary results of the
Year 2000 Program, management anticipates that the Company's Year 2000
compliance expenses will not be material and that the Company's Year 2000
Program will be completed before January 1, 2000. The Company's failure to
successfully complete its Year 2000 Program could have a material adverse effect
on the Company's business, financial condition and results of operations.
34
<PAGE> 36
BUSINESS
GENERAL
Intracel is an integrated biopharmaceutical company focused on the
development and commercialization of cancer vaccines and immunotherapeutic and
diagnostic products for cancers and infectious diseases. Based upon the results
of Phase III clinical trials, the Company is preparing a BLA for its OncoVAX(CL)
cancer vaccine for the post-surgical treatment of Stage II colon cancer, the
most common form of colon cancer. The Company is also planning to initiate Phase
III clinical trials for OncoVAX(CL) in combination with chemotherapy for Stage
III colon cancer, has initiated Phase III clinical trials for KLH for the
treatment of refractory bladder cancer, and is planning to initiate a Phase
II/III clinical trial for its ASI(BCL) vaccine for the treatment of low-grade
B-cell lymphoma. In addition, the Company markets a portfolio of in vitro
diagnostic products and is introducing a number of new diagnostic products for
detecting and monitoring various cancers, AIDS and heart disease.
The Company believes that OncoVAX(CL) is the first vaccine to demonstrate
efficacy for the post-surgical treatment of Stage II colon cancer, and has
recently announced the results of the ten-year Phase III Amsterdam trial. This
randomized, multi-centered 254-patient clinical trial was the third in a series
of clinical trials of OncoVAX(CL) conducted in the United States and Europe. The
series included the Phase III ECOG trial and the Phase II/III Hoover trial. In
the Amsterdam trial, which added a fourth booster vaccination to the regimen,
the Company believes that OncoVAX(CL) demonstrated a 61% reduction in the rate
of recurrences and a 50% improvement in the survival rate for patients with
Stage II colon cancer when compared to surgery alone. The Company believes that
the results of the Amsterdam trial are supported by positive trends shown in the
ECOG and Hoover trials. Stage II colon cancer accounts for approximately 120,000
of the more than 200,000 new cases of colon cancer diagnosed in the United
States and Europe each year. There is currently no product approved by the FDA
for patients with Stage II colon cancer, and surgery is the principal means of
treatment. The Company plans to file a BLA for OncoVAX(CL) with the FDA in 1999
and is presently seeking the necessary regulatory and reimbursement approvals in
certain countries in Europe. If the FDA does not consider the trials discussed
above as relevant or supporting to the efficacy of OncoVAX(CL), the FDA may
require additional clinical trials of OncoVAX(CL) prior to or after the FDA's
approval of the product. There can be no assurance that the Company will obtain
FDA approval for OncoVAX(CL) on a timely basis. See "Risk Factors -- Dependence
on OncoVAX(CL)" for a description of certain issues relating to the proposed BLA
filing.
OncoVAX(CL) is a multivalent vaccine produced from a patient's own
surgically removed tumor. The tumor is collected immediately after surgery and
delivered to one of the Company's OncoVAX Centers for manufacture and subsequent
administration of the vaccine. Each OncoVAX Center has been designed to treat up
to 2,000 patients per year. The Company plans to establish OncoVAX Centers at or
near hospitals with established surgery practices, serving areas characterized
by high population density and high incidence of colon cancer. The Company
expects that each OncoVAX Center will require less than 3,000 square feet and
will employ a staff of production technicians and a supervising physician.
Facilities for the first OncoVAX Center in the United States have been
established at Lehigh Valley Hospital in Allentown, Pennsylvania, and the terms
of the Company's ownership in, and operation of, the center are being developed
pursuant to a joint venture with Lehigh Valley Hospital. A second OncoVAX Center
in the United States is being established at the Company's therapeutic
manufacturing facility in Rockville, Maryland. Future OncoVAX Centers may also
be structured as joint ventures with established healthcare providers. The
OncoVAX Centers located in the United States will be considered to be
manufacturing facilities by the FDA and will be regulated accordingly. The first
OncoVAX Center in Europe is being established at University Hospital, Vrije
Universiteit, Amsterdam. The Company plans to establish more than 25 OncoVAX
Centers in the United States and more than 15 OncoVAX Centers in Europe. The
Company estimates that each OncoVAX Center will cost approximately $1.0 to $3.0
million dollars to build. The Company expects revenues from operating OncoVAX
Centers to offset the cost of new centers.
The Company plans to leverage its OncoVAX Centers to perform expedited
clinical trials and to launch other products, such as its in vivo imaging agent,
HumaSPECT, and its B-cell lymphoma vaccine ASI(BCL).
35
<PAGE> 37
The Company has filed an amendment to the IND for OncoVAX(CL) with the FDA to
commence a Phase III clinical trial for the use of OncoVAX(CL) in combination
with chemotherapy for the treatment of Stage III colon cancer. The Company
believes that this combination therapy will be more effective in the treatment
of Stage III colon cancer than either OncoVAX(CL) or chemotherapy administered
alone. The Company is currently in discussions with the FDA regarding the
commencement of the Phase III clinical trial for this combination therapy. No
assurance can be given that the Company will be given clearance to commence this
Phase III clinical trial in a timely manner, if at all. See "Risk
Factors -- Dependence on OncoVAX(CL)".
The Company has initiated a Phase III clinical trial for KLH for the
treatment of refractory bladder cancer. In Phase II clinical trials, the Company
believes that KLH demonstrated significantly less toxicity than the leading
FDA-approved product for the treatment of bladder cancer. The Company has
entered into a strategic partnership with Mentor, a leading urology company,
under which Mentor has been funding research and development, is required to
make milestone payments to the Company and will market KLH worldwide. Mentor
also markets Accu-D(x), the Company's rapid bladder cancer test.
The Company plans to file an amendment to the IND for its ASI(BCL)vaccine
with the FDA to commence a Phase II/III clinical trial for such vaccine in the
first half of 1999. ASI(BCL) is designed to prevent recurrence of low-grade
non-Hodgkin's B-cell lymphoma, the most common type of B-cell lymphoma, in
patients who have achieved remission through chemotherapy and/or immunotherapy.
ASI(BCL), like OncoVAX(CL), is an autologous vaccine and is produced using a
unique antigen derived from a patient's own cancerous cells. The Company
believes that a Phase I clinical trial has demonstrated that ASI(BCL) can
stimulate a specific immune response and is associated with improved clinical
outcomes.
The Company has substantial expertise in the development and manufacturing
of totally human antibodies. In April 1998, the Company commenced enrollment in
its Phase I clinical trial for its totally human antibody HumaRAD(16.88) for the
treatment of head and neck cancer and plans to submit an IND with the FDA to
commence a Phase I clinical trial of a related product, HumaRAD(88BV59) for the
treatment of ovarian cancer, in the first half of 1999. In addition, the Company
is developing several antibody products to treat life-threatening infectious
diseases.
Through Bartels, the Company also markets a portfolio of innovative in
vitro diagnostic products for the confirmation of viral and bacterial diseases.
The Company markets these diagnostic products domestically to approximately
1,500 hospitals and clinical laboratories through its internal sales force.
Internationally, the Company relies upon third-party distributors to market its
diagnostic products. In 16 foreign countries, the Company is marketing a
one-minute test for HIV/AIDS based on its proprietary INSTI technology. In
addition, the Company is introducing a number of new diagnostic products,
including its Apo-Tek Lp(a) test kit to monitor an important indicator of heart
disease, its Accu-D(x) test to monitor the recurrence of bladder cancer and its
ZYMMUNE test to monitor CD4/CD8 levels in patients with HIV/AIDS. As a
complementary product for OncoVAX(CL), the Company has developed an in vivo
diagnostic product, HumaSPECT, to monitor recurrence and metastatic spread of
colon cancer. For a Phase III clinical trial, the Company believes that
HumaSPECT demonstrated significant advantages over CT scans, the current
standard for detecting recurrence and metastatic spread of colon cancer. The
Company has filed a BLA in the United States and in December 1998 received
marketing authorization for HumaSPECT in Europe. Syncor currently holds world-
wide distribution rights for the Company's HumaSPECT product. While the Company
is currently in negotiations to terminate the agreement providing for such
rights, there can be no assurances that the agreement will be terminated on a
timely basis, if at all.
The Company's technology foundation in cancer vaccines and human antibodies
is supported by a clinical trial group with expertise in designing and
implementing complex clinical trials and by state-of-the-art manufacturing
facilities capable of producing commercial quantities of its therapeutic,
diagnostic and prognostic products. To conduct research, development,
manufacturing and marketing of its products, the Company employs over 220 people
in multiple facilities, including its corporate headquarters in Issaquah,
Washington, a therapeutic product facility located in Rockville, Maryland and
diagnostic product facilities in Issaquah, Washington and Richmond, British
Columbia, Canada.
36
<PAGE> 38
BACKGROUND INFORMATION
Overview
Cancer is a family of more than one hundred different diseases which can be
categorized into two broad groups: (i) solid tumors, like colon, breast,
prostate and lung cancer and (ii) hematologic, or blood-borne, cancers like
B-cell lymphoma and leukemia. Both groups are generally characterized by a
breakdown of the cellular mechanisms that ordinarily regulate cell growth and
cell death in healthy tissues.
Cancers develop from normal cells in the body. When a cell ceases to act
according to its pre-programmed function, it may become malignant and grow
uncontrollably. In solid tumors, malignant cells disrupt the normal function of
the tissues in which they are growing and can also spread to other tissues in
the body or "metastasize." This disruption in vital organs, such as the lungs or
the liver, frequently leads to death. Blood-borne cancers primarily affect blood
cells and the immune system. Death from blood-borne cancers is usually caused by
infection and/or vital organ failure.
Despite a substantial investment in cancer research and development during
the past several decades, the overall incidence of cancer is now higher than it
was 30 years ago. According to the World Health Organization, cancer kills six
million people per annum worldwide. The American Cancer Society estimates that,
in the United States, the incidence of new cancer cases in 1998 will be
approximately 1.2 million and that over 560,000 people will die from cancer. In
addition, according to the American Cancer Society, over 35% of all Americans,
or 85 million people, now living will eventually contract some form of cancer.
According to statistics published by the American Cancer Society which are
based on estimates from the National Cancer Institute, approximately 35% of all
new cancer cases and approximately 24% of cancer deaths in the United States in
1998 will be attributable to colorectal, breast, ovarian, bladder and head and
neck cancer. The diagnosis and treatment of these cancers and B-cell lymphoma
are the subject of current development efforts by the Company. The following
table details the new cases, deaths and direct treatment expenditures for
selected cancers in the United States:
NEW CASES, DEATHS AND ANNUAL EXPENDITURES FOR SELECTED CANCERS IN THE UNITED
STATES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
ANNUAL
EXPENDITURES(2)
TYPE NEW CASES(1) DEATHS(1) (IN MILLIONS)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lung 171,500 160,100 $5,060
- ---------------------------------------------------------------------------------
Colorectal 131,600 56,500 6,465
- ---------------------------------------------------------------------------------
Breast 180,300 43,900 6,599
- ---------------------------------------------------------------------------------
Prostate 184,500 39,200 4,610
- ---------------------------------------------------------------------------------
Ovarian 25,400 14,500 906
- ---------------------------------------------------------------------------------
Bladder 54,400 12,500 2,172
- ---------------------------------------------------------------------------------
Head and neck 30,300 8,000 N/A
- ---------------------------------------------------------------------------------
Non-Hodgkin's lymphoma(3) 55,400 24,900 N/A
</TABLE>
- ---------------
(1) Source: American Cancer Society's Cancer Facts and Figures, 1998.
(2) Includes all direct treatment expenses but excludes all indirect and actual
morbidity costs. Source: Brown M.L., Fintor L.; "The Economic Burden of
Cancer," Cancer Prevention and Control, New York, Marcel Dekker, 1995.
(3) Includes B-cell lymphoma, which accounts for a vast majority of new cases
and deaths.
37
<PAGE> 39
Current Cancer Treatments
The three most common methods of treating patients with cancer are surgery,
chemotherapy and radiation. Surgery is primarily performed to remove solid
tumors that are accessible to the surgeon and can be effective if the cancer has
not yet metastasized. Frequently, however, the surgeon cannot remove all of the
cancerous cells associated with the solid tumor. This results in the need for
post-surgical "adjuvant" treatment methods, such as chemotherapy or radiation,
to kill or limit growth of remaining cancerous cells and to prevent recurrence
of the cancer.
Chemotherapy, which typically involves the intravenous administration of
cytotoxic drugs designed to destroy cancerous cells, is used for the treatment
of both solid tumors and blood-borne malignancies. Chemotherapeutic drugs
generally interfere with cell division and are therefore more toxic to rapidly
dividing cancer cells. Since cancer cells can often survive the effect of a
single drug, several different drugs are usually given in a combination therapy
designed to target overlapping mechanisms of cellular metabolism and to
overwhelm the ability of cancer cells to develop drug resistance. Nevertheless,
partial and even complete remissions achieved by chemotherapy are often not
permanent, because the treatment does not kill all the cancer cells, and the
cancer resumes its progression within a few months or years of treatment.
Chemotherapy is often re-administered to relapsed patients whose response
typically becomes shorter with each successive treatment as resistance
increases. Eventually, most patients become "refractory" to chemotherapy,
meaning that the length of their response, if any, to treatment is so brief as
to conclude that further chemotherapy regimes would be of little or no benefit.
Chemotherapeutic drugs are not sufficiently specific to cancer cells to
avoid affecting normal cells, especially those that are growing rapidly. As a
result, patients often experience debilitating side effects such as nausea,
vomiting, hair loss, anemia and fatigue, as well as life-threatening side
effects such as immune system suppression. These side effects can limit the
effectiveness of therapy because the clinician must avoid exceeding the maximum
dose of drug that the patient can tolerate. Since dosages must be limited to
avoid unacceptable side effects, it may not be possible to administer
sufficiently high doses of chemotherapeutic drugs to overcome the natural
ability of cancer cells to become resistant.
Radiation is employed to irradiate a solid tumor and surrounding tissues
and is a first-line therapy for inoperable tumors, but side effects are a
limiting factor in treatment. Radiation accomplishes its purpose by killing
cancer cells through a process called ionization. Some cells die immediately
after radiation because of the direct effect, though most die because the
radiation damages the chromosomes and DNA thereby limiting cell division.
Radiation is used frequently in conjunction with surgery either to reduce the
tumor mass prior to surgery or to destroy any tumor cells that may remain at the
tumor site after surgery. However, radiation therapy cannot assure that all
tumor cells will be destroyed and has very limited utility for treating
widespread metastatic disease.
Mechanisms of Immunity
The immune system is composed of specialized cells that recognize, destroy
and eliminate disease-causing foreign substances or cancer cells. There are two
generally recognized components of immunity, cellular immunity and humoral
immunity. Cellular immunity is effected by T lymphocytes ("T-cells"), natural
killer cells, macrophages, and polymorphonuclear leukocytes. T-cells recognize
and can be directly toxic to viruses, bacteria, parasites and cancer cells.
T-cells also secrete cytokines which recruit and activate other immune cells,
such as macrophages, natural killer cells and polymorphonuclear leukocytes, to
the site of infection or tumor, where these cells engulf, or secrete cytotoxic
substances that kill, the foreign substances, infectious agents or cancer cells.
T-cells also direct the development of humoral immunity. Humoral immunity is
effected by antibodies produced by B lymphocytes ("B-cells"). Antibodies are
proteins produced in response to foreign substances called "antigens."
Antibodies have a region that binds specifically to the antigen and a region
that binds other immune cells such as macrophages and natural killer cells. The
region that binds other immune cells is only recognized by these cells when the
antibody is bound to the antigen. Thus, the antibody specifically directs the
elimination of the antigen from the body. In persons with healthy immune
systems, cancerous cells are recognized as antigens and eliminated through a
process called immune
38
<PAGE> 40
surveillance. In patients with cancer, the immune surveillance process often
fails, thus allowing cancerous cells to evade elimination by the immune system
and develop into tumors and lymphomas. It is believed, however, that the immune
system's ability to fight cancer can be enhanced through various
immunotherapeutic approaches.
Emerging Immunotherapeutic Cancer Treatments
Scientific progress in defining key aspects of the molecular biology and
immunology of cancer in recent years has yielded a number of promising new
treatment approaches, which potentially overcome some of the major drawbacks of
current treatment modalities. The Company believes that one of the most
promising approaches for the development of cancer treatments is immunotherapy.
The four principal immunotherapeutic or cancer vaccine approaches are described
in the following table and include: (i) Active Specific Immunotherapy, (ii)
Active Non-Specific Immunotherapy, (iii) Antibody-Based Immunotherapy and (iv)
Adoptive Immunotherapy. The Company is developing products which utilize one or
more of the first three of these approaches.
IMMUNOTHERAPEUTIC APPROACHES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
TYPE OF IMMUNOTHERAPY DESCRIPTION
- -------------------------------------------------------------------------------------
<S> <C>
Active Specific Activation of anti-tumor immunity using antigenic tumor
cells, cell lysates, or extracted/synthetic tumor antigens.
- -------------------------------------------------------------------------------------
Active Non-Specific Activation of anti-tumor immunity and other nonspecific
effector cells using microbial or chemical immunomodulators.
- -------------------------------------------------------------------------------------
Antibody-Based Transfer of antibodies or antisera, providing indirect
enhancement to immunity.
- -------------------------------------------------------------------------------------
Adoptive Transfer of immunological cells from one patient to another.
</TABLE>
Active Specific Immunotherapy involves the stimulation of a patient's
immune system by using a patient's own cancer cells or extracted or synthetic
tumor associated antigens. Cancer vaccines based upon active specific
immunotherapy are typically mixed with a non-specific adjuvant whose role is to
stimulate the immune system's response to the vaccine. By isolating cells or
antigenic components from the tumor, mixing them with an adjuvant, and
reintroducing this mixture back into the individual, the immune system may be
induced to develop a response capable of destroying tumor cells. Active specific
immunotherapy treatments are generally being developed as an adjuvant to
surgery. Adjuvant therapy is necessary because surgery often fails to remove all
primary or metastatic cancer cells. Active specific immunotherapy may offer the
means by which an individual's immune system can be activated throughout the
body to search out and destroy these residual cancer cells. The Company's active
specific immunotherapeutic products include OncoVAX(CL) for the treatment of
colon cancer and ASI(BCL) for the treatment of B-cell lymphoma.
Active Non-Specific Immunotherapy involves the stimulation of a patient's
immune system by using non-specific microbial or chemical immunomodulators, such
as Bacillus Calmette-Guerin ("BCG"), the only FDA-approved immunomodulator for
the treatment of bladder cancer. The mechanisms by which these non-specific
immunomodulators enhance the immune response to antigens are poorly understood
but are thought to involve the inducement of a local inflammatory reaction. This
reaction results in the recruitment and activation of antigen presenting cells,
the production of cytokines and the recruitment of effector T-cells and B-cells
to the site of the antigen. Some of these non-specific agents have also been
shown to be effective as immunogenic carriers and adjuvants. The Company's
active non-specific immunotherapeutic products include KLH for the treatment of
refractory bladder cancer.
Antibody-Based Immunotherapy involves the use of anti-cancer monoclonal
antibodies as stand-alone therapeutics to augment a patient's immune system or
as targeting mechanisms for the administration of radiation or chemotherapy.
While monoclonal antibodies have been shown to be effective in binding to cancer
cells, problems associated with their specificity, immunogenicity and variable
binding properties have to date resulted in a limited number of useful
applications for even the most effective monoclonal antibodies when
39
<PAGE> 41
used alone. Research has increasingly moved towards using monoclonal antibodies
as vehicles for targeting the administration of radiation or chemotherapy to the
immediate vicinity of malignant cells. The Company's antibody-based
immunotherapeutic products include HumaRAD(16.88) and HumaRAD(88BV59), totally
human antibodies labeled with (90)Yttrium for the intratumoral treatment of head
and neck cancer and of ovarian cancer, respectively.
Adoptive Immunotherapy involves the transfer of immunological cells with
anti-cancer properties from one patient into another in the hope that these
cells either directly or indirectly produce anti-cancer effects on growing
tumors. Although significant advances have been made, the available data remains
inconclusive. At present, the Company is not active in this field.
THERAPEUTIC PRODUCTS
The Company has accumulated and developed proprietary technology and
expertise in several different approaches to the development of cancer vaccines
and immunotherapeutics. The diversity of the Company's product and technology
portfolio reflects the Company's belief that different approaches are required
for different cancers. The following table sets forth the Company's leading
therapeutic and in vivo monitoring products, classifies each according to its
immunotherapeutic approach, specifies the cancer indication treated or monitored
by each and summarizes the regulatory status of each:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
THERAPEUTIC PRODUCTS
- ---------------------------------------------------------------------------------------------------------
IMMUNOTHERAPEUTIC/ CLINICAL TRIAL STATUS/
PRODUCT DIAGNOSTIC APPROACH INDICATION EXPECTED MILESTONES(1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OncoVAX(CL) Active Specific Stage II colon cancer Phase III complete, BLA
Immunotherapy filing expected in 1999.
Launch in Europe expected
in first half of 1999
subject to opinions on
national regulatory
status.(2)
- ---------------------------------------------------------------------------------------------------------
OncoVAX(CL) plus Active Specific Stage III colon cancer Amendment to IND filed for
chemotherapy Immunotherapy plus Phase III.(3)
chemotherapy
- ---------------------------------------------------------------------------------------------------------
KLH Active Non-Specific Refractory bladder cancer Phase III initiated.
Immunotherapy
- ---------------------------------------------------------------------------------------------------------
ASI(BCL) Active Specific B-cell lymphoma Phase II/III amendment to
Immunotherapy IND planned for submission
in 1999.
- ---------------------------------------------------------------------------------------------------------
HumaRAD(16.88) Antibody-Based Diagnosis Head and neck cancer Phase I enrollment
commenced.
- ---------------------------------------------------------------------------------------------------------
HumaRAD(88BV59) Antibody-Based Diagnosis Ovarian cancer Phase I IND planned for
submission in 1999.
- ---------------------------------------------------------------------------------------------------------
MONOGENE(INT) Antibody-Based Gene HIV Phase I IND planned for
Therapy submission in 1999.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) See "Risk Factors -- Government Regulation: No Assurance of Regulatory
Approvals" and "-- Government Regulation."
(2) See "Risk Factors -- Dependence on OncoVAX(CL)" for a description of certain
issues relating to the Phase III clinical trials and the proposed BLA
filing.
(3) See "Risk Factors -- Dependence on OncoVAX(CL)" for a description of certain
issues relating to the status of this IND amendment.
OncoVAX(CL) for the treatment of colon cancer
The American Cancer Society estimates that approximately 95,600 Americans
will be diagnosed with colon cancer in 1998 and approximately 47,700 will die
from colon cancer in 1998, ranking second only to lung cancer as a cause of
death from cancer. According to Facts and Figures in the European Community
(1993), colon cancer afflicts over 120,000 people annually in Europe, with
deaths from colon cancer estimated at over
40
<PAGE> 42
79,000 per year. Colon cancer is generally classified into four categories or
stages according to the status of the tumor nodes and metastasis. In Stage I
colon cancer, the tumor has not penetrated the bowel wall and surgery is
curative in more than 90% of the cases. In Stage II colon cancer, penetration of
the bowel wall has occurred but regional lymph nodes are negative and surgery is
curative for approximately 70% of these patients. Approximately two-thirds of
patients with colon cancer present with Stage II disease. In Stage III colon
cancer, the tumor has spread to the lymph nodes and the cure rate is moderate to
poor depending on the extent of lymph node involvement. In Stage IV colon
cancer, the cancer has spread to other vital organs in the body and is fatal in
the vast majority of cases. Generally, patients that recur present with advanced
colon cancer and the prognosis for these patients is very poor.
Except for surgery, there is no medically accepted treatment for either
Stage I or Stage II colon cancer and trials using adjuvant chemotherapy have not
clearly demonstrated any patient benefit. For Stage III colon cancer, a
combination of the chemotherapeutic drugs 5-fluorouracil ("5-FU") and levamisole
or leucovorin is the treatment of choice in the United States and in Europe. The
Company estimates that between 20% and 30% of patients fail to complete their
course of chemotherapy because of adverse reactions.
OncoVAX(CL) is an active specific immunotherapeutic for the post-surgical
treatment of patients diagnosed with Stage II colon cancer. OncoVAX(CL) is
prepared for each patient using the patient's own surgically removed tumor.
After receipt at an OncoVAX Center, the tumor is enzymatically treated to
separate the tumor cells and these cells are frozen awaiting preparation of the
vaccine. The vaccine consists of a regimen of four inoculations administered
over a period of six months. When a patient presents approximately four to five
weeks after surgery for the first inoculation and one week later for the second
inoculation, a portion of the tumor cells is thawed, irradiated to neutralize
tumorigenic potential and combined with a proprietary formulation of BCG that
serves as an immunogenic enhancer. The third inoculation (given one week after
the second inoculation) and the final booster inoculation (given six months
after the initial inoculation) are prepared the same way but without the
addition of BCG.
In the Amsterdam trial, OncoVAX(CL) was tested in the prospectively
randomized, multi-center Phase III clinical trial. A total of 254 patients were
randomized postoperatively to receive either OncoVAX(CL) or no further treatment
after eligibility was established. Eligible patients included patients with
confirmed Stage II or Stage III disease whose primary tumors had an adequate
number of cells to allow for the production of OncoVAX(CL). Twelve hospitals
within a four-hour radius of University Hospital screened potential candidates
for the protocol. The potential candidate's colon resection was performed at one
of the twelve sites, and the tumor specimen was transported to University
Hospital's vaccine production laboratory for processing.
The Company believes that the Amsterdam trial demonstrated that, at a
median follow-up period of 5.4 years after treatment, OncoVAX(CL) significantly
reduces the rate of tumor recurrences by 44% in patients with Stage II and III
colon cancer. In Stage II patients, OncoVAX(CL) had the greatest impact with a
statistically significant 61% reduction in the rate of recurrences along with
proportional increases in overall survival.
The Company believes that, in addition to its efficacy, OncoVAX(CL) has
demonstrated an extremely favorable safety profile. Over a 15-year period, more
than 700 people have received either a three- or four-shot regimen of
OncoVAX(CL) with no significant side effects reported. The Company believes that
the results of the Amsterdam trial confirmed positive trends seen in the ECOG
and Hoover trials that tested OncoVAX(CL) administered in regimens of three
inoculations without a six-month booster inoculation.
The Company is now preparing a BLA for OncoVAX(CL) for submission to the
FDA in 1999. The Company is also seeking the necessary registrations and
reimbursement approvals in certain countries in Europe. See "Risk
Factors -- Dependence on OncoVAX(CL)."
To commercialize OncoVAX(CL), the Company is planning to establish OncoVAX
Centers at or near hospitals with established surgery practices. OncoVAX Centers
have been designed to treat up to 2,000 patients per year. The Company expects
that each OncoVAX Center will require less than 3,000 square feet and contain
all the equipment, facilities and personnel necessary to manufacture, store and
administer OncoVAX(CL). The first centers in the United States are planned for
areas characterized by high population
41
<PAGE> 43
density and high incidence of colon cancer. In each OncoVAX Center, the Company
will employ or otherwise retain a staff of production technicians and a
supervising physician. Each OncoVAX Center will be responsible for collecting
tumors from regional colorectal surgeons. The Company estimates that most
OncoVAX Centers can be established and put into operation for an investment
between $1.0 and $3.0 million per site. Facilities for the first OncoVAX Center
in the United States have been established at Lehigh Valley Hospital in
Allentown, Pennsylvania, and the terms of the Company's ownership in, and
operation of, the facilities are being developed pursuant to a joint venture
with Lehigh Valley Hospital. A second OncoVAX Center in the United States is
being established at the Company's therapeutic manufacturing facility in
Rockville, Maryland. A Research and Center Agreement has been entered into
between the Company and Duke University for the establishment of an OncoVAX
Center at Duke University Medical Center whereby the required facilities and
personnel will be provided to the Company. In addition, the Company has signed
non-binding letters of intent with each of Vanderbilt University Medical Center,
the Robert H. Lurie Comprehensive Cancer Center of Northwestern University, the
University of Rochester Medical Center and Hoag Memorial Hospital Presbyterian
to form joint ventures for the formation of additional OncoVAX Centers. The
OncoVAX centers located in the United States will be considered to be
manufacturing facilities by the FDA and will be regulated accordingly. The first
OncoVAX Center in Europe is being established at University Hospital, Vrije
Universiteit, Amsterdam. The Company plans to establish more than 25 OncoVAX
Centers in the United States and more than 15 OncoVAX Centers in Europe.
The Company and Lehigh Valley Hospital have entered into a joint venture
agreement to own and operate an OncoVAX Center for the manufacture of
OncoVAX(CL) and other oncological products and to provide, or arrange for the
provision of, such products to cancer patients in the mid-Atlantic region of the
United States. Prior to FDA approval for OncoVAX(CL), the Company will lease
facilities and equipment (the "Equipment") from Lehigh Valley Hospital for the
purpose of manufacturing and producing OncoVAX(CL) for use in the conduct of
clinical trials and arranging and/or sponsoring such clinical trials. Upon
receipt of FDA approval for OncoVAX(CL), the parties will form and capitalize a
new entity in which Intracel and Lehigh Valley Hospital will be the sole
shareholders. In connection with the formation of such new entity, the Company
will then purchase the Equipment in exchange for cash in the amount of $36,842
and a promissory note made by the Company and payable to Lehigh Valley Hospital
in the maximum principal amount of approximately $663,518 together with
interest, convertible into shares of the Company's common stock at a minimum
conversion price that is generally based upon the then current public trading
price of the Company's common stock (which shall in no event be less than 75% of
the per share price to the public of common stock in this offering) and which
shall be secured by a pledge of the Equipment. Concurrently with such purchase,
the Company will contribute the Equipment in exchange for ninety-five percent of
the joint venture entity's issued capital stock and Lehigh Valley Hospital will
purchase the remaining five percent for cash. Under the terms of the agreement
it is contemplated that the Company shall be primarily responsible for case
management, reimbursement, quality assurance, sales and marketing and supply of
materials necessary for the manufacture and production of OncoVAX(CL) while
Lehigh Valley Hospital shall be primarily responsible for the provision of
bioengineering and housekeeping support services, specialized laboratory testing
and the development of relationships with managed care entities and physician
groups. In addition, Lehigh Valley Hospital shall provide, on a limited basis,
an employee physician to serve as "medical director" to the Lehigh Valley
Hospital OncoVAX Center in exchange for payment to Lehigh Valley Hospital of an
amount reflecting the fair market value of such services, which the parties
agree will equal $75,000 for the first year of the agreement.
Herbert C. Hoover, Jr., M.D., the Chairman of the Department of Surgery at
Lehigh Valley Hospital, has agreed to spend 25% of his professional time to
continue to assist the Company in setting up OncoVAX Centers. See "-- Medical
Advisory Board." The Company has agreed to pay to Lehigh Valley Hospital the sum
of $125,000 per annum, which amount will be offset by Lehigh Valley Hospital
against the salary that the hospital pays to Dr. Hoover. It is anticipated that
Dr. Hoover's time commitment to the Company will increase with the progressive
implementation of the Company's OncoVAX(CL) program and that the salary offset
will be renegotiated to appropriately reflect his growing time commitment.
Intracel has agreed to grant to Dr. Hoover options to purchase up to 133,333
shares of the Company's common stock with an exercise price equal to the lesser
of $13.00 per share and the price per share being offered to the public in this
offering,
42
<PAGE> 44
with vesting terms of 25% fully vested upon grant and 25% of such options will
vest on each of the first, second and third anniversaries of such grant. In
addition, the Company has agreed to grant to Dr. Hoover an additional 66,666
options at such time as the OncoVAX Center at Lehigh Valley Hospital is open and
treating the first patients. It is anticipated that further stock options will
be granted to Dr. Hoover in connection with the achievement of additional
milestones to be determined in the future. Dr. Hoover currently is the holder of
200,000 shares of the Company's common stock.
The Company plans to leverage its OncoVAX Centers to perform expedited
clinical trials and to launch other products, such as its in vivo imaging agent
HumaSPECT for monitoring recurrence of colon cancer and ASI(BCL) for prevention
of recurrence of disease in B-cell lymphoma. In the immediate term, the Company
plans to use the OncoVAX Centers to conduct a Phase III clinical trial for
OncoVAX(CL) in combination with chemotherapy to treat Stage III colon cancer
patients. See "Risk Factors -- Dependence on OncoVAX(CL)" for the status of the
Company's clinical trial for such product.
KLH for the treatment of bladder cancer
The American Cancer Society estimates that there will be 54,400 new cases
of bladder cancer in the United States in 1998. Bladder cancer is the fourth
most prevalent malignant disease among male patients and the eighth among female
patients. The Company estimates that approximately 350,000 people in the United
States currently have had or are living with bladder cancer. Patients diagnosed
with bladder cancer present with superficial tumors of which approximately 80%
are papillary and the remaining 20% are carcinoma in situ ("CIS"). Superficial
papillary tumors respond well to endoscopic surgery and post-surgical adjuvant
therapy, but recurrence at the same or another site in the bladder is relatively
common. CIS has particularly invasive and lethal potential and is not amenable
to surgical resection. Intravesicular therapy, using chemotherapy and/or BCG, is
used to treat endoscopically unresectable bladder cancer lesions. It is also
used after surgery as adjuvant therapy designed to prevent recurrences.
The Company is developing an active, non-specific immunotherapeutic
approach for the treatment of bladder cancer using a proprietary formulation of
keyhole limpet hemocyanin. Keyhole limpet hemocyanin is a potent immune
stimulator that induces a non-specific inflammatory response in the bladder.
However, a tumor-specific phenomenon may be involved as it has been recognized
that keyhole limpet hemocyanin shares an antigen in common with bladder cancer
cells. The Company believes that keyhole limpet hemocyanin has a significantly
more favorable toxicity profile than BCG therapy and chemotherapy. Keyhole
limpet hemocyanin is also being used by the Company and others as an immunogenic
enhancer for products based upon active specific immunotherapy.
The Company has completed a Phase I/II dose escalation study on KLH for
superficial bladder cancer and CIS of the bladder. KLH was administered as a
treatment for those bladder cancer patients that did not respond to treatment
with BCG or chemotherapy. Data from the Phase I/II study indicates that, of the
25% of all bladder cancer patients who fail to respond to BCG or other forms of
treatment, KLH has a greater than 50% complete response rate. Based upon these
results, the Company has commenced a Phase III clinical trial to evaluate the
efficacy of KLH for the treatment of refractory bladder cancer.
Agreements with Mentor
On June 16, 1997, the Company entered into an exclusive distribution
agreement with Mentor for the Accu-D(X) bladder cancer diagnostic product, which
the Company refers to as Accu-D(X), with an initial term of five years and which
is automatically renewable for a one year term thereafter until either party
terminates the agreement with 180 days written notice. Under this agreement,
Mentor accepts title of the product shipments upon receipt and pays the Company
a specific purchase price defined by the agreement. Additionally, Mentor will
pay the Company a royalty of 50% of its net sales of the Company's product, less
the specific purchase price as defined in the agreement. The Company is
obligated to provide up to 12,000 units of the product per year to be used by
Mentor for promotional purposes, at no cost to Mentor.
On December 22, 1997, the Company entered into a research, collaboration
and distribution agreement with Mentor whereby the Company agreed to provide
certain research, development and pilot programs for
43
<PAGE> 45
Mentor in exchange for research and development fees in an aggregate amount of
up to $3,000,000 based on a milestone payment schedule. The Company will receive
$1,000,000 within five days of submission of written notice of the completion of
each milestone to Mentor. The Company is required to pay the cost in excess of
$3,000,000 for expenditures within the scope of the project development
schedule. The Company is the owner of all rights to proprietary technical
information and the United States Patent to which Mentor was granted exclusive
world-wide rights to market, sell and distribute the program product. This
agreement is effective for a ten year period following the first approval of
commercialized use of products under development. Mentor has the right to
terminate this agreement at the expiration of five years from the date of the
first approval of commercialized use of the product based upon 180 days written
notice to the Company. As of September 30, 1998, the Company has received to
date milestone payments from Mentor in the amount of $1,000,000.
ASI(BCL) for the treatment of B-cell Lymphoma
The American Cancer Society estimates that approximately 55,400 cases of
non-Hodgkin's lymphoma will be diagnosed in the United States in 1998. As with
other cell types in the body, the B-cells and T-cells of the immune system may
become malignant and grow as systemic tumors such as lymphomas. B-cell non-
Hodgkin's lymphomas are one such group of cancers of the immune system and
currently afflict approximately 250,000 people in the United States alone.
B-cell non-Hodgkin's lymphomas are diverse with respect to both diagnosis and
treatment and are generally classified as low-grade, intermediate or high grade.
The Company estimates that approximately half of the 250,000 patients afflicted
with non-Hodgkin's lymphoma in the United States have low-grade or follicular
lymphoma and approximately 18,000 of these have been diagnosed within the
previous 12 months. Treatment alternatives for lymphoma patients include
chemotherapy, radiation and Rituxan(R) and Intron A, which is currently
indicated for use in refractory, low-grade, CD20 positive B-cell non-Hodgkin's
lymphoma.
In conjunction with researchers at Stanford University, the Company has
been developing ASI(BCL), an active specific immunotherapeutic product for the
treatment of B-cell lymphoma, as an adjuvant therapy to chemotherapy and
antibody-based immunotherapy. The approach is based upon the observation that
each clone of B-cells expresses on the cell surface an antibody unique to that
clone. Each patient's B-cell lymphoma may be characterized by the unique portion
of the antibody molecule, the idiotype, expressed on the surface of that
patient's tumor cells and this idiotype constitutes a patient-specific,
tumor-specific antigen. By stimulating an immune response against this idiotype,
the Company believes that ASI(BCL) may be able to prevent the continuous pattern
of tumor relapse in B-cell lymphoma patients completing remission therapy.
Results from a Phase I study indicated that when B-cell lymphoma patients
were immunized during remission, 71% (15 out of 21) developed an immune response
to ASI(BCL). Of these responding patients, 87% (13 out of 15) remained in a
state of remission for a median duration of 7.9 years. An additional Phase I
activity study has been ongoing since 1995 for which the Company has prepared 31
vaccines, of which 27 have now been administered. Based upon results obtained to
date, the Company is preparing to file an amendment to its existing IND to
commence a Phase II/III clinical trial of ASI(BCL) in the United States in the
first half of 1999.
HumaRAD
The Company is developing HumaRAD(16.88) and HumaRAD(88BV59), radiolabeled
human monoclonal antibodies for the treatment of head and neck cancer and of
ovarian cancer, respectively. Focal head and neck cancer grows locally and
usually metastasizes to the regional lymph nodes rather than to distant sites.
This compartmentalization provides an opportunity for intratumoral injection of
a radiolabeled monoclonal antibody. The American Cancer Society estimates that
30,300 people in the United States will develop head and neck cancer in 1998 and
that approximately 8,000 people will die in 1998 from the disease. Surgery and
radiation are the only currently available treatments for head and neck cancer
and are often disfiguring. Like head and neck cancer, ovarian cancer is a
relatively localized disease. The American Cancer Society estimates that, in
1998, there will be 25,400 cases of newly diagnosed ovarian cancer in the United
States and that approximately 14,500 people will die in 1998 from the disease.
Approximately 70% of patients with ovarian cancer are diagnosed with advanced
disease. The introduction of platinum combination chemotherapy and
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<PAGE> 46
taxol has greatly improved medium-term survival, but long-term survival rates
remain low. The prognosis is particularly poor for patients with recurrent or
progressive disease.
The Company's HumaRAD products utilize radioimmunotherapy ("RIT"), a form
of targeted radiation therapy, by having a human monoclonal antibody carry a
therapeutic dose of radiation, in this case (90)Yttrium, to tumor cells. By
targeting "compartmentalized" tumors with intratumoral injections of a human
monoclonal antibody, the Company believes its HumaRAD products may overcome
systemic toxicity and the antigenicity of non-human antibodies, two of the major
problems previously encountered with RIT in the treatment of solid tumors.
The Company has developed extensive expertise in the RIT field. The
Company's HumaRAD human monoclonal antibodies bind with a variety of tumor types
in vivo and have been shown to be specific for tumor localization in patients
with colorectal, breast, ovarian and head and neck cancer. One of the most
important advantages seen with these HumaRAD products is their lack of
immunogenicity in patients. This is in contrast to a single administration of a
mouse monoclonal antibody from which the majority of patients develop a human
anti-mouse response precluding further or frequent treatment with the mouse
antibody. The administration of HumaRAD, even following multiple infusions, does
not elicit a human anti-human response. This is important because multiple
infusions are necessary to deliver a therapeutic dose of radiation.
The Company, by using intratumoral injections of HumaRAD(16.88) in patients
with head and neck cancer, has been able to demonstrate that it can deliver
therapeutic doses of radiation to the primary tumor and metastatic lymph nodes.
In ovarian cancer, where the whole peritoneal cavity is at risk and the majority
of patients present with advanced disease, the Company is evaluating the
intraperitioneal administration of HumaRAD(88BV59) in patients who have minimal
residual disease following surgery and chemotherapy. The Company has commenced
enrollment of its Phase I clinical trial of HumaRAD(16.88) for the treatment of
head and neck cancer and plans to submit an IND with the FDA to commence a Phase
I clinical trial of HumaRAD(88BV59) for the treatment of ovarian cancer in the
first half of 1999.
Other products
The successful development of HumaSPECT and the Company's HumaRAD products
has enabled the Company to extend its human antibody program to the development
of products to treat several serious infectious diseases in North America and
Europe. The principal targets of this program are life-threatening infectious
diseases, including nosocomial, or hospital-borne, infections and HIV/AIDS.
The Company is developing human monoclonal antibodies for three different
types of bacteria: staphylococcus epidermidis, enterococcus faecalis and
enterococcus faecium. Some of this work was initiated pursuant to an agreement
with Baxter which terminated in March 1998. Baxter may have some residual
licensing rights to products developed during the course of this contract.
Staphylococcus epidermis is a major cause of infections of premature infants in
hospitals. Enterococcus faecalis and enterococcus faecium are major causes of
serious infections in immunocompromised patients. The seriousness of
enterococcus infection, particularly faecium, is exacerbated by the increasing
prevalence of resistance to antibiotics, including vancomycin. The Company plans
to file an IND to commence Phase I clinical trials of one or more of these
antibodies in the first half of 1999.
The Company has also been developing its MONOGENE(INT) antibody-based gene
therapy product for the treatment of patients with HIV/AIDS. MONOGENE(INT)
involves the introduction of an antibody gene into key immune cells of the body.
The antibody gene allows the immune cells to produce an antibody fragment which
binds to the critical integrase protein and which, in extensive preclinical
testing, has been shown to strongly inhibit HIV infection. The Company believes
that this gene therapy approach is less toxic and less likely to result in viral
resistance than certain other therapies. The Company is currently focused on
manufacturing clinical grade quantities of MONOGENE(INT) necessary for use in
conducting a Phase I clinical trial.
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DIAGNOSTIC PRODUCTS
In addition to its therapeutic products portfolio, the Company also
develops, manufactures and markets a portfolio of in vitro diagnostic products.
The Company's diagnostic business unit has been expanded through acquisition and
internal development to include the following products:
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
DIAGNOSTIC PRODUCTS
- ------------------------------------------------------------------------------------------------------
PRODUCT DIAGNOSTIC USES STATUS(1)
- ------------------------------------------------------------------------------------------------------
Confirmatory diagnostic Viruses and bacteria Being marketed.
products
- ------------------------------------------------------------------------------------------------------
INSTI HIV-1/2 HIV Registered or approved in 16 countries.
- ------------------------------------------------------------------------------------------------------
Chemotrax(BR) Breast cancer Pre-market approval ("PMA") application approved.
- ------------------------------------------------------------------------------------------------------
ZYMMUNE CD4/CD8 HIV 501(k) cleared. Being marketed.
- ------------------------------------------------------------------------------------------------------
Accu-D(x) Bladder cancer 501(k) cleared. Being marketed by Mentor.
- ------------------------------------------------------------------------------------------------------
Apo-Tek Lp(a) Cardiovascular disease 501(k) cleared. Being marketed by Sigma
Diagnostics, Inc. ("Sigma").
- ------------------------------------------------------------------------------------------------------
HumaSPECT Monitoring of colon BLA submitted in the United States.(2) Marketing
cancer authorization granted in Europe.
- ------------------------------------------------------------------------------------------------------
HumaSPECT Ovarian cancer Phase II completed.
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "-- Government Regulation -- Device Regulation."
(2) See "Business -- Diagnostic Products -- In Vivo Diagnostics" for a
description of certain issues relating to the Company's BLA for HumaSPECT.
IN VITRO DIAGNOSTICS
Confirmatory diagnostic products
With the exception of pathogens which have a major effect on the blood
supply, such as HIV and hepatitis, a significant volume of virology and
bacteriology testing in the United States and elsewhere continues to employ
standard cell culture techniques. Depending on the pathogen suspected and the
organs involved, a fecal, sputum or blood sample is taken from the patient and
sent to a hospital or clinical laboratory in a plastic transport containing a
liquid preservative. The laboratory incubates the patient sample with a cell-
line selected for its ability to produce the suspected pathogen. After a
standard incubation period, the cells are then exposed to antibodies that
recognize the virus or bacterium for which the test has been designed. These
antibodies are coupled with dyes or enzymes so laboratory technicians can
observe whether the virus or bacterium is present.
Through Bartels, the Company manufactures and/or markets a comprehensive
family of products required for every step of this process and is a recognized
supplier in the field. The product portfolio includes 31 transports, 50
cell-lines, more than 60 antibodies and 66 enzyme-linked immuno-assay ("ELISA")
tests. The Company also supplies instrumentation required to read the results of
its ELISA tests. In accordance with standard industry practice, these
instruments are generally furnished to customers at a charge that is based, in
part, upon customer purchase volume.
INSTI HIV-1/2
After several international clinical trials, the Company is currently
launching a rapid test for detection of HIV-1 and HIV-2. The INSTI HIV-1/2 test
takes approximately one minute to run, is easy to perform and interpret and is
as sensitive and specific as most instrument-based tests which take more than an
hour or more and many steps to perform. The product has been registered/approved
in India, Thailand, Chile, Russia,
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Pakistan, South Africa, Venezuela, Costa Rica, Panama, Colombia, Jordan, Belize,
Haiti, the Dominican Republic, Surinam and Turkey. The Company has not sought
and does not anticipate seeking approval of this product for marketing in the
United States. INSTI HIV-1/2 is the first product utilizing the Company's INSTI
platform technology that provides a fast and accurate antibody detection system
for serum, plasma and whole blood samples. In addition to speed and accuracy,
the INSTI format has been designed for high-volume, low-cost production. The
product is being manufactured at the Company's facility in Richmond, British
Columbia, Canada.
Chemotrax(BR)
Until recently, there has been no FDA-approved test to determine the
sensitivity of solid tumors to the range of chemotherapeutic agents available to
treat these tumors. In 1996, after a four-year PMA application process, Bartels
Prognostics (a company, unrelated to Bartels, in which Intracel has a minority
financial interest) received FDA approval to market Chemotrax(BR), a
chemotherapeutic sensitivity test to be used in conjunction with the treatment
of breast cancer. Clinical trials demonstrated that Chemotrax(BR) accurately
measured breast tumor cell sensitivity to 5-FU, a type of chemotherapy widely
used to treat breast and other cancers, and that assay results correlated
closely to patient clinical responses to 5-FU. Bartels Prognostics has received
FDA approval of an investigational device exemption ("IDE") for the testing of
four other chemotherapeutic agents and intends to supplement the IDE to obtain
FDA approval to those two other chemotherapeutic agents so that a panel of
standard chemotherapies can be evaluated for each breast cancer patient. The
clinical trials have not yet commenced. The Company has exclusive rights to
market Chemotrax(BR).
ZYMMUNE CD4/CD8
The Company is launching ZYMMUNE CD4/CD8, a product to determine the number
of CD4 and CD8 immune cells in the body. CD4/CD8 counts are an important marker
for staging and treating HIV-infected individuals and implementing therapeutic
intervention. The demand for CD4/CD8 testing is expected to grow as patients on
the new triple therapy regimes live longer and require extended monitoring. The
standard methodology used to determine the level of these immune cells has been
a combination of flow cytometry and hematology. ZYMMUNE CD4/CD8 is a simpler,
less costly alternative to the flow cytometer and provides results in less than
35 minutes. The ZYMMUNE CD4/CD8 testing system received final FDA clearance in
November 1995 and is now in expanded field trials.
Accu-D(x)
The Company has developed Accu-D(x), a point-of-care in vitro diagnostic
test for the detection of recurrent bladder cancer. Accu-D(x) is a urine-based
test which can be performed in a physician's office in about seven minutes. The
Company estimates that the market potential for Accu-D(x) in the United States
includes approximately 350,000 persons previously diagnosed with bladder cancer.
Accu-D(x) was cleared for marketing by the FDA in April 1997. The Company has
also entered into an agreement with Mentor for the marketing and distribution of
Accu-D(x), pursuant to which product sales began in early 1998. Under the terms
of the agreement, the Company receives 50% of the net sales of the product.
Apo-Tek Lp(a)
In November 1997, the Company received FDA clearance to market its Apo-Tek
Lp(a) test kit which detects Lipoprotein(a) ("Lp(a)"), a single independent risk
factor for astherosclerotic cardiovascular disease. The Company's Apo-Tek Lp(a)
test can be used with human serum or plasma to detect and accurately quantify
Lp(a) levels and shows no cross reactivity with plasminogen or other plasma
components. The Company currently has a distribution agreement with Sigma in
connection with Apo-Tek Lp(a), pursuant to which product sales began in early
1998.
IN VIVO DIAGNOSTICS
The Company plans to market OncoVAX(CL) in conjunction with HumaSPECT,
which has been designed to detect recurrence of colorectal cancer. HumaSPECT is
a totally human antibody that is labeled with a
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radioisotope and then injected into a patient to detect recurrent or metastatic
spread of colon cancer. Because HumaSPECT utilizes a human antibody (rather than
a non-human antibody that can elicit an adverse reaction by the patient's own
immune system), it can be repeatedly infused. A multi-center Phase III clinical
trial was completed for HumaSPECT in 1996. In this trial, the Company believes
that HumaSPECT demonstrated to be as accurate as CT scans in detecting
recurrence of colorectal cancer and significantly superior to CT scans in
determining whether a recurrence is inoperable. The Company has since submitted
a BLA to the FDA and recently received marketing authorization for HumaSPECT in
Europe. The Company believes, with the European Commission's approval, that
HumaSPECT is the first totally human antibody approved for use in humans.
HumaSPECT is also being evaluated in clinical trials for its efficacy in
detecting recurrent lung, ovarian and prostate cancer. The Company plans to
recommend HumaSPECT to patients vaccinated with OncoVAX(CL) to monitor
recurrence and metastatic spread during the three-year period following
vaccination. HumaSPECT can be administered and the results interpreted at an
OncoVAX Center, with the results sent to a patient's oncologist or physician for
further action, if required.
On November 5, 1997, the FDA advised the Company in writing that its BLA
for HumaSPECT was not approvable at that time. The letter raised questions
regarding clinical and manufacturing process issues and questions related to the
FDA's inspection of the manufacturing facility itself. The Company submitted
responses to the issues raised in the FDA letter via letters dated April 10, May
19 and 29, and July 15 and 24, 1998. On October 6, 1998, the FDA issued a
warning letter to Intracel raising concerns about, among other things, records
relating to the clinical investigations of HumaSPECT under the HumaSPECT BLA.
The Company believes it has responded to the issues raised by the FDA. However,
discussions with the FDA on these matters are ongoing. Once a company fully
responds to the FDA, the agency has six months to either approve the BLA or
issue a "complete action" letter setting forth specific deficiencies, if any,
and the actions necessary to receive approval. There can be no assurance,
however, that upon review of these submissions that the FDA ultimately will
approve the BLA for HumaSPECT.
Syncor currently holds world-wide distribution rights for the Company's
HumaSPECT product. While the Company is currently in negotiations to terminate
the agreement providing for such rights because it wishes to market HumaSPECT in
conjunction with OncoVAX(CL) at OncoVAX Centers, there can be no assurances that
the agreement will be terminated on a timely basis, if at all. In the event that
the agreement with Syncor is not terminated, the Company believes, based upon
the experience of other comparable products, that sales of HumaSPECT will be
limited and may not warrant the expenses associated with manufacturing the
product.
MANUFACTURING
The Company manufactures its therapeutic products in Rockville, Maryland in
a facility of approximately 120,000 square feet. The Rockville, Maryland
facility contains facilities for production of human monoclonal antibodies, gene
therapy and production of vaccines from antisera as well as extensive research
and development facilities. The Company manufactures all of its FDA-cleared
diagnostic products in two registered facilities totaling approximately 54,000
square feet in Issaquah, Washington. The Company's INSTI HIV-1/2 product is
manufactured in a facility of approximately 7,000 square feet in Richmond,
British Columbia, Canada. Facilities for the first OncoVAX Center in the United
States have been established at Lehigh Valley Hospital in Allentown,
Pennsylvania, and the terms of the Company's ownership in, and operation of, the
center are being developed pursuant to a joint venture with Lehigh Valley
Hospital. A second OncoVAX Center in the United States is being established at
the Company's therapeutic manufacturing facility in Rockville, Maryland. The
first OncoVAX Center in Europe is being established at University Hospital,
Vrije Universiteit, Amsterdam, The Netherlands. The Company is planning to
establish more than 40 OncoVAX Centers in the United States and Europe to
manufacture and administer OncoVAX(CL). All of the Company's facilities are
leased. Upon establishment of the OncoVAX Centers, the Company believes that its
facilities will be adequate for the foreseeable future.
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MARKETING AND SALES
The Company markets and sells its diagnostic products in the United States
through its own direct sales force, which consists of 17 employees. Outside the
United States, the Company utilizes local distributors for the sale of its
diagnostic products. The Company has appointed Sigma and Mentor as exclusive
world-wide distributors for Apo-Tek Lp(a) and of Accu-D(x), respectively.
The Company plans to market and sell OncoVAX(CL) and HumaSPECT through
OncoVAX Centers to be established in the United States and Europe. The Company
anticipates that OncoVAX Centers will be supported by account representatives
with both sales and service responsibilities with centralized marketing support
located in Rockville, Maryland. The Company has appointed Mentor as exclusive
world-wide distributor for KLH, but has not appointed distributors for any of
its other therapeutic products.
RESEARCH AND DEVELOPMENT
The Company employs approximately 25 people in research and development, 16
of whom hold advanced degrees in chemistry and molecular biology. Their research
and development efforts range from generic cancer vaccines to gene therapy for
HIV/AIDS. For the six months ended December 31, 1995, the year ended December
31, 1996 and the year ended December 31, 1997, the Company (on a pro-forma basis
after giving effect to the Merger as if it had occurred on January 1, 1997)
spent $1.1 million, $1.0 million and $8.6 million, respectively, on research and
development.
REIMBURSEMENT
The ability of the Company to successfully commercialize its products
depends, in part, on coverage and reimbursement of such products by third-party
payers, such as government health care programs (including Medicare and
Medicaid), indemnity insurers, and managed care organizations. In the past
several years there have been numerous initiatives on the federal and state
government levels for comprehensive or incremental reforms affecting the payment
for health care services and products, including a number of proposals that
would significantly limit reimbursement under the Medicare and Medicaid
programs. The Company anticipates that federal and state governments will
continue to review and assess health care delivery systems and payment
methodologies. There can be no assurance that adequate third-party coverage and
reimbursement will be available for the Company's products. If adequate coverage
and reimbursement are not provided by government and other third-party payers
for uses of the Company's products, the market acceptance of these products
could be adversely affected.
In the United States, almost all people over age 65 have primary health
care coverage through the federal Medicare program administered by the Health
Care Financing Administration ("HCFA"). The strong correlation between the
incidence of cancer and age means that HCFA's decisions concerning coverage and
payment for OncoVAX(CL) by Medicare will be financially significant to the
Company. As an autologous product that will not generally be sold through
traditional commercial channels, OncoVAX(CL) may present unique coverage and
payment issues for Medicare. Currently, once approved by the FDA, Medicare
covers medically necessary biologics administered as part of or incident to a
physician's service when furnished to beneficiaries in settings such as
physicians' offices or clinics. Under federal law, HCFA pays physicians the
lesser of their actual charge for the drug or 95% of the commercially published
price of the drug. The Company plans to work to ensure that HCFA addresses and
resolves any unique OncoVAX(CL) issues under its existing policies that
generally provide Medicare coverage and payment for FDA-approved drugs.
Medicare's decision concerning coverage and reimbursement of OncoVAX(CL)
also may be useful in assuring private coverage and payment. Adults under age 65
who have insurance coverage are likely to have employer sponsored or
work-related health plans, which are increasingly likely to involve some element
of managed care with policies similar to those of Medicare. Because coverage and
payment issues for private insurance coverage are heavily dependent on the
provisions in the insurance contract, the Company is planning to work closely
with payors and patients to obtain coverage and payment for OncoVAX(CL).
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GOVERNMENT REGULATION
The testing, manufacturing, labeling, advertising, promotion, export and
marketing, among other things, of the Company's therapeutic and diagnostic
products are subject to extensive regulation by governmental authorities in the
United States and other countries. Therapeutic and diagnostic products that are
administered to patients are regulated as drugs or biologic drugs, while
diagnostic products that are used on blood and tissue samples taken from
patients are regulated as devices. In Europe, in vitro diagnostic devices will
be subject to a Directive, to be adopted in 1999, which will create a harmonized
regime for such products. For the purposes of European Community law,
OncoVAX(CL) is neither a medical device or medicinal product and therefore is
unharmonized. Regulatory requirements are accordingly to be determined on a
national basis. In certain Member States, OncoVAX(CL) would be unregulated.
Drug Regulation
Non-biological drugs and biological drugs are generally subject to some of
the same laws and regulations. Ultimately, however, they are approved under
different regulatory frameworks, with non-biological drugs being approved under
the FDC Act through an NDA and biological drugs being approved under the PHS Act
by a BLA. Among other things, the FDA Modernization Act clarifies that
biological products are subject to the same requirements as non-biological
products under the FDC Act, except that a biological product licensed under the
PHS Act is not required to have an NDA. Thus, as a biologic, OncoVAX(CL) is
subject to IND regulations prior to approval and will be regulated as both a
biologic and a drug once it has an approved BLA. Traditionally, a company
seeking FDA approval to market a biological drug (in contrast to a non-
biological drug) was required to file and obtain approval of a PLA and an
Establishment License Application ("ELA") with the FDA pursuant to the PHS Act
before commercial marketing of the product could begin. The FDA Modernization
Act repealed the statutory requirement for an ELA for a biological product.
Instead, a single BLA covering both the product and the facility in which the
product is manufactured is now required. As of February 19, 1998, the effective
date of the FDA Modernization Act, approval of applications filed under the old
system will result in the issuance of a BLA for the product. No refiling or
other action on the part of the applicant will be required to implement this
conversion to a single license. At the present time, the Company believes that
OncoVAX(CL) and other immunotherapeutics that it may develop will be regulated
by the FDA as biologics.
The steps required before a drug or biologic may be approved for marketing
in the United States generally include (i) preclinical laboratory tests and
animal tests, (ii) the submission to the FDA of an IND application for human
clinical testing, which must become effective before human clinical trials may
commence, (iii) adequate and well-controlled human clinical trials to establish
the safety and efficacy of the product, (iv) in the case of a biologic, the
submission to the FDA of a BLA, or in the case of a drug, an NDA, (v) FDA review
of the BLA or NDA and (vi) satisfactory completion of an FDA inspection of the
manufacturing facilities at which the product is made to assess compliance with
cGMPs. The testing and approval process requires substantial time, effort and
financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all.
Preclinical studies include laboratory evaluation of the product, as well
as animal studies to assess the safety and potential efficacy of the product.
The results of the preclinical studies, together with manufacturing information
and analytical data, are submitted to the FDA as part of the IND. The IND
automatically will become effective thirty days after receipt by the FDA unless
the FDA, before that time, raises concerns or questions about the conduct of the
trials as outlined in the IND and places the trial on clinical hold. In such
case, the IND sponsor and the FDA must resolve any outstanding concerns before
clinical trials can proceed. There can be no assurance that submission of an IND
will result in FDA authorization to commence clinical trials. Moreover, once
trials have commenced, the FDA may stop the trials, or particular types of
trials, by placing a "clinical hold" on such trials because of concerns about,
for example, the safety of the product being tested or the adequacy of the trial
design. Such holds can cause substantial delay and in some cases may require
abandonment of a product or a particular trial.
Clinical trials involve the administration of the investigational products
to healthy volunteers or patients under the supervision of a qualified principal
investigator consistent with an informed consent. Further, each
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clinical trial must be reviewed and approved by an independent Institutional
Review Board ("IRB") at each institution at which the study will be conducted.
The IRB will consider, among other things, ethical factors, the safety of human
subjects and the possible liability of the institution.
Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into human
subjects, the drug is usually tested for safety (adverse effects), dosage
tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
Phase II clinical trials usually involve studies in a limited patient population
to (i) evaluate the efficacy of the drug for specific, targeted indications,
(ii) determine dosage tolerance and optimal dosage and (iii) identify possible
adverse effects and safety risks. Phase III clinical trials generally further
evaluate clinical efficacy and test further for safety within an expanded
patient population and at multiple clinical sites. Phase IV clinical trials are
conducted after approval to gain additional experience from the treatment of
patients in the intended therapeutic indication and to document a clinical
benefit in the case of drugs approved under accelerated approval regulations. If
the FDA approves a product while a company has ongoing clinical trials that were
not necessary for approval, a company may be able to use the data from these
clinical trials to meet all or part of any Phase IV clinical trial requirement.
These clinical trials are often referred to as "Phase III/IV post-approval
clinical trials." Failure to promptly conduct Phase IV clinical trials could
result in withdrawal of approval for products approved under accelerated
approval regulations.
In the case of products for severe or life-threatening diseases, the
initial clinical trials are sometimes done in patients rather than in healthy
volunteers. Since these patients are afflicted already with the target disease,
it is possible that such clinical trials may provide evidence of efficacy
traditionally obtained in Phase II clinical trials. These trials are referred to
frequently as Phase I/II trials. There can be no assurance that Phase I, Phase
II or Phase III testing will be completed successfully within any specific time
period, if at all, with respect to any of the Company's product candidates.
Furthermore, the FDA may suspend clinical trials at any time on various grounds,
including a finding that the subjects or patients are being exposed to an
unacceptable health risk.
The results of the preclinical studies and clinical trials, together with
detailed information on the manufacture and composition of the product, are
submitted to the FDA in the form of a BLA or NDA requesting approval to market
the product. Before approving a BLA or NDA, the FDA will inspect the facilities
at which the product is manufactured and will not approve the product unless the
manufacturing facility is in cGMP compliance. The FDA may delay approval of a
BLA or NDA if applicable regulatory criteria are not satisfied, require
additional testing or information, and/or require postmarketing testing and
surveillance to monitor safety or efficacy of a product. There can be no
assurance that FDA approval of any BLA or NDA submitted by the Company will be
granted on a timely basis, if at all. Also, if regulatory approval of a product
is granted, such approval may entail limitations on the indicated uses for which
such product may be marketed. Any FDA approvals that may be granted will be
subject to continual review, and newly discovered or developed safety or
efficacy data may result in withdrawal of products from marketing. Moreover, if
and when such approval is obtained, the marketing and manufacture of the
Company's products would remain subject to extensive regulatory requirements
administered by the FDA and other regulatory bodies, including compliance with
cGMPs and adverse event reporting requirements. Failure to comply with these
regulatory requirements could, among other things, result in product seizures,
recalls, fines, injunctions, suspensions, or withdrawals of regulatory
approvals, operating restrictions and criminal prosecutions.
The FDA Modernization Act establishes a new statutory program for the
approval of fast track drugs, including biological products. The fast track
program is designed to facilitate the development and expedite the approval of
therapies that are intended to treat serious or life-threatening conditions,
such as cancer and AIDS, and that demonstrate the potential to address unmet
medical needs for such conditions. Under the new fast track program, a request
for designation may be submitted concurrently with, or any time after, the
submission of an application for an IND. If a product meets the statutory
criteria, the Secretary is required to designate it as a fast track drug within
60 days of the request for designation. An application for a fast track drug may
be approved upon determination that the drug has an effect on a clinical
endpoint or a surrogate endpoint that is reasonably likely to predict clinical
benefit. While precise time frames for approval of fast track products have not
been established, the Prescription Drug User Fee Act established performance
goals
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in correspondence between the FDA Commissioner and Congress committing the
agency to a six-month review period for priority drugs.
The Company may elect to seek approval of OncoVAX(CL) under this fast track
process. If a product is approved under the fast track program, the sponsor may
be required to conduct additional adequate and well-controlled studies to verify
that the effect on the surrogate marker represents improved clinical outcome or
otherwise confirm the effect on a clinical endpoint. In the event such
postmarketing studies do not verify the drug's anticipated clinical benefit, or
if there is other evidence that the drug product is not shown to be safe and
effective, expedited withdrawal procedures permit the FDA, after a hearing, to
remove a product from the market. For products approved under the fast track
provisions, promotional materials must be submitted to the FDA for review 30
days prior to dissemination. Significant uncertainty exists as to the extent to
which such initiative will result in accelerated review and approval. Further,
the FDA has considerable discretion in determining eligibility for accelerated
review and approval and is not bound by discussions that an applicant may have
with FDA staff. Accordingly, the FDA could employ such discretion to deny
eligibility of OncoVAX(CL) as a candidate for accelerated review or require
additional clinical trials or other information before approving OncoVAX(CL).
The Company cannot predict the ultimate impact, if any, of the new approval
process on the timing or likelihood of FDA approval of OncoVAX(CL) or any of its
other potential products.
Treatment of patients with an experimental therapy may be allowed under a
treatment IND before general marketing begins and pending FDA approval. Charging
for an investigation product also may be allowed under a treatment IND to
recover certain costs of development, if various requirements are met. The
Company may elect to file a treatment IND pending approval of its BLA for
OncoVAX(CL). The FDA has full discretion with regard to whether to allow a
treatment IND to go into effect and there can be no assurance that the FDA will
allow a treatment IND in this instance.
The Company also will be subject to a variety of regulations governing
clinical trials and sales of its products outside the United States. Whether or
not FDA approval has been obtained, approval of a product by the comparable
non-U.S. regulatory authorities must be obtained prior to the commencement of
marketing of the product in their respective countries. The approval process
varies from country to country and the time needed to secure approval may be
longer or shorter than that required for FDA approval.
The pharmaceutical legislation of the European Union requires any person
seeking to market a medicinal product for human use to obtain approval of an
MAA. Procedures for granting such authorizations have been harmonized within the
European Union through the issue of directives for implementation into the
domestic law of each Member State and by Regulations having direct effect. There
are two authorization procedures by which approvals can be sought to market
pharmaceutical products in more than one Member State. The first is a
centralized assessment procedure administered by the EMEA. The second is a
decentralized, or "mutual recognition," procedure available only to
non-biologics. Pursuant to this procedure, an applicant may apply for a national
authorization in one Member State. Upon obtaining that authorization, an
applicant may make further national applications in such other Member States as
are relevant to the applicant, requesting the relevant national authorities in
those Member States to recognize, by reference to the assessment report of the
relevant national authority in the first Member State, the marketing
authorization already granted. In the event of objection, European Union
authorities require that binding arbitration determine whether authorizations
should be granted and, if so, on what terms. The Company's policy is to design
its clinical trials in order to meet the eligibility requirements for
centralized EMEA approval. Drugs which fall within the definition of "high
technology medicines" under the Annex to Council Regulation 2309/93 undergo the
centralized approval system under which the CPMP is obliged to give an opinion
as to whether a marketing authorization has been granted within 210 days
(although the "clock" may be stopped if further information is required).
In addition, prices are regulated in most countries other than the United
States. For example, regulators in certain European countries condition their
approval of a pharmaceutical product on the agreement of the seller not to sell
the product for more than a certain price in their respective countries. In some
cases, the price established in any of these countries may serve as a benchmark
in the other countries. As such, the price approved in connection with the first
approval obtained in any of these European countries may serve as the maximum
price that may be approved in the other European countries. Also, a price
approved in one of these
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European countries that is lower than the price previously approved in the other
European countries may require a reduction in the prices in such other European
countries. In such event, there can be no assurance that the resulting prices
would be sufficient to generate an acceptable return on the Company's investment
in its products.
Device Regulation
Pursuant to the FDC Act and the regulations promulgated thereunder, the FDA
regulates the preclinical and clinical testing, manufacturing, labeling,
distribution and promotion of medical devices. In the United States, medical
devices are classified into one of three classes (i.e., Class I, II, or III) on
the basis of the controls deemed necessary by the FDA to reasonably ensure their
safety and effectiveness. Class I devices are subject to general controls (e.g.,
labeling, premarket notification and adherence to cGMPs) and Class II devices
are subject to general and special controls (such as performance standards,
postmarket surveillance, patient registries, and FDA guidelines). Generally,
Class III devices are those which must receive premarket approval by the FDA to
ensure their safety and effectiveness (life-sustaining, life-supporting and
implantable devices, or new devices which have been found not to be
substantially equivalent to legally marketed devices). Before a new device can
be introduced in the market, the manufacturer must generally obtain FDA
clearance or approval through either clearance of a 510(k) notification or
approval of a PMA application. However, most Class I devices are now exempt from
the FDA's market clearance requirements.
A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed Class I or Class II device, or if it is a
preamendment Class III device for which the FDA has called for PMA applications.
A PMA application must be supported by valid scientific evidence to demonstrate
the safety and effectiveness of the device, typically including the results of
clinical trials, bench tests and laboratory and animal studies. The PMA
application must also contain a complete description of the device and its
components, and a detailed description of the methods, facilities and controls
used to manufacture the device. In addition, the submission must include the
proposed labeling, advertising literature and any training materials.
Once the FDA determines that the PMA application is sufficiently complete
to permit a substantive review, the FDA will accept the application for filing
and begin its review. Although the FDA has 180 days to review a PMA application,
such reviews generally take one to three years, and may take significantly
longer, from the date the PMA application is accepted for filing.
During the review of a PMA application, an advisory committee likely will
be convened to review and evaluate the application and provide recommendations
to the FDA as to whether the device should be approved. The FDA is not bound by
the recommendation of the advisory panel. In addition, prior to approval, the
FDA generally will inspect the manufacturing facility to ensure compliance with
applicable cGMP requirements. If granted approval, the PMA application may
include significant limitations on the indicated uses for which the product may
be marketed, and the agency may require post-marketing studies of the device.
If the FDA's evaluation of the PMA application or manufacturing facilities
is not favorable, the FDA will deny approval of the PMA application or issue a
"non-approval" letter. The FDA may determine that additional clinical trials are
necessary, in which case approval may be delayed for one or more years while
additional clinical trials are conducted and submitted. The PMA application
process can be expensive, uncertain and lengthy, and a number of devices for
which FDA clearance has been sought by other companies have never been approved
for marketing. Modifications to a device that is the subject of an approved PMA
application, its labeling or its manufacturing process may require approval by
the FDA of PMA application supplements or new PMA applications. Supplements to a
PMA application often require the submission of the same type of information
required for an initial PMA application, except they are generally limited to
that information needed to support the proposed change.
A 510(k) clearance will be granted if the submitted information establishes
that the proposed device is "substantially equivalent" to a legally marketed
Class I or Class II medical device or a preamendment Class III medical device
for which the FDA has not called for PMA applications. In some cases, 510(k)
submissions require clinical data. It generally takes from four to 12 months
from submission to obtain 510(k)
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premarket clearance, but it may take longer. The FDA may determine that a
proposed device is not substantially equivalent to a legally marketed device, or
that additional information is needed before a substantial equivalence
determination can be made. A "not substantially equivalent" determination, or a
request for additional information could prevent or delay the market
introduction of new products that fall into this category. For any devices that
are cleared through the 510(k) process, modifications or enhancements that could
significantly affect safety or effectiveness, or constitute a major change in
the intended use of the device, will require new 510(k) submissions.
If human clinical trials of a device are required, whether for a 510(k) or
a PMA application, and the device presents a "significant risk," the sponsor of
the trial (usually the manufacturer or the distributor of the device) will have
to file an IDE application prior to commencing human clinical trials. The IDE
application must be supported by data, typically including the results of animal
and laboratory testing. If the IDE application is approved by the FDA and one or
more appropriate IRBs, human clinical trials may begin at a specific number of
investigational sites with a specific number of patients, as approved by the
FDA. If the device presents a "nonsignificant risk" to the patient, a sponsor
may begin the clinical trial after obtaining approval for the study by one or
more appropriate IRBs without the need for FDA approval. Submission of an IDE
does not give assurance that the FDA will approve the IDE and, if it is
approved, there can be no assurance that the FDA will determine that the data
derived from these studies supports the safety and efficacy of the device or
warrants the continuation of clinical studies. Sponsors of clinical trials are
permitted to sell investigational devices distributed in the course of the study
provided such compensation does not exceed recovery of the costs of manufacture,
research, development and handling. An IDE supplement must be submitted to and
approved by the FDA before a sponsor or investigator may make a change to the
investigational plan that may affect its scientific soundness or the rights,
safety or welfare of human subjects.
Although clinical investigations of most devices are subject to the IDE
requirements, clinical investigations of in vitro diagnostic ("IVDs") tests are
exempt from the IDE requirements, including FDA approval of investigations,
provided the testing meets certain exemption criteria. IVD manufacturers must
also establish distribution controls to assure that IVDs distributed for the
purpose of conducting clinical investigations are used only for that purpose.
Pursuant to current FDA policy, manufacturers of IVDs labeled for
investigational use only ("IUO") or research use only ("RUO") are encouraged by
the FDA to establish a certification program under which investigational IVDs
are distributed to or utilized only by individuals, laboratories or health care
facilities that have provided the manufacturer with a written certification of
compliance indicating that the IUO or RUO product will be restricted in use and
will, among other things, meet institutional review board and informed consent
requirements.
Any devices manufactured or distributed by the Company pursuant to FDA
clearance or approvals are subject to pervasive and continuing regulation,
including routine inspections of facilities by the FDA and certain state
agencies. Manufacturers of medical devices for marketing in the United States
are required to adhere to applicable regulations setting forth detailed cGMP
requirements, which include testing, control and documentation requirements.
Manufacturers must also comply with Medical Device Reporting ("MDR")
requirements that a firm report to the FDA any incident in which its product may
have caused or contributed to a death or serious injury, or in which its product
malfunctioned and, if the malfunction were to recur, it would be likely to cause
or contribute to a death or serious injury. Labeling and promotional activities
are subject to scrutiny by the FDA and, in certain circumstances, by the Federal
Trade Commission. Current FDA enforcement policy prohibits the marketing of
approved medical devices for unapproved uses.
The Company is subject to routine inspection by the FDA and certain state
agencies for compliance with cGMP requirements, MDR requirements, and other
applicable regulations. With respect to devices, the FDA Modernization Act will
affect the IDE, 510(k) and PMA application processes, and also will affect
device standards and data requirements, procedures relating to humanitarian and
breakthrough devices, tracking and postmarket surveillance, accredited
third-party review, and the dissemination of off-label information. The Company
cannot predict how or when these changes will be implemented or what effect the
changes will have on the regulation of the Company's products. Changes in
existing requirements or adoption of new requirements could have a material
adverse effect on the Company's business, financial condition, and results of
operations. There can be no assurance that the Company will not incur
significant costs to comply with laws
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and regulations in the future or that laws and regulations will not have a
material adverse effect on the Company's business, financial condition or
results of operations.
Within the European Community, there exists a harmonized European
regulatory regime for medical devices (Directive 93/42/EEC) and, from 1999, a
separate Directive for in vitro diagnostics will be adopted. These Directives
require that relevant products satisfy certain Essential Requirements and bear a
marking to demonstrate compliance.
The Company is also subject to numerous federal, state and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. There can be no assurance that the Company
will not be required to incur significant costs to comply with such laws and
regulations in the future or that such laws or regulations will not have a
material adverse effect upon the Company's ability to do business.
Noncompliance with applicable requirements can result in, among other
things, fines, injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, failure of the government to grant
premarket clearance or premarket approval for devices, withdrawal of marketing
clearances or approvals, and criminal prosecution. The FDA also has authority to
request recall, repair, replacement or refund of the cost of any device
manufactured or distributed by the Company.
Health Care Fraud and Abuse
The Company is subject to various federal and state laws pertaining to
health care fraud and abuse, including anti-kickback laws, physician
self-referral laws, and false claim laws. Violations of these laws are
punishable by criminal and/or civil sanctions. The Company has never been
challenged by a government authority under these laws, and intends to seek legal
counsel and structure its operations in order to comply with such laws. However,
because of the breadth of some of these laws, the Company cannot provide
assurances that one or more of its current or future practices would not be
challenged by governmental authorities under these laws or that such challenge
could not be successful.
Anti-Kickback Laws. The Company's operations are subject to federal and
state anti-kickback laws. The Federal Health Care Programs Anti-Kickback Statute
(section 1128B(b) of the Social Security Act) prohibits persons or entities
from, among other things, knowingly and willfully offering, paying, soliciting
or receiving any remuneration, directly or indirectly, overtly or covertly, in
cash or in kind, in return for or to induce (i) the referral of an individual
for the furnishing of any item or service for which payment may be made in whole
or in part under a Federal Health Care Program, including Medicare and Medicaid,
or (ii) the purchasing, ordering, or recommending of any product or service for
which payment may be made in whole or in part under a Federal Health Care
Program. The statute is broad in scope and has been interpreted by federal
courts and administrative tribunals to apply if even "one purpose" (as opposed
to the primary or sole purpose) of an arrangement is to induce the referral of
business. The statute contains certain exceptions, and regulations have created
certain "safe harbors," which identify specific practices that might otherwise
fall within the broad language of the statutory prohibition, but that are not
considered unlawful under the statute. Safe harbors exist for, among other
things, certain investment interests held in an entity by a referral source, as
well as employment and personal service arrangements. Each safe harbor contains
a number of requirements that must be met. Practices that do not satisfy all of
the requirements of an applicable safe harbor do not necessarily violate the
statute, although such practices may be subject to scrutiny by federal
enforcement officials. Several states also have anti-kickback laws that vary in
scope and may apply regardless of whether a Federal Health Care Program is
involved.
The Company has established, or may establish in the future, various
financial relationships with potential purchasers of the Company's products or
sources of referral, including hospitals, clinical laboratories and physicians.
For example, the Company may lease space from hospitals and may contract with
clinical laboratories for testing to be performed in connection with patient
treatment. In addition, the Company may acquire equipment, products, services
and/or capital improvements from hospitals where OncoVAX Centers may be located,
through payments of cash, notes and/or stock, and/or may enter into joint
ventures for the operation of such centers, as the Company has done with Lehigh
Valley Hospital. As long as such
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relationships involve the lease or purchase by the Company of space, products,
services or capital improvements needed for the Company's operations, and the
amounts paid represent fair market value, the Company believes that such
relationships should not be found to violate the anti-kickback laws. In
addition, certain supervising physicians at the Company's OncoVAX Centers, as
well as physician-members of the Company's Medical Advisory Board, may
recommend, order or purchase the Company's products, or refer patients to the
Company's OncoVAX Centers. Arrangements with these physicians or their employers
will be structured to either meet the requirements of the applicable safe
harbors for employment and personal service arrangements or, as with the other
relationships described above, compensate the individuals or their employers a
fair market value amount for the physician's services. Potential purchasers of
the Company's products or sources of referral may acquire investment interests
in the Company or in the OncoVAX Centers. The Company believes that such
interests could qualify for the investment interests safe harbor or, absent safe
harbor compliance, should not be found to violate the anti-kickback laws as long
as such interests are offered and purchased for a fair market value amount and
any return on investment is proportional to the amount of the investment. The
Company may provide certain customers with volume-based discounts on the sale of
laboratory reagents and instrumentation necessary to read ELISA tests. The
Company believes that its policies for providing discounts and instrumentation
are consistent with standard industry practices and should not be found to
violate the anti-kickback laws. Moreover, the Company's CEO has made a donation
to Lehigh Valley Hospital in the amount of 5,000 shares of Company common stock.
Because the contributed shares were owned by the CEO, and provided that, if
subjected to regulatory scrutiny, the donation was found to be motivated solely
by the CEO's charitable purpose, the Company believes that the CEO's donation
should not be found to violate the anti-kickback laws.
Physician Self-Referral Laws. To the extent it has financial relationships
with physicians, the Company is subject to federal and state physician
self-referral laws. The federal Medicare/Medicaid physician self-referral law
(the "Stark law," section 1877 of the Social Security Act) prohibits a physician
from referring Medicare and Medicaid beneficiaries to an entity for specified
"designated health services," including outpatient prescription drugs, if the
physician has either an investment interest in the entity or a compensation
arrangement with the entity. There are several exceptions to the Stark law
prohibition, including exceptions for employment and personal service
arrangements, as well as investment interests in publicly traded companies with
stockholder equity exceeding $75 million. Several states also have physician
self-referral laws that vary in scope and may apply regardless of whether a
Federal Health Care Program is involved.
As described above, the Company has established, or may establish in the
future, various financial relationships with physicians who may refer patients
to the Company's OncoVAX Centers. Since the centers will furnish designated
health services, such as the OncoVAX vaccine, which likely would be deemed an
outpatient prescription drug, the Company intends to structure arrangements with
referring physicians to be in compliance with the Stark law. For example,
arrangements with supervising physicians at the Company's OncoVAX Centers, as
well as physician-members of the Company's Medical Advisory Board, will be
structured to meet the requirements of applicable Stark law exceptions,
including exceptions for employment and personal service arrangements. Certain
physician-members of the Company's Medical Advisory Board may hold investment
interests in the Company. Since such investment interests would not currently
qualify for a Stark law exception, the Company intends to enter into agreements
with these physicians that prohibit the physicians from referring patients to
the Company's OncoVAX Centers until the Company has sufficient stockholder
equity to qualify for the Stark law exception for ownership in a publicly traded
company. Moreover, once the Company's stock becomes publicly traded, it will not
be in a position to know or control whether some physicians who refer patients
to OncoVAX Centers may be investors in the Company. Absent the Company having
sufficient stockholder equity to qualify for the Stark law exception for
ownership in a publicly traded company, any such referrals that do occur could
be found to be in violation of the Stark law.
False Claims Laws. The Company is subject to federal and state laws
prohibiting individuals or entities from knowingly and willfully presenting, or
causing to be presented, false reimbursement claims to third-party payers,
including the Medicare and Medicaid programs. Although the Company does not
currently submit reimbursement claims to third-party payers for any of its
products, the Company may provide customers with CPT coding recommendations for
its products. Moreover, once operational, the Company's OncoVAX
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Centers may submit claims to third-party payers. The Company intends that claims
submitted to third-party payers by OncoVAX Centers will comply with requirements
imposed by such payers, including Medicare program requirements for the coverage
of biologics administered incident to a physician's service.
Facility Licensure, Corporate Practice of Medicine and other Health Care
Professions
States generally require that certain types of health care facilities have
regulatory licenses in order to operate and treat patients. Facilities must
satisfy specified regulatory requirements, and undergo periodic surveys or
inspections by state licensing bodies, in order to obtain and maintain such
licenses. Some states may require licensure of the Company's OncoVAX Centers.
The Company intends to obtain and maintain all required regulatory licenses for
the OncoVAX Centers.
Many states also have laws restricting the corporate practice of medicine.
These laws generally prohibit non-physician entities from practicing medicine or
otherwise exercising control over a physician's practice of medicine. In some
states, these laws prohibit business corporations from employing physicians to
render medical services on behalf of the corporation, although the retention of
physicians on an independent contractor basis is generally permissible. Some
states also have laws restricting the corporate practice of other health care
professions such as nurse practitioners. The Company intends to retain
supervising physicians and other health care professionals for its OncoVAX
Centers in compliance with these laws.
Other Regulation
The Company is subject to laws of more general applicability dealing with
issues such as occupational safety, employment, medical leave, and civil rights
and discrimination. Federal, state and local governments in many instances are
expanding the regulatory requirements on businesses, and the imposition of these
requirements may have the effect of increasing operating costs and reducing the
profitability of the Company's operations.
RADIOACTIVE AND OTHER HAZARDOUS MATERIALS
The NRC and the Agreement States regulate companies that possess
radioactive material and those that manufacture, prepare, or transfer
radioactive drugs for commercial distribution to assure the public's safety
through proper use of radioactive materials. Agreement States typically regulate
in a manner similar to the NRC. The Company's incorporation of radioactive
materials into its HumaRAD products and HumaSPECT subjects it to these NRC
requirements. To comply, the Company must apply for and maintain appropriate
licenses and comply with reporting, recordkeeping, and other regulatory
requirements. Obtaining and maintaining a license includes demonstrating that:
the Company's equipment and facilities are adequate to protect health and
minimize danger to life and property; the personnel are adequately qualified to
operate the equipment; and environmental concerns are adequately addressed.
Other regulatory requirements include specific packaging and labeling
compliance, measuring radiation emitted from products before distribution,
conducting daily inspections and maintaining instruments used to measure the
product's radiation. The regulatory authorities periodically conduct routine
inspections, the frequency of which varies depending on the Company's history
and changes in volume or character of manufacturing operations.
The NRC takes enforcement actions against those companies failing to
achieve compliance with NRC regulations. The Company's failure to comply with
the regulatory requirements could subject it to enforcement actions including
civil penalties up to $5,500 per violation per day and orders to modify, suspend
or revoke its licenses. With a suspended or revoked license, the Company would
be required to cease possessing the radioactive material necessary for producing
its products and distributing its products. The nature of a particular penalty
will depend on who discovered the violation and upon its severity, its
repetitiveness and the willfulness involved. The manufacturing and
administration of the Company's HumaRAD products and HumaSPECT require the
handling, use and disposal of (90)Yttrium and Technetium Tc 99m, respectively,
each a radioactive isotope. These activities must comply with various state and
NRC regulations regarding the handling and use of radioactive materials.
Violations of these regulations could significantly delay completion of clinical
trials and commercialization of the Company's HumaRAD products and HumaSPECT.
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The administration of the Company's HumaRAD products and HumaSPECT entails
the introduction of radioactive materials into patients. These patients emit
radioactivity at levels that pose a safety concern to others around them,
especially healthcare workers for whom the cumulative effect of repeated
exposure to radioactivity is of particular concern. These concerns are addressed
in regulations promulgated by the NRC, as well as by various state and local
governments and individual hospitals. Generally, patients who emit radioactivity
above specified levels are required to be hospitalized, where they can be
isolated from others until radiation falls to acceptable levels. The NRC
recently enacted regulations that have made it easier for hospitals to treat
patients with radioactive materials on an outpatient basis. Under these
regulations, the Company's HumaRAD products and HumaSPECT may be administered on
an outpatient basis in most cases. Although state and local governments often
follow the lead of the NRC, many currently do not, and there can be no assurance
that they will do so or that patients receiving the Company's HumaRAD products
and HumaSPECT will not have to remain hospitalized for one to three days
following administration, adding to the overall cost.
The Company expects to continue using hazardous chemicals and radioactive
compounds in its ongoing research activities. Although the Company believes that
safety procedures for handling and disposing of such materials will comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. The Company could be held liable for any damages that result from
such an accident, contamination or injury from the handling and disposal of
these materials as well as for unexpected remedial costs and penalties that may
result from any violation of applicable regulations, which could result in a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company may incur substantial costs to
comply with environmental regulations.
PATENTS AND OTHER INTELLECTUAL PROPERTY
The Company believes that patent and trade secret protection is important
to its business and that its future will depend in part on its ability to
maintain its technology licenses, protect its trade secrets, secure additional
patents and operate without infringing the proprietary rights of others.
Currently, the Company has an extensive portfolio of patents and additional
pending patent applications in connection with most of the Company's therapeutic
products. This includes United States Patent No. 5,484,596, which covers the
OncoVAX(CL) method of treatment and will expire in January 2013.
Extensive research has been conducted in the cancer vaccine and monoclonal
antibody fields by pharmaceutical and biotechnology companies and other
organizations and a substantial number of patents in these fields have been
issued to other pharmaceutical and biotechnology companies. In addition,
competitors may have applications for additional patents pending and may obtain
additional patents and proprietary rights related to products or processes
competitive with or similar to those of the Company. Patent applications are
maintained in secrecy for a period after filing and, in the United States,
patent applications are confidential until the patent is issued. Publication of
discoveries in the scientific or patent literature tends to lag behind actual
discoveries and the filing of related patent applications. The Company may not
be aware of all of the patents potentially adverse to the Company's interests
that may have been issued to other companies, research or academic institutions,
or others. No assurance can be given that such patents do not exist, have not
been filed, or could not be filed or issued, which contain claims relating to
the Company's technology, products or processes. To date, no consistent policy
has emerged regarding the breadth of claims allowable in pharmaceutical and
biotechnology patents.
The Company is aware of various patents that have been issued to others
that pertain to a portion of the Company's prospective business. The Company is
aware, in particular, of the existence of at least one United States patent
owned by another party that may interfere with the manufacture and marketing of
HumaSPECT in the United States. There can be no assurance that other patents do
not exist in the United States or in other countries or that patents will not be
issued to third parties that contain preclusive or conflicting claims with
respect to OncoVAX(CL) or any of the Company's other product candidates or
programs. Commercialization of cancer vaccines and monoclonal antibody-based
products may require licensing and/or cross-licensing of one or more patents
with other organizations in the field. There can be no assurance that the
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licenses that might be required for the Company's processes or products would be
available on commercially acceptable terms, if at all.
The Company's breach of an existing license or failure to obtain a license
to technology required to commercialize its product candidates may have a
material adverse effect on the Company's business, financial condition and
results of operations. Litigation, which could result in substantial costs to
the Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the United States Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome could subject the Company to significant
liabilities to third parties and require the Company to license disputed rights
from third parties or to cease using such technology.
Patents issued and patent applications filed internationally relating to
biologics are numerous and there can be no assurance that current and potential
competitors and other third parties have not filed or in the future will not
file applications for, or have not received or in the future will not receive,
patents or obtain additional proprietary rights relating to products or
processes used or proposed to be used by the Company. Many non-United States
jurisdictions allow oppositions by third parties to granted patents and/or
issued patents. The Company may have to participate in opposition proceedings in
non-United States jurisdictions to prevent a third party from obtaining a patent
that may be adverse to the Company's interests. Also, the Company may have to
defend against a third party's opposition to a patent granted and/or issued to
the Company. There can be no assurance that the Company will be successful in an
opposition proceeding, and participation in such a proceeding could result in
substantial cost to the Company whether or not the eventual outcome is favorable
to the Company. Moreover, there is certain subject matter which is patentable in
the United States and not generally patentable outside of the United States and
may limit the protection the Company can obtain on some of its inventions
outside of the United States. For example, methods of treating humans are not
patentable in many countries outside of the United States. These and/or other
issues may prevent the Company from obtaining patent protection outside of the
United States, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company also relies on trade secrets and trademarks to protect its
technology, especially where patent protection is not believed to be appropriate
or obtainable. The Company protects its proprietary technology and processes, in
part, by confidentiality agreements with its key employees, consultants, medical
advisory board members, collaborators and contractors. There can be no assurance
that these agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets and trademarks or
those of its collaborators or contractors will not otherwise become known or be
discovered independently by competitors. All of the Company's material patents,
including those which relate to the Company's OncoVAX(CL), HumaSPECT and the
Company's HumaRAD products, have been pledged to secure certain of the Company's
existing debt obligations. See "-- Recent Debt Refinancings."
RECENT DEBT REFINANCINGS
On April 1, 1998, the Company issued to each of Northstar High Yield Fund
and Northstar High Total Return Fund II a 12.5% promissory note (each such note,
an "April 1998 Note") in the principal amount of $4.0 million and a warrant to
purchase 32,711 shares of common stock (collectively, the "April 1998
Securities"). The Company applied approximately $6.7 million of the $8.0 million
proceeds from the sale of the April 1998 Securities to retire the Company's
existing credit facility with Creditanstalt AB. The maturity of the April 1998
Notes was subsequently extended from April 17, 1998 to August 21, 1998 and the
principal amount of the April 1998 Note issued to Northstar High Total Return
Fund II was increased to $6.0 million, bringing the total principal amount
outstanding under the April 1998 Notes to $10.0 million.
On July 31, 1998, the Company's subsidiary, PerImmune Holdings, entered
into an agreement with Organon Teknika (the "Organon Amendment") whereby Organon
Teknika agreed to extend the maturity of a promissory note issued by PerImmune
Holdings in the original principal amount of approximately $9.2 mil-
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lion, plus all unpaid accrued interest as calculated on the date of this
offering (the "Organon Note"), from August 1, 1998 to January 15, 2000. The
Organon Amendment provides that, from and after the date of the consummation of
this offering until paid in full, interest will accrue on the Organon Note at
the rate of 10% per annum, and shall be due and payable on a quarterly basis,
commencing on each November 1 thereafter. The Organon Amendment also provides
that the Organon Note shall mature on January 15, 2000 and shall be payable in
quarterly installments over the nine or twelve month period thereafter,
depending on the Company's cash and cash equivalent balances as of December 31,
1999. The Organon Note is convertible, at the option of Organon Teknika, into
common stock any time from and after the date of the consummation of this
offering at a conversion price equal to the price to the public set forth on the
cover page of this Prospectus, subject to certain anti-dilution adjustments. The
Organon Note is secured by a first priority perfected security interest in all
of the patents owned by PerImmune Holdings including those related to OncoVAXCL,
HumaSPECT and the Company's HumaRAD products (the "PerImmune Patents"). The
Organon Amendment also extended the date of certain milestone payments due under
the Intellectual Property Agreement, dated August 2, 1996, by and among
PerImmune Holdings and Akzo Nobel Pharma International, B.V. ("Akzo") (the
"Intellectual Property Agreement"). Under the Organon Amendment, the Company
agreed to guarantee payment of the Organon Note and payment of milestone
payments due under the Intellectual Property Agreement.
On August 25, 1998, the Company completed a comprehensive refinancing of
its outstanding indebtedness (the "August 1998 Refinancing"). In the August 1998
Refinancing, the Company issued to Northstar High Yield Fund, Northstar High
Total Return Fund, Northstar High Total Return Fund II and Northstar Strategic
Income Fund (collectively, the "Northstar Funds") (i) the Company's 12%
guaranteed senior secured primary notes due August 25, 2003 in the aggregate
original principal amount of $35.0 million (the "August 1998 Primary Notes"),
(ii) the Company's 12% guaranteed senior secured escrow notes due August 25,
2003 in the aggregate original principal amount of $6.0 million (the "August
1998 Escrow Notes" and, together with the August 1998 Primary Notes, the "August
1998 Notes") and (iii) common stock warrants to purchase up to 1,083,339 shares
of common stock (the "August 1998 Warrants" and, together with the August 1998
Notes, the "August 1998 Securities"). In addition, the Company amended and
restated (i) certain provisions of warrants previously granted to certain of the
Northstar Funds and (ii) certain provisions of that portion of a warrant
previously granted to CoreStates Enterprise Fund ("CoreStates"), which was
assigned and transferred to the Northstar Funds (the "CoreStates Warrant"). The
description of the agreements that effected the August 1998 Refinancing
contained herein does not purport to be complete and is qualified in its
entirety by reference to such agreements, which have been filed as Exhibits to
the Registration Statement of which this Prospectus is a part.
As consideration for their purchase of the August 1998 Securities, the
Northstar Funds (i) contributed to the Company (A) each of the 12.5% April 1998
Notes, (B) a senior secured promissory note in the original principal amount of
$4.7 million issued by the Company to Northstar High Total Return Fund on
December 27, 1995, due and payable on December 21, 2000 (the "1995 Note") and
(C) an aggregate of 47,030 shares of the Company's Series A-2 preferred stock
("Series A-2 Preferred Stock") and (ii) paid the remaining proceeds from the
purchase of the August 1998 Securities to the Company.
The net cash proceeds from the sale of the August 1998 Securities were
applied (i) to discharge the Company's indebtedness to (A) CoreStates in the
aggregate amount of $5,097,568.91, including interest, for repayment of a
Secured Promissory Note, in the original principal amount of $4.0 million,
bearing an interest rate of 13% per annum, (B) Northstar High Total Return Fund
in the amount of $7,171,131, including interest, for repayment of the 1995 Note,
(C) Northstar High Yield Fund and Northstar High Total Return Fund II in the
amount of $10,113,014 for repayment of the April 1998 Notes and (D) Northstar
High Total Return Fund in the amount of $4,876,423 for redemption of certain
shares of the Series A-2 Preferred Stock, (ii) to make a $500,000 milestone
payment owed by PerImmune Holdings to Akzo pursuant to the Intellectual Property
Agreement, (iii) to advance to subsidiaries of the Company capital required by
such subsidiaries in the amount of $2,165,365.09, (iv) to fund a (A) $6.0
million escrow account ("Segregated Account") (which sum represents all of the
cash proceeds from the sale of the August 1998 Escrow Notes) and (B) a $4.92
million escrow (the "Escrow Account"), which amount was sufficient to pay,
together with
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the proceeds from the investment thereof, the first four quarterly interest
payments on the August 1998 Notes. In addition, in conjunction with the sale of
the August 1998 Securities, CoreStates transferred the CoreStates Warrant,
representing the right to purchase up to 159,073 shares of the Company's Common
Stock, to the Northstar Funds.
The August 1998 Notes are secured by (i) a first priority security interest
in all the existing and future assets of the Company, other than the PerImmune
Patents and certain equipment financed pursuant to the Loan and Security
Agreement, dated September 30, 1997, between the Company and the Washington
Economic Development Finance Authority, and a second security interest in
certain of the PerImmune Patents and (ii) a pledge of all the issued and
outstanding capital stock of the existing and future subsidiaries of the
Company.
Pursuant to the Interest Escrow Security Agreement, the Company is
permitted to obtain funds upon request from such Segregated Account, provided
that no event of default (as defined) occurs. The Company may draw out of the
Escrow Account to make scheduled interest payments on the August 1998 Notes,
provided that, after giving effect to any such withdrawal, the Company, subject
to certain conditions, is required to maintain the balance in the Escrow Account
at an amount sufficient to pay the next four scheduled interest payments, and,
after the first two successive full payments of interest hereafter, at a level
sufficient to pay the next two successive full payments of interest on the
outstanding August 1998 Notes. The Northstar Funds will have a first priority
security interest in the Escrow Account. The Escrow Account will be terminated
after payment in full of all interest accrued through and including the twelfth
successive interest payment due on the August 1998 Notes, with any balance
remaining in the Escrow Account to be retained by the Company. The August 1998
Notes are guaranteed by all the existing subsidiaries of the Company and will be
guaranteed by all future subsidiaries of the Company.
The August 1998 Notes, among other things, require that the Company comply
with certain financial covenants beginning in the year 2000 including, without
limitation, maintaining an adjusted debt to EBITDA (as defined) ratio, minimum
levels of tangible net worth and interest coverage, and maximum levels of
leverage for certain periods. In February 1999, the August 1998 Notes were
amended to eliminate the Company's obligations to comply with financial
covenants relating to the maintenance of an adjusted debt to EBITDA ratio,
minimum tangible net worth and interest coverage. In addition, the August 1998
Notes impose certain limitations on the ability of the Company to, among other
things, (i) incur additional indebtedness, (ii) pay dividends or make certain
other restricted payments, (iii) consummate certain asset sales, (iv) enter into
certain transactions with affiliates, (v) incur liens, (vi) merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets, (vii) enter into certain
restrictive arrangements relating to the Company's subsidiaries, (viii) extend
credit and (ix) make investments.
Pursuant to the terms of the August 1998 Primary Notes, up to $5.0 million
aggregate principal amount of the August 1998 Primary Notes must be redeemed (at
a price equal to 100% of their principal amount plus accrued and unpaid
interest, if any, to the date of redemption), when and as the Company receives
the net proceeds from the sale of common stock offered hereby. See "Use of
Proceeds." Pursuant to the terms of the August 1998 Escrow Notes, the Company
must notify the noteholders if the Company or any of its subsidiaries receives
cash proceeds from the sale of debt or equity securities or from certain asset
sales, and, if requested, up to $6.0 million aggregate principal amount of the
August 1998 Escrow Notes must be redeemed, in whole or in part (at a price equal
to 100% of their principal amount plus accrued and unpaid interest, if any, to
the date of redemption). In January 1999, the August 1998 Escrow Notes were
amended to eliminate the Company's obligation to redeem the August 1998 Escrow
Notes with proceeds received from this offering or any other debt or equity
offering prior to the consummation of this offering.
The Northstar Funds may require the Company to repurchase an aggregate of
up to $7.5 million aggregate principal of the August 1998 Notes at a price equal
to 100% of their principal amount plus accrued and unpaid interest, upon the
failure of Intracel to satisfy certain ratios of EBITDA to interest expense as
measured at the end of each of three successive fiscal quarters of the Company
commencing March 31, 2000. In February 1999, the August 1998 Notes were amended
to eliminate these repurchase obligations.
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The Northstar Funds may require the Company to prepay the August 1998
Notes, in whole or in part, at a price equal to 101% of the principal amount so
prepaid, plus accrued interest to the date of prepayment, if there is a Change
of Control (as defined) of the Company.
The August 1998 Primary Notes may be prepaid, in whole or in part, at the
option of the Company initially at a redemption price of 112% of the principal
amount thereof, and declining to 100% of the principal amount thereof after July
31, 2002, plus accrued and unpaid interest, if any, to the date of redemption.
The August 1998 Escrow Notes may be prepaid, in whole or in part, at the option
of the Company, provided that certain notice requirements are met.
Events of default under the August 1998 Notes include, among other things,
(i) failure to pay principal or interest on the August 1998 Notes when due, (ii)
breaches of representations, warranties and covenants, (iii) defaults under
other indebtedness of the Company or its subsidiaries, (iv) failure to
consummate an equity offering on or prior to December 31, 1999, with an
aggregate offering price of not less than $40.0 million and aggregate proceeds
to the Company (net of selling expenses and underwriters' discounts or selling
agent's commission) of not less than $35.0 million, (v) the occurrence of
certain events of bankruptcy, (vi) certain adverse judgments against the Company
or its subsidiaries, (vii) certain ERISA events and (viii) other customary
defaults, in certain cases after the expiration of a grace period.
The August 1998 Warrants are exercisable until August 25, 2003 at an
exercise price of $15.00 per share. As part of the August 1998 Refinancing, the
Company agreed to grant certain demand and "piggyback" registration rights to
the Northstar Funds and their affiliates with respect to the shares of common
stock held by them, including those issuable upon exercise of warrants, and has
agreed to file a registration statement covering such shares 181 days after the
date of this Prospectus. See "Shares Eligible for Future Sale."
In January 1999, the Company and the Northstar Funds entered into a First
Amendment and Waiver Agreement which, among other things, (i) amended the terms
of the August 1998 Escrow Notes to eliminate the Company's obligation to redeem
the August 1998 Escrow Notes with proceeds received from this offering or any
other debt or equity offering prior to the consummation of this offering, (ii)
amended the Interest Escrow Security Agreement to eliminate the balance required
to be maintained in the escrow account created thereunder and to permit the next
three scheduled interest payments to be paid out of amounts currently held in
such escrow account, and (iii) waived certain non-payment events of default and
compliance by the Company with certain covenants set forth in the documentation
executed in connection with the August 1998 Refinancing.
In February 1999, the Company and the Northstar Funds and the Company
entered into a Second Amendment Agreement which amended the terms of the August
1998 Notes to eliminate the Company's obligation to (i) repurchase such notes
upon the Company's failure to comply with certain ratios of EBITDA to interest
expense as measured at the end of each of three successive fiscal quarters of
the Company commencing March 31, 2000; (ii) prepay such notes at a price equal
to 101% of the principal amount so prepaid, plus accrued interest to the date of
prepayment if Simon R. McKenzie shall cease to be the principal executive
officer of the Company in charge of the Company's management and policies for a
period of 30 days or more and the holders of the August 1998 Notes have not
approved a successor within 180 days after the cessation of his full time
service to the Company and (iii) comply with certain financial covenants
beginning in the year 2000 including maintaining an adjusted debt to EBITDA
ratio, minimum levels of tangible net worth and interest coverage.
The Company has entered into a Senior Note Purchase Agreement with an
accredited investor whose members currently hold various securities issued by
the Company, pursuant to which the Company has sold $2 million aggregate
principal amount of the Company's non-convertible debt securities bearing
interest at the rate of 15% per annum. The proceeds from the issuance and sale
of these non-convertible debt securities will be used for working capital and
other general corporate purposes. In addition, Messrs. Hanna, McKenzie, Bloom
and Schuyler, all being current stockholders, officers and/or directors of the
Company, have committed to invest, at the Company's request, up to $5 million in
the Company within the next six to twelve months. Such investment, which would
be used solely for working capital, will be in the form of non-convertible debt
securities bearing interest at a rate of 15% per annum and payable one year
after the funding date. However,
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<PAGE> 64
the commitment will be null and void if not drawn down upon by the one year
anniversary of the consummation of this offering.
COMPETITION
The pharmaceutical and biotechnology industries are intensely competitive.
Many of the product candidates being developed by the Company, if approved,
would compete with existing drugs, therapies and diagnostic products. There are
many pharmaceutical companies, biotechnology companies, public and private
universities and research organizations actively engaged in research and
development of products for the treatment of people with cancer. Many of these
organizations have financial, technical, manufacturing and marketing resources
and experience greater than those of the Company. Several of them may have
developed or are developing therapies or diagnostic products that could be used
for treatment or diagnosis of the same diseases targeted by the Company. If a
competing company were to develop or acquire rights to a more efficacious
therapeutic or diagnostic product for the same diseases targeted by the Company,
or one which offers significantly lower costs of treatment or diagnosis, the
Company's business, financial condition and results of operations could be
materially adversely affected.
The Company believes that competition in the development and marketing of
new cancer therapies will be based primarily on product efficacy and safety,
time to market and price. To the extent the Company's product programs are
successful, it also intends to rely to some degree on patents and other
intellectual property and orphan drug designations to protect its products from
competition.
The Company believes that its product development programs will be subject
to significant competition from companies utilizing alternative technologies as
well as to increasing competition from companies that develop and apply
technologies similar to the Company's technologies. Other companies may succeed
in developing products earlier than the Company, obtaining approvals for such
products from the FDA more rapidly than the Company or developing products that
are more effective than those under development or proposed to be developed by
the Company. There can be no assurance that research and development by others
will not render the Company's technology or product candidates obsolete or
non-competitive or result in treatments superior to any therapy developed by the
Company, or that any therapy developed by the Company will be preferred to any
existing or newly developed technologies.
PRODUCT LIABILITY AND INSURANCE
The manufacture and sale of human therapeutic and diagnostic products
involve an inherent risk of product liability claims and associated adverse
publicity. The Company has only limited commercial product liability insurance.
There can be no assurance that the Company will be able to maintain existing
insurance or obtain additional product liability insurance on acceptable terms
or with adequate coverage against potential liabilities. Such insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms, if at all. An inability to obtain sufficient insurance
coverage on reasonable terms or to otherwise protect against potential product
liability claims brought against the Company in excess of its insurance
coverage, if any, or a product recall could have a material adverse effect upon
the Company's business, financial condition and results of operations.
HUMAN RESOURCES
As of December 31, 1998, the Company had over 220 employees. The Company's
employees are not represented by a collective bargaining agreement. The Company
believes its relations with its employees are good.
MEDICAL ADVISORY BOARD
The Company's Medical Advisory Board is comprised of internationally
recognized clinical researchers in the fields of oncology and cancer surgery.
The Medical Advisory Board advises the Company's management
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<PAGE> 65
on strategic issues related to the Company's clinical development programs and
consists of the following individuals:
Herbert C. Hoover, Jr., M.D., co-chairman of the Medical Advisory Board and
Medical Director of the Company, is the Chairman of the Department of Surgery at
Lehigh Valley Hospital in Allentown, Pennsylvania and the Vice Chairman of the
Department of Surgery and Professor of Surgery at Pennsylvania State
University/Milton S. Hershey Medical Center, Hershey, Pennsylvania. Dr. Hoover
is the holder of the Anne C. and Carl R. Anderson Chair of Surgery at Lehigh
Valley Hospital. Dr. Hoover obtained a B.A. from the Kansas State College of
Pittsburgh in 1966 and his M.D. in 1970 from the University of Kansas School of
Medicine. Dr. Hoover is a member of numerous professional societies and
national, regional, medical school and hospital committees and boards, as well
as being on the editorial board of various medical and scientific journals.
Herbert Michael Pinedo, M.D., Ph.D., co-chairman of the Medical Advisory
Board, is Professor of Medical Oncology and Chief of the Department of Medical
Oncology at the Vrije Universiteit in Amsterdam, the Netherlands. Dr. Pinedo
obtained his M.S. and his M.D. degree in 1967 and his Ph.D. in Medical Science
in 1972, from the Medical School of the University of Leiden in Amsterdam, the
Netherlands. Dr. Pinedo belongs to numerous professional societies, university
and hospital committees and boards, and is on the editorial board of numerous
medical journals.
Michael Andrew Choti, M.D. is Director, Johns Hopkins Colon Cancer Center,
and Medical Director, Outpatient Center at The Johns Hopkins Hospital and has
been Assistant Professor in the Department of Surgery at The Johns Hopkins
School of Medicine since 1992, Assistant Professor in the Department of Oncology
at The Johns Hopkins School of Medicine since 1995, and a full-time staff member
in the Department of Surgery at The Johns Hopkins Hospital. Dr. Choti obtained
his B.S. in 1979 from the University of California at Irvine and his M.D. in
1983 from Yale University School of Medicine. Dr. Choti is a member of various
professional societies as well as being involved in various professional
activities.
Ronald Levy, M.D. has been Chief of the Division of Oncology at Stanford
University School of Medicine since 1993. From 1987, Dr. Levy has been Professor
of Medicine, Division of Oncology, at Stanford University School of Medicine,
holder of the Summy Chair at Stanford University School of Medicine, and an
American Cancer Society Clinical Research Professor. Dr. Levy obtained his A.B.
from Harvard University in 1963 and obtained his M.D. from Stanford University
in 1968. Dr. Levy is a member of numerous medical societies and an active member
of various professional review organizations, including the Margaret Early Trust
Research Grant Committee and the Scientific Advisory Board of CellPro, Bothell,
Washington.
H. Kim Lyerly, M.D., Ph.D. is Professor of Surgery, Immunology, and
Pathology and Clinical Director of the Duke Center for Genetic and Cellular
Therapies at Duke University Medical Center. Dr. Lyerly obtained his B.S. in
1980 from the University of California at Riverside and his M.D. from the
University of California at Los Angeles in 1983. Dr. Lyerly is on the Editorial
Board of Annals of Surgery and International Journal of Surgical Science. Dr.
Lyerly has been awarded numerous honors and belongs to numerous professional
societies. Since 1990, Dr. Lyerly has been a research sponsor working with
various M.D.s and Ph.D.s, as well as an investigator since 1988 working on
protocols for the treatment of diseases such as AIDS and leukemia, and on
molecular therapeutics programs.
Bruce G. Wolff, M.D. is Professor of Surgery at the Mayo Medical School and
a consultant in colon, rectal, and general surgery, at the Mayo Clinic. Dr.
Wolff obtained a B.S. from Davidson College and his M.D. from Duke University
School of Medicine. Dr. Wolff belongs to numerous in-house Mayo Clinic
organizations as well as national and regional organizations including being
vice-chairman of the American Cancer Society Executive Committee on Allied
Health Personnel.
LEGAL PROCEEDINGS
On November 30, 1998, a complaint was filed against the Company in the
Circuit Court of Cook County, Illinois, Law Division, by Vector Securities
International Inc. ("Vector"). In the complaint, Vector alleges a breach of
contract by the Company in connection with the Company's retention of Vector as
a financial
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advisor, and seeks damages of approximately $1.6 million plus attorneys' fees.
The Company believes it has defenses to the claims alleged in the complaint as
well as a counterclaim against Vector. On January 29, 1999, the Company filed
its answer to the complaint and its counterclaim. In addition, the Company is
aware that there has been a trademark opposition proceeding filed with the
Trademark Trial and Appeal Board, Jenner Technologies, Inc. v. Theriak S.A.
(Case No. 106,938), in which Jenner Technologies, Inc. is challenging Theriak
S.A.'s registration of the OncoVAX(CL) trademark. The Company's rights to use
the OncoVAX(CL) mark in countries other than the United States derive from
Theriak's rights in that mark. The outcome of the above-mentioned proceeding may
effect whether or not the Company is or will be entitled to use the OncoVAX(CL)
mark. Management is unable to fully assess the impact of the Vector complaint
and trademark opposition at this time. However, the Company has reserved
approximately $1.6 million, the full amount of Vector's claim. The Company does
not believe the ultimate outcome of its trademark opposition will have a
material impact on the financial position, results of operations or cash flows
of the Company. The Company also recently received a request for payment of
approximately $990,000 due under a license agreement assumed by the Company in
connection with its purchase of certain assets from Zynaxis Inc. The Company is
currently in the process of reviewing the underlying contracts and
correspondence regarding this claim to determine its validity.
On January 20, 1999, a complaint was filed against the Company in the Court
of Common Pleas of Philadelphia County, Trial Division, by Thomas Jefferson
University ("TJU"). In the complaint, TJU seeks a declaration that the Company
is required to defend TJU in an arbitration instituted by BioReliance
Manufacturing, Inc. ("BioReliance") against TJU on December 29, 1998, in
Washington, DC, and a declaration that the Company is required to indemnify TJU
for any claims arising out of the arbitration. In the arbitration, BioReliance
seeks damages against TJU of approximately $129,000 arising out of several
unpaid invoices. The Company is in the process of preparing a response to the
complaint. Management believes that the ultimate outcome of this claim will not
have a material impact on the financial position, results of operations or cash
flows of the Company.
In addition, the Company is party to claims and litigation that arise in
the normal course of business. Management believes that the ultimate outcome of
these claims and litigation will not have a material impact on the financial
position or results of operations of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the Company's
current directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Michael G. Hanna, 62 Chairman of the Board and Chief Scientific Officer
Ph.D. ..................
Simon R. McKenzie......... 42 President, Chief Executive Officer and Director
Lawrence A. Bloom......... 42 Senior Vice President and Chief Financial Officer
Daniel S. Reale........... 44 Senior Vice President and President, OncoVAX(CL) Division
Persis M. Strong.......... 45 Senior Vice President and President, Bartels Diagnostics
Division
Diana Goroff, Ph.D........ 46 Senior Vice President, Operations
Carl T. Foster............ 33 Senior Vice President European Operations, Business
Development
Patricia A. Barnett....... 48 Vice President, Reimbursement
Raymond J. Schuyler....... 63 Director
Joseph F. Caligiuri....... 70 Director
Steven B. Gerber, M.D. ... 44 Director
Alexander Klibanov, 49 Director
Ph.D. ..................
</TABLE>
- ---------------
Michael G. Hanna, Ph.D. is currently Chairman of the Board and Chief
Scientific Officer of the Company. Dr. Hanna had been Chairman of the Board,
Chief Executive Officer and President of PerImmune since 1994. Dr. Hanna founded
the Litton Institute of Applied Biotechnology ("LIAB") in 1982. In 1985, Organon
Teknika assumed operations of LIAB and Dr. Hanna served as Senior Vice President
of Organon Teknika. Prior to his position at LIAB in 1982, Dr. Hanna served as
the Director of the National Cancer Institute, Frederick Cancer Research Center.
Simon R. McKenzie founded Intracel in 1987 and serves as President, Chief
Executive Officer and a director of the Company. From 1987 to the present, Mr.
McKenzie has served as President of Intracel and, from 1995 to 1997, Mr.
McKenzie was also Chairman of the Board. Prior to forming Intracel, Mr. McKenzie
co-founded and managed Baltech, Inc., an early stage pharmaceutical company
developing a new class of antiviral drugs including candidates for treating
Herpes Simplex. Since 1997, Mr. McKenzie has served on the Board of Directors of
New Century Pharmaceuticals, an early stage company working in x-ray
crystallography.
Lawrence A. Bloom is currently Senior Vice President and Chief Financial
Officer for the Company. Mr. Bloom joined the Company in January 1998 as Senior
Vice President, Corporate Development and was promoted to his current position
in August 1998. From 1996 to 1997, Mr. Bloom was a consultant to emerging
biotechnology companies. From 1991 to 1995, Mr. Bloom served as Senior Vice
President for Dillon Read Inc., an investment banking firm. From 1985 to 1990,
Mr. Bloom served as Vice President and Associate Portfolio Manager for Lehman
Management Co., a $15 billion money management division of Shearson/ Lehman
American Express.
Daniel S. Reale is currently Senior Vice President of the Company and
President of the Company's OncoVAX(CL) Division. From 1994 to 1997, Mr. Reale
served as President and Chief Operating Officer of Coral Therapeutics, a
provider of in-hospital apheresis-based technologies, where he was responsible
for the establishment of 10 hospital-based state-of-the-art blood service units
in cGMP environments. From 1989 to 1994, Mr. Reale served as Senior Vice
President, Operations for Chartwell Home Therapies, L.P., where Mr. Reale
oversaw 14 infusion pharmacies with hospital based supporting clinics.
Persis M. Strong presently serves as Senior Vice President of the Company
and President of the Company's Bartels Diagnostics Division. She joined the
Company in 1995 as Vice President of Marketing. Ms. Strong has over 17 years of
management and business development experience in the medical diagnostics
industry. Prior to joining the Company, Ms. Strong spent seven years with Binax,
Inc., a point-of-care diagnostics company, where she served as Vice President of
Marketing. From 1981 to 1988, Ms. Strong was
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employed by Ventrex Laboratories, Inc., a biotechnology company, in various
marketing and management positions. Ms. Strong has extensive international
business experience and has successfully organized and negotiated manufacturing
and distribution arrangements in over 35 international markets.
Diana Goroff, Ph.D. is Senior Vice President of Operations. From 1991 to
1998, Dr. Goroff served as Director of Parenteral Drug Manufacturing for
PerImmune. Dr. Goroff has extensive experience with production of monoclonal
antibodies and has recently managed the clinical production of the Company's
first totally human antibody.
Carl T. Foster is Senior Vice President European Operations, Business
Development. He joined the Company as Vice President of Business Development in
June 1998. From 1997 to June 1998, Mr. Foster served as Managing Director of
Ferghana Partners, Inc., an investment banking firm. From 1989 to 1997, Mr.
Foster was employed by Merck and Co., Inc. and Astra Merck, Inc., which are
affiliated pharmaceutical companies, most recently as Director of Licensing and
Business Development of Astra Merck, Inc..
Patricia A. Barnett joined the Company in August 1998 as Vice President of
Reimbursement in August 1998. From 1997 to August 1998, Ms. Barnett was employed
by Bristol-Myers Squibb Company, a pharmaceutical company, most recently as
Associate Director of Reimbursement. In addition, from 1993 to 1997, Ms. Barnett
was also employed by Genentech, Inc., a biotechnology company, as a Senior
Manager of Health Economics and Policy and Health Care Affairs.
Raymond J. Schuyler has been a director of Intracel since August 1995. From
February 1974 through 1998, Mr. Schuyler was employed by Orion Capital and
Security Insurance Co. of Hartford, one of Intracel's principal institutional
stockholders, most recently as a Senior Vice President and Chief Investment
Officer. Mr. Schuyler has been involved in investment banking and portfolio
management for more than 38 years.
Joseph F. Caligiuri became a director of Intracel immediately following the
Merger. Mr. Caligiuri retired as a Corporate Executive Vice President of Litton
Industries, Inc. in April 1993, where he had worked since 1969. Mr. Caligiuri
also serves as a member of the Board of Directors of Titan Corporation, a
commercial and military electronic and information systems company and Avnet,
Inc., an electronics components and distribution company.
Steven B. Gerber, M.D. became a director of Intracel immediately following
the Merger. Since 1990, Dr. Gerber has been a senior pharmaceutical industry
analyst and Head of Healthcare Research for CIBC Oppenheimer, an investment
banking firm. Dr. Gerber holds a medical staff appointment at Cedars-Sinai
Medical Center in Los Angeles. He is also a member of the Board of Overseers of
Tufts University School of Medicine, and a member of the Board of Directors of
Syncor International Corporation.
Alexander Klibanov, Ph.D. has been a director of Intracel since July 1992.
For more than five years, Dr. Klibanov has been a Professor of Chemistry in the
Department of Chemistry at the Massachusetts Institute of Technology. He serves
on the editorial and review board of numerous scientific publications in the
fields of chemistry and biochemistry. He is a leader in the fields of
enzymology, having published numerous related articles in leading publications.
There are no family relationships among any of the persons who are
directors or executive officers of Intracel.
Directors of the Company are elected by holders of common stock for a
three-year term, and are divided into three classes with staggered terms that
currently have expiration dates as follows: (a) Class I Directors -- 1999, (b)
Class II Directors -- 2000 and (c) Class III Directors -- 2001. As of the date
hereof, Messrs. Gerber and Caligiuri serve as Class I Directors, Messrs.
Klibanov and Schuyler serve as Class II Directors and Dr. Hanna and Mr. McKenzie
serve as Class III Directors.
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SUMMARY OF EXECUTIVE COMPENSATION
The table below sets forth certain information concerning the compensation
earned by the Company's Chief Executive Officer and each of the other most
highly compensated executive officers of the Company (collectively, the "Named
Executive Officers") whose aggregate cash compensation exceeded $100,000 for
services rendered in all capacities to the Company during the year ended
December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------- --------------------------------
SHARES OF
COMMON STOCK
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUSES OPTIONS/WARRANTS COMPENSATION
- ---------------------------------------- -------- ------- ---------------- ------------
<S> <C> <C> <C> <C>
Simon R. McKenzie
President and Chief Executive
Officer............................... $207,534 452,896
Michael G. Hanna, Ph.D.
Chairman of the Board and
Chief Scientific Officer.............. 202,797
Daniel S. Reale
Senior Vice President and President,
OncoVAX(CL) Division.................. 164,272 66,667
Lawrence A. Bloom
Senior Vice President and Chief
Financial Officer..................... 153,751 76,667
Persis M. Strong
Senior Vice President and President,
Bartels Diagnostics Division.......... 147,945 10,000
</TABLE>
The following table sets forth information regarding stock options granted
pursuant to the Company Stock Option Plan (as defined) during the fiscal year
ended December 31, 1998 to each of the Named Executive Officers. The Company has
never granted any stock appreciation rights.
OPTION/WARRANT GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS/WARRANTS AT ASSUMED ANNUAL RATES
NUMBER OF GRANTED TO OF STOCK PRICE
SECURITIES EMPLOYEES APPRECIATION FOR
UNDERLYING IN FISCAL YEAR OPTION/WARRANTS TERM
OPTIONS/WARRANTS ENDED EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED DECEMBER 31, 1998 PER SHARE(1) DATE 5% 10%
- --------------------- ---------------- ----------------- -------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Simon R.
McKenzie(2)........ 452,896 54.4% $ 6.75 1/2/03 $844,606 $1,866,358
Michael G. Hanna
Ph.D...............
Daniel S. Reale(3)... 66,667 8.0% 11.25 3/9/03 207,212 457,885
Lawrence A.
Bloom(4)........... 10,000 1.2% 11.25 4/8/03 31,082 68,682
66,667 8.0% 15.00 12/31/03 276,283 610,513
Persis M. Strong(5)... 10,000 1.2% 11.25 4/8/03 31,082 68,682
</TABLE>
- ---------------
(1) All share numbers and prices adjusted to reflect a two-for-one stock split
on December 31, 1997 and a two-for-three reverse stock split on December 28,
1998. The Company granted options and warrants to employees totaling 832,894
shares (as adjusted) during the year ended December 31, 1998.
(2) On January 2, 1998, the Company issued warrants to purchase 452,896 shares
of common stock in connection with an employment agreement. The warrants
vested immediately, carry an exercise price of $6.75 per share, and expire
five years from the date of issue.
(3) On March 9, 1998, the Company issued a five-year option for 66,667 shares at
an exercise price of $11.25 per share of which 25% became immediately vested
and exercisable upon issuance. The remaining portion vests equally over the
subsequent three-year period on each anniversary date.
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<PAGE> 70
(4) On April 8, 1998, the Company issued a five-year option for 10,000 shares at
an exercise price of $11.25 per share of which 25% became immediately vested
and exercisable upon issuance. The remaining portion vests equally over the
subsequent three-year period on each anniversary date. On December 28, 1998,
the Company issued a five-year option for 66,667 shares at an exercise price
of $15.00 per share. The entire option became vested and exercisable upon
issuance.
(5) On April 8, 1998, the Company issued a five-year option for 10,000 shares at
an exercise price of $11.25 per share of which 25% became immediately vested
and exercisable upon issuance. The remaining portion vests equally over the
subsequent three-year period on each anniversary date.
The following table sets forth the specified information concerning options
exercised by the Named Executive Officers during the year ended December 31,
1998 and unexercised options held by the Named Executive Officers as of December
31, 1998.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT VALUE OF UNEXERCISED
TO UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS OPTIONS/WARRANTS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Simon R. McKenzie...... 80,000(2) $500,000 506,230 $4,412,102
Lawrence A. Bloom...... 72,500 17,500 36,872 $110,625
Daniel S. Reale........ 16,667 50,000 62,501 187,500
Persis M. Strong....... 51,389 11,944 532,709 64,788
</TABLE>
- ---------------
(1) Calculated based upon the difference between the exercise price and the
$15.00 estimated fair market value of the underlying securities as of
December 31, 1998.
(2) On July 5, 1998, Mr. McKenzie exercised options to acquire 80,000 shares of
the Company's common stock at an exercise price of $3.75 per share. Mr.
McKenzie received a loan from the Company in the amount of $300,000 to
facilitate his exercising such options. The full recourse note, which
matures on July 5, 2001, bears interest at a rate of 10% per annum (payable
at maturity).
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with certain of its key
employees. The following is a summary of the material terms and conditions of
such agreements and is subject to the detailed provisions of the respective
agreements attached as exhibits to the Registration Statement.
Dr. Hanna entered into an employment agreement with the Company as of
January 2, 1998, providing for his employment as Chairman of the Board and Chief
Scientific Officer of the Company with a base salary of $200,000, which may be
increased by discretionary bonus payments. The Company may terminate employment
for cause (as defined) or either party may terminate upon 30 days prior notice.
Pursuant to the employment agreement, the Company has provided to Dr. Hanna a
$2,000,000 life insurance policy which will be fully funded within five years.
Dr. Hanna's compensation also includes customary perquisites and other personal
benefits. If Dr. Hanna's employment is terminated without cause, or Dr. Hanna
terminates the agreement by reason of constructive discharge (as defined), the
Company is obligated to pay him a lump sum amount equal to the monthly portion
of his base salary multiplied by 36, certain benefits for a three-year period
following termination and, to the extent he is not fully vested with the Company
retirement plans, the difference between any amounts payable to him under such
plans and amounts which would have been payable had he been vested. If
employment is terminated on account of medical disability (as defined), the
Company is obligated to pay Dr. Hanna an amount equal to two-thirds of his base
salary (less any amounts paid as workers compensation, social security
disability or other federal, state or local disability benefits) for the period
ending the earlier of (i) the date that Dr. Hanna becomes employed in a
full-time manner or substantially full-time basis, in which case he shall
receive his base salary without adjustment or (ii) the date that Dr. Hanna
attains normal retirement age. The agreement has an initial three-year term and
shall be negotiated on an annual basis upon expiration of the initial term. The
agreement also provides that Dr. Hanna may not engage in certain competitive
activities with the Company for a period of one year following termination of
the agreement.
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Mr. McKenzie entered into an employment agreement with the Company as of
January 2, 1998, providing for his employment as President and Chief Executive
Officer of the Company with a base salary of $200,000, which may be increased by
discretionary bonus payments.
In addition, pursuant to the agreement the Company granted to Mr. McKenzie
warrants, exercisable at $6.75 per share, to acquire 452,896 shares of common
stock. Mr. McKenzie's compensation also includes customary perquisites and other
personal benefits. The Company may terminate employment for cause (as defined)
or either party may terminate the agreement upon 30 days prior notice. If such
agreement is terminated without cause, or Mr. McKenzie terminates the agreement
by reason of constructive discharge (as defined), the Company is obligated to
pay him a lump sum amount equal to the monthly portion of his base salary
multiplied by 36, certain benefits for a three-year period following termination
and, to the extent he is not fully vested with the Company retirement plans, the
difference between any amounts payable to him under such plans and amounts which
would have been payable had he been vested. If employment is terminated on
account of medical disability (as defined), the Company is obligated to pay Mr.
McKenzie an amount equal to two-thirds of his base salary (less any amounts paid
as workers compensation, social security disability or other federal, state or
local disability benefits) for the period ending the earlier of (i) the date
that Mr. McKenzie becomes employed in a full-time manner or substantially
full-time basis, in which case he shall receive his base salary without
adjustment or (ii) the date that Mr. McKenzie attains normal retirement age. The
agreement has an initial four-year term and shall be negotiated on an annual
basis upon expiration of the initial term. Mr. McKenzie has agreed not to
compete with the Company for a period of one year following termination of the
agreement.
Mr. Reale entered into an employment agreement with the Company effective
March 8, 1998, providing for his employment as President of the OncoVAX(CL)
Division with a base salary of $200,000, which may be increased by discretionary
bonus payments. Pursuant to the agreement, the Company has granted Mr. Reale
options to purchase 66,667 shares of its common stock at an exercise price of
$11.25 per share vesting at a rate of 25% on the commencement of his employment
and 25% on each of the first, second and third anniversaries thereof. If Mr.
Reale achieves the first and second year performance objectives set forth
therein, his options will vest at an accelerated rate. Additionally, Mr. Reale
may receive additional performance bonuses totaling up to 100% of his salary.
Mr. Reale's compensation includes customary perquisites and other personal
benefits.
Ms. Strong entered into an employment agreement with the Company effective
June 1, 1998, providing for her employment as Senior Vice President and
President of the Bartels Diagnostic Division with a base salary of $160,000,
which may be increased by discretionary bonus payments. During her employment
with the Company, Ms. Strong has purchased 6,666 shares of common stock and been
granted options to purchase 63,333 shares of common stock with exercise prices
ranging from $3.75 per share to $11.25 per share. Ms. Strong's compensation
includes customary perquisites and customary benefits.
Mr. Bloom entered into an employment agreement with the Company August 24,
1998, providing for his employment as Chief Financial Officer and Senior Vice
President of Corporate Development with a base salary of $180,000, which may be
increased by discretionary bonus payments and option grants. Prior to his
entering this employment agreement, Mr. Bloom had a consulting agreement with
the Company from August 1997 to February 1998, pursuant to which he was paid
$51,000. Mr. Bloom has purchased 13,333 shares of common stock in the Company
and has been granted options to purchase 90,000 shares of common stock with the
exercise prices ranging from $6.75 per share to $15.00 per share. Mr. Bloom's
compensation includes customary perquisites and customary benefits.
Mr. Foster entered into an employment agreement with the Company effective
May 19, 1998, providing for his employment as Vice President of Business
Development with a base salary of $200,000, which may be increased by
discretionary bonus payments, and is guaranteed to receive an aggregate of at
least $300,000 in total cash compensation during his first year of employment.
Pursuant to the agreement, the Company has granted Mr. Foster options to
purchase 66,667 shares of its common stock at an exercise price of $15.00 per
share vesting at a rate of 25% on the commencement of his employment and 25% on
each of the first, second and third anniversaries thereof. If Mr. Foster
achieves the first and second year performance objectives set forth therein, his
options will vest at an accelerated rate. Additionally, Mr. Foster may receive
additional
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<PAGE> 72
performance bonuses totaling up to 100% of his salary. Mr. Foster's compensation
includes customary perquisites and customary benefits.
Ms. Barnett entered into an employment agreement with the Company effective
August 25, 1998, providing for her employment as Vice President of Reimbursement
with a base salary of $132,500, which may be increased by discretionary bonus
payments and is guaranteed to be at least $167,500 during the first year of
employment. Pursuant to the agreement, the Company has granted Ms. Barnett
options to purchase 23,333 shares of its common stock at an exercise price of
$15.00 per share vesting at a rate of 25% on the commencement of her employment
and 25% on each of the first, second and third anniversaries thereof. If Ms.
Barnett achieves the first and second year performance objectives set forth
therein, her options will vest at an accelerated rate. Additionally, Ms. Barnett
may receive additional performance bonuses totaling up to 50% of her salary. Ms.
Barnett's compensation includes the customary perquisites and customary
benefits.
STOCK OPTION PLANS
Intracel Stock Option Plans
The Company has reserved 1,110,172 shares of common stock for issuance
under its 1989 Stock Option Plan and 1990-91 Stock Option Plan (the "Company
Stock Option Plan") which provides for the granting of options to key employees
and consultants of the Company and its subsidiaries. The option price per share,
the amount of shares underlying each option, the vesting period and the
expiration date are determined by the Board of Directors at the date of the
grant, except that the option price may not be less than the fair market value
(as defined) of stock on the date of the grant and the option period may not
exceed ten years. For stockholders possessing more than a 10% ownership
interest, the option price shall not be less than 110% of the fair market value
at the date of grant. The vesting period for options issued in 1997 ranged from
24 months to 48 months and all had expiration dates five years from the date of
issue. At September 30, 1998, options to purchase 604,681 shares of common stock
at $1.50 to $15.00 per share were outstanding, of which 346,412 were vested and
exercisable.
The Company's 1999 Stock Incentive Plan (the "1999 Plan") was adopted and
approved by the Board of Directors and by the Company's stockholders in January
1999. Options under this plan will not be issued until after the closing of the
Company's anticipated public offering in 1999. The 1999 Plan allows granting of
options intended to qualify as "incentive stock options" under Section 422 of
the Internal Revenue Code of 1986, nonqualified stock options and stock
appreciation rights. The 1999 Plan also allows the transfer or sale of common
stock to selected individuals in connection with the performances of services to
the Company or its affiliates. A total of 3,000,000 shares of common stock have
been reserved for issuance under the 1999 Plan, plus an annual increase to be
added on the first day of the Company's fiscal year beginning in 2000 equal to
two percent (2%) of the number of shares outstanding as of such date not to
exceed 500,000 in any plan year. The Board of Directors or a committee
designated by the Board is authorized to administer the 1999 Plan, including the
selection of individuals eligible for grants of options, issuances of common
stock, the terms of such grants or issuances, possible amendments to the terms
of such grants or issuances and the interpretation of the terms of, and adoption
of rules for, the 1999 Plan. The maximum term of any stock option to be granted
under the 1999 Plan is ten years, except that with respect to incentive stock
options granted to a person possessing more than 10% of the combined voting
power of the Company (a "10% Stockholder"), the term of such stock options shall
be for no more than five years.
The exercise price of nonqualified stock options and incentive stock
options granted under the 1999 Plan must be at least 85% and 100%, respectively,
of the fair market value of the common stock on the grant date except that the
exercise price of incentive stock options granted to a 10% Stockholder must be
at least 110% of such fair market value on the grant date. The aggregate fair
market value on the date of grant of the common stock for which incentive stock
options are exercisable for the first time by an employee during any calendar
year may not exceed $100,000. The purchase price of shares of common stock
granted under the 1999 Plan must be at least 85% of the fair market value of the
common stock on the grant date except that the purchase price of shares of
common stock granted to a 10% Stockholder must be at least 100% of such fair
market value on the grant date. The individual agreements under the 1999 Plan
may provide for repurchase rights for the
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<PAGE> 73
Company under the terms and conditions set forth in the 1999 Plan. The 1999 Plan
will terminate in 2009, unless earlier terminated by the Board.
PerImmune Holdings, Inc. Stock Option Plan
Pursuant to the Amended and Restated 1996 Stock Option Plan of PerImmune
Holdings (the "PerImmune Stock Option Plan") for independent directors,
executive officers and key employees and consultants (all as defined) of
PerImmune Holdings, PerImmune and the Company, PerImmune Holdings reserved 500
shares of its common stock, par value $.01 per share, for issuance. At the time
of the Merger, options to purchase 257 shares of PerImmune Holdings were
outstanding, of which options to purchase 87 shares of PerImmune Holdings were
vested and exercisable. In connection with the Merger, the Company assumed
PerImmune Holdings' obligations under the PerImmune Stock Option Plan.
Consequently, each option outstanding under the PerImmune Stock Option Plan
converted into an option to purchase 6,072.21 shares of common stock upon
exercise. Of the options to purchase 257 shares of PerImmune Holdings, options
to purchase 255 shares of PerImmune Holdings were granted to employees of
PerImmune Holdings at an exercise price of $2,725 per share and options to
purchase two shares of PerImmune Holdings were granted to directors of PerImmune
Holdings at an exercise price of $45,000 per share. In conjunction with the
execution of one year employment agreements with the Company effective August 3,
1998, seven employees holding PerImmune Holdings, Inc. stock options agreed to
surrender a total of 79 unvested options.
RETIREMENT SAVINGS PLANS
The Company has a 401(k) savings plan covering substantially all of its
employees. Eligible employees may contribute amounts through payroll deductions.
The Company matches employees' contributions at the discretion of the Company's
Board of Directors. The Company did not match employee contributions to the
401(k) savings plan in the 1997, 1996 and 1995 periods. The Company does not
provide other post-retirement benefits.
In connection with the Merger, the Company assumed PerImmune Holdings'
employee pension plan, a noncontributory defined benefit pension plan (the
"PerImmune Holdings Plan") retroactive to August 2, 1996. The Company froze the
benefits under the PerImmune Holdings Plan in February 1998, and determined that
the remaining PerImmune Holdings Plan assets and recorded pension liability
exceeded the obligation relating to the participants. As a result of the
curtailment of the plan benefits, the Company recorded income of $800,000 and
reduced the related pension liability in accordance with Statement of Financial
Accounting Standards No. 88, "Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans."
In addition, PerImmune Holdings maintains a defined-contribution savings
plan under Section 401(k) of the Internal Revenue Code. This plan covers
substantially all full-time employees. Participating employees may defer a
portion of their pretax earnings up to the Internal Revenue Service annual
contribution limit. PerImmune Holdings matches employee contributions according
to a specified formula. PerImmune Holdings' matching contributions totalled
$176,098 and $72,779 for the year ended December 31, 1997, and period from
August 3, 1996 through December 31, 1996, respectively.
COMMITTEES OF THE BOARD OF DIRECTORS
In March 1998, the Board of Directors designated a Compensation Committee,
which consists of Joseph Caligiuri, Steven Gerber and Alexander Klibanov. The
Compensation Committee reviews executive salaries and administers any bonuses,
incentive compensation and stock options of the Company issuable to management
employees and directors of the Company. In addition, the Compensation Committee
consults with management of the Company regarding compensation policies and
practices of the Company. Also in March 1998, the Board of Directors established
an Audit Committee consisting of Joseph Caligiuri, Simon R. McKenzie and Raymond
J. Schuyler, an Executive Committee consisting of Michael J. Hanna, Simon R.
McKenzie and Raymond J. Schuyler and a Finance Committee consisting of Steven
Gerber, Simon R. McKenzie and Raymond J. Schuyler. The Audit Committee will
review the professional services provided by the Company's independent auditors,
the annual financial statements of the Company and the Company's internal
financial controls.
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<PAGE> 74
DIRECTOR COMPENSATION
Fees. None of the Company's directors who are also employees of the Company
receive cash compensation for attendance at meetings of the Board of Directors
or at meetings of committees of the Board of Directors of which they are
members. Independent, non-employee directors shall be entitled to cash
compensation of $1,500 for attendance at meetings of the Board of Directors or
at meetings of committees of the Board of Directors of which they are members.
All directors receive reimbursement for reasonable travel expenses incurred in
connection with attendance at each Board of Directors and committee meeting.
Stock Options. To attract and retain independent, non-employee directors
for the Company, the Company has issued, and intends to continue to issue, to
its independent directors, a one-time grant of 10,000 options to purchase the
Company's common stock pursuant to the Company Stock Option Plan, in amounts
determined at the discretion of the Board of Directors or the Compensation
Committee and exercisable at a price equal to the fair market value of the
common stock on the date of grant. These options vest over a three-year period.
Independent directors will generally be granted stock options upon their initial
appointment, and independent directors and stockholder representative directors
may be granted stock options during their term of service as an incentive for
continued service. Employee directors are not granted stock options for their
services as directors.
CONFIDENTIALITY AND NON-COMPETE AGREEMENTS
The Company has entered into employment agreements containing
confidentiality and non-compete provisions with each of its key employees. The
agreements provide that, among other things, all inventions, discoveries and
ideas which are, directly or indirectly, related to or suggested by the
employee's employment or are pertinent to any field of business or research in
which the Company is engaged or is considering engaging during the employee's
employment shall be the sole and exclusive property of the Company. The
agreements also provide that, for a two year period, except with respect to
Michael G. Hanna and Simon R. McKenzie, the Company's Chairman of the Board and
Chief Scientific Officer and the President and Chief Executive Officer and
Lawrence A. Bloom, the Company's Chief Financial Officer whereby the period is
for six months, respectively, whereby the period is for one year, from the date
of termination of employment with the Company for any reason, the employee will
not, directly or indirectly, engage, participate or invest in any business
activity anywhere in the world that is competitive with or similar to the
products and services of the Company or make use of any of the Company's
confidential information. Although the Company seeks to have key employees enter
into oral agreements, there can be no assurance that such restrictions will be
enforceable.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of December 31, 1998, and as adjusted
to reflect the sale of the shares of common stock offered hereby (assuming no
exercise of the Underwriters' over-allotment option), by: (i) each person (or
group of affiliated persons) known by the Company to own beneficially more than
five percent of the Company's outstanding common stock; (ii) each of the
Company's directors; (iii) each Named Executive Officer of the Company; and (iv)
all directors and executive officers of the Company as a group. Dr. Michael G.
Hanna, Jr. (the "Selling Stockholder") has granted the Underwriters a 30-day
option to purchase up to an aggregate of 300,000 shares of common stock on the
same terms and conditions as the offering to cover over-allotments, if any, in
connection with this offering. See "Underwriting."
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
OUTSTANDING(3)
NAME, TITLE AND --------------------
ADDRESS OF OFFICERS, NUMBER OF SHARES PRIOR TO AFTER
DIRECTORS AND BENEFICIAL OWNERS(1) BENEFICIALLY OWNED(2) OFFERING OFFERING
---------------------------------- --------------------- -------- --------
<S> <C> <C> <C>
Michael G. Hanna, Ph.D.(4) 3,701,029 32.12% 19.56%
Chairman of the Board and Chief Scientific Officer
Northstar Funds, TD Partners and 1,072,805 9.31 6.91
Thomas O. Dial(5)
2 Pickwick Plaza
Greenwich, CT 06830
Security Insurance Co. of Hartford(6) 889,374 7.72 5.73
600 Fifth Avenue
New York, NY 10020
Simon R. McKenzie(7) 798,962 6.64 4.98
President, Chief Executive Officer and Director
Mentor Corporation(8) 784,562 6.81 5.05
5425 Hollister Avenue
Santa Barbara, CA 93111
Syncor International Corporation(9) 681,080 5.91 4.39
6464 Canoga Avenue
Woodland Hills, CA 91367
Diana Goroff, Ph.D.(10) 182,167 1.56 1.16
Vice President of Operations
Raymond Schuyler(11) 119,186 1.03 *
Director
Lawrence A. Bloom(12) 85,833 * *
Senior Vice President and Chief Financial Officer
Persis M. Strong(13) 58,055 * *
Senior Vice President and President Bartels Diagnostics
Division
Alexander Klibanov, Ph.D.(14) 53,333 * *
Director
Joseph F. Caligiuri(15) 18,216 * *
Director
Daniel S. Reale(16) 16,667 * *
Senior Vice President and President, OncoVAX(CL) Division
Carl T. Foster(16) 16,667 * *
Vice President, Business Development
Steven B. Gerber, M.D.(17) 6,072 * *
Director
Patricia A. Barnett(18) 5,833 * *
Vice President, Reimbursement
All directors and executive officers as a group (12 persons) 4,989,154 40.35% 26.42%
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of common stock.
(1) Unless otherwise indicated, the address for each person is c/o Intracel
Corporation, 2005 NW Sammamish Road, Suite 107, Issaquah, Washington 98027.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission"). In computing the
number of shares beneficially owned by a person and the percentage
ownership of that person, shares of common stock and preferred stock
subject to options and warrants held by that person that are exercisable
within 60 days are deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing percentage ownership of any other
person. Options vest over a period of three to five years from the date of
grant. Options granted under the PerImmune Holdings,
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<PAGE> 76
Inc. 1996 Stock Option Plan have been adjusted and reflected in the
equivalent number of shares of the Company under the merger and
consolidation terms of the options agreement. Unless otherwise indicated in
the footnotes to this table, the persons and entities named in the table
have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
(3) Based on 11,521,694 shares outstanding prior to this offering (including
7,501,086 shares of common stock, 3,490,390 shares of common stock which
will be issued pursuant to the Preferred Stock Conversion, 36,432 shares of
common stock which will be issued under automatic conversion features of
certain outstanding debt, and 493,786 shares of common stock issuable under
warrants immediately exercisable after this offering), and 15,521,694
shares of common stock outstanding after this offering.
(4) Includes 3,036,121 shares of common stock held for Dr. Hanna's personal
account and 664,908 shares of common stock (over which Dr. Hanna has sole
voting power under the terms of a voting trust entered into among certain
other founding employees of PerImmune Holdings). Dr. Michael G. Hanna, Jr.
(the "Selling Stockholder") has granted the Underwriters a 30-day option to
purchase up to an aggregate of 300,000 shares of common stock on the same
terms and conditions as the offering to cover over-allotments, if any, in
connection with this offering. If such option is exercised in full, Dr.
Hanna would beneficially own 17.63% of the shares outstanding after the
offering.
(5) Includes 15,884 shares of Series A-1 preferred stock (which will be
automatically converted to 21,605 shares of common stock at the conclusion
of this offering) and warrants to purchase 31,814 shares of common stock at
a price of $10.50 per share, held by Northstar High Yield Fund; 254,147
shares of Series A-1 preferred stock (which will be automatically converted
to 345,697 shares of common stock at the conclusion of this offering), and
106,049 shares of common stock, and warrants to purchase 127,259 shares of
common stock at a price of $10.50 per share held by Northstar Advantage
High Total Return Fund; and 148,148 shares of common stock held by
Northstar Balance Sheet Opportunities; but does not include warrants to
purchase 812,343 shares of common stock held by Northstar Advantage High
Total Return Fund, warrants to purchase 270,516 shares of common stock held
by Northstar High Total Return Fund II, warrants to purchase 39,634 shares
of common stock held by Northstar Strategic Income Fund, and warrants to
purchase 151,613 shares of common held by Northstar High Yield Fund, all of
which are expected to remain outstanding after this offering. Also includes
68,335 shares of Series A preferred stock and 79,421 shares of Series A-1
preferred stock (which will be automatically converted to 92,951 and
108,030 shares of common stock upon consummation of this offering), and
warrants to purchase 3,697 shares of common stock at a price of $6.00 per
share) held by TD Partners; and 87,555 shares of common stock beneficially
owned by Mr. Thomas O. Dial. Northstar High Yield Fund, High Total Return
Fund, High Total Return Fund II, Strategic Income Fund and Balance Sheet
Opportunities Fund are registered mutual funds of Northstar Financial
Management Services, Inc., a registered financial management firm. Mr. Dial
is an employee of Northstar Financial Management Services, Inc. and
Portfolio Manager of the Northstar High Total Return Fund, High Total
Return Fund II, and Balance Sheet Opportunities Fund, and Managing Partner
of TD Partners. Mr. Dial disclaims beneficial ownership of any of
Northstar's holdings of the Company's stock. As Managing Partner of TD
Partners, Mr. Dial has voting and investment power with respect to that
partnership.
(6) Includes 384,388 shares of Series A preferred stock and 158,842 shares of
Series A-1 preferred stock which will be automatically converted to 522,854
and 216,061 shares of common stock, respectively, upon consummation of this
offering, and 150,459 shares of common stock. Security Insurance Co. of
Hartford is a subsidiary of Orion Capital Corporation, a New York Stock
Exchange-listed insurance holding company.
(7) Includes 292,732 shares of common stock beneficially owned, 53,334 shares
issuable upon exercise of options that are currently fully vested and
exercisable and 452,896 shares issuable upon exercise of warrants to be
granted in accordance with an employment agreement dated January 2, 1998.
(8) Includes 120 shares of Series B-2 preferred stock which will be
automatically converted to 784,562 shares of common stock upon consummation
of this offering. Mentor Corporation is a medical technology developer,
manufacturer, and distributor. Mentor and the Company are parties in a
joint development agreement. Voting control of Mentor's holdings of the
Company's securities rests with a Mentor executive committee.
(9) Includes 100 shares of Series B-1 preferred stock which will be
automatically converted to 681,080 shares of common stock upon consummation
of this offering. Syncor International Corp. is a pharmacy services company
engaged in compounding and distributing radiopharmaceutical products and
services. Syncor and the Company are parties to a joint development
agreement. Voting control of Syncor's holdings of the Company's securities
rests with a Syncor executive committee.
(10) Includes 121,445 shares issuable upon exercise of options that are
currently fully vested and exercisable and 60,722 shares which will be
distributed from the voting trust upon consummation of this offering.
(11) Includes 15,884 shares of Series A-1 preferred stock which will be
automatically converted to 21,605 shares of common stock upon consummation
of this offering, 84,248 shares of common stock, and 13,333 shares of
common stock issuable upon exercise of options which are fully vested and
exercisable.
(12) Includes 13,333 shares of common stock and 72,500 shares of common stock
issuable upon exercise of options which are fully vested and exercisable.
(13) Includes 6,666 shares of common stock and 51,389 shares of common stock
issuable upon exercise of options which are fully vested and exercisable.
(14) Includes 26,667 shares of common stock issuable upon exercise of options
which are fully vested and exercisable and 26,666 shares of common stock.
(15) Includes 6,072 shares of common stock issuable upon exercise of options
which are fully vested and exercisable and 12,144 shares which will be
distributed from the voting trust upon consummation of this offering.
(16) Includes 16,667 shares of common stock issuable upon exercise of options
which are fully vested and exercisable.
(17) Includes 6,072 shares of common stock issuable upon exercise of options
which are fully vested and exercisable.
(18) Includes 5,833 shares of common stock issuable upon exercise of options
which are fully vested and exercisable.
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DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Certificate of Incorporation, and Bylaws, copies
of which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
As of December 31, 1998, the authorized capital stock of the Company
currently consists of (i) 25,000,000 shares of common stock (increased to
50,000,000 shares in January 1999), and (ii) 5,000,000 shares of preferred
stock. Immediately prior to the date hereof, there were 11,521,694 shares of
common stock outstanding (including 3,490,390 shares of common stock issuable
upon the automatic conversion of the 1,518,684 shares of preferred stock issued
and outstanding, or accrued, on the date hereof; 493,786 shares of common stock
issuable in connection with "in-the-money" warrants issued and outstanding on
the date hereof, which warrants automatically expire upon the closing of this
offering; and 36,432 shares of common stock issuable in connection with three
convertible Promissory Notes issued and outstanding on the date hereof, which
Notes automatically convert into common stock upon the consummation of this
offering) held by approximately 148 holders of record.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held of
record on all matters on which stockholders are entitled to vote. Holders of
common stock do not have cumulative voting rights and, therefore, holders of a
majority of the shares of common stock voting for the election of directors can
elect all of the directors. In such event, the holders of the remaining shares
of common stock will not be able to elect any directors.
Holders of common stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. The Company has not paid any cash dividends since inception
and does not anticipate paying cash dividends in the foreseeable future. In the
event of liquidation, dissolution or winding up of the Company, the holders of
common stock are entitled to share ratably in any corporate assets remaining
after payment of all debts, subject to any preferential rights of any
outstanding preferred stock. See "Dividend Policy."
Holders of common stock have no preemptive, conversion or redemption rights
and are not subject to further calls or assessments by the Company. All of the
outstanding shares of common stock are, and the shares offered by the Company
hereby will be, if issued, validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors have authority to issue up to 5,000,000 shares of
preferred stock and to fix the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. Upon consummation of this
offering, all 1,518,684 shares of convertible preferred stock issued and
outstanding, or accrued, will automatically convert into 3,490,390 shares of the
Company's common stock.
WARRANTS
In connection with several transactions, the Company issued warrants
("Warrants") to buy a total of 2,351,338 shares of common stock, of which
Warrants to purchase 2,220,790 shares of common stock are still outstanding. The
Warrants may be exercised in whole or in part at any time after the date of
issue until the expiration date by delivering the warrant agreement with the
duly executed form of subscription to the Company. Warrants generally expire
five years from the date of issue and are subject to antidilution protection.
Outstanding Warrants to purchase 493,786 shares of common stock are subject
to accelerated expiration upon the earlier of: (i) this offering; or (ii) the
date immediately prior to the effective date of any
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<PAGE> 78
consolidation of the Company with or merger of the Company into any other
corporation or entity or the sale or transfer of all or substantially all of the
assets of the Company to another person or entity.
On July 22, 1994, the Company issued Warrants to purchase 51,999 shares of
common stock to several Series A stockholders in connection with the Preferred
Stock Purchase Agreement between the Company and the Series A preferred
stockholders. After giving effect to a two-for-one split of the common stock
effective as of December 31, 1997 and the 2-for-3 reverse stock split of the
common stock authorized by the Company's Board of Directors on December 28, 1998
(the "Stock Splits"), the remaining outstanding Warrants are currently
exercisable for a total of 44,835 shares of the common stock at an exercise
price of $6.00 per share, and which will expire upon conclusion of this offering
unless exercised.
In connection with an additional Preferred Stock Purchase Agreement entered
into by the Company and several Series A-1 preferred stockholders on September
22, 1995, the Company issued Warrants to purchase 86,462 shares of common stock.
After giving effect to the Stock Splits, such Warrants are currently exercisable
into 115,283 shares of common stock at an exercise price of $6.00 per share, and
which will expire upon conclusion of this offering unless exercised. On November
21, 1995, the Company issued Warrants to purchase 91,177 shares of common stock
in connection with a second closing under the Preferred Stock Purchase Agreement
dated September 27, 1995. After giving effect to the Stock Splits, such Warrants
are currently exercisable into 121,570 shares of common stock at an exercise
price of $6.75 per share, and which will expire upon conclusion of this offering
unless exercised.
On December 28, 1995, the Company issued Warrants to purchase 94,010 shares
of common stock in connection with a Warrant and Note Agreement with Northstar
Advantage High Total Return Fund. After giving effect to the Stock Splits, such
Warrants are currently exercisable into 125,347 shares of common stock at an
exercise price of $10.50 per share.
On June 11, 1996, the Company issued Warrants to purchase 159,073 shares of
common stock in connection with a Note and Warrant Purchase Agreement with
CoreStates Enterprise Fund. After giving effect to the Stock Splits, such
Warrants are currently exercisable into 212,098 shares of common stock at an
exercise price of $10.50 per share and which will expire upon conclusion of this
offering unless exercised.
On June 21, 1996, the Company issued Warrants to purchase 79,537 shares of
common stock in connection with a Note and Warrant Purchase Agreement with
Northstar Advantage High Total Return Fund. These warrants were exercised on
November 18, 1997 at a price of $7.00 per share.
On January 2, 1998, the Company issued Warrants to purchase 452,896 shares
of common stock in connection with an employment agreement between Simon R.
McKenzie, the Company's Chief Executive Officer, and the Company. The Warrants
currently carry an exercise price of $6.75 per share, and expire five years from
the date of issue.
On April 1, 1998, the Company issued Warrants to purchase 65,422 shares of
common stock in connection with a Note and Warrant Purchase Agreement at a
current exercise price of $11.46 per share.
On August 25, 1998, the Company issued Warrants to purchase up to 1,083,339
shares of common stock in connection with the August 1998 Refinancing as
discussed elsewhere in this Prospectus. See "Business -- Recent Debt
Refinancings."
CONVERTIBLE NOTES
In January 1997, the Company's subsidiary, PerImmune Holdings, issued three
promissory notes each in the amount of $77,500 that will each be automatically
converted into 12,144 shares of the Company's common stock at the conclusion of
this offering. Upon conversion, the rights of each investor under the promissory
notes cease and each investor will be entitled to rights as holders of common
stock.
REGISTRATION RIGHTS
Upon consummation of the offering, certain stockholders who will hold an
aggregate of 7,833,842 shares of common stock (the "Holders"), including
3,849,666 outstanding shares of common stock, 3,490,390 shares
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<PAGE> 79
of common stock issuable upon the Preferred Stock Conversion at the consummation
of this offering, and 493,786 shares of common stock issuable upon exercise of
"in-the-money" Warrants (with exercise prices ranging from $6.00 to $10.50 per
share) that will otherwise expire upon conclusion of this offering, are entitled
to certain registration rights with respect to the common stock under the
Securities Act. Pursuant to the terms of these registration rights, the Company
is required to notify each Holder of each decision of the Company to file a
registration statement. Upon receipt of such notice, a Holder may request to
include certain of the Holder's shares of common stock in the Company's
registration, subject to the determination of the managing underwriters that
inclusion will not interfere with the offering. These rights have been waived by
the Holders, other than the Selling Stockholder, to the extent that such Holders
had rights to register common stock in this offering.
The Company has agreed with certain of its Holders to file a registration
statement on Form S-1 with respect to such Holder's shares of Common Stock on
the 181st day following the consumation of this offering. In addition, certain
Holders can require the Company to use its best efforts to prepare and file a
registration statement on Form S-3 (or any successor form) with respect to such
Holders' shares of common stock. The right of the Holders to request the Company
to file a registration statement on Form S-3 is available to the Holders no more
than twice during any twelve-month period.
The Company generally is required to bear the expenses relating to the sale
of shares under registrations contemplated by the registration rights, except
for underwriting fees and discounts. The Company also is obligated to indemnify
the stockholders whose shares are included in any of the Company's registrations
against certain losses and limitations, including certain liabilities under the
Securities Act and state securities laws generally.
Following this offering, the rights of any Holder to cause the Company to
register shares terminates when all of such Holder's securities subject to the
registration rights can be transferred or sold under the provisions of Rule 144.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION, BYLAWS AND
DELAWARE LAW
Classified Board of Directors. The Certificate of Incorporation of the
Company provides for the Board of Directors to be divided into three classes of
directors, as nearly equal in number as is reasonably possible, serving
staggered terms so that the directors' initial terms will expire either at the
1999, 2000 or 2001 annual meeting of the stockholders. Starting with the 1999
annual meeting of the stockholders, one class of directors will be elected each
year for a three-year term.
The Company believes that a classified Board of Directors will help to
assure the continuity and stability of the Board of Directors and the Company's
business strategies and policies as determined by the Board of Directors, since
a majority of the directors at any given time will have had prior experience as
directors of the Company. The Company believes that this, in turn, will permit
the Board of Directors to more effectively represent the interest of
stockholders. With a classified Board of Directors, at least two annual meetings
of stockholders, instead of one, will generally be required to effect a change
in the majority of the Board of Directors. As a result, a provision relating to
a classified Board of Directors may discourage proxy contests for the election
of directors or purchases of a substantial block of the common stock because its
provisions could operate to prevent obtaining control of the Board of Directors
in a relatively short period of time. The classification provision could also
have the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company. Under the Delaware
General Corporation Law (the "DGCL"), a director on a classified board may be
removed by the stockholders of the corporation only for cause.
Advance Notice Provisions for Stockholder Nominations of Directors and
Stockholder Proposals. The Bylaws of the Company establish an advance notice
procedure with regard to the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors (the "Nomination Procedure") and with regard to other matters to be
brought by stockholders before an annual meeting of stockholders of the Company
(the "Business Procedure").
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<PAGE> 80
The Nomination Procedure requires that a stockholder give prior written
notice, in proper form, of a planned nomination for the Board of Directors to
the Secretary of the Company. The requirements as to the form and timing of that
notice are specified in the Bylaws of the Company. If the Chairman of the Board
of Directors determines that the other business was not properly brought before
such meeting in accordance with the Business Procedure, such business will not
be conducted at such meeting.
Although the Bylaws of the Company do not give the Board of Directors any
power to approve or disapprove stockholder nominations for the election of
directors or of any business desired by stockholders to be conducted at an
annual meeting, the Bylaws of the Company (i) may have the effect of precluding
a nomination for the election of directors or precluding the conduct of business
at a particular annual meeting if the proper procedures are not followed or (ii)
may discourage or deter a third party from conducting a solicitation of proxies
to elect its own slate of directors or otherwise attempting to obtain control of
the Company, even if the conduct of such solicitation or such attempt might be
beneficial to the Company and its stockholders.
Business Combinations. The Company is subject to the provisions of Section
203 of the DGCL, an anti-takeover law. In general, the statute prohibits a
publicly held Delaware corporation from engaging in certain transactions and
"business combinations" with an "Interested Stockholder" (as defined in Section
203) for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless either (i) prior to the date
such person becomes an interested stockholder, the Board approves either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) upon the consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time of the consummation of such
transaction, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and also
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer or (iii) on or subsequent to
the date such person becomes an interested stockholder, the business combination
is approved by the Board and authorized at an annual or special meeting of
stockholders, not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock which is not owned by the interested
stockholder. A "business combination" includes a merger, asset sale, or other
transaction resulting in a financial benefit to the stockholder. For purposes of
section 203, an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation contains certain provisions
permitted under DGCL relating to the liability of directors. These provisions
eliminate a director's personal liability for monetary damages resulting from a
breach of fiduciary duty. This provision in the Certificate of Incorporation
does not eliminate the duty of care, and in appropriate circumstances equitable
remedies such as an injunction or other forms of non-monetary relief would
remain available under the DGCL. Each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company, for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, or for any transaction from which the director
derived an improper personal benefit. These provisions will not alter a
director's liability under federal securities laws. The Bylaws of the Company
provide for full indemnification of officers and directors to the full extent
permitted under the DGCL, as it now exists or may in the future by amendment
(but, in the case of such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than permitted
prior thereto), or by other applicable law as then in effect, against all
expenses, liabilities and losses actually and reasonably incurred or suffered in
connection with service for or on behalf of the Company, including payment of
expenses in defending an action or proceeding upon receipt of any undertaking by
the person indemnified to repay such payment if it is ultimately determined that
such person is not entitled to indemnification. Such indemnification will
continue to an indemnified person who has ceased to be a director, officer,
employee or agent and will inure to the benefit of the indemnified person's
heirs, executors and administrators.
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<PAGE> 81
The Company's Bylaws provide that the Company may maintain insurance, at
its expense, to protect itself and any indemnified party against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the DGCL. The Company,
without further stockholder approval, may enter into contracts with any
indemnified person in furtherance of the indemnification provisions contained in
the Bylaws and may create a trust fund, grant a security interest or use other
means (including without limitation, a letter of credit) to ensure the payment
of such amounts as may be necessary to effect indemnification as provided in the
Bylaws.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock of the Company is
American Stock Transfer & Trust Company.
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<PAGE> 82
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the common
stock of the Company. Future sales of substantial amounts of shares of common
stock in the public market following this offering could adversely affect the
market price of the common stock. Such sales also might make it more difficult
for the Company to sell equity securities or equity-related securities in the
future at a time and price that the Company deems appropriate or at all.
Upon consummation of this offering, the Company will have 15,521,694 shares
of common stock outstanding, assuming no exercise of the Underwriters'
over-allotment option granted by the Company and no exercise of outstanding
options. Of these shares, all of the 4,000,000 shares sold in this offering will
be freely tradable without restriction or further registration under the
Securities Act, unless such shares are purchased by affiliates of the Company.
The remaining 11,521,694 shares of common stock will be restricted securities
("Restricted Shares") within the meaning of the Securities Act. Restricted
Shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rules 144, 144(k) or 701 promulgated
under the Securities Act, which rules are summarized below. Holders of
substantially all of those shares will have the right to request the
registration of their shares under the Securities Act following completion of a
period of one year, in the case of directors and executive officers, and 180
days, in the case of such other stockholders, after the date of this Prospectus,
which, upon the effectiveness of such registration, would permit the free
transferability of such shares.
In general, under Rule 144, beginning 90 days after the date of this
Prospectus, an affiliate of the Company, or person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least one year,
will be entitled to sell in any three-month period a number of shares that does
not exceed the greater of (i) one percent of the then outstanding shares of the
Company's common stock or (ii) the average weekly trading volume of the
Company's common stock on the Nasdaq Stock Market during the four calendar weeks
immediately preceding the date on which notice of the sale is filed with the
Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to manner of sale, notice and availability of current public
information about the Company. A person (or person whose shares are aggregated)
who is not deemed to have been an affiliate of the Company at any time during
the 90 days immediately preceding the sale and who has beneficially owned
Restricted Shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
The Company's directors, executive officers and certain stockholders, who
in the aggregate hold 4,989,154 shares of common stock of the Company
outstanding immediately prior to the consummation of this offering have entered
into or are subject to lock-up agreements under which they have agreed not to
sell, directly or indirectly, any shares owned by them for a period of one year,
in the case of directors and executive officers, and 180 days, in the case of
such other stockholders, after the date of this Prospectus without the prior
written consent of the Underwriters. See "Underwriting." Upon expiration of the
lock-up agreements, approximately 4,989,154 shares of common stock (including
approximately 389,979 shares subject to outstanding vested options and, 452,896
shares issuable upon exercise of warrants which do not expire at the conclusion
of this offering) will become eligible for immediate public resale, subject in
some cases to vesting provisions and volume limitations pursuant to Rule 144.
The remaining approximately 7,375,415 shares held by existing stockholders will
become eligible for public resale at various times over a period of less than
two years following the consummation of this offering, subject in some cases to
vesting provisions and volume limitations. 7,833,842 of the shares outstanding
immediately following the consummation of this offering will be entitled to
registration rights with respect to such shares upon termination of lock-up
agreements. The number of shares sold in the public market could increase if
registration rights are exercised. Dr. Hanna has agreed with the Company not to
sell, other than pursuant to the over-allot option granted to the Underwriters
in this offering, more than 10% of the shares of common stock held by him during
each of the twelve-month periods commencing on the date of this Prospectus and
the first anniversary thereof. In addition, the Company intends to file a
registration statement on Form S-8 for the shares held pursuant to its stock
option plans, which may make these shares freely tradeable. Such registration
statement will become effective immediately upon filing and shares covered by
that registration statement will thereupon be eligible for sale in the public
markets, subject to the applicable lock-up agreements and Rule 144 limitations
applicable to affiliates. See "Description of Capital Stock -- Registration
Rights."
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<PAGE> 83
UNDERWRITING
Subject to certain terms and conditions contained in an underwriting
agreement (the "Underwriting Agreement"), the Underwriters named below
(collectively, the "Underwriters"), for whom Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") and Piper Jaffray Inc. are acting as
representatives (the "Representatives"), have severally agreed to purchase the
number of shares of common stock from the Company set forth opposite their names
below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Piper Jaffray Inc...........................................
---------
Total............................................. 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of common stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of the
shares of common stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all such shares of common stock (other than the shares
of common stock covered by the over-allotment option described below) must be so
purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of common stock to the public initially at the price
to the public set forth on the cover page of this Prospectus and to certain
dealers (who may include the Underwriters) at such price less a concession not
to exceed $ per share. The Underwriters may allow, and such dealers may
reallow, discounts not in excess of $ per share to any other Underwriter and
certain other dealers.
The Company and the Selling Stockholder have granted to the Underwriters an
option to purchase up to 600,000 additional shares of common stock at the
initial public offering price less underwriting discounts and commissions solely
to cover over-allotments. Such option may be exercised in whole or in part from
time to time during the 30-day period after the date of this Prospectus. To the
extent that the Underwriters exercise such option, each of the Underwriters will
be committed, subject to certain conditions, to purchase a number of option
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table. In the event that the Underwriters exercise the
over-allotment option, the Underwriters shall purchase the first 300,000
additional shares of such option from the Selling Stockholder.
The Company, certain stockholders of the Company and the executive officers
and directors of the Company have agreed not to directly or indirectly offer,
pledge, sell, contract to sell, sell any option or contract to purchase or grant
any option, right or warrant to purchase or otherwise transfer or dispose of any
shares of common stock or any securities convertible into or exercisable or
exchangeable for common stock, or enter into any swap or other arrangement that
transfers all or a portion of the economic consequences associated with the
ownership of such common stock, or to cause a registration statement covering
any shares of common stock to be filed, for a period of one year, in the case of
directors and executive officers, and for a period of 180 days, in the case of
such other stockholders, after the closing of this offering without the prior
written consent of the Underwriters, subject to certain limited exceptions, and
provided that the Company may issue shares of common stock upon vesting of
rights under the Company Stock Option Plan and the PerImmune Stock Option Plan.
See "Shares Eligible for Future Sale."
Prior to this offering, there has been no established trading market for
the common stock. The initial price to the public for the common stock offered
hereby has been determined by negotiation among the Company and the
Representatives. The factors considered in determining the initial price to the
public include
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<PAGE> 84
the history of and the prospects for the industry in which the Company competes,
the ability of the Company's management, the past and present operations of the
Company, the prospects for future earnings of the Company, the general condition
of the securities markets at the time of this offering and the recent market
prices of securities of generally comparable companies. The Company's common
stock has been approved for listing on the Nasdaq National Market subject to
official notice of issuance.
The Underwriters do not intend to make sales to accounts over which they
exercise discretionary authority in excess of 5% of the number of shares of
common stock offered hereby.
In connection with this offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the Underwriters may over-allot this offering,
creating a syndicate short position. Underwriters may bid for and purchase
shares of common stock in the open market to cover syndicate short positions. In
addition, the Underwriters may bid for and purchase shares of common stock in
the open market to stabilize the price of the common stock. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The Underwriters are not required to engage in these activities
and may end these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the shares offered hereby is being passed upon for the
Company by Morrison & Foerster LLP, New York, New York. Certain legal matters
will be passed upon for the Underwriters by Brown & Wood LLP, New York, New
York.
EXPERTS
The consolidated financial statements of the Company at September 30, 1998
and December 31, 1997, and for the nine-month period and the year then ended,
included in this Prospectus have been included herein in reliance on the report,
after the restatement described in Note 15, of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of the Company at December 31, 1996
and for the year ended December 31, 1996, the six months ended December 31,
1995, and for the year ended June 30, 1995, appearing in this Prospectus have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of PerImmune Holdings, Inc. and
Subsidiary at December 31, 1997 and for the year then ended, included in this
Prospectus have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The consolidated financial statements of PerImmune Holdings, Inc. and
Subsidiary as of December 31, 1996 and the related consolidated statements of
operations, stockholders' deficit and cash flows for the period from August 3,
1996 through December 31, 1996 and the statements of operations, stockholders'
equity and cash flows of the Predecessor Company for the period from January 1,
1996 through August 2, 1996 and for the year ended December 31, 1995 appearing
in this Prospectus have been audited by KPMG LLP, independent certified public
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
In February 1998, the Company's Board of Directors dismissed Ernst & Young
LLP and appointed PricewaterhouseCoopers LLP as the Company's independent
accountants to report on the Company's consolidated balance sheet as of December
31, 1997, and the related consolidated statements of operations,
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<PAGE> 85
stockholders' deficit, and cash flows for the year then ended. The report of
Ernst & Young LLP for the year ended December 31, 1996 and June 30, 1995 and for
the six months ended December 31, 1995 did not contain any adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.
In February 1998, in conjunction with the acquisition of PerImmune
Holdings, the Company's Board of Directors dismissed KPMG LLP and appointed
PricewaterhouseCoopers LLP as PerImmune Holdings independent accountants to
report on its consolidated balance sheet as of December 31, 1997, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the year then ended. The report of KPMG Peat Marwick at
December 31, 1996 and for the period from August 3, 1996 through December 31,
1996 did not contain any adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the audits for the periods presented within this
Prospectus and Registration Statement, there were no disagreements with Ernst &
Young LLP or KPMG LLP on any matter of accounting principles or practices,
financial disclosure or auditor scope of procedure, which disagreements if not
resolved to the satisfaction of Ernst & Young LLP or KPMG LLP would have caused
them to make reference thereto in their report on the financial statements for
such years. Prior to retaining PricewaterhouseCoopers LLP, the Company had not
consulted with PricewaterhouseCoopers LLP regarding the application of
accounting principles or the type of audit opinion that might be rendered on the
Company's financial statements.
During the course of Ernst & Young LLP's audit of the consolidated
financial statements of the Company for the year ended December 31, 1996, Ernst
& Young LLP notified the Company that it had identified two material weaknesses
considered reportable conditions as defined under standards of the American
Institute of Certified Public Accountants. The first of these was failure to
maintain accurate information to monitor financial position, results of
operations and liquidity. The second of these related to the method of
accounting, monitoring and valuation of the Company's "Research Use Only"
inventory. Ernst & Young LLP attributed the cause for these two material
weaknesses to inadequate accounting resources, lack of technical accounting
expertise at the Company and the lack of adequate systems to maintain and
account for "Research Use Only" inventory. In order to remedy these weaknesses,
the Company hired several accounting personnel with technical experience and
expertise in financial management and reporting and has performed an extensive
analysis of the "Research Use Only" inventory as of December 31, 1997 to assure
a consistent and accurate valuation. In connection with the audit of the
consolidated financial statements of the Company for the year ended December 31,
1997, the Company's current auditors did not identify any material weaknesses
considered reportable conditions.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the common stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are contained in the schedules and exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
As a result of this offering, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, will file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and its regional offices located at Seven World
Trade
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<PAGE> 86
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Avenue, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may be obtained by mail from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission also maintains a World Wide Web
site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Upon approval of the common stock for
quotation on the Nasdaq National Market, such reports, proxy and information
statements and other information can be inspected at the office of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
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<PAGE> 87
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRACEL CORPORATION
Report of PricewaterhouseCoopers LLP, independent
accountants............................................ F-2
Report of Ernst & Young LLP, independent auditors......... F-3
Consolidated Balance Sheets as of December 31, 1996 and
1997 and September 30, 1998 ........................... F-4
Consolidated Statements of Operations for the year ended
June 30, 1995, the six months ended December 31, 1995,
the years ended December 31, 1996 and 1997 and the nine
months ended September 30, 1997 (unaudited) and 1998... F-5
Consolidated Statements of Stockholders' Deficit for the
year ended June 30, 1995, the six months ended December
31, 1995, the years ended December 31, 1996 and 1997
and the nine months ended September 1998............... F-6
Consolidated Statements of Cash Flows for the year ended
June 30, 1995, the six months ended December 31, 1995,
the years ended December 31, 1996 and 1997 and the nine
months ended September 30, 1997 (unaudited) and 1998... F-7
Notes to Consolidated Financial Statements................ F-8
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
Report of PricewaterhouseCoopers LLP, independent
accountants............................................ F-38
Consolidated Balance Sheets as of December 31, 1997 and
1996................................................... F-39
Consolidated Statements of Operations for the year ended
December 31, 1997 and the period from August 3, 1996
through December 31, 1996.............................. F-40
Consolidated Statements of Stockholders' Equity (Deficit)
for the year ended December 31, 1997 and the period
from August 3, 1996 through December 31, 1996.......... F-41
Consolidated Statements of Cash Flows for the year ended
December 31, 1997 and the period from August 3, 1996
through December 31, 1996.............................. F-42
Notes to Consolidated Financial Statements................ F-43
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY; AND PREDECESSOR
COMPANY
Report of KPMG LLP, independent certified public
accountants............................................ F-56
Consolidated Balance Sheet as of December 31, 1996........ F-57
Statements of Operations for the period from August 3,
1996 through December 31, 1996, the period from January
1, 1996 through August 2, 1996 and the year ended
December 31, 1995...................................... F-58
Statements of Stockholders' Equity (Deficit) for the
period from August 3, 1996 through December 31, 1996,
the period from January 1, 1996 through August 2, 1996
and the year ended December 31, 1995................... F-59
Statements of Cash Flows for the period from August 3,
1996 through December 31, 1996, the period from January
1, 1996 through August 2, 1996 and the year ended
December 31, 1995...................................... F-60
Notes to Financial Statements............................. F-61
</TABLE>
F-1
<PAGE> 88
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Intracel Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' deficit and of cash flows,
after the restatement described in Note 15, present fairly, in all material
respects, the consolidated financial position of Intracel Corporation (the
"Company") at September 30, 1998 and December 31, 1997, and the consolidated
results of its operations and its cash flows for the nine month period and year
then ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Seattle, Washington
January 19, 1999, except for paragraphs 4
and 9 of Note 10, as to which the date
is January 26, 1999, paragraph 19 of Note 6,
as to which the date is February 6, 1999 and
paragraph 14 of Note 10, as to which
the date is February 8, 1999
F-2
<PAGE> 89
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Intracel Corporation and Subsidiary
We have audited the accompanying consolidated balance sheet of Intracel
Corporation and subsidiary as of December 31, 1996, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the year
ended June 30, 1995, the six months ended December 31, 1995, and the year ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Intracel
Corporation and subsidiary at December 31, 1996, and the consolidated results of
their operations and their cash flows for the year ended June 30, 1995, the six
months ended December 31, 1995, and the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Seattle, Washington
December 3, 1997, except for
paragraph 3 of Note 6 and
paragraph 10 of Note 10, as to
which the date is January 2,
1998, Note 15, as to which the
date is December 10, 1998, and
paragraph 13 of Note 10 as to
which the date is February 8,
1999.
F-3
<PAGE> 90
INTRACEL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- SEPTEMBER 30,
1996 1997 1998
ASSETS ------------ ------------ -------------
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 3,145,231 $ 1,974,629 $ 412,526
Pledged securities.......................................... 3,951,400
Restricted cash............................................. 2,000,000 7,027,993
Accounts receivable, net.................................... 2,383,828 2,003,249 2,512,933
Inventories, net............................................ 3,113,187 1,821,013 2,068,451
Other assets................................................ 404,679 398,494 769,876
------------ ------------ ------------
Total current assets............................... 9,046,925 8,197,385 16,743,179
Property and equipment, net................................. 3,247,333 3,178,959 4,538,909
Restricted cash............................................. 133,236
Cost in excess of net assets acquired, net.................. 12,563,052 11,654,880 12,997,821
Deferred acquisition costs.................................. 2,862,513
Other assets, net of accumulated amortization of $80,310,
$453,001 and $1,557,622, respectively..................... 1,665,417 2,147,858 17,546,749
------------ ------------ ------------
Total assets....................................... $ 26,522,727 $ 28,041,595 $ 51,959,894
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current portion of long-term debt........................... $ 3,505,122 $ 2,144,729 $ 176,411
Accounts payable............................................ 2,075,033 1,965,995 8,138,480
Accrued liabilities......................................... 1,941,669 4,356,999 3,611,786
------------ ------------ ------------
Total current liabilities.......................... 7,521,824 8,467,723 11,926,677
Line of credit.............................................. 500,000 500,000
Long-term debt, less current portion........................ 18,738,945 17,630,494 45,896,436
Pension liability........................................... 74,152
------------ ------------ ------------
Total liabilities.................................. 26,760,769 26,598,217 57,897,265
------------ ------------ ------------
Commitments and contingencies
Redeemable and convertible preferred stock, $0.0001 par
value;
5,000,000 shares authorized:
Series A preferred stock, 730,000 shares authorized,
557,656, 603,622, and 640,639 shares issued and
outstanding at December 31, 1996 and 1997, and September
30, 1998, respectively.................................. 4,461,248 4,828,976 5,121,896
Series A-1 preferred stock, 850,000 shares authorized,
738,235, 651,168 and 690,951 shares issued and
outstanding at December 31, 1996 and 1997, and September
30, 1998, respectively.................................. 5,905,880 5,209,340 5,527,580
Series A-3 preferred stock, 200,000 shares authorized,
147,923 and 156,961 shares issued and outstanding at
December 31, 1997, and September 30, 1998,
respectively............................................ 1,183,384 1,255,696
Series B-1 preferred stock, 100 shares authorized, shares
issued and outstanding at September 30, 1998............ 4,166,858
Series B-2 preferred stock, 120 shares authorized, shares
issued and outstanding at September 30, 1998............ 5,087,331
------------ ------------ ------------
10,367,128 11,221,700 21,159,361
------------ ------------ ------------
Stockholders' deficit:
Series A-2 preferred stock; $0.0001 par value; 155,000
shares authorized; 44,063 and no shares issued and
outstanding, $4,406,300 and $0 aggregate preference in
liquidation at December 31, 1997 and September 30, 1998,
respectively............................................ 4
Common stock, $0.0001 par value; 50,000,000 shares
authorized; 2,645,191, 3,579,052 and 7,440,365 shares
issued and outstanding at December 31, 1996 and 1997 and
September 30, 1998, respectively........................ 265 358 744
Additional paid-in capital................................ 2,404,038 11,401,762 48,145,012
Accumulated deficit....................................... (12,909,473) (21,180,446) (74,942,488)
Note receivable due from stockholder...................... (100,000) (300,000)
------------ ------------ ------------
Total stockholders' deficit........................ (10,605,170) (9,778,322) (27,096,732)
------------ ------------ ------------
Total liabilities and stockholders' deficit........ $ 26,522,727 $ 28,041,595 $ 51,959,894
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 91
INTRACEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30,
YEAR ENDED DECEMBER 31, ------------------------- -------------------------
JUNE 30, 1995 1995 1996 1997 1997 1998
------------- ---------------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Product.......................... $1,565,795 $ 2,426,158 $14,718,421 $13,452,204 $10,231,319 $10,862,482
Contract......................... 3,381,836
---------- ----------- ----------- ----------- ----------- -----------
Total revenue............. 1,565,795 2,426,158 14,718,421 13,452,204 10,231,319 14,244,318
COST OF REVENUE
Product.......................... 823,988 1,779,172 8,264,679 8,661,058 5,908,592 7,678,160
Contract......................... 1,909,755
---------- ----------- ----------- ----------- ----------- -----------
Total cost of revenue..... 823,988 1,779,172 8,264,679 8,661,058 5,908,592 9,587,915
Selling, general and
administrative................... 1,580,336 2,592,940 5,739,937 8,478,175 5,912,557 11,100,805
Research and development........... 1,173,754 1,118,020 1,042,668 555,840 522,775 8,419,774
Acquired research and
development...................... 2,100,000 37,718,000
Amortization of cost in excess of
net assets acquired.............. 151,362 908,172 908,172 681,129 744,804
Reorganization expense............. 917,442
---------- ----------- ----------- ----------- ----------- -----------
Total operating expense........ 3,578,078 7,741,494 16,872,898 18,603,245 13,025,053 67,571,298
---------- ----------- ----------- ----------- ----------- -----------
Loss from operations........... 2,012,283 5,315,336 2,154,477 5,151,041 2,793,734 53,326,980
Interest expense (income), net..... (68,329) 134,400 2,235,496 2,912,592 2,100,560 3,293,131
Gain on pension curtailment........ (800,000)
Other income....................... (1,272,720)
---------- ----------- ----------- ----------- ----------- -----------
Loss before extraordinary
item......................... 1,943,954 5,449,736 4,389,973 8,063,633 4,894,294 54,547,391
Extraordinary gain on early
extinguishment of debt........... (1,367,000) (785,349)
---------- ----------- ----------- ----------- ----------- -----------
Net loss.................. $1,943,954 $ 4,082,736 $ 4,389,973 $ 8,063,633 $ 4,894,294 $53,762,042
Preferred stock
dividends/accretion.............. 211,448 266,136 789,552 1,260,928 896,980 1,957,739
---------- ----------- ----------- ----------- ----------- -----------
Net loss applicable to common
stockholders..................... $2,155,402 $ 4,348,872 $ 5,179,525 $ 9,324,561 $ 5,791,274 $55,719,781
========== =========== =========== =========== =========== ===========
Basic and diluted net loss per
share before extraordinary
item............................. $ 0.82 $ 2.21 $ 1.99 $ 3.43 $ 2.23 $ 7.75
Extraordinary item................. (0.53) (0.11)
---------- ----------- ----------- ----------- ----------- -----------
Basic and diluted net loss per
share............................ $ 0.82 $ 1.68 $ 1.99 $ 3.43 $ 2.23 $ 7.64
========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 92
INTRACEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
SERIES A-2
PREFERRED STOCK COMMON STOCK NOTE
---------------- ------------------- ADDITIONAL RECEIVABLE
PAR PAR PAID-IN ACCUMULATED DUE FROM
SHARES VALUE SHARES VALUE CAPITAL DEFICIT STOCKHOLDERS TOTAL
-------- ------ ---------- ------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1994....... 2,641,118 $ 264 $ 2,198,030 $ (1,225,674) $(100,000) $ 872,620
Sale of common stock, net..... 1,333 8,000 8,000
Preferred stock dividends..... (211,448) (211,448)
Net loss...................... (1,943,954) (1,943,954)
------- --- ---------- ------ ----------- ------------ --------- ------------
BALANCE AT JUNE 30, 1995...... 2,642,451 264 2,206,030 (3,381,076) (100,000) (1,274,782)
Preferred stock dividends..... (266,136) (266,136)
Net loss...................... (4,082,736) (4,082,736)
------- --- ---------- ------ ----------- ------------ --------- ------------
BALANCE AT DECEMBER 31,
1995........................ 2,642,451 264 2,206,030 (7,729,948) (100,000) (5,623,654)
Repurchase of common stock.... (116,742) (11) (326,801) (326,812)
Sale of common stock, net..... 117,333 12 339,718 339,730
Exercise of common stock
options..................... 2,149 8,061 8,061
Other......................... 177,030 177,030
Preferred stock dividends..... (789,552) (789,552)
Net loss...................... (4,389,973) (4,389,973)
------- --- ---------- ------ ----------- ------------ --------- ------------
BALANCE AT DECEMBER 31,
1996........................ 2,645,191 265 2,404,038 (12,909,473) (100,000) (10,605,170)
Sale of Series A-2 preferred
stock....................... 40,000 $ 4 3,999,996 4,000,000
Preferred stock dividends..... 4,063 (647,288) (207,340) (854,628)
Repurchase of common stock.... (68,731) (7) (208,743) (208,750)
Sale of common stock, net..... 978,095 98 5,760,826 5,760,924
Exercise of common stock
warrants.................... 24,497 2 146,982 146,984
Other......................... (54,049) (54,049)
Repayment of stockholder note
receivable.................. 100,000 100,000
Net loss...................... (8,063,633) (8,063,633)
------- --- ---------- ------ ----------- ------------ --------- ------------
BALANCE AT DECEMBER 31,
1997........................ 44,063 4 3,579,052 358 11,401,762 (21,180,446) (9,778,322)
Common stock issued and stock
options granted in
conjunction with the
acquisition of PerImmune
Holdings Inc................ 3,652,436 365 35,421,649 35,422,014
Common stock issued in
exchange for 1997 placement
costs....................... 46,669 5 315,104 315,109
Preferred stock
dividends/accretions........ 2,967 1 (920,425) (920,424)
Cash dividends accrued for
Series B-1 and B-2 preferred
stock....................... (567,192) (567,192)
Stock options exercised....... 162,208 16 457,977 (300,000) 157,993
Redemption of Series A-2
preferred stock............. (47,030) (5) (4,876,418) (4,876,423)
Warrants issued in conjunction
with the issuance of August
1998 Note................... 6,751,050 6,751,050
Re-evaluation of existing
stock warrants.............. 190,000 190,000
Other......................... (28,495) (28,495)
Net loss...................... (53,762,042) (53,762,042)
------- --- ---------- ------ ----------- ------------ --------- ------------
BALANCE AT SEPTEMBER 30,
1998........................ $ 7,440,365 $ 744 $48,145,012 $(74,942,488) $(300,000) $(27,096,732)
======= === ========== ====== =========== ============ ========= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 93
INTRACEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
YEAR ENDED SIX MONTHS ENDED ------------------------- --------------------------
JUNE 30, 1995 DECEMBER 31, 1995 1996 1997 1997 1998
------------- ----------------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating activities:
Net loss........................... $(1,943,954) $ (4,082,736) $(4,389,973) $(8,063,633) $(4,894,294) $(53,762,042)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Extraordinary gain on early
extinguishment of debt......... (1,367,000) (785,349)
Amortization and depreciation.... 124,363 414,933 2,190,808 2,262,103 1,710,529 3,574,597
Gain on pension curtailment...... (800,000)
Gain on settlement of a
contingent liability........... (1,050,000)
Gain on recovery of investment in
GAIFAR......................... (222,720)
Acquired research and development
charge......................... 2,100,000 37,718,000
Noncash investment charge........ 339,408
Noncash interest expense......... 1,198,392 1,993,515 1,462,701 2,798,247
Noncash inventory charge......... 1,119,000 315,831
Noncash charge on fixed assets... 600,618 532,921
Other............................ 58,030 (23,658) 83,009
Changes in operating assets and
liabilities:
Accounts receivable, net....... 19,027 29,390 (1,156,412) 380,579 299,676 296,401
Inventories, net............... (21,640) 18,357 (2,113,698) 821,568 6,213 115,402
Other assets................... 4,954 (301,901) (323,181) 67,080 17,879
Accounts payable............... 103,232 886,963 339,522 (109,038) (316,033) 3,683,051
Accrued liabilities............ 267,278 666,231 (342,932) (387,292) (575,659) (532,140)
----------- ------------ ----------- ----------- ----------- ------------
Net cash used in operating
activities......................... (1,451,694) (1,328,908) (3,059,756) (2,508,930) (1,730,524) (8,865,665)
----------- ------------ ----------- ----------- ----------- ------------
Investing activities:
Purchase of pledged securities..... (3,951,400)
Deposits of restricted cash........ (2,000,000) (7,027,993)
Release of restricted cash......... 2,000,000
Investment in other assets......... (82,129) (330,225) (3,486)
Purchase of Bartels, Inc........... (13,000,000)
Purchase of assets from Zynaxis,
Inc.............................. (519,000)
Purchase of property and
equipment........................ (106,560) (288,391) (1,587,193) (1,360,209) (912,044) (462,369)
Capitalized patent costs........... (183,995) (25,000) (118,754)
Investment in GAIFAR............... (283,220)
Recovery of investment in GAIFAR... 222,720
Investment in and advances to
Bartels Prognostics.............. (348,198) (795,299) (475,000)
Cash acquired in conjunction with
purchase of PerImmune Holdings,
Inc. (Holdings).................. 2,504,064
Cash paid in conjunction with the
purchase of Holdings............. (1,307,632)
----------- ------------ ----------- ----------- ----------- ------------
Net cash provided by (used in)
investing activities............... (188,689) (13,807,391) (2,402,606) (4,180,508) (1,717,269) (8,144,850)
----------- ------------ ----------- ----------- ----------- ------------
Financing activities:
Proceeds from sale of preferred
stock............................ 3,750,000 5,350,000 1,732,740 1,773,733
Repurchase of common stock......... (326,812) (208,750)
Proceeds from sale of common stock
and exercise of common stock
options.......................... 8,000 347,791 6,248,201 44,000 157,993
Deferred stock issue costs......... (245,968) (140,933) (848,721)
Issuance of common stock
warrants......................... 6,751,050
Exercise of common stock
warrants......................... 146,984
Repayment of stockholder note
receivable....................... 100,000 100,000
Proceeds from the issuance of
long-term obligations............ 54,226 14,845,744 5,960,000 713,339 44,054,506
Debt issue costs................... (668,351) (78,967) (658,087)
Redemption of Series A-2 preferred
stock............................ (4,876,423)
Payments of long-term
obligations...................... (223,413) (3,356,853) (896,345) (2,908,494) (1,625,006) (28,623,343)
Payment of line of credit.......... (500,000)
Payment of pension liability....... (300,000)
Use of restricted cash............. 326,431
Book overdraft..................... 194,807
Other.............................. 119,000 19,751 (44,039) (34,994)
----------- ------------ ----------- ----------- ----------- ------------
Net cash provided by financing
activities......................... 3,588,813 16,838,891 4,535,283 5,518,836 302,562 15,448,412
----------- ------------ ----------- ----------- ----------- ------------
Net increase (decrease) in cash and
cash equivalents................... 1,948,430 1,702,592 (927,079) (1,170,602) (3,145,231) (1,562,103)
Cash and cash equivalents at
beginning of period................ 421,288 2,369,718 4,072,310 3,145,231 3,145,231 1,974,629
----------- ------------ ----------- ----------- ----------- ------------
Cash and cash equivalents at end of
period............................. $ 2,369,718 $ 4,072,310 $ 3,145,231 $ 1,974,629 $ -- $ 412,526
=========== ============ =========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 94
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY:
Intracel Corporation (the "Company") develops and manufactures therapeutic
prognostic and diagnostic products for the treatment of cancers and serious
viral diseases. The Company's current and future products are based on several
proprietary platform technologies, including the development of totally human
antibodies, INSTI (a rapid diagnostic format), and ZYMMUNE (a cell counting
technology). These technologies allow the Company to leverage its core
competencies into large, global clinical markets. In 1995, the Company changed
its fiscal year end from June 30 to December 31.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries after elimination of all significant
intercompany accounts and transactions. Corporate joint ventures are accounted
for under the equity method.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and
money market funds carried at cost, which approximates market.
Restricted Cash
Restricted cash consist of the proceeds of the Company's Guaranteed Senior
Secured Escrow Note deposited in a segregated bank account from which the
Company is permitted to obtain funds upon request to the lender.
Pledged Securities
Pledged securities consist of United States-backed treasury bills with
terms up to 6 months. Securities held in escrow will be used to fund one full
year of interest payments relating to the Company's Guaranteed Senior Secured
Primary Note.
Trade accounts receivable
Accounts receivable are presented net of allowances for doubtful accounts
of $60,000, $50,000 and $121,194 at December 31, 1997, 1996 and September 30,
1998, respectively. The Company recorded provisions for doubtful accounts of
approximately $99,000, $11,000 and $80,649 for the periods ended December 31,
1997, 1996 and September 30, 1998, respectively.
Inventories
Inventories consist of raw materials used in the production process and
diagnostic products, research reagents and antibodies held for sale. Inventories
are valued at the lower of first-in, first-out cost or market.
Property and equipment and depreciation
Property and equipment are stated at cost less accumulated depreciation.
Maintenance and repairs are charged to expense as incurred. Significant
betterments are capitalized. Upon retirement or sale the cost of assets disposed
of and the related accumulated depreciation and amortization are removed from
the accounts and any resulting gain or loss is reflected in the consolidated
statements of operations. Depreciation of property and equipment is provided
using primarily the straight-line method over the estimated useful lives of
three to
F-8
<PAGE> 95
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
seven years. Leasehold improvements are amortized on a straight-line method over
the shorter of the useful life or the lease term.
Construction in progress includes the costs of constructed machinery.
Construction in progress costs are transferred to other property and equipment
categories when the construction/installation is completed and the asset is
ready for its intended use.
Cost in excess of net assets acquired
Cost in excess of net assets acquired represents the excess of the cost of
purchased subsidiaries over the estimated fair value of the net assets acquired
as of the date of acquisition and is being amortized by the straight-line
method. The weighted average amortization period for cost in excess of net
assets acquired is 14 years.
Other assets
Other assets consist primarily of patent and technology costs and an
investment (see Note 11). Patent and technology costs are amortized on a
straight-line basis over the estimated useful lives. The weighted average
amortization period for patent and technology cost is 10 years. The investment
is accounted for using the equity method.
Valuation of long lived assets
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, including, but not limited to, property and equipment, cost
in excess of net assets acquired, and other assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of are
determined in a similar manner, except that fair market values are reduced for
the cost to dispose.
Income taxes
The Company follows the liability method of accounting for income taxes
pursuant to Statement of Financial Accounting Standards No. 109 (SFAS No. 109),
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
The Company provides a valuation allowance, if necessary, to reduce deferred tax
assets to their estimated realizable value.
Stock issuance costs
Proceeds from issuances of capital stock are presented net of specific
incremental costs directly attributable to the related offering.
Revenue recognition
Revenue from sales of products is recognized on the date of delivery to
customers or upon shipment, based on the contractual terms of applicable
agreements.
The Company has entered into various research and development and licensing
agreements. Research and development revenue from cost reimbursement agreements
is recorded as the related expenses are incurred, up to contractual limits and
when the Company meets its performance obligations under the
F-9
<PAGE> 96
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
respective agreements. Contract revenue is recognized under other agreements
when milestones are met and the Company's performance obligations have been
satisfied in accordance with the terms of the respective agreements. Cash
received that is related to future performance under such contracts is deferred
and recognized as revenue when earned. After performance obligations have been
satisfied, the related amounts received are not reimbursable in the event the
research is unsuccessful.
The Company also engages in contracts with commercial entities and agencies
of the U.S. government (Department of Defense and the National Institute of
Health) on either a cost-plus-fixed-fee, fixed price or a
cost-plus-percentage-fee basis. Revenue on cost-plus-fixed-fee, fixed price and
cost-plus-percentage-fee contract is recognized based on the ratio of total
direct and indirect costs incurred during the period to total estimated costs
using the percentage-of-completion method. Estimates to complete are reviewed
periodically and revised as required in the period the revision is determined.
Provisions are made for the full amount of anticipated losses, if any, on
all contracts in the period in which they are first known and estimable.
Contracts with the U.S. government are subject to government audit upon contract
completion and therefore, all contract costs are potentially subject to
adjustment, even after reimbursement. Management believes adequate provisions
for such adjustments, if any, have been made in the consolidated financial
statements. Expense recovery rates have been audited through 1996.
Research and development
The Company makes significant investments in research for the development
of new products. Research and development costs are charged to expense as
incurred.
Reorganization expense
The Company recognized reorganization expense of $917,442 in 1996 in
connection with the Company's relocation from Cambridge, Massachusetts to
Issaquah, Washington.
Net loss per share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (SFAS No. 128), "Earnings Per Share." SFAS No. 128
requires the presentation of basic and diluted earnings (loss) per share for all
periods presented.
In accordance with SFAS No. 128, basic net loss per share has been computed
using the weighted-average number of shares of common stock outstanding during
the period, except that pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 98, if applicable, common shares issued in each of the
periods presented for nominal consideration have been included in the
calculation as if they were outstanding for all periods presented.
Pro forma basic and diluted net loss per share has been computed as
described above and also gives effect to the conversion of the convertible
instruments that will occur upon completion of the Company's initial public
offering. The Company has included the equivalent number of common shares from
the conversion of certain convertible notes and preferred stock in the
calculation of pro forma EPS. The notes and preferred stock are assumed
converted because their terms require conversion upon an initial public
offering. Consequently, the Company anticipates 3,463,385 shares of common stock
will be issued upon conversion or exercise of such preferred stock and
convertible notes.
F-10
<PAGE> 97
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
A reconciliation of shares used in the calculation of basic and diluted and
pro forma basic and diluted net loss per share follows:
<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS ENDED
ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30,
YEAR ENDED DECEMBER 31, ------------------------ -------------------------------
JUNE 30, 1995 1995 1996 1997 1997 1998
------------- ------------ ---------- ----------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net loss......................... $1,943,954 $4,082,736 $4,389,973 $ 8,063,633 4,894,294 $53,762,042
Preferred stock
dividends/accretion............ 211,448 266,136 789,552 1,260,928 896,980 1,957,739
---------- ---------- ---------- ----------- ---------- -----------
Net loss for common stock........ $2,155,402 $4,348,872 $5,179,525 $ 9,324,561 $5,791,274 $55,719,781
========== ========== ========== =========== ========== ===========
Weighted average shares of common
stock outstanding (shares used
in computing basic and diluted
net loss per share)............ 2,641,784 2,590,828 2,596,883 2,715,599 2,595,535 7,291,018
========== ========== ========== =========== ========== ===========
Basic and diluted net loss per
share before extraordinary
item........................... $ 0.82 $ 2.21 $ 1.99 $ 3.43 $ 2.23 $ 7.75
Extraordinary item............... (0.53) (0.11)
---------- ---------- ---------- ----------- ---------- -----------
Basic and diluted net loss per
share.......................... $ 0.82 $ 1.68 $ 1.99 $ 3.43 $ 2.23 $ 7.64
========== ========== ========== =========== ========== ===========
Shares used in computing basic
and diluted net loss per
share.......................... 2,715,599 7,291,018
----------- -----------
Adjustment to reflect the effect
of the assumed conversion of
convertible instruments:
Preferred stock - series A 804,829 854,185
Preferred stock - series A-1 868,224 921,267
Preferred stock - series A-3 197,231 209,282
Preferred stock - series B-1 669,615
Preferred stock - series B-2 772,604
Convertible notes 36,432
----------- -----------
1,870,284 3,463,385
----------- -----------
Shares used in computing pro
forma basic and diluted net
loss per share................. 4,585,883 10,754,403
=========== ===========
Pro forma basic and diluted net
loss per share................. $ 1.76 $ 5.00
=========== ===========
</TABLE>
Had the Company been in a net income position, diluted earnings per share
would have included the shares used in the computation of basic net loss per
share as well as additional potential common shares related to outstanding
options and warrants which were excluded because they are anti-dilutive.
F-11
<PAGE> 98
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Supplemental disclosure of cash flow information
Noncash investing and financing activities consisted of:
<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS
YEAR ENDED ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, DECEMBER 31, ----------------------- SEPTEMBER 30,
1995 1995 1996 1997 1998
---------- ----------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Preferred stock dividends paid with
stock................................ $211,448 $ 266,136 $ 789,552 $1,260,928 $ 1,153,595
Acquisition of Zymmune................. 1,500,000
Property and equipment acquired under
capital lease........................ 96,705
Accrued stock issuance costs........... 315,109
Deferred acquisition costs............. 2,862,513
Conversion of note payable into Series
A-2 preferred stock.................. 2,000,000
Conversion of accrued interest into
Series A-2 preferred stock........... 267,260
Conversion of Series A-1 preferred
stock into Series A-3 preferred
stock................................ 1,115,128
Common stock issued in exchange for
1997 stock issuance costs............ 315,109
Re-evaluation of existing stock
warrants............................. 190,000
Dividends accrued on Series B-1 and B-2
preferred stock...................... 567,192
Accretion on Series B-1 and B-2
preferred stock...................... 236,952
Accrued interest added to note
principal............................ 814,165
Common stock issued for a note......... 300,000
Acquisition of Perimmune Holdings, Inc.
("Holdings" -- See note 11)
Fair value of assets acquired........ 19,249,000
Acquired research and development.... 37,718,000
Issuance of Intracel Corporation
common stock....................... 24,654,000
Assumption of long term debt......... 11,532,000
Grant of options to purchase Intracel
Corporation common stock........... 10,768,000
Issuance of Series B-1 preferred
stock.............................. 4,098,744
Issuance of Series B-2 preferred
stock.............................. 4,918,493
Assumption of acquisition costs...... 3,500,000
Other.................................. 73,800
</TABLE>
Net cash paid for interest during 1997, 1996, the six months ended December
31, 1995, the year ended June 30, 1995 and the nine months ended September 30,
1998 totalled $1,506,390, $1,094,350, $59,071, $22,154 and $507,928,
respectively.
Concentrations of credit risk
The Company's customers are predominantly comprised of government research
organizations and companies in the biomedical research, pharmaceutical and
diagnostic industries throughout the world. No single customer accounted for a
significant amount of the Company's revenues and there were no significant
accounts receivable from a single customer. The Company reviews the credit
histories of potential customers
F-12
<PAGE> 99
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
prior to extending credit and maintains allowances for potential credit losses.
The Company maintains cash and cash equivalents in high credit quality financial
institutions. The Company believes that its risk from concentration of credit is
limited.
Use of estimates and assumptions
The preparation of the consolidated 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.
Fair value of financial instruments
For certain financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, recorded amounts
approximate market value.
The Company believes it is not practicable to estimate a fair market value
different from the preferred stock's carrying value as these securities have
numerous unique features (as described in Note 10) and there is no quoted market
price at September 30, 1998.
The carrying amount of the senior note payable and the line of credit
approximate market value because they have interest rates that vary with market
interest rates. The Company believes it is not practicable to estimate the fair
value for the residual of the long term debt as these securities have numerous
unique features such as detachable warrants and contingent interest rates, as
described in Note 6, and there is no quoted market price at September 30, 1998.
Reclassifications
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform with the 1997 presentation. The reclassifications had no
effect on previously reported net loss, stockholders' deficit or cash flows.
Unaudited interim financial statements
In the opinion of the Company's management, the September 30, 1997
unaudited interim financial statements include all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of the financial
statements except for those pertaining to the acquisition of Holdings as
discussed further in Note 11. All references hereinafter to September 30, 1997
amounts are based on unaudited information.
New accounting pronouncements
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." This statement requires that changes in comprehensive income be shown
in a financial statement that is displayed with the same prominence as other
financial statements. The statement is effective for fiscal years beginning
after December 15, 1997. Reclassification for earlier periods is required for
comparative purposes. The Company does not have any material items of
comprehensive income, other than net loss, and accordingly, the statement does
not have any material impact on reported financial position or results of
operations.
F-13
<PAGE> 100
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information."
This statement supersedes Statement of Financial Accounting Standards No. 14,
"Financial Reporting for Segments of a Business Enterprise." This statement
includes requirements to report selected segment information quarterly and
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues. The
statement will be effective for fiscal years beginning after December 15, 1997.
Reclassification for earlier periods is required, unless impracticable, for
comparative purposes. The Company is currently evaluating the impact this
statement will have on its financial statements; however, because the statement
requires only additional disclosure, the Company does not expect the statement
to have a material impact on its reported financial position or results of
operations.
In February 1998, the FASB Issued Statement of Financial Accounting
Standards No. 132 "Employers' Disclosures about Pensions and Other
Postretirement Benefits." This Statement revises employers' disclosures about
pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer as useful as
they were when FASB Statements No. 87, Employers' Accounting for Pensions, No.
88, Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pensions Plans and for Termination Benefits, and No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, were issued. The Statement
suggests combined formats for presentation of pension and other postretirement
benefit disclosures. The Statement also permits reduced disclosures for
nonpublic entities. This Statement is effective for fiscal years beginning after
December 15, 1997. Earlier application is encouraged. Restatement of disclosures
for earlier periods provided for comparative purposes is required unless the
information is not readily available, in which case the notes to the financial
statements should include all available information and a description of the
information not available. The Company is currently evaluating the impact this
statement will have on its financial statements; however, because the statement
requires only additional disclosure, the Company does not expect the statement
to have a material impact on its reported financial position or results of
operations.
3. INVENTORIES:
Inventories consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1996 1997 1998
---------- ---------- -------------
<S> <C> <C> <C>
Raw materials......................... $ 909,198 $1,100,325 $ 826,885
Work in process....................... 265,712 160,886 197,957
Finished goods........................ 1,938,277 559,802 1,043,609
---------- ---------- ----------
$3,113,187 $1,821,013 $2,068,451
========== ========== ==========
</TABLE>
F-14
<PAGE> 101
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
Laboratory equipment................ $ 4,173,856 $ 4,183,788 $ 8,331,843
Computer equipment.................. 473,483 550,260 1,283,142
Leasehold improvements.............. 392,786 477,177 506,997
Furniture........................... 337,830 365,532 394,109
Construction in progress............ 1,005,519
----------- ----------- -----------
5,377,955 5,576,757 11,521,610
Accumulated depreciation............ (2,130,622) (2,397,798) (6,982,701)
----------- ----------- -----------
$ 3,247,333 $ 3,178,959 $ 4,538,909
=========== =========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1996, the six
months ended December 31, 1995, the year ended June 30, 1995 and the nine months
ended September 30, 1998 was $982,740, $861,546, $414,933, $124,363 and
$1,143,117, respectively.
5. ACCRUED LIABILITIES:
Accrued liabilities consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1996 1997 1998
---------- ---------- -------------
<S> <C> <C> <C>
Acquisition costs..................... $ 375,000 $2,862,513 $ 284,618
Taxes payable......................... 291,055 828,594 1,120,882
Interest payable...................... 492,752 596,028
Accrued stock issuance costs.......... 315,109
Accrued payroll....................... 420,544 304,690 659,743
Building maintenance.................. 66,569
Accrued dividends..................... 567,192
Other................................. 362,318 46,093 316,754
---------- ---------- ----------
$1,941,669 $4,356,999 $3,611,786
========== ========== ==========
</TABLE>
F-15
<PAGE> 102
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT:
Long-term debt consisted of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- -------------
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
Senior note payable to bank, collateralized
by substantially all of the assets of the
Company, interest at the higher of prime
plus 1.5% or the federal funds rate plus
0.5% (10% and 9.75% at December 31, 1997 and
1996, respectively). If the interest
payments are not made on a timely basis, the
stated interest rate will be increased by a
penalty amount. Quarterly principal payments
of $250,000 plus interest payable through
December 31, 1996 at which time the payments
increase to $500,000 plus interest through
November 16, 2000. The senior note payable
to bank must be repaid to the extent of any
net proceeds from the issuance and sale of
equity securities by the Company. The note
was issued with 121,570 detachable warrants
to purchase common stock at $6.75 per share
expiring November 16, 2002. The warrants
were estimated to have an immaterial fair
value for financial reporting purposes.
During April 1998, the Company repaid all of
the senior note payable with the proceeds
from the issuance of $8,000,000 of notes
payable to an existing note holder (the
"April 1998 Notes"). The April 1998 Notes
were issued with 65,422 detachable warrants
at an exercise price of $11.46 per share
expiring April 17, 2003. The warrants were
estimated to have an immaterial fair value
for financial reporting purposes. During
August 1998, the Company repaid all of the
April 1998 Notes with proceeds from the
issuance of $41,000,000 of notes payable to
an existing note holder (the "August 1998
Notes")..................................... $ 8,250,000 $ 6,000,000
</TABLE>
F-16
<PAGE> 103
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- -------------
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
Subordinated note payable, collateralized by
substantially all of the assets of the
Company, interest at 8% per year through
November 30, 1997, increasing to 11%
thereafter. Principal is due December 31,
2000. The maturity date may accelerate under
certain circumstances, as disclosed and
defined in the terms of the agreement,
including a "change in control." The note
was issued with 125,347 detachable warrants
to purchase common stock at $10.50 per share
expiring December 28, 2000. The warrants
were estimated to have an immaterial fair
value for financial reporting purposes. The
note was issued at an original discount of
$1,565,000 which is being amortized over the
term of the note. The unamortized discount
equaled $819,000 and $1,252,000 at December
31, 1997 and 1996, respectively. The
proceeds were used to retire a note payable,
resulting in an extraordinary gain of
$1,367,000 during the period ended December
31, 1995. The Company is required to make
quarterly interest payments and has the
option under certain conditions to add
required interest payments to principal in
lieu of paying in cash. Interest payments of
$507,106 and $395,061 were made "in kind" by
issuing additional promissory notes during
1997 and 1996, respectively. During August
1998, the Company repaid all of the
subordinated note payable with proceeds from
the issuance of the August 1998 notes....... 5,402,060 6,342,166
Subordinated note payable, collateralized by
substantially all of the assets of the
Company, interest at 12% per year through
June 21, 1998, increasing to 13% thereafter.
Principal is due June 30, 2001. The note was
issued with 106,049 detachable warrants to
purchase common stock at $10.50 per share
expiring on April 1, 2003. The warrants were
estimated to have an immaterial fair value
for financial reporting purposes. In
November 1997, the note and warrant holder
purchased 106,049 shares of the Company's
common stock for $6.75 per share, and
simultaneously relinquished to the Company
the warrants to purchase 106,049 shares of
common stock at $10.50 per share. The note
was converted to Series A-2 preferred stock
during 1997 (see Note 10)................... 2,000,000
</TABLE>
F-17
<PAGE> 104
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- -------------
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
Subordinated note payable to bank,
collateralized by substantially all of the
assets of the Company, interest at 12%
through June 11, 1998, increasing to 13%
thereafter. Principal is due June 30, 2001.
The maturity date may accelerate under
certain circumstances, as disclosed and
defined in the terms of the agreement,
including a "change in control." The note
was issued with 212,098 detachable warrants
to purchase common stock at $10.50 per share
expiring on April 1, 2003. Warrants were
estimated to have an immaterial fair value
for financial reporting purposes. The note
includes a provision guaranteeing the issuer
a 20% compounded annual return through any
combination of warrant appreciation or
interest payments. The Company is required
to make quarterly interest payments and has
the option under certain conditions to add
required interest payments to principal in
lieu of paying in cash. Interest payments of
$366,666 and $269,333 were made "in kind" by
issuing additional promissory notes during
1997 and 1996, respectively. During August
1998, the Company repaid all of the
subordinated note payable with proceeds from
the issuance of the August 1998 notes....... 4,269,333 4,635,999
Subordinated note payable to the
Massachusetts Business Development
Corporation in conjunction with a loan
agreement issued by the United States Small
Business Administration, collateralized by
equipment purchased with the proceeds,
interest at prime plus 2.75% (11% at
December 31, 1996). Principal of $8,334 plus
interest payable monthly through April 1,
2002. This note was paid in full by the
Company during 1997......................... 566,656
Note payable, in the amount of $450,000,
issued in conjunction with the purchase of
certain assets of Zymmune Diagnostic Systems
and collateralized by the related equipment,
inventory, and intellectual property
purchased with the proceeds. Principal plus
accrued interest at 6% due on October 24,
1999. The note requires contingent payments
of up to $1,050,000 based on attaining
certain FDA clinical trial milestones.
Zymmune Diagnostic Systems believes the
milestones are probable of achievement and,
accordingly, the Company had accrued the
additional amount at December 31, 1997. The
Company, however, disputed these amounts
(see Note 11). During August 1998 the
Company settled such dispute................ 1,500,000 1,500,000
</TABLE>
F-18
<PAGE> 105
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- -------------
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
12% Guaranteed Senior Secured Primary Note
due August 1, 2003 in the amount of $35
million and a 12% Guaranteed Senior Secured
Escrow Note due August 1, 2003 in the amount
of $6 million and common stock warrants to
purchase up to 1,433,179 shares of the
Company's common stock. The warrants were
estimated to have a fair value of $6,751,050
for financial reporting purposes. The notes
are collateralized by (i) a first priority
security interest in all the existing and
future assets of the Company, other than the
Perimmune Patents and certain equipment
financed pursuant to the Loan and Security
Agreement, dated September 30, 1997, between
the Company and the Washington Economic
Development Finance Authority, and a second
security interest in certain of the
Perimmune Patents and (ii) a pledge of all
the issued and outstanding capital stock of
the existing and future subsidiaries of the
Company. Pursuant to the terms of the
Primary Notes, up to $5.0 million aggregate
principal amount of the Primary Notes must
be redeemed upon the closing of an initial
public offering. Pursuant to the terms of
the Escrow Notes, the Company must notify
the noteholders of its sale of common stock
upon the closing of an initial public
offering and, if requested, up to $6.0
million aggregate principal amount of the
August 1998 Escrow Notes must be redeemed,
in whole or in part......................... $34,322,680
Note payable, in the amount of $9,234,935
assumed in connection with the merger of
Perimmune Holdings, Inc. (see Note 11 for
additional discussion of the merger) The 8%
note, increased to 10% after certain dates.
Accrued interest is added to the principal
balance on February 1 and August 1 of which
the maturity date is January 15, 2000. The
terms of scheduled repayment are variable
depending on the company's cash position as
of December 31, 1999. The note is
convertible at the option of the lender into
common stock at any time prior to the
repayment of the note in full at a
conversion price equal to the price to the
public if and when the company was to
complete an initial public offering. Certain
patents, patent applications, trademarks and
plant and equipment collateralize the
note........................................ 10,802,170
</TABLE>
F-19
<PAGE> 106
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- -------------
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
Note payable collateralized by the equipment
purchased with the proceeds, payments of
principal plus interest at 11% totaling
$15,208 due monthly through August 1, 2002.
Note allows for additional borrowings of up
to $1,500,000 for the purchase of
manufacturing equipment. Guaranteed by a
bond posted by the State of Washington
Economic Development Council................ 664,588 569,273
Three notes payable each in the amount of
$77,500 uncollateralized, non-interest
bearing assumed in connection with the
merger of PerImmune Holdings. Inc. Each note
is convertible into the Company's common
stock if the company consummates an initial
public offering............................. 232,500
Other of which includes $603,000 and
$187,000 of interest as of December 31, 1997
and 1996, respectively, in connection with a
subordinated note payable that included a
provision guaranteeing the issuer a 20%
compounded annual return through any
combination of warrant appreciation or
interest payments. The Company has
calculated additional interest expense as
the difference between the stated rate of
12%, increased to 13% June 1998, and the
guaranteed rate of 20% for the periods
effective. On August 25, 1998 the note was
extinguished and as a condition of
extinguishment the noteholder agreed to
waive the "make-whole" guarantee provision.
The Company has reversed all accumulated
accrued interest associated with the
"make-whole" guarantee provision and has
reported an "Extraordinary Gain on
Extinguishment of Debt" in the amount of
$925,000 in its September 30, 1998 financial
statements.................................. 256,018 632,470 146,224
----------- ----------- -----------
22,244,067 19,775,223 46,072,847
Less current portion........................ (3,505,122) (2,144,729) (176,411)
----------- ----------- -----------
$18,738,945 $17,630,494 $45,896,436
=========== =========== ===========
</TABLE>
The various debt agreements contain restrictive covenants relating to
quarterly profitability, minimum levels of net worth and liquidity, limitations
on additional debt and dividends, and other nonfinancial covenants including
certain subjective clauses.
The Company received certain amendments and waivers to its debt agreement
and covenants contained therein.
F-20
<PAGE> 107
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
Future minimum debt payments at September 30, 1998 are as follows:
<TABLE>
<S> <C>
1999............................................ 176,411
2000............................................ 6,267,373
2001............................................ 6,232,903
2002............................................ 144,740
2003............................................ 41,000,000
-----------
$53,821,427
===========
</TABLE>
On April 1, 1998, the Company issued 12.5% notes ("April 1998 Notes") in
the original principal amount of $8.0 million including warrants to purchase
65,422 shares of the Company's common stock. The Company applied the proceeds
from the April 1998 Notes to retire the Company's senior note payable to bank
issued November of 1995 in the principal amount of $6.1 million, including
accrued interest, and the line of credit in the amount of $0.5 million (See Note
7). The remaining $1.4 million was used primarily for working capital purposes.
In June of 1998 the Company amended its April 1998 Notes whereby the lender
agreed to advance an additional $2.0 million to the Company for working capital
purposes. The first advance of $1.0 million occurred in June 1998 while the
second advance of $1.0 million occurred in July 1998. Both April 1998 Notes as
amended, were repaid with proceeds from the "August 1998 Notes" discussed below.
On August 25, 1998 the Company completed a comprehensive refinancing of its
outstanding debt. The August 1998 Notes are (i) a 12% Guaranteed Senior Secured
Primary Note due August 1, 2003 in the amount of $35 million and (ii) a 12%
Guaranteed Senior Secured Escrow Note due August 1, 2003 in the amount of $6
million and (iii) common stock warrants to purchase up to 1,083,339 shares of
the Company's common stock. The net proceeds from the August 1998 Notes were
used to (i) discharge the Company's subordinated note payable to bank issued
June of 1996 in the amount of $5.1 million, including accrued interest, (ii)
discharge the Company's subordinated note payable issued in December of 1995 in
the principal amount of $7.2 million including accrued interest, (iii) discharge
the Company's Amended April 1998 notes in the principal amount of $10.1 million
including accrued interest, and (iv) redeem an aggregate of 47,030 shares of the
Company's Series A-2 Preferred Stock, $.0001 par value per share in the amount
of $4.9 million.
Of the remaining $13.7 million $6.0 million from the Guaranteed Senior
Secured Escrow Note was deposited into a segregated bank account from which the
Company is permitted to obtain funds upon request to the lender, $4.9 million
was deposited into an escrow account, reflected as restricted cash on the
balance sheet, which is equivalent to four scheduled interest payments on the
August 1998 notes, $0.5 million was used to comply with a Company milestone
obligation, and the remaining $2.3 million will be used for working capital
purposes.
The August 1998 Notes are collateralized by (i) a first priority security
interest in all the existing and future assets of the Company, other than the
PerImmune Patents and certain equipment financed pursuant to the Loan and
Security Agreement, dated September 30, 1997, between the Company and the
Washington Economic Development Finance Authority, and a second security
interest in certain of the PerImmune Patents and (ii) a pledge of all the issued
and outstanding capital stock of the existing and future subsidiaries of the
Company.
The Company is permitted to obtain funds upon request from such Segregated
Account, provided that no event of default (as defined) occurs. The Company may
draw out of the escrow account to make scheduled interest payments on the August
1998 Notes, provided that, after giving effect to any such withdrawal, the
F-21
<PAGE> 108
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
Company, subject to certain conditions, is required to maintain the balance in
the escrow account at an amount sufficient to pay the next four scheduled
interest payments, and after the first two successive full payments of interest
hereafter, at a level sufficient to pay the next two successive full payments of
interest on the outstanding August 1998 Notes. The noteholders have a
collateralized interest in the escrow account. The escrow account will be
terminated after payment in full of all interest accrued through and including
the twelfth successive interest payment due on the August 1998 Notes, with any
balance remaining in the escrow account to be retained by the Company. The
August 1998 Notes are guaranteed by all the existing subsidiaries of the Company
and will be guaranteed by all future subsidiaries of the Company.
The August 1998 Notes, among other things, require that the Company comply
with certain financial covenants beginning in the year 2000 including, without
limitation, maintaining an adjusted debt to EBITDA (as defined) ratio, minimum
levels of tangible net worth and interest coverage, and maximum levels of
leverage for certain periods. In addition, the August 1998 Notes impose certain
limitations on the ability of the Company to, among other things, (i) incur
additional indebtedness, (ii) pay dividends or make certain other restricted
payments, (iii) consummate certain asset sales, (iv) enter into certain
transactions with affiliates, (v) incur liens, (vi) merge or consolidate with
any other person or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its assets, (vii) enter into certain restrictive
arrangements relating to the Company's subsidiaries, (viii) extend credit and
(ix) make investments.
Pursuant to the terms of the August 1998 Primary Notes, up to $5.0 million
aggregate principal amount of the August 1998 Primary Notes must be redeemed
upon the closing of an initial public offering. Pursuant to the terms of the
August 1998 Escrow Notes, the Company must notify the noteholders of its sale of
common stock upon the closing of an initial public offering and, if requested,
up to $6.0 million aggregate principal amount of the August 1998 Escrow Notes
must be redeemed, in whole or in part.
The noteholders may require the Company to repurchase an aggregate of up to
$7.5 million aggregate principal of the August 1998 Notes at a price equal to
100% of their principal amount plus accrued and unpaid interest, upon the
failure of Intracel to satisfy certain ratios of EBITDA to interest expense as
measured at the end of each of three successive fiscal quarters of the Company
commencing March 31, 2000.
The noteholders may require the Company to prepay the August 1998 Notes, in
whole or in part, at a price equal to 101% of the principal amount so prepaid,
plus accrued interest to the date of prepayment, if there is a Change of Control
(as defined) of the Company, or if Simon R. McKenzie shall cease to be the
principal executive officer of the Company in charge of the Company's management
and policies for a period of 30 days or more.
The August 1998 Primary Notes may be prepaid, in whole or in part, at the
option of the Company initially at a redemption price of 112% of the principal
amount thereof, and declining to 100% of the principal amount thereof after July
31, 2002, plus accrued and unpaid interest, if any, to the date of redemption.
The August 1998 Escrow Notes may be prepaid, in whole or in part, at the option
of the Company, provided that certain notice requirements are met.
Events of default under the August 1998 Notes include, among other things,
(i) failure to pay principal or interest on the August 1998 Notes when due, (ii)
breaches of representations, warranties and covenants, (iii) defaults under
other indebtedness of the Company or its subsidiaries, (iv) failure to
consummate an equity offering on or prior to December 31, 1999, with an
aggregate offering price of not less than $40.0 million and aggregate proceeds
to the Company (net of selling expenses and underwriters' discounts or selling
agent's commission) of not less than $35.0 million, (v) the occurrence of
certain events of bankruptcy, (vi) certain adverse judgments against the Company
or its subsidiaries, (vii) certain ERISA events and (viii) other customary
defaults, in certain cases after the expiration of a grace period.
F-22
<PAGE> 109
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
The 1,083,339 warrants issued in connection with the August 1998 Notes are
exercisable until August 25, 2003 at an exercise price per share equal to the
price to the public per share upon the consummation of an initial public
offering. In the event the Company does not consummate an initial public
offering on or prior to December 31, 1998 all 1,083,339 warrants are exercisable
at $15.00 per share. The Company has determined the warrants to have a fair
value of $4.6 million which will be accounted for as a note issuance discount
and amortized using the effective interest method over the life of the note.
In January 1999, the Company and the Northstar Funds entered into a First
Amendment and Waiver Agreement which, among other things, (i) amended the terms
of the August 1998 Escrow Notes to eliminate the Company's obligation to redeem
the August 1998 Escrow Notes with proceeds received from this offering or any
other debt or equity offering prior to the consummation of this offering, (ii)
amended the Interest Escrow Security Agreement to reduce the balance required to
be maintained in the escrow account created thereunder to an amount sufficient
to pay the next two scheduled interest payments on the Notes, and (iii) waived
certain non-payment events of default and compliance by the Company with certain
covenants set forth in the documentation executed in connection with the August
1998 Refinancing.
On February 6, 1999, the Company and the Northstar Funds entered into a
Second Amendment Agreement which amended the terms of the August 1998 Notes to
eliminate the Company's obligation to (i) repurchase such notes upon the
Company's failure to comply with certain ratios of EBITDA to interest expense as
measured at the end of each of three successive fiscal quarters of the Company
commencing March 31, 2000; (ii) prepay such notes at a price equal to 101% of
the principal amount so prepaid, plus accrued interest to the date of prepayment
if Simon R. McKenzie shall cease to be the principal executive officer of the
Company in charge of the Company's management and policies for a period of 30
days or more and the holders of the August 1998 Notes have not approved a
successor within 180 days after the cessation of his full time service to the
Company and (iii) comply with certain financial covenants beginning in the year
2000 including maintaining an adjusted debt to EBITDA ratio, minimum levels of
tangible net worth and interest coverage.
During August 1998 the Company entered into a settlement agreement with
Vaxcel, Inc., an assignee of an agreement for the purchases of certain assets of
Zymmune Diagnostic Systems from Zynaxis, Inc. (See Note 11). Pursuant to the
terms of the settlement agreement the Company paid $100,000 for a complete and
unconditional release of all obligations owed to Vaxcel, Inc. In return the
Company agreed to pay a royalty of $200,000 in the event Company sales of
Zymunne-related products equal or exceed $3,000,000. As of September 30, 1998
the Company's total sales of Zymmune-related products from the inception of the
agreement, July 1995 to September 30, 1998 was approximately $100,000. The
Company does not anticipate reaching the $3,000,000 sales threshold in the
future. The Company had $1,500,000 recorded for obligations to Vaxcel, Inc. The
Company reported the extinguishment of its long-term debt obligation associated
with this agreement as a "Extraordinary Gain on Early Extinguishment of Debt" in
the amount of $350,000 and "Other Income" in the amount of $1,050,000.
7. LINE OF CREDIT:
Under the terms of the senior note payable to bank (Note 6), the Company
has a line of credit with an aggregate borrowing capacity of $1.0 million at
prime plus 1.5%. The agreement includes various restrictive covenants which,
among other things, require the Company to maintain certain minimum working
capital and net worth amounts. The line of credit facility has a maturity date
of November 16, 2000.
At December 31, 1997 and 1996, there were $500,000 of borrowings on the
line of credit facility. During April 1998, the Company repaid the line of
credit with the proceeds from the issuance of the April 1998 notes.
F-23
<PAGE> 110
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES:
The Company did not provide an income tax benefit for any of the periods
presented because it has experienced operating losses since inception.
At September 30, 1998 the Company had net operating loss carryforwards for
federal income tax purposes of approximately $49 million which expire through
2018. Utilization of net operating loss carryforwards will be subject to certain
limitations under Section 382 of the Internal Revenue Code.
The following is a reconciliation of the income tax benefit to the amount
based on the statutory Federal rate:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED NINE MONTHS
YEAR ENDED ENDED DECEMBER 31, ENDED
JUNE 30, DECEMBER 31, --------------- SEPTEMBER 30,
1995 1995 1996 1997 1998
---------- ------------ ----- ----- -------------
<S> <C> <C> <C> <C> <C>
Federal income tax benefit at
statutory rate............... (34)% (34)% (34)% (34)% (35)%
Change in valuation
allowance.................... 34 % 34 % 34 % 34 % 35 %
----- ----- ----- ----- -----
===== ===== ===== ===== =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are approximately as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1996 1997 1998
---------- ---------- -------------
<S> <C> <C> <C>
Deferred income tax assets:
Tax loss carryforwards............. $3,392,000 $5,930,000 $ 17,132,000
Tax credit carryforwards........... 96,000 96,000 96,000
Property, plant and equipment...... 171,000
Inventories........................ 548,000 140,000
Other.............................. 333,000 438,000 863,000
---------- ---------- -------------
3,992,000 7,012,000 18,231,000
Deferred income tax liabilities:
Other.............................. (65,000) (61,000) (75,000)
---------- ---------- -------------
3,927,000 6,951,000 18,156,000
Valuation allowance.................. (3,927,000) (6,951,000) (18,156,000)
---------- ---------- -------------
Net deferred taxes assets............ $ $ $
========== ========== =============
</TABLE>
A full valuation allowance has been recorded at December 31, 1997, 1996,
and September 30, 1998 based on management's determination that the recognition
criteria for realization has not been met.
9. COMMITMENTS AND CONTINGENCIES:
On November 30, 1998, a complaint was filed against the Company in the
Circuit Court of Cook County, Illinois, Law Division, by Vector Securities
International Inc. ("Vector"). In the complaint, Vector alleges a breach of
contract by the Company in connection with the Company's retention of Vector as
a financial advisor, and seeks damages of approximately $1.6 million plus
attorneys' fees. The Company believes it has defenses to the claims alleged in
the complaint as well as counterclaims against Vector, and is currently in the
process of preparing its answer to the complaint and its counterclaims.
Management is unable to fully assess the impact of the Vector complaint and
trademark opposition at this time. However, the Company has
F-24
<PAGE> 111
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
reserved approximately $1.6 million, the full amount of Vector's claim. The
Company does not believe the ultimate outcome of its trademark opposition will
have a material impact on the financial position, results of operations or cash
flows of the Company.
The Company recently received a request for payment of approximately
$990,000 due under a license agreement assumed by the Company in connection with
its purchase of certain assets from Zynaxis Inc. The Company is currently in the
process of reviewing the underlying contracts and correspondence regarding this
claim to determine its validity.
In addition, the Company is party to claims and litigation that arise in
the normal course of business. Management believes that the ultimate outcome of
these claims and litigation will not have a material impact on the financial
position or results of operations of the Company.
In the ordinary course of business, the Company is subject to extensive and
changing federal regulations within the United States and by other foreign
countries with regard to the manufacturing and marketing of products. To date
the Company has not identified any potential liabilities arising from the
manufacturing and marketing of its products.
The Company has operating leases for its facilities with remaining fixed
terms ranging up to six years. Rental expense was approximately $2,024,000,
$783,000, $1,466,000, $200,000, and $192,000 for the nine months ended September
30, 1998 and the years ended December 31, 1997 and 1996, the six months ended
December 31, 1995 and the twelve months ended June 30, 1995, respectively.
Future approximate minimum operating lease payments are as follows:
<TABLE>
<S> <C>
Year ending September 30:
1999................................................... $2,018,395
2000................................................... 1,880,257
2001................................................... 1,840,377
2002................................................... 1,890,459
2003................................................... 1,945,870
----------
Total minimum lease payments............................. $9,575,358
==========
</TABLE>
10. CAPITAL STOCK AND STOCKHOLDERS' DEFICIT:
Preferred stock
The Company is authorized to issue 5 million shares of $0.0001 par value
serial preferred stock. Each series of the preferred stock is a separate class
and, as a class, has a liquidation preference equal to the aggregate purchase
price paid for such class.
F-25
<PAGE> 112
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CAPITAL STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
The historical share information regarding the Company's preferred stock
activity follows:
<TABLE>
<CAPTION>
SERIES SERIES SERIES SERIES SERIES SERIES
A A-1 A-2 A-3 B-1 B-2
------- -------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1994
Issuance of preferred stock...................... 468,755
Dividend payments in kind........................ 26,431
------- -------- ------- ------- --- ---
BALANCES AT JUNE 30, 1995........................ 495,186
Issuance of preferred stock...................... 668,750
Dividend payments in kind........................ 20,000 13,261
------- -------- ------- ------- --- ---
BALANCES AT DECEMBER 31, 1995.................... 515,186 682,011
Dividend payments in kind........................ 42,470 56,224
------- -------- ------- ------- --- ---
BALANCES AT DECEMBER 31, 1996.................... 557,656 738,235
Issuance of preferred stock...................... 40,000
Conversion of Series A-1 into Series A-3......... (139,390) 139,390
Dividend payments in kind........................ 45,966 52,323 4,063 8,533
------- -------- ------- ------- --- ---
BALANCES AT DECEMBER 31, 1997.................... 603,622 651,168 44,063 147,923
Issuance of preferred stock...................... 100 120
Dividend payments in kind........................ 37,017 39,783 2,967 9,038
Redemption of preferred stock.................... (47,030)
------- -------- ------- ------- --- ---
BALANCES AT SEPTEMBER 30, 1998................... 640,639 690,951 -- 156,961 100 120
======= ======== ======= ======= === ===
</TABLE>
Series A, Series A-1, and Series A-3 redeemable and convertible preferred
stock
The Series A, Series A-1, and Series A-3 redeemable and convertible
preferred stocks were issued for net proceeds of $8.00 per share and are
convertible into common stock of the Company at a conversion ratio of 1.33
shares of common stock per one share of preferred stock, which is equivalent to
a conversion price of $6.00 per share. Holders of these preferred shares are
entitled to receive a cumulative 8% annual dividend. Dividends may be paid in
cash or in additional shares ("in kind") at the option of the Company until
January 1, 1999 after which time dividends are payable only in cash. The Company
is required to redeem all outstanding shares at $8.00 per share, plus accrued
dividends, on July 1, 2001 (Series A) and September 22, 2002 (Series A-1 and
Series A-3). Each preferred share has voting rights equivalent to two shares of
common stock except for the Series A-3 which does not have voting rights unless
converted to common stock. The stockholders have a liquidation preference of
$8.00 per share upon the dissolution of the Company. The Company covenants that
it will not amend the articles of incorporation, recapitalize, pay or declare
dividends on junior stock, merge or consolidate, liquidate, dissolve or change
the principal business of the Company as long as 25% of the authorized shares
are outstanding of each series of preferred stock, unless 51% or more of the
preferred stockholders approve the change.
The Series A, Series A-1 and Series A-3 preferred stock is mandatorily
convertible into common stock at a ratio of 1.33 shares of common stock per one
share of preferred stock upon the closing of an underwritten public offering
pursuant to an effective registration statement on Form S-1 for the sale of
common stock at a per share price of at least $6.00 per share with aggregate
proceeds of at least $10,000,000, so long as the offering occurs no later than
September 19, 1998. On January 26, 1999 the Company amended the Series A, Series
A-1, and Series A-3 stockholder agreements to extend the aforementioned date to
June 30, 1999.
F-26
<PAGE> 113
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CAPITAL STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
Series A-2 preferred stock
The Series A-2 preferred stock was non-convertible, non-voting and were
issued in conjunction with the exchange of $2,267,260 of subordinated debt and
accrued interest in addition to the receipt of $1,732,740 in cash, resulting in
net proceeds of $100 per share. Holders of these preferred shares were entitled
to receive a cumulative 13.5% dividend in cash or in kind, at the option of the
Company, until February 28, 2007 at which time the dividend rate would have
increased to 19% and payable only in cash. The Company had the option to redeem
these shares at any time prior to February 28, 2000 for $100 per share. The
stockholders also had the right to elect directors and exchange their shares for
notes if dividend payments were in arrears for a specified period of time. The
stockholders had a liquidation preference of $100 per share upon the dissolution
of the Company.
On August 25, 1998 all outstanding shares of Series A-2 Preferred Stock
were redeemed in conjunction with the refinancing of the Company's long-term
debt.
Series B-1 and B-2 preferred stock
The Series B-1 and B-2 redeemable and convertible preferred stock were
issued in conjunction with the merger with Holdings to replace that company's
outstanding shares of Holdings Series A and Series B preferred stock with rights
and preferences identical to the original issues. The stockholders have a
liquidation preference of $45,000 and $50,000 per share, respectively, upon
dissolution of the Company. Holders of these preferred shares are entitled to
receive a cumulative 7% per annum dividend based on the liquidation preference
amount per share. Holders of these preferred shares are entitled to receive
annual dividends in cash, commencing on April 24, 1998 and June 16, 1998,
respectively, and continuing, thereafter, on each subsequent anniversary date.
Each preferred share has voting rights equivalent to 6,072.21 shares of common
stock. The Company covenants that it will not amend certain portions of it's
articles of incorporation, dissolve, merge or consolidate the Company, unless
51% or more of the Series B-1 preferred stockholders and 51% of the Series B-2
preferred stockholders approve the change.
On the fifth anniversary of the Series B-1 and B-2 assumed initial issue
date, the Company shall redeem all of the then outstanding shares at the Series
B-1 and B-2 liquidation preference amount. Each share of Series B-1 and B-2
preferred stock may be converted into common stock, at any time prior to the
respective redemption dates, at the option of the stockholder or will
automatically convert to common stock immediately prior to the first registered,
underwritten public offering of shares of common stock by the Company. Theses
preferred shares are convertible into 6,072.21 shares of common stock per one
share of Series B-1 preferred stock or Series B-2 preferred stock.
Common stock
The Company is authorized to issue 25,000,000 shares of $0.0001 par value
voting common stock. On January 26, 1999, the Board of Directors increased the
authorized shares of common stock to 50,000,000 shares. All references in the
consolidated financial statements and related notes thereto reflect this revised
amount. Upon liquidation or dissolution, holders of common stock will be paid
only after preferred stock preferences have been satisfied.
On December 31, 1997, all outstanding shares of common stock were split two
for one.
In November 1997, the Company issued 805,979 shares of common stock for
proceeds of $5,687,124, net of issuance costs of approximately $561,077 and
other noncash transactions of $73,800. In conjunction with this transaction,
24,497 warrants to purchase common shares for $6.00 per share were exercised for
proceeds of $146,980.
F-27
<PAGE> 114
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CAPITAL STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
In January 1998, the Company issued 3,652,436 shares of common stock in
connection with the acquisition of Holdings. The Company also assumed the
outstanding stock options granted to Holdings employees equivalent to 1,560,554
shares of Intracel common stock (Note 11).
On December 28, 1998, the Company's Board of Directors approved a
two-for-three reverse stock split of the Company's common stock. The reverse
stock split became effective on February 8, 1999 when an Amended and Restated
Certificate of Incorporation was filed with the Secretary of State of Delaware.
All references in the consolidated financial statements and related notes
thereto referring to shares, share prices, per share amounts and other share
information have been retroactively adjusted for the reverse stock split.
Initial Public Offering
In March 1998, the Company's Board of Directors authorized the Company to
file a Registration Statement with the Securities and Exchange Commission to
permit the Company to proceed with an initial public offering of its common
stock.
Stock options
The Company's 1989 Amended Stock Option Plan (the "Plan") which covers the
Intracel/Bartels employees, provides for the issuance of incentive and
nonqualified stock options to employees, directors, and consultants. There are
1,110,172 shares of common stock reserved under the Plan. The Company's Board of
Directors establishes the option price per share, vesting period, and option
term at the date of grant. Generally, options are granted by the Company's Board
of Directors at an exercise price of not less than the fair market value of the
Company's common stock at the date of grant. For stockholders possessing at
least a 10% ownership interest, the option price shall not be less than 110% of
the fair market value at the date of grant. The vesting period of options
generally ranges from immediately to ratably over four years. Option terms
generally are five or ten years.
The Company also has a 1996 Stock Option Plan, which covers the PerImmune
employees, provides for the issuance of incentive and nonqualified stock options
to employees, directors, and consultants. The Company's Board of Directors
establishes the option price per share, vesting period, and option term at the
date of grant. The vesting period of options generally ranges from one to three
years. Option terms generally are 10 years.
The Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25 (APB No. 25), "Accounting for Stock Issued to Employees," and
related interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair value of the Company's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
Under APB No. 25, because the exercise price of the Company's stock options
generally equals the fair value, as determined by the Board of Directors, of the
underlying stock on the date of grant, no compensation expense is recognized in
the Company's consolidated financial statements.
F-28
<PAGE> 115
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CAPITAL STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
Information regarding activities in the option plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- --------
<S> <C> <C>
Options outstanding, July 1, 1994........................... 335,356 $3.00
----------
Options outstanding, June 30, 1995.......................... 335,356 3.00
----------
Options outstanding, December 31, 1995...................... 335,356 3.00
Options granted........................................... 218,667 4.04
Options canceled.......................................... (6,667) 3.75
----------
Options outstanding, December 31, 1996...................... 547,356 3.41
Options granted........................................... 86,667 6.75
Options expired........................................... (54,667) 3.75
----------
Options outstanding, December 31, 1997...................... 579,356 3.87
Options assumed in merger with Holdings, Inc.............. 1,560,554 0.50
Options granted........................................... 316,664 12.27
Options canceled.......................................... (926,102) 1.75
Options exercised......................................... (162,205) 2.82
----------
Options outstanding, September 30, 1998..................... 1,368,267 $3.66
==========
</TABLE>
At December 31, 1996, 1997 and September 30, 1998 the Company granted stock
options in excess of the authorized Plan amount by 82,838, 114,838 and 240,163
shares, respectively. The Company intends to submit for shareholder approval an
amendment to its stock option plan to increase the number of options authorized
for issuance.
The following table summarizes information about options outstanding at
September 30, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
RANGE OF NUMBER EXERCISE CONTRACTUAL NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING PRICE LIFE EXERCISABLE PRICE
- ---------------------------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ .45...................... 751,434 .45 4 years 531,319 .45
$ 1.50 - $ 2.25............. 72,555 1.56 0 72,555 1.56
$ 2.26 - $ 3.39............. 78,933 2.54 0 78,934 2.54
$ 3.40 - $ 5.10............. 96,534 3.75 2.83 years 88,533 3.75
$ 5.11 - $ 7.65............. 115,477 6.65 4.29 years 42,700 6.63
$11.25 - $15................ 253,334 12.75 5.57 years 75,834 12.51
--------- ----- ---------- -------- -----
1,368,267 3.66 3.79 years 889,875 2.38
</TABLE>
Pro forma information regarding net income (loss) is required by SFAS No.
123, and has been determined as if the Company had accounted for its employee
stock options granted after January 1, 1996 under the fair value method of that
statement. The fair values of options granted in 1998, 1997 and 1996 (no options
were granted during the six months ended December 31, 1995 or the year ended
June 30, 1995) were
F-29
<PAGE> 116
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CAPITAL STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
estimated at the date of grant using the minimum value method and the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- ------------
<S> <C> <C> <C>
Risk free interest rate.................... 6.41% 6.28% 6.5%
Expected holding period.................... 4 years 6 years 6 years
Dividend yield............................. 0.0% 0.0% 0.0%
</TABLE>
The minimum value method was developed for use in estimating the fair value
of options granted by nonpublic entities and, accordingly, excludes
consideration of volatility. In addition, option valuation models require the
input of highly subjective assumptions. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the minimum value
method does not necessarily provide a reliable single measure of the fair value
of its stock options.
The weighted average fair values per share at the date of grant for options
granted were as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER
-------------- 30,
1996 1997 1998
----- ----- ------------
<S> <C> <C> <C>
Options granted whose exercise price was equal
to the fair value of the stock on the date of
grant........................................ $1.13 $2.09 $2.46
===== ===== =====
</TABLE>
The following table presents net loss and per share amounts as if the
Company accounted for compensation expense related to stock options under the
fair value method prescribed by SFAS No. 123:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
NINE MONTHS ENDED
1996 1997 SEPTEMBER 30, 1998
PRO FORMA PRO FORMA PRO FORMA
----------- ----------- ------------------
<S> <C> <C> <C>
Net loss -- as reported......... $(4,389,973) $(8,063,633) $(53,762,042)
Net loss -- pro forma........... (4,420,723) (8,105,094) (53,933,264
Loss per share -- as reported... (1.99) (3.43) (7.64)
Loss per share -- pro forma..... (2.00) (3.45) (7.67)
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period.
At September 30, 1998, the following warrants to purchase common stock were
outstanding:
<TABLE>
<CAPTION>
PRICE PER
SHARE,
NUMBER OF SUBJECT TO
SHARES ADJUSTMENT EXPIRATION DATE
- --------- ---------- ------------------
<C> <C> <S>
44,835 $ 6.00 July 22, 1999
115,283 6.00 September 22, 2000
121,570 6.75 November 16, 2002
125,347 10.50 December 28, 2000
212,098 10.50 April 1, 2003
- ---------
452,896 6.75 January 2, 2003
65,422 11.46 August 25, 2003
1,083,339 15.00 August 25, 2003
- ---------
2,220,790
=========
</TABLE>
F-30
<PAGE> 117
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CAPITAL STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
The outstanding warrants carry registration rights, certain anti-dilutive
rights, and certain adjustments to the number of shares obtainable under the
warrants, as provided in the warrant agreements. The expiration dates of the
warrants may accelerate under certain circumstances, including the closing of an
initial public offering of common stock at a minimum purchase price per share of
$8 to $9 and minimum aggregate proceeds of $10,000,000.
On January 2, 1998, the Company issued Warrants to purchase 452,896 shares
of common stock in connection with an employment agreement between Simon R.
McKenzie, the Company's Chief Executive Officer, and the Company. The Warrants
carry an exercise price of $6.75 per share and expire 5 years from the date of
issue. On April 1, 1998, the Company issued Warrants to purchase 65,422 shares
of common stock in connection with a Note and Warrant Purchase Agreement at an
exercise price of $11.46 per share.
On August 25, 1998, the Company issued Warrants to purchase 1,083,339
shares of Common Stock in connection with a note and Warrant Purchase Agreement
at an exercise price per share of $15.00.
11. ACQUISITIONS:
In April 1996, the Company entered into an agreement with Bartels
Prognostics acquiring certain manufacturing equipment for $360,000. The
agreement also granted the Company exclusive manufacturing and marketing rights
subject to the full payment of $1,000,000 for 644,696 shares, or 23.443%, of
common stock of Bartels Prognostics. The Company accrued $375,000 and paid
$250,000 in 1996 and made the residual payments of $750,000 in 1997, comprising
the total consideration of $1,000,000. Additionally, the Company made advances
to Bartels Prognostics of $45,299 and $98,198 during 1997 and 1996,
respectively. At December 31, 1997 and 1996, advances to Bartels Prognostics are
included in other current assets and the investment in Bartels Prognostics is
included in other assets. The agreement allows for further discussion regarding
the potential future merger of the two entities.
In November 1995, the Company purchased certain assets and assumed certain
liabilities of Bartels, a biotechnology company in the business of developing,
manufacturing, selling, and distributing reagents and cell culture media from
Dade International for an aggregate purchase price of approximately $17,667,000.
The acquisition was financed primarily via a $9,000,000 term loan and a
$1,000,000 revolving credit note from a commercial bank, and a $4,667,000 note
payable to the seller (the note payable to the seller was paid in December 1995
primarily from the proceeds of the December 1995 Subordinated Secured Promissory
Note). The purchase price was allocated to the assets acquired based upon fair
market values. The excess of the purchase price over the fair market value of
the assets acquired in the amount of $13,622,586, has been allocated to cost in
excess of net assets acquired and is being amortized over 15 years. Acquired
in-process research and development approximating $1,300,000 was expensed in
1995 as the technological feasibility of the acquired technology had not been
established and the technology had no future alternative use as of the date of
acquisition. This acquisition was accounted for as a purchase and, accordingly,
the results of operations of the acquired business is included in the
accompanying consolidated statement of operations from the date of acquisition.
In September 1995, the Company purchased certain assets of Zymmune
Diagnostic Systems from Zynaxis, Inc., a developer of drug delivery systems, for
an aggregate purchase price of approximately $2,019,000. The financing consisted
of a note payable to Zynaxis and a series of contingent payments. The contingent
payment liability of $1,050,000 was recorded as a long-term liability due to the
Company's view that the milestones underlying the payments are probable of being
achieved. The note payable and the contingent payments to Zynaxis resulted in a
noncash transaction for the purchase of the assets in the amount of
approximately $1,500,000. Assets purchased included technology, patents,
equipment, and inventory. The purchase price was allocated to the assets
acquired based upon their fair market values. Acquired in-process research and
development approximating $800,000 was expensed in 1995 as the technological
feasibility of the acquired technology had not been established and the
technology had no future alternative use as of the date
F-31
<PAGE> 118
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ACQUISITIONS: (CONTINUED)
of the acquisition. Although the manufacturing milestone was achieved during
fiscal year 1996, the Company has alleged a number of breaches of the agreement
by Zynaxis and has accordingly withheld all payments pending resolution of the
dispute. In August 1998 the Company settled with the assignee of this agreement
(Vaxcel, Inc.) for an amount substantially less than the value of the note and
contingent payments.
On January 2, 1998, the Company acquired in a tax-free merger all the
capital stock of PerImmune Holdings ("Holdings") which conducts operations
through PerImmune, Inc., its wholly owned subsidiary ("PerImmune"). As a result
of this transaction, Holdings and PerImmune have become subsidiaries of the
Company. In anticipation of this acquisition, the Company placed $2,000,000 of
cash in a restricted escrow account on December 31, 1997 to satisfy requirements
of the holder of the senior note payable. At December 31, 1997, the Company has
deferred certain acquisition costs related to this transaction, including legal,
accounting and other fees. PerImmune is a research oriented healthcare company
that applies biotechnology and other life sciences technologies to develop and
provide products and services. PerImmune's focus is on the development of human
monoclonal antibodies for cancer and infectious disease applications, as well as
cancer vaccines, specific and nonspecific immunotherapy and cardiovascular
disease test products. The aggregate purchase price was approximately
$59,471,000, payable in 3,652,436 shares of Intracel common stock, 1,560,554
options to purchase Intracel common stock, 220 shares of Intracel Series B-1 and
B-2 preferred stock, the assumption of obligations of approximately $11,532,000
and the assumption of other certain liabilities. The acquisition has been
accounted for using the purchase method of accounting and the September 30, 1998
financial statements reflect valuation of all assets, including identifiable
intangibles, at their estimated fair market values. Perimmune's operating
results are included in Intracel's consolidated operating results from the date
of acquisition. The Company recognized a one time expense of $37,718,000 in the
first quarter of 1998 related to acquired in process research and development as
the technological feasibility of the acquired technology had not been
established and the technology had no future alternative use as of the date of
acquisition. A description of the acquired technology by project is as follows:
(1) HumaSPECT CR -- A product for detecting colorectal cancer
metastasis by radioimmunoscintigraphy. At the merger date of January 2,
1998, this product was in the registration process in Europe and in the
United States after having completed Phase III clinical trials.
(2) HumaSPECT BR -- A product for detecting breast cancer metastasis
by radioimmunoscintigraphy. At the merger date, this product had completed
Phase II clinical trials.
(3) HumaSPECT OV -- A product for detecting ovarian cancer metastasis
by radioimmunoscintigraphy. At the merger date, this product was in Phase I
clinical trials.
(4) HumaSPECT ID -- A product for detecting infectious disease
(bacteria). At the merger date, this product was in Phase I clinical
trials.
(5) Oncology Management ASI; OncoVAX(CL) -- A product designed to
prevent tumor recurrence in colon cancer patients. At the date of merger,
this product had completed Phase II and two Phase III clinical trials.
Although the clinical data in the definitive Phase III trial was not
complete, there was evidence that the trial would be successful upon
completion.
OncoVAX(BCL) -- A product designed to prevent tumor recurrence in
B-cell lymphoma patients.
(6) Generic Vaccine -- A product designed to employ the HumaSPECT
human monoclonal antibodies to detect and isolate from tumor cells those
functional antigens that can be used for protective immunity. At the date
of merger, this product was in basic research.
(7) KLH Therapeutic -- The Keyhole Limpet is a marine animal that
exists in the ocean range from Monterey, California to Mexico. PerImmune's
proprietary technology is the purification of a
F-32
<PAGE> 119
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ACQUISITIONS: (CONTINUED)
particularly active component of KLH isolated from the blood of these
animals. This component has proven safety and efficacy in treating bladder
cancer and might apply to other cancers. It is also used in the vaccine for
B-cell lymphoma.
The following table sets forth the fair value assigned to each project.
<TABLE>
<S> <C>
HumaSPECT CR................................................ $10,153
HumaSPECT BR................................................ 3,924
HumaSPECT OV................................................ 1,372
HumaSPECT ID................................................ 1,038
Oncology Management ASI..................................... 21,141
Generic Vaccine............................................. --
KLH Therapeutic............................................. 90
-------
$37,718
</TABLE>
The remainder of the total purchase price was allocated as follows:
<TABLE>
<CAPTION>
PURCHASE AMORTIZATION
PRICE PERIOD
ALLOCATION (YEARS)
---------- ------------
<S> <C> <C>
Working capital (deficit) acquired.......................... $ (145)
Other long-term assets...................................... 3,968
Workforce in progress....................................... 144 3
Product technology.......................................... 6,861 10
Patents..................................................... 8,608 10
Cost in excess of net assets acquired....................... 2,317 10
</TABLE>
In connection with the acquisition of Holdings, the Company assumed the
ownership rights of certain patents and other technology rights developed under
the research and development contracts with OTC. Under the terms of the
ownership rights, the Company is required to make certain milestone payments of
up to $10 million if specific future conditions are met, and will make payments
of between 5.0% and 7.5% of net product sales and 50% of license revenue. The
milestone and royalty payments will continue until the expiration or termination
of the related patents covering the products defined in the agreement. As of the
date of acquisition $500,000 of milestone payments were included in accrued
liabilities for amounts payable to OTC. On August 25, 1998 the liability was
satisfied in its entirety through cash payment to OTC. No royalty payments have
been accrued or are due to OTC.
Also in conjunction with the acquisition, the Company assumed the following
contractual rights and obligations from Holdings:
Agreement with Baxter
On January 1, 1996, PerImmune entered into a research collaboration and
license agreement with Baxter Healthcare Corporation (Baxter) whereby PerImmune
agreed to provide certain research, development and pilot manufacturing services
for Baxter in exchange for reimbursement of research and development costs,
milestone payments and certain royalty payments. PerImmune received a
non-refundable milestone payment of $1,500,000 in January 1996 and is reimbursed
for actual costs incurred plus a fee of 16% during the term of the agreement.
Baxter is also obligated to make up to $3,000,000 in additional milestone
payments, if PerImmune achieves certain stages of U.S. and European regulatory
approvals for the serotherapy products for infectious and autoimmune diseases
under development. In addition, PerImmune earns a royalty ranging between 4% and
8% of gross profit with a minimum royalty ranging between 2% and 4% of net
sales, as defined in the agreement on sales of products depending on whether the
product is a result of previously existing technology of PerImmune or new
technology resulting from this development agreement. As of September 30, 1998,
no royalty or additional milestone payments have been earned. The agreement has
a term of three years
F-33
<PAGE> 120
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ACQUISITIONS: (CONTINUED)
with an option for a fourth year. Either party may terminate this agreement at
any time without cause. All patents and technology developed under this
agreement are the property of Baxter.
Agreement with Arch Development Corporation
PerImmune has a license agreement with the Arch Development Corporation
(Arch) to make and sell products under the patent rights for Apotek Lp(a)
developed at the University of Chicago. The agreement requires PerImmune to pay
Arch a royalty of 4% of related product sales. As of September 30, 1998,
PerImmune paid $22,400 of royalty expense under this agreement.
Distribution Agreement with Syncor International Corporation
On April 1, 1997, PerImmune entered into an exclusive distribution
agreement with Syncor International Corporation (Syncor) for the HumaSPECT and
antibody conjugated radiotherapeutic products. Under this agreement, Sycor
accepts title of the product upon receipt and pays PerImmune a specific purchase
price defined by the agreement. Additionally, Syncor will pay PerImmune a
royalty of 50% of its net sales of PerImmune's products less the specific
purchased price, as defined, and right of return exists if the product received
by Syncor has less than one year until its expiration. To date, PerImmune has
not earned any royalties under this agreement. PerImmune is obligated to spend
15% of annual sales of products covered by this agreement on research and
development to improve upon existing products or develop new products. PerImmune
is required to reimburse Syncor for all expenses related to marketing these
products up to $1,500,000, plus 50% of amounts over $1,500,000, provided the
expenditures are in accordance with the annual market plan as prepared and
agreed by the two companies. For the nine month period ended September 30, 1998,
PerImmune has reimbursed Syncor for marketing expenses of $138,000. This
agreement has a term of five years and is renewable for two additional two-year
terms.
Agreements with Mentor Corporation
On June 16, 1997, the PerImmune entered into an exclusive distribution
agreement with Mentor Corporation (Mentor) for the AuraTek -- FDP bladder cancer
diagnostic product, which PerImmune refers to as Accu-D(X), with an initial term
of five years and is automatically renewable for one year terms thereafter until
either party terminates the agreement with 180 days written notice. Under this
agreement, Mentor accepts title of the product shipments upon receipt and pays
PerImmune a specific purchase price defined by the agreement. Additionally,
Mentor will pay PerImmune a royalty of 50% of its net sales of PerImmune's
product, less the specific purchase price as defined in the agreement. PerImmune
is obligated to provide up to 12,000 units of the product per year to be used by
Mentor for promotional purposes, at no cost to Mentor.
On December 22, 1997, PerImmune entered into a research, collaboration and
distribution agreement with Mentor whereby PerImmune agreed to provide certain
research, development and pilot programs for Mentor in exchange for research and
development fees in an aggregate amount of $3,000,000 based on a milestone
payment schedule. As of December 31, 1997, PerImmune had not earned any
milestone payments. PerImmune will receive $1,000,000 within five days of
submission of written notice of the completion of each milestone to Mentor.
PerImmune is required to pay the cost in excess of $3,000,000 for expenditures
within the scope of the project development schedule. PerImmune is the owner of
all rights to proprietary technical information and the U.S. Patent to which
Mentor was granted exclusive world-wide rights to market, sell and distribute
the program product. This agreement is effective for a ten-year period following
the first approval of commercialized use of products under development. Mentor
has the right to terminate this agreement at the expiration of five years from
the date of the first approval of commercialized use of the product based upon
180 days written notice to PerImmune. As of September 30, 1998, the Company has
received to date milestone payments from Mentor in the amount of $1,000,000.
F-34
<PAGE> 121
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ACQUISITIONS: (CONTINUED)
Sigma Agreement
On June 30, 1997, PerImmune entered into a product development and license
agreement with Sigma Diagnostics, Inc. (Sigma) for a diagnostic product, whereby
PerImmune agreed to provide product development and licensing services for Sigma
in exchange for a product development fee and royalty payment. PerImmune is
entitled to receive an aggregate amount of $348,000 based on a milestone payment
schedule that requires a payment of $87,000 upon completion of each respective
milestone of which $87,000 was earned in 1997. During 1998, the Company received
an additional $87,000. In addition, PerImmune will receive an annual royalty
payment ranging between 3.5% and 7% of the net selling price of the licensed
product depending on whether there are any additional competitors for this
product in the marketplace. PerImmune has sole and exclusive ownership of the
licensed patents, while Sigma has the exclusive world-wide right to use and
sublicense the project program information. This agreement has a term of five
years and is automatically renewable for a one-year term thereafter until Sigma
terminates the agreement.
Manufacturing/Distribution Agreement with OTC
On August 1, 1997, PerImmune entered into an exclusive
manufacturing/distribution agreement with OTC for the FDP Dipstick product,
which PerImmune refers to as Accu-Dx. Under the agreement, PerImmune paid OTC
$250,000 in exchange for the exclusive right to purchase, at a defined price,
such OTC product for package and resale under trademarks or tradenames
designated by PerImmune. PerImmune is obligated to purchase at least 100,000
units of the product annually at $4.00 per unit, starting on August 1, 1998.
This agreement has an initial term of three years and is automatically renewed
in two-year terms until written notice of termination from either PerImmune or
OTC.
Other Contracts and Agreements
PerImmune has entered into various other licensing and research and
development agreements whereby it is committed to participate in research and
development projects, either on a best efforts basis or upon attainment of
certain performance milestones, as defined, or both, for various periods unless
canceled by the respective parties. Such future amounts to be paid to PerImmune
will primarily be determined on a cost-plus basis, and are subject to specific
performance criteria.
The following unaudited pro forma information has been prepared assuming
Holdings had been acquired as of the beginning of the periods presented. The pro
forma information is presented for information purposes only and is not
necessarily indicative of what would have occurred if the acquisition had been
made as of those dates. In addition, the pro forma information is not intended
to be a projection of future results.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
PRO FORMA INFORMATION DECEMBER 31, -------------------
(IN THOUSANDS, EXCEPT PER SHARE) 1997 1997 1998
-------------------------------- ------------ ------- --------
(ACTUAL)
<S> <C> <C> <C>
Revenue.................................... $21,341 $16,521 $14,244
Net loss................................... 58,287 50,480 53,762
Loss per common share basic and diluted.... 9.35 8.22 7.64
</TABLE>
12. JOINT VENTURE:
During 1995, the Company made a 45% investment in the German American
Institute for AIDS Research (GAIFAR), a German limited liability Company. The
purpose of the entity was to develop and distribute the Company's products
within the Eastern European market. The investment is accounted for under the
equity method. Also during 1995, GAIFAR obtained a 1,000,000 Deustche mark (DM)
unsecured loan through the German government. During 1996, the Company made an
additional contribution of capital
F-35
<PAGE> 122
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. JOINT VENTURE: (CONTINUED)
approximating $283,000 in accordance with the loan agreement with the German
government. No further capital contributions were required based on the terms of
the financing. As of December 31, 1996, the Company had written off the entire
investment in the joint venture because the amount was deemed not to be
recoverable, which resulted in a charge to operations of $339,408.
In July of 1997, the Company entered into a termination and sale agreement
which resulted in the transfer of all joint venture shares back to GAIFAR on May
14, 1998, releasing the Company from its guarantee of the 1,000,000 DM loan. In
September and October, 1998 the Company received approximately $225,000 and
$90,500, respectively, which the Company considers a recovery of an investment
that was previously written off. These amounts are considered as settlement in
full for the transfer of all joint venture shares.
13. EMPLOYEE RETIREMENT BENEFIT PLANS:
Retirement Savings Plan
The Company maintains two separate retirement savings plans. The first is a
401(k) savings plan covering the Intracel and Bartels employees. Eligible
employees may contribute amounts through payroll deductions. The Company matches
employees' contributions at the discretion of the Company's Board of Directors.
The Company did not match employee contributions to the 401(k) savings plan in
the 1997, 1996 and 1995 periods. The Company does not provide other
post-retirement benefits.
The second is a defined-contribution savings plan under Section 401(k) of
the Internal Revenue Code covering substantially all former PerImmune full-time
employees. Participating employees may defer a portion of their pretax earnings
up to the Internal Revenue Service annual contribution limit. The Company
matches employee contributions according to a specified formula. The Company's
matching contributions totalled $134,455, $176,098 and $72,779 for the periods
ended September 30, 1998, December 31, 1997 and period from August 3, 1996
through December 31, 1996, respectively.
Pension Plan
In connection with the Company's merger with Holdings, the Company assumed
Holdings' employee pension plan. The Company froze the benefits under the Plan
in February 1998, and determined that the remaining Plan assets and recorded
pension liability exceeded the obligation relating to the participants. As a
result of the curtailment of the plan benefits, the Company recorded a gain in
the quarter ended March 31, 1998 of $800,000 and reduced the related pension
liability in accordance with Statement of Financial Accounting Standards No. 88,
"Employers Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans."
F-36
<PAGE> 123
INTRACEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE RETIREMENT BENEFIT PLANS: (CONTINUED)
The following table sets forth the funded status of the plan at September
30, 1998 and the composition of net periodic pension cost and significant
assumptions for the nine month period then ended.
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
approximately $1,488,170.................................. $ 1,759,951
Plan assets at fair value................................... 1,605,615
------------
Excess of projected benefit obligation over plan assets..... (154,336)
Unrecognized net investment loss............................ 80,184
------------
Total pension liability accrued................... $ (74,152)
============
Net periodic pension cost includes the following components:
Service cost -- benefits earned during the period......... $ 54,464
Interest cost on projected benefit obligation............. 118,929
Actual return on assets................................... (136,472)
------------
Net periodic pension cost......................... $ 36,921
============
Significant assumptions used were as follows:
Discount rate............................................. 6.75%
Rate of increase in compensation levels (graded by age of
participant)........................................... 4.0 to 10.5%
Expected rate of return of assets......................... 9.5%
============
</TABLE>
14. SUBSEQUENT EVENTS:
The Company has entered into a letter of intent with two accredited
investors who currently hold various securities issued by the Company, pursuant
to which the Company has agreed to sell $2 million aggregate principal amount of
the Company's non-convertible debt securities. The proceeds from the issuance
and sale of this non-convertible debt will be used for working capital and other
general corporate purposes.
15. RESTATEMENT:
The Company's financial statements as of and for the years ended December
31, 1996 and 1997, have been restated for the following:
Long-term debt
Certain of the Company's debt with a bank, with a stated interest rate of
12%, increased to 13% in June 1998, contained a "make-whole" provision which
guaranteed the note holder a 20% return through any combination of interest
payments or payments-in-kind or stock warrant appreciation (See Note 6).
Previously the Company had not recognized any interest in addition to the stated
interest for 1997 and excluded an immaterial portion of the interest in 1996.
Accordingly, the 1997 and 1996 financial statements have been restated to
recognize additional interest expense of $417,000 and $56,000, respectively,
which results in a total interest rate of 20% for each year. Such restatements
increased previously reported loss before extraordinary item and net loss by
like amounts, and increased basic and diluted loss before extraordinary item and
net loss per share amounts by $.15 and $.02 in 1997 and 1996, respectively.
Inventory
At December 31, 1997 the Company directly charged $1.1 million to cost of
revenue-product for the estimated amount of obsolete inventory. Subsequently,
the Company has become aware of a December 31, 1996 inventory adjustment in the
amount of $832,000 to reduce inventory that was inadvertently not reflected in
the Company's December 31, 1996 audited financial statements. Accordingly, the
1996 financial statements have been restated to reduce inventory in 1996 with a
charge to cost of revenue-product. As a result of this restatement, the 1997
financial statements were also restated to reduce by $832,000 the $1.1 million
charge to cost of revenue-product. Such restatements increased loss before
extraordinary item and net loss in 1996 by $832,000 and decreased the 1997
amounts by a like amount. Basic and diluted loss before extraordinary item and
net loss per share amounts for 1996 and 1997 were increased and decreased by
$.32 and $.31, respectively.
F-37
<PAGE> 124
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Perimmune Holdings, Inc. and Subsidiary
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
Perimmune Holdings, Inc. and Subsidiary (the "Company") at December 31, 1997,
and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of the 1997 financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
McLean, Virginia
April 2, 1998, except for the
second paragraph of Note 14
as to which the date is June 8, 1998.
F-38
<PAGE> 125
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,504,064 $ 2,423,910
Accounts receivable, net.................................. 646,524 1,260,719
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 159,561 749,039
Inventories............................................... 362,840 375,488
Prepaid expenses.......................................... 415,928 293,699
------------ -----------
Total current assets.............................. 4,088,917 5,102,855
Property and equipment, net................................. 2,040,698 7,283,715
Restricted cash............................................. 433,000
Cost in excess of assets acquired, including acquisition
costs, net of accumulated amortization of $383,000 in 1997
and $113,000 in 1996...................................... 1,467,500 1,237,500
------------ -----------
Total assets...................................... $ 8,030,115 $13,624,070
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of notes payable.......................... $ 10,220,505 $ 5,600,000
Current portion of capitalized lease obligations.......... 44,896
Accounts payable.......................................... 616,140 1,950,427
Accrued liabilities....................................... 2,078,283 1,387,334
------------ -----------
Total current liabilities......................... 12,959,824 8,937,761
Capitalized lease obligations, less current portion......... 127,342
Pension liability........................................... 1,183,902 935,879
Notes payable, less current portion......................... 9,234,935
------------ -----------
Total liabilities................................. 14,271,068 19,108,575
------------ -----------
Commitments and contingencies
Series A redeemable and convertible preferred stock -- $0.01
par value; 1,000 shares authorized; 100 shares issued and
outstanding at December 31, 1997 (aggregate liquidation
preference of $4,500,000)................................. 4,280,165
Series B redeemable and convertible preferred stock -- $0.01
par value; 1,000 shares authorized; 120 shares issued and
outstanding at December 31, 1997 (aggregate liquidation
preference of $6,000,000)................................. 5,505,952
------------ -----------
9,786,117
------------ -----------
Stockholders' equity (deficit):
Common stock -- $0.01 par value; 3,000 and 1,000 shares
authorized, respectively; 601.5 and 593.5 shares issued
and outstanding at December 31, 1997 and 1996,
respectively........................................... 6 6
Additional paid-in capital............................. 282,668
Accumulated deficit.................................... (16,309,744) (5,484,511)
------------ -----------
Total stockholders' equity (deficit).............. (16,027,070) (5,484,505)
------------ -----------
Total liabilities and stockholders' equity
(deficit)....................................... $ 8,030,115 $13,624,070
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-39
<PAGE> 126
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM
AUGUST 3, 1996 THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 3, 1996
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------------
<S> <C> <C>
REVENUE:
Contract research and development revenue:
Government............................................. $ 1,869,301 $ 2,750,942
Commercial............................................. 3,909,239 1,105,515
Product sales............................................. 2,110,695 594,157
------------ -----------
Total revenue..................................... 7,889,235 4,450,614
------------ -----------
COST OF CONTRACTS AND SALES:
Contract research and development costs:
Government............................................. 1,584,922 1,968,098
Commercial............................................. 3,431,181 885,942
Cost of products sold..................................... 1,600,054 324,886
------------ -----------
Total costs of contracts and sales................ 6,616,157 3,178,926
------------ -----------
GROSS PROFIT................................................ 1,273,078 1,271,688
------------ -----------
OPERATING EXPENSES:
Research and development.................................. 8,077,491 4,683,020
General and administrative................................ 1,685,880 708,247
Marketing................................................. 554,720
Other..................................................... 607,521 10,151
------------ -----------
Total operating expenses.......................... 10,925,612 5,401,418
------------ -----------
LOSS FROM OPERATIONS........................................ (9,652,534) (4,129,730)
Other income (expense):
Interest income........................................... 200,958
Interest expense.......................................... (1,038,467) (445,590)
Loss on sale-leaseback transaction........................ (335,190)
------------ -----------
LOSS BEFORE INCOME TAXES.................................... (10,825,233) (4,575,320)
Income taxes................................................
------------ -----------
NET LOSS.................................................... (10,825,233) (4,575,320)
Preferred stock accretion................................... 32,332
------------ -----------
Net loss applicable to common stockholders.................. $(10,857,565) $(4,575,320)
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-40
<PAGE> 127
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM
AUGUST 3, 1996 THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock................. 585 $6 $ 5,844 $ 5,850
Acquisition costs paid through issuance
of common stock........................ 9 100,000 100,000
Consideration paid in excess of net
assets acquired........................ (105,844) $ (909,191) (1,015,035)
Net loss for the period from August 3,
1996 through December 31, 1996......... (4,575,320) (4,575,320)
--- -- --------- ------------ ------------
Balance at December 31, 1996............. 594 6 (5,484,511) (5,484,505)
Issuance of common stock on December 12,
1997................................... 7 315,000 315,000
Issuance of additional common stock to
investment advisor (note 2)............ 1
Preferred stock accretion................ (32,332) (32,332)
Net loss for the year.................... (10,825,233) (10,825,233)
--- -- --------- ------------ ------------
Balance at December 31, 1997............. 602 $6 $ 282,668 $(16,309,744) $(16,027,070)
=== == ========= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-41
<PAGE> 128
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997 AND PERIOD FROM
AUGUST 3, 1996 THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 3,
YEAR ENDED 1996 THROUGH
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(10,825,233) $(4,575,320)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 268,688 185,834
Amortization........................................... 270,000 113,000
Loss on sale-leaseback and disposal of equipment....... 365,985 1,330
Changes in assets and liabilities:
Decrease in accounts receivable...................... 614,195 230,393
Decrease in costs and estimated earnings in excess of
billings.......................................... 589,478 237,825
Decrease (increase) in inventories................... 12,648 (4,840)
Increase in prepaid expenses......................... (122,229) (162,592)
Increase in accounts payable and accrued
liabilities....................................... 329,685 2,170,210
------------ -----------
Net cash used in operating activities............. (8,496,783) (1,804,160)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (314,601) (129,280)
Acquisition costs......................................... (1,250,000)
Proceeds from sale-leaseback and disposal of equipment.... 5,135,564
Payment to investment advisor............................. (1,225,000)
------------ -----------
Net cash provided by (used in) investing
activities...................................... 3,595,963 (1,379,280)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... 315,000 5,850
Proceeds from issuance of convertible preferred stock (net
of transaction costs of $746,215)...................... 9,753,785
Repayment of capital lease obligations.................... (40,381)
Proceeds from issuance of notes payable................... 985,570 5,600,000
Payments of notes payable................................. (5,600,000)
Increase in restricted cash............................... (433,000)
------------ -----------
Net cash provided by financing activities......... 4,980,974 5,605,850
------------ -----------
Net increase in cash and cash equivalents................... 80,154 2,422,410
Cash and cash equivalents at beginning of period............ 2,423,910 1,500
------------ -----------
Cash and cash equivalents at end of period.................. $ 2,504,064 $ 2,423,910
============ ===========
Supplemental cash flow information:
Cash paid for:
Interest............................................... $ 1,013,347 $ 138,600
Supplemental disclosure of non-cash financing activities:
Purchase of common stock of PerImmune, Inc. with a note
payable................................................ $ 9,234,935
Acquisition costs paid through issuance of common stock... 100,000
Consideration paid in excess of net assets acquired....... 1,015,035
Preferred stock accretion................................. $ 32,332
Cost in excess of assets acquired included in accrued
liabilities............................................ 500,000
Equipment acquired under capital lease obligations........ 212,619
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-42
<PAGE> 129
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
PerImmune Holdings, Inc. (Holdings) was incorporated on June 28, 1996 for
the purpose of acquiring PerImmune, Inc. (PerImmune) in a leveraged buyout
transaction.
Between 1985 and 1996, PerImmune was owned by Organon Teknika Corporation
(OTC), a subsidiary of Akzo Nobel, Inc., which is wholly owned by Akzo Nobel, NV
(Netherlands). Prior to December 20, 1994, PerImmune operated as a division of
OTC, and was known as Biotechnology Research Institute (BRI). On December 20,
1994, PerImmune, Inc., was formed as a wholly owned subsidiary of OTC with the
issuance of 1,000 shares of common stock in exchange for all the assets and
liabilities related to PerImmune. Effective August 3, 1996, PerImmune was
acquired by Holdings through a leveraged buyout (see note 2). Holdings has no
substantive operations.
The Company is a research oriented healthcare company that applies
biotechnology and other life sciences technologies to develop and provide
products and services. The Company's focus is on the development of human
monoclonal antibodies for cancer and infectious disease applications, as well
as, cancer vaccines, specific and nonspecific immunotherapy and cardiovascular
disease test products. Most of PerImmune's products are intended for human use
and are, therefore, regulated by the United States Food and Drug Administration.
Historically, the Company's primary sources of revenue have been research and
development contracts with affiliated companies, revenues generated from
government contracts and sales of products and services. PerImmune markets its
products in the United States, Europe and other geographic regions.
Basis of Presentation
The consolidated financial statements include the accounts of Holdings and
PerImmune. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
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 materially from those estimates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original
maturities of three months or less at the date of investment.
Inventories
Inventories are stated at the lower of cost (as determined by the first-in,
first-out method) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets of 3 to 7 years. Expenditures for maintenance, repairs and
renewals of relatively minor items are generally charged to expense as incurred.
F-43
<PAGE> 130
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Construction in progress includes the costs of constructed machinery.
Construction in progress costs are transferred to other property and equipment
categories when the construction/installation is completed and the asset is
ready for its intended use.
Cost in Excess of Assets Acquired
Cost in excess of assets acquired represents the excess of cost of an
acquired business over the fair value of the identifiable net tangible and
intangible assets acquired. Cost in excess of assets acquired is amortized using
the straight-line method over 15 years. The Company periodically evaluates the
life and the recoverability of cost in excess of assets acquired by comparing
the estimated future undiscounted operational cash flows to the carrying value
of cost in excess of assets acquired.
Acquisition Costs
Acquisition costs represent costs incurred related to the leveraged buyout
transaction (see note 2). Amortization of acquisition costs is computed using
the straight-line method over five years.
Income Taxes
Income taxes are accounted for using the asset and liability method
pursuant to Statement of Financial Accounting Standard No. 109 (SFAS No. 109),
Accounting for Income Taxes. Deferred taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes for a change in tax rates is recognized in income in
the period that includes the enactment date. The Company establishes valuation
allowances in accordance with the provisions of SFAS No. 109. The Company
continually reviews the adequacy of the valuation allowances and will recognize
deferred tax benefits only when it is more likely than not that the benefits
will be realized. Holdings and its subsidiary file a consolidated U.S. federal
income tax return.
Fair Value of Financial Instruments
The Company has notes payable related to the leveraged buy-out and other
notes payable obligations for which it is not practicable to estimate the fair
value since they are not traded, and no quoted values are readily available for
similar financial instruments.
Stock-based Compensation
The Company accounts for stock option issuances in accordance with the
provisions of APB No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, deferred compensation is recorded to the extent that
the fair value of the underlying stock exceeds the exercise price on the date of
grant. Such deferred compensation is amortized over the respective vesting
periods of related option grants. Transactions with non-employees, in which
goods or services are the consideration received for the issuance of equity
instruments, are accounted for under the fair-value based method defined in
Statement of Financial Accounting Standard No. 123 (SFAS No. 123) Accounting for
Stock-Based Compensation (see note 11).
Revenue Recognition
Revenue from sales of products is recognized on the date of delivery to
customers or upon shipment, based upon the contractual terms of applicable
agreements.
The Company has entered into various research and development and licensing
agreements (see note 3). Research and development revenue from cost
reimbursement agreements is recorded as the related expenses are incurred, up to
contractual limits and when the Company meets its performance obligations under
the respective agreements. Contract revenue is recognized under other agreements
when milestones are met and the Company's performance obligations have been
satisfied in accordance with the terms of the respective
F-44
<PAGE> 131
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
agreements. Cash received that is related to future performance under such
contracts is deferred and recognized as revenue when earned.
The Company also engages in contracts with commercial entities and agencies
of the U.S. government (Department of Defense and the National Institute of
Health) on either a cost-plus-fixed-fee, fixed price or a
cost-plus-percentage-fee basis. Revenue on cost-plus-fixed-fee, fixed price and
cost-plus-percentage-fee contracts is recognized based on the ratio of total
direct and indirect costs incurred during the period to total estimated costs
using the percentage-of-completion method. Estimates to complete are reviewed
periodically and revised as required in the period the revision is determined.
Provisions are made for the full amount of anticipated losses, if any, on all
contracts in the period in which they are first known and estimable. Contracts
with the U.S. government are subject to government audit upon contract
completion and therefore, all contract costs are potentially subject to
adjustment, even after reimbursement. Management believes adequate provisions
for such adjustments, if any, have been made in the financial statements.
Expense recovery rates have been audited through 1996.
Research and Development Costs
Research and development costs are expensed as incurred.
Concentration of Credit Risk
The Company performs research and development services for nonaffiliated
entities. The Company generally does not require collateral or other security in
extending credit to its customers. Additionally, the U.S. federal government and
Baxter Healthcare Corporation contributed 24% and 34% of total revenue for the
year ended December 31, 1997, respectively and 62% and 14% for the period from
August 3, 1996 through December 31, 1996, respectively.
Reclassifications
Certain reclassifications have been made to the 1996 financial statements
to conform with the 1997 presentation. The reclassifications had no effect on
previously reported net loss, stockholders' equity (deficit) or cash flows.
(2) LEVERAGED BUYOUT
In 1996, Holdings engaged an investment advisor with regards to the
purchase of PerImmune from Akzo Nobel, Inc. for which the investment advisor's
fee totalled $1,250,000. As of December 31, 1996, $1,225,000 of the advisor's
fee was included in accounts payable and the entire amount was paid in full
during 1997. During 1996, the investment advisor also received 8.5 shares of the
Company's common stock in exchange for funding certain related legal expenses on
behalf of the Company totaling $100,000. The shares are protected from dilution
through certain third-party financings. During the year ended December 31, 1997,
the investment advisor was issued one additional share of the Company's common
stock.
Effective August 3, 1996, 100% of PerImmune's common stock was acquired by
Holdings from OTC in exchange for a $9,234,935 note payable (see note 8). The
transaction was accounted for in accordance with Emerging Issues Task Force
Abstracts No. 88-16 (EITF No. 88-16), Basis in Leveraged Buyout Transactions.
Because the transaction was wholly financed by OTC, all such consideration was
determined to be nonmonetary and, under the provisions of EITF 88-16, the assets
and liabilities of PerImmune were carried over at historical cost.
Concurrent with the leveraged buyout, the ownership rights of certain
patents and other technology rights developed under the research and development
contracts with affiliates, which pertain to the business of PerImmune, were
transferred to Holdings. Under the terms of the transfer, Holdings is required
to make
F-45
<PAGE> 132
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(2) LEVERAGED BUYOUT (CONTINUED)
certain milestone payments of up to $10 million if specific future conditions
are met, and will make payments of between 5% and 7.5% of net product sales and
50% of license revenue. The milestone and royalty payments will continue until
the expiration or termination of the related patents covering the products
defined in the agreement. As of December 31, 1997, $500,000 of milestone
payments were included in accrued liabilities for amounts payable to OTC. No
royalty payments have been accrued or are due to OTC.
(3) CONTRACTS AND AGREEMENTS
Agreement with Baxter
On January 1, 1996, PerImmune entered into a research collaboration and
license agreement with Baxter Healthcare Corporation (Baxter) whereby the
Company agreed to provide certain research, development and pilot manufacturing
services for Baxter in exchange for reimbursement of research and development
costs, milestone payments and certain royalty payments. The Company received a
non-refundable milestone payment of $1,500,000 in January 1996 and is reimbursed
for actual costs incurred plus a fee of 16% during the term of the agreement.
Baxter is also obligated to make up to $3,000,000 in additional milestone
payments, if the Company achieves certain stages of U.S. and European regulatory
approvals for the serotherapy products for infectious and autoimmune diseases
under development. In addition, the Company earns a royalty ranging between 4%
and 8% of gross profit with a minimum royalty ranging between 2% and 4% of net
sales, as defined in the agreement, on sales of products depending on whether
the product is a result of previously existing technology of the Company or new
technology resulting from this development agreement. As of December 31, 1997,
no royalty or additional milestone payments has been earned. The agreement has a
term of three years with an option for a fourth year. Either party may terminate
this agreement at any time without cause. All patents and technology developed
under this agreement are the property of Baxter.
Agreement with Arch Development Corporation
PerImmune has a license agreement with the Arch Development Corporation
(Arch) to make and sell products under the patent rights for Apotek Lp(a)
developed at the University of Chicago. The agreement requires the Company to
pay Arch a royalty of 4 percent of related product sales. As of December 31,
1997, the Company has not incurred any royalty expense under this agreement.
Distribution Agreement with Syncor International Corporation
On April 1, 1997, the Company entered into an exclusive distribution
agreement with Syncor International Corporation (Syncor) for the HumaSPECT and
antibody conjugated radiotherapeutic products. Under this agreement, Syncor
accepts title of the product upon receipt and pays the Company a specific
purchase price defined by the agreement. Additionally, Syncor will pay the
Company a royalty of 50% of its net sales of the Company's products less the
specific purchased price, as defined, and right of return exists if the product
received by Syncor has less than one year until its expiration. To date, the
Company has not earned any royalties under this agreement. The Company is
obligated to spend 15% of annual sales of products covered by this agreement on
research and development to improve upon existing products or develop new
products. The Company is required to reimburse Syncor for all expenses related
to marketing these products up to $1,500,000, plus 50% of amounts over
$1,500,000, provided the expenditures are in accordance with the annual market
plan as prepared and agreed by the two companies. For the year ended December
31, 1997, the Company has reimbursed Syncor for marketing expenses of $330,000.
This agreement has a term of five years and is renewable for two additional
two-year terms.
F-46
<PAGE> 133
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(3) CONTRACTS AND AGREEMENTS (CONTINUED)
Agreements with Mentor Corporation
On June 16, 1997, the Company entered into an exclusive distribution
agreement with Mentor Corporation (Mentor) for the AuraTek -- FDP bladder cancer
diagnostic product, which the Company refers to as Accu-D(x), with an initial
term of five years and is automatically renewable for a one year term thereafter
until either party terminates the agreement with 180 days written notice. Under
this agreement, Mentor accepts title of the product shipments upon receipt and
pays the Company a specific purchase price defined by the agreement.
Additionally, Mentor will pay the Company a royalty of 50% of its net sales of
the Company's product, less the specific purchase price as defined in the
agreement. The Company is obligated to provide up to 12,000 units of the product
per year to be used by Mentor for promotional purposes, at no cost to Mentor.
On December 22, 1997, the Company entered into a research, collaboration
and distribution agreement with Mentor whereby the Company agreed to provide
certain research, development and pilot programs for Mentor in exchange for
research and development fees in an aggregate amount of $3,000,000 based on a
milestone payment schedule. As of December 31, 1997, the Company had not earned
any milestone payments. The Company will receive $1,000,000 within five days of
submission of written notice of the completion of each milestone to Mentor. The
Company is required to pay the cost in excess of $3,000,000 for expenditures
within the scope of the project development schedule. The Company is the owner
of all rights to proprietary technical information and the U.S. Patent to which
Mentor was granted exclusive world-wide rights to market, sell and distribute
the program product. This agreement is effective for a ten year period following
the first approval of commercialized use of products under development. Mentor
has the right to terminate this agreement at the expiration of five years from
the date of the first approval of commercialized use of the product based upon
180 days written notice to the Company.
Sigma Agreement
On June 30, 1997, the Company entered into a product development and
license agreement with Sigma Diagnostics, Inc. (SIGMA) for a diagnostic product,
whereby the Company agreed to provide product development and licensing services
for SIGMA in exchange for a product development fee and royalty payment. The
Company is entitled to receive an aggregate amount of $348,000 based on a
milestone payment schedule that requires a payment of $87,000 upon completion of
each respective milestone of which $87,000 was earned in 1997. In addition, the
Company will receive an annual royalty payment ranging between 3.5% and 7% of
the net selling price of the licensed product depending on whether there are any
additional competitors for this product in the marketplace. The Company has sole
and exclusive ownership of the licensed patents, while SIGMA has the exclusive
world-wide right to use and sublicense the project program information. This
agreement has a term of five years and is automatically renewable for a one year
term thereafter until SIGMA terminates the agreement.
Manufacturing/Distribution Agreement with OTC
On August 1, 1997, the Company entered into an exclusive
manufacturing/distribution agreement with OTC for the FDP Dipstick product,
which the Company refers to as Accu-D(x). Under the agreement, the Company paid
OTC $250,000 in exchange for the exclusive right to purchase, at a defined
price, such OTC product for package and resale under trademarks or tradenames
designated by the Company. The Company is obligated to purchase at least 100,000
units of the product annually at $4.00 per unit, starting on August 1, 1998.
This agreement has an initial term of three years and is automatically renewed
in two-year terms until written notice of termination from either the Company or
OTC.
F-47
<PAGE> 134
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(3) CONTRACTS AND AGREEMENTS (CONTINUED)
Other Contracts and Agreements
The Company has entered into various other licensing and research and
development agreements whereby it is committed to participate in research and
development projects, either on a best efforts basis or upon attainment of
certain performance milestones, as defined, or both, for various periods unless
canceled by the respective parties. Such future amounts to be paid to the
Company will primarily be determined on a cost-plus basis, and are subject to
specific performance criteria.
(4) ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- ----------
<S> <C> <C>
Government contracts................................. $123,964 $ 395,952
Product sales and corporate contracts................ 535,560 879,767
-------- ----------
659,524 1,275,719
Allowance for doubtful accounts...................... 13,000 15,000
-------- ----------
$646,524 $1,260,719
======== ==========
</TABLE>
(5) INVENTORIES
Inventories at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Finished goods......................................... $ 92,888 $186,837
Work-in-process........................................ 1,337
Raw materials.......................................... 269,952 187,314
-------- --------
$362,840 $375,488
======== ========
</TABLE>
(6) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Leasehold improvements............................. $ 990,573
Leased property.................................... $ 212,619
Computers.......................................... 667,557 453,946
Machinery and equipment............................ 3,549,485 3,735,691
Construction in progress........................... 1,005,316 5,935,047
---------- -----------
5,434,977 11,115,257
Accumulated depreciation and amortization.......... 3,394,279 3,831,542
---------- -----------
$2,040,698 $ 7,283,715
========== ===========
</TABLE>
Sale-Leaseback of Facility
On January 15, 1997, PerImmune exercised its option to purchase the land
and building it occupies in Rockville, Maryland, for a pre-established price of
$7,900,000. Concurrent with the purchase, PerImmune sold the property to a
third-party buyer. The sale included the building and improvements, and certain
equipment. The sales price, excluding settlement and transfer costs, was
$14,150,000, and the loss resulting from this transaction was approximately
$335,000, after consideration of estimated costs for repairs described below.
The Company received approximately $5,136,000 in cash at the closing of the
transaction. This
F-48
<PAGE> 135
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(6) PROPERTY AND EQUIPMENT (CONTINUED)
transaction has been treated as a sale-leaseback. As such, the plant and
equipment previously owned by the Company were removed from the balance sheet
and the loss was recognized.
In conjunction with the sale, PerImmune agreed to make certain repairs at
its own expense and to obtain the release of certain liens against the property.
To ensure compliance with these provisions of the agreement, PerImmune deposited
$500,000 (maintenance escrow) and $100,000 (lien escrow) into escrow accounts.
In addition, PerImmune has agreed to deposit, on a monthly basis from February
1997 through January 2002, $3,333 for costs to be used for elevator repairs and
refurbishment (elevator escrow). The Company is entitled to any amounts not
spent for the described purpose. As of December 31, 1997, the balances in the
maintenance escrow and elevator escrow were $393,000 and $40,000, respectively.
Liens against the property have been released and the $100,000 lien escrow was
refunded to the Company in full during 1997.
In connection with the sale leaseback transaction, PerImmune issued the
buyer a warrant for the purchase of 25,000 shares of PerImmune common stock if
PerImmune consummates an initial public offering (IPO) or if certain other
events occur, such as a capital reorganization, recapitalization, dissolution or
liquidation. The warrants are exercisable for three years following the date of
one of the previously described events. The warrants expire in July 1999 if one
of the above events has not occurred. The warrant purchase price in an IPO would
be the offering price and for the other events described above, the price would
be determined by a formula described in the warrant agreement.
(7) COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS
The following is a summary of costs and estimated earnings in excess of
billings on uncompleted contracts as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Costs incurred on uncompleted contracts........... $30,077,868 $28,548,030
Estimated earnings................................ 2,298,118 2,154,438
----------- -----------
Total costs and estimated earnings................ 32,375,986 30,702,468
Less:
Billings to date................................ 32,148,654 29,836,800
Allowance for losses............................ 67,771 116,629
----------- -----------
$ 159,561 $ 749,039
=========== ===========
</TABLE>
(8) NOTES PAYABLE
Notes payable at December 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
8% promissory notes to OTC........................ $ 9,988,005 $14,834,935
Other notes....................................... 232,500
----------- -----------
10,220,505 14,834,935
Less current portion.............................. 10,220,505 5,600,000
----------- -----------
$ $ 9,234,935
=========== ===========
</TABLE>
In August 1996, in connection with the leveraged buyout, Holdings issued an
8% promissory note to OTC for $9,234,935 to purchase the outstanding common
stock of PerImmune, Inc. Interest accrued on the note is added to the principal
balance on February 1 and August 1 each year. The note matures in August 1998
and is collateralized by the patents, patent applications, trademarks and plant
and equipment acquired in the
F-49
<PAGE> 136
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(8) NOTES PAYABLE (CONTINUED)
leveraged buyout. As of December 31, 1997 and 1996, the principal and accrued
interest amount outstanding was $9,988,005 and $9,234,935, respectively.
Holdings also issued an 8% note for a credit facility permitting draws of
$720,000 per month up to $3,600,000 and a $2,871,532 working capital facility to
provide capital for operations, both with OTC. The Company borrowed $3,600,000
and $2,000,000, respectively, under the facilities as of December 31, 1996.
These notes were collateralized by the patents, patent applications, trademarks
and plant and equipment acquired in the leveraged buyout. These notes matured in
January and August 1997, respectively, and principal and accrued interest were
paid in full.
In January 1997, Holdings issued three uncollateralized, non-interest
bearing promissory notes, for a total face amount of $232,500, to its advisors
on the sale leaseback transaction (see note 6). Each promissory note is
convertible into two shares of Holdings $0.01 par value common stock and have no
specified maturity date. As of December 31, 1997, no conversion had taken place.
(9) ACCRUED LIABILITIES
Accrued liabilities at December 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accrued payroll..................................... $ 157,856 $ 166,853
Accrued bonuses..................................... 327,648 313,004
Accrued interest -- OTC promissory note............. 332,110 306,990
Accrued repair costs (see note 6)................... 393,000
Due to OTC.......................................... 500,000
Other............................................... 367,669 600,487
---------- ----------
$2,078,283 $1,387,334
========== ==========
</TABLE>
(10) EMPLOYEE RETIREMENT BENEFIT PLANS
Pension Plan
In December 1996, the Company decided to establish a noncontributory
defined benefit pension plan (the Plan) retroactive to the date of the leveraged
buyout. This plan has terms similar to those of the Akzo Nobel Retirement Plan
(ANRP) and covers substantially all of the Company's employees. Under the terms
of this plan employees are given credit for prior service. Pursuant to the terms
of the purchase agreement, the fair value of plan assets equal to the present
value of the accumulated pension benefit obligation (as determined by an
actuarial valuation as of the date of the leveraged buyout) were transferred
from ANRP to PerImmune's new pension trust in April 1997. In February 1998, the
Company froze the benefit accruals under the plan.
F-50
<PAGE> 137
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(10) EMPLOYEE RETIREMENT BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status of the plan at December
31, 1997 and 1996, and the composition of net periodic pension cost and
significant assumptions for the year ended December 31, 1997 and period from
August 3, 1996 through December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of approximately $1,251,865 in 1997 and $1,133,561 in
1996................................................... $ 1,565,486 $ 1,362,971
Effect of anticipated increase in compensation levels..... 770,256 718,744
------------ ------------
Projected benefit obligation................................ 2,335,742 2,081,715
Plan assets at fair value................................... 1,360,127 1,238,260
------------ ------------
Excess of projected benefit obligation over plan assets..... (975,615) (843,455)
Unrecognized net investment gain............................ (208,287) (92,424)
------------ ------------
Total pension liability accrued................... $ (1,183,902) $ (935,879)
============ ============
Net periodic pension cost includes the following components:
Service cost -- benefits earned during the period......... $ 213,981 $ 93,606
Interest cost on projected benefit obligation............. 151,631 61,916
Actual return on assets................................... (173,965) (135,097)
Net amortization and deferred investment gain............. 56,376 92,424
------------ ------------
Net periodic pension cost......................... $ 248,023 $ 112,849
============ ============
Significant assumptions used were as follows:
Discount rate............................................. 7.5% 7.5%
Rate of increase in compensation levels (graded by age of
participant)........................................... 4.0 to 10.5% 4.0 to 10.5%
Expected rate of return of assets......................... 9.5% 9.5%
============ ============
</TABLE>
Retirement Savings Plan
The Company maintains a defined-contribution savings plan under Section
401(k) of the Internal Revenue Code. The plan covers substantially all full-time
employees. Participating employees may defer a portion of their pretax earnings
up to the Internal Revenue Service annual contribution limit. The Company
matches employee contributions according to a specified formula. The Company's
matching contributions totalled $176,098 and $72,779 for the year ended December
31, 1997 and period from August 3, 1996 through December 31, 1996, respectively.
(11) STOCKHOLDERS' EQUITY
Syncor Agreement
On April 23, 1997, Holdings issued 100 shares of its Series A Mandatorily
Redeemable Convertible Preferred Stock (par value .01/share) (Series A) to
Syncor International Corporation (Syncor) for $4,500,000 less transaction costs
of $246,215. Dividends are payable if and when declared by the Board of
Directors at the rate of 7% of the liquidation preference per annum, where the
liquidation preference is initially defined as $45,000 per share, subject to
certain adjustments. Each share of Series A may be converted into one share of
common stock before the redemption date (as defined below) at the option of the
holder, or is automatically converted on the date of a qualifying initial public
offering, as defined in the agreement. The Company shall redeem the Series A
seven years after the issuance date (the redemption date) in the event that all
shares have not been converted by this date. If such redemption occurs, the
redemption price shall
F-51
<PAGE> 138
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(11) STOCKHOLDERS' EQUITY (CONTINUED)
equal the amount of the liquidation preference plus any declared but unpaid
dividends. No dividends on the Company's common stock may be made while any
shares of preferred stock remain outstanding. In the event of liquidation or
dissolution, Syncor shall be entitled to be paid from the assets of Holdings, in
preference to the common stockholders, but on an equal basis with Preferred
Series B stockholders, the liquidation preference plus all declared but unpaid
dividends. Holdings shall also have the right of first refusal to repurchase
these shares should Syncor wish to sell them. In connection with this issuance,
Syncor and the holders of Holding's stock were also granted certain registration
rights as contained in the registration agreement.
Mentor Agreements
On June 16, 1997, the Company issued 20 shares of Series B Mandatorily
Redeemable Convertible Preferred Stock (par value .01/share) (Series B) to
Mentor Corporation (Mentor) for $1,000,000. On December 22, 1997, the Company
issued an additional 100 shares of Series B to Mentor for $5,000,000 less
transaction costs of $500,000. Dividends are payable if and when declared by the
Board of Directors at the rate of 7% of the liquidation preference per annum,
where liquidation preferences is defined as $50,000 per share, subject to
certain adjustments. Each share of Series B preferred stock shall have the same
rights, preferences and terms as Series A preferred stock.
Options
On September 27, 1996, Holdings granted 255 stock options to members of
management at an exercise price of $2,725 per option. The options vest over
three years and expire ten years from the date of grant. On May 16, 1997,
Holdings granted an additional 2 stock options to its directors at an exercise
price of $45,000 per option. The options vest over one year and expire ten years
from the date of grant. Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE
------- --------------
<S> <C> <C>
Outstanding at August 3, 1996............................
Granted.................................................. 255 $ 2,725
Exercised................................................
Canceled.................................................
--- -------
Outstanding at December 31, 1996......................... 255 2,725
Granted.................................................. 2 45,000
Exercised................................................
Canceled.................................................
--- -------
Outstanding at December 31, 1997......................... 257 $ 3,054
=== =======
Options exercisable at December 31, 1997................. 87 $ 2,725
=== =======
</TABLE>
The weighted-average remaining contractual life of outstanding options, as
of December 31, 1997 and 1996, was 8.75 and 9.75 years, respectively.
Under APB No. 25, because the exercise price of the Company's stock options
generally equals the fair value, as determined by the Company's management, of
the underlying stock on the date of grant, no compensation expense is recognized
in the Company's consolidated financial statements.
F-52
<PAGE> 139
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(11) STOCKHOLDERS' EQUITY (CONTINUED)
Pro forma information regarding net loss is required by SFAS No. 123, and
has been determined as if the Company had accounted for its stock options under
the fair value method of that statement. The fair value of each option is
estimated at the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions used for grants issued during the
year ended December 31, 1997, and period from August 3, 1996 through December
31, 1996:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Risk-free interest rate................................... 6.76% 6.28%
Dividend yield............................................ 0.00% 0.00%
Volatility factor......................................... 70.00% 70.00%
Expected term of option................................... 2 years 3 years
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
net loss would have been as indicated in the pro forma table below:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED AUGUST 3, 1996
DECEMBER 31, THROUGH
1997 DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
Net loss -- as reported........................ $10,825,233 $4,575,320
Net loss -- pro forma.......................... 10,963,095 4,604,552
Weighted average fair value of options
granted...................................... 16,654 1,377
</TABLE>
(12) COMMITMENTS
The Company leases certain equipment under agreements which are classified
as capital leases. Assets under capital leases at December 31, 1997 are included
in the consolidated balance sheet as follows:
<TABLE>
<S> <C>
Telephone system and equipment.............................. $180,619
Computer equipment.......................................... 32,000
--------
212,619
Less: accumulated depreciation.............................. 23,652
--------
$188,967
========
</TABLE>
The Company also leases laboratory, office and manufacturing facilities and
equipment under noncancelable operating leases which expire at various times
through January 31, 2007 (including the lease transaction described in note 6
which is also reflected in the amounts below).
F-53
<PAGE> 140
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(12) COMMITMENTS (CONTINUED)
Future minimum lease payments, by year end and in the aggregate, under the
aforementioned capital and operating leases, are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- --------
<S> <C> <C>
1998................................................ $ 1,912,291 $ 66,813
1999................................................ 1,766,447 73,976
2000................................................ 1,801,118 69,980
2001................................................ 1,847,568 5,166
2002................................................ 1,902,379
Thereafter.......................................... 8,396,465
----------- --------
$17,626,268 215,935
===========
Less: imputed interest.............................. 43,697
--------
Present value of net minimum obligations............ 172,238
Current portion..................................... 44,896
--------
Long-term obligation................................ $127,342
========
</TABLE>
Rent expense was $1,753,790 and $588,311 for the year ended December 31,
1997, and the period from August 3, 1996 through December 31, 1996,
respectively. Rent expense is included in both selling, general and
administrative expenses and costs of contracts in the consolidated statements of
operations.
In July 1997, the Company entered into a licensing agreement with a
computer system company for the non-exclusive rights to its system software and
maintenance services. The total licensing fee for the eighteen month period
ending December 31, 1998 is $210,095 and the total maintenance fee is $48,120.
As of December 31, 1997, the Company had paid $132,215 of the licensing and
maintenance fees and the remaining commitment is included in the above future
minimum lease payments.
On January 2, 1998, the Company entered into a three year employment
agreement with a key member of management. The agreement establishes a minimum
compensation level and certain other terms.
(13) INCOME TAXES
The amount computed by applying the Federal corporate income tax rate of
34% to loss before income taxes is reconciled to the provision for income taxes
as follows:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED AUGUST 3, 1996
DECEMBER 31, THROUGH
1997 DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
Income tax benefit at statutory rates.......... $(3,680,579) $(1,555,609)
State income taxes, net of federal tax
benefit...................................... (486,573) (205,675)
Valuation allowance adjustment................. 4,167,152 1,759,661
Other.......................................... 1,623
----------- -----------
$ $
=========== ===========
</TABLE>
F-54
<PAGE> 141
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(13) INCOME TAXES (CONTINUED)
Deferred income tax (assets) and liabilities as of December 31, 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------ -----------------
<S> <C> <C>
Net operating loss carryforwards............... $(5,997,028) $(1,802,118)
Excess of tax over book basis of assets........ (95,820) (193,520)
Allowance for doubtful accounts and other
reserves..................................... (32,000) (11,539)
Accrued expenses............................... (604,924) (520,259)
Other.......................................... 23,610 (11,567)
----------- -----------
Deferred tax assets............................ (6,706,162) (2,539,003)
Valuation allowance............................ 6,706,162 2,539,003
----------- -----------
Net deferred tax asset......................... $ -- $ --
=========== ===========
</TABLE>
At December 31, 1997 the Company has a net operating loss carryforward for
both federal and state purposes of approximately $14,992,000 which expire
through the year 2012. This net operating loss carryforward relates to the
period August 3, 1996 through December 31, 1996 and for the year ended December
31, 1997 (periods subsequent to the leverage buyout) and as such, is not limited
under existing tax laws. However, this carryforward will be limited under the
Internal Revenue Code as a result of the changes in ownership of the Company as
discussed in note 14. A valuation allowance has been established to reflect the
uncertainty of future taxable income to utilize available tax loss
carryforwards.
(14) SUBSEQUENT EVENTS
Merger
On January 2, 1998, the stockholders of Holdings sold all outstanding
shares of Holding's capital stock to Intracel Corporation ("Intracel") through a
tax-free merger. With the consummation of the transaction, Holdings and
Perimmune became subsidiaries of Intracel. Intracel is a privately owned
biotechnology company developing products that improve the treatment options for
patients suffering from serious viral diseases and cancers. The aggregate
purchase price was approximately $59,471,000, payable in 5,478,654 shares of
Intracel common stock, 2,340,838 options to purchase Intracel common stock, 220
shares of Intracel Series B-1 and B-2 preferred stock, Intracel's assumption of
Perimmune's debt of approximately $11,532,000 and Intracel's assumption of other
liabilities. The acquisition will be accounted for using the purchase method of
accounting and accordingly, Intracel's financial statements will reflect
valuation of all of Perimmune's assets, including identifiable intangibles, at
their estimated fair market values. Perimmune's operating results will be
included in Intracel's consolidated operating results from the date of
acquisition.
Refinancing
On June 8, 1998 OTC negotiated with Intracel to delay the maturity of the
8% note payable until January 2000.
F-55
<PAGE> 142
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
The Board of Directors and Stockholders
PerImmune Holdings, Inc.:
We have audited the consolidated balance sheet of PerImmune Holdings, Inc. and
subsidiary (the Company) as of December 31, 1996, and the related consolidated
statements of operations, stockholders' deficit and cash flows for the period
from August 3, 1996 through December 31, 1996. We have also audited the
statements of operations, stockholders' equity and cash flows of the Predecessor
Company for the period from January 1, 1996 through August 2, 1996 and for the
year ended December 31, 1995. These financial statements are the responsibility
of the Companies' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of PerImmune
Holdings, Inc. and subsidiary as of December 31, 1996, and the consolidated
results of their operations and their cash flows for the period from August 3,
1996 through December 31, 1996, and the results of operations and cash flows for
the Predecessor Company for the period from January 1, 1996 through August 2,
1996 and for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
KPMG LLP
Baltimore, Maryland
February 28, 1997, except as to
note 14 which is as of April 23, 1997
and June 16, 1997
F-56
<PAGE> 143
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents................................. $ 2,423,910
Accounts receivable:
Affiliates (Note 3).................................... 218,494
Government............................................. 395,952
Other.................................................. 646,273
Inventories (Note 5)...................................... 375,488
Costs and estimated earnings in excess of billings on
uncompleted contracts (Note 7)......................... 749,039
Other current assets...................................... 293,699
-----------
Total current assets........................................ 5,102,855
Plant and equipment, net (Note 6 and 14).................... 7,283,715
Acquisition costs, net (Note 2)............................. 1,237,500
-----------
$13,624,070
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable (Note 8).................................... $ 5,600,000
Accounts payable (Note 2)................................. 1,950,427
Accrued liabilities (Note 9).............................. 1,387,334
-----------
Total current liabilities................................... 8,937,761
Accrued pension liability (Note 10)......................... 935,879
Note payable (Note 8)....................................... 9,234,935
-----------
Total liabilities........................................... 19,108,575
Stockholders' deficit (Notes 2 and 11):
Common stock: $.01 par value; 1,000 shares authorized;
593.5 shares issued and outstanding at December 31,
1996................................................... 6
Accumulated deficit....................................... (5,484,511)
-----------
Total stockholders' deficit................................. (5,484,505)
Commitments and contingencies (Notes 3, 4 and 12)
Subsequent events (Note 14)
-----------
$13,624,070
===========
</TABLE>
See Accompanying Notes to Financial Statements.
F-57
<PAGE> 144
PERIMMUNE HOLDINGS INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
STATEMENTS OF OPERATIONS
PERIOD FROM AUGUST 3, 1996 THROUGH DECEMBER 31, 1996, PERIOD FROM JANUARY 1,
1996 THROUGH
AUGUST 2, 1996 AND YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERIMMUNE
HOLDINGS PREDECESSOR COMPANY
CONSOLIDATED -----------------------------------
----------------- PERIOD FROM
PERIOD FROM JANUARY 1,
AUGUST 3, 1996 1996
THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1996 AUGUST 2, 1996 DECEMBER 31, 1995
----------------- -------------- -----------------
<S> <C> <C> <C>
Revenues:
Contract research and development revenue:
Affiliates (Note 3)..................... $ 322,652 $ -- $ --
Government.............................. 2,750,942 3,420,549 6,578,019
Commercial.............................. 782,863 2,151,763 775,700
Product sales.............................. 594,157 1,631,918 1,407,274
----------- ----------- ------------
4,450,614 7,204,230 8,760,993
----------- ----------- ------------
Costs of contracts and sales:
Contract research and development costs:
Affiliates (Note 3)..................... 300,066 4,312,638 9,545,830
Government.............................. 1,968,098 3,375,008 5,778,534
Commercial.............................. 585,876 1,985,682 643,224
Costs of products sold..................... 324,886 1,102,374 1,124,239
----------- ----------- ------------
3,178,926 10,775,702 17,091,827
----------- ----------- ------------
Gross profit (loss).......................... 1,271,688 (3,571,472) (8,330,834)
Operating expenses:
Research and development (Note 1).......... 4,683,020 189,261 359,998
Selling, general and administrative........ 708,247 740,174 1,283,234
Other...................................... 10,151 14,211 28,862
----------- ----------- ------------
Total operating expenses..................... 5,401,418 943,646 1,672,094
----------- ----------- ------------
Loss from operations......................... (4,129,730) (4,515,118) (10,002,928)
Interest expense............................. (445,590) -- --
----------- ----------- ------------
Loss before income taxes..................... (4,575,320) (4,515,118) (10,002,928)
Provision for income taxes (Note 13)......... -- -- --
----------- ----------- ------------
Net loss..................................... $(4,575,320) $(4,515,118) $(10,002,928)
=========== =========== ============
</TABLE>
See Accompanying Notes to Financial Statements.
F-58
<PAGE> 145
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM AUGUST 3, 1996 THROUGH DECEMBER 31, 1996, PERIOD FROM JANUARY 1,
1996 THROUGH
AUGUST 2, 1996 AND YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS
------------ PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT) TOTAL
------ ------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY:
Balance at January 1, 1995............ 1,000 $ 10 $10,242,309 $ -- $ 10,242,319
Net contribution from parent.......... -- -- 10,282,014 -- 10,282,014
Net loss.............................. -- -- -- (10,002,928) (10,002,928)
----- ---- ----------- ------------ ------------
Balance at December 31, 1995.......... 1,000 10 20,524,323 (10,002,928) 10,521,405
Net contribution from parent.......... -- -- 3,154,644 -- 3,154,644
Net loss for the period from January
1, 1996 through August 2, 1996..... -- -- -- (4,515,118) (4,515,118)
----- ---- ----------- ------------ ------------
Balance at August 2, 1996............... 1,000 10 23,678,967 (14,518,046) 9,160,931
===== ==== =========== ============ ============
- -----------------------------------------------------------------------------------------------------
PERIMMUNE HOLDINGS, INC.:
Issuance of common stock of PerImmune
Holdings, Inc. on June 28, 1996.... 585 6 5,844 -- 5,850
Acquisition costs paid through
issuance of common stock
(Note 2)........................... 8.5 -- 100,000 -- 100,000
Consideration paid in excess of net
assets acquired (Note 2)........... -- -- (105,844) (909,191) (1,015,035)
Net loss for the period from August 3,
1996 through December 31, 1996..... -- -- -- (4,575,320) (4,575,320)
----- ---- ----------- ------------ ------------
Balance at December 31, 1996............ 593.5 $ 6 $ -- $ (5,484,511) $ (5,484,505)
===== ==== =========== ============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
F-59
<PAGE> 146
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
STATEMENTS OF CASH FLOWS
PERIOD FROM AUGUST 3, 1996 THROUGH DECEMBER 31, 1996, PERIOD FROM JANUARY 1,
1996 THROUGH
AUGUST 2, 1996 AND YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERIMMUNE HOLDINGS PREDECESSOR COMPANY
CONSOLIDATED ------------------------------------
--------------------- PERIOD FROM
PERIOD FROM AUGUST 3, JANUARY 1, 1996
1996 THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1996 AUGUST 2, 1996 DECEMBER 31, 1995
--------------------- --------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(4,575,320) $(4,515,118) $(10,002,928)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................. 298,834 270,148 476,186
Loss on disposal of equipment.................. 1,330 -- 44,342
Decrease (increase) in accounts receivable:
Affiliates................................... (156,721) 2,720,401 991,941
Government................................... 317,372 140,254 (375,722)
Other........................................ 69,742 (439,377) (115,311)
Decrease (increase) in costs and estimated
earnings in excess of billings............... 237,825 (125,687) (158,452)
Increase in inventories........................ (4,840) (57,490) (42,852)
Decrease (increase) in other current assets.... (162,592) 102,105 74,058
Increase (decrease) in accounts payable and
accrued liabilities.......................... 2,062,411 (628,419) (276,783)
Increase in accrued pension liability.......... 112,849 -- --
Increase (decrease) in advance contract
billings..................................... (5,050) (516,568) 132,402
----------- ----------- ------------
Net cash used in operating activities............... (1,804,160) (3,049,751) (9,253,119)
----------- ----------- ------------
Cash flows from investing activities:
Acquisition costs................................. (1,250,000) -- --
Capital expenditures.............................. (129,280) (104,893) (1,029,395)
----------- ----------- ------------
Net cash used in investing activities............... (1,379,280) (104,893) (1,029,395)
----------- ----------- ------------
Cash flows from financing activities:
Net contribution from parent company.............. -- 3,154,644 10,282,014
Proceeds from issuance of common stock............ 5,850 -- --
Proceeds from issuance of notes payable........... 5,600,000 -- --
----------- ----------- ------------
Net cash provided by financing activities........... 5,605,850 3,154,644 10,282,014
----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents....................................... 2,422,410 -- (500)
Cash and cash equivalents at beginning of year...... 1,500 1,500 2,000
----------- ----------- ------------
Cash and cash equivalents at end of year............ $ 2,423,910 $ 1,500 $ 1,500
=========== =========== ============
Supplementary disclosure of non-cash financing
activities:
Purchase of common stock of PerImmune, Inc. with a
note payable (Note 2).......................... $ 9,234,935 -- --
Acquisition costs paid through issuance of common
stock.......................................... 100,000 -- --
Consideration paid in excess of net assets
acquired....................................... 1,015,035 -- --
=========== =========== ============
</TABLE>
See Accompanying Notes to Financial Statements.
F-60
<PAGE> 147
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
PerImmune Holdings, Inc. and Subsidiary is composed of PerImmune Holdings,
Inc. (Holdings) and PerImmune, Inc. (the Company or PerImmune). Holdings was
incorporated on June 28, 1996 for the purpose of acquiring the Company in a
leveraged buyout transaction.
Between 1985 and 1996, the Company was owned by Organon Teknika Corporation
(the Parent Company or OTC), a subsidiary of Akzo Nobel, Inc., which is
wholly-owned by Akzo Nobel, NV (Netherlands). Prior to December 20, 1994, the
Company operated as a division of OTC, and was known as Biotechnology Research
Institute (BRI). On December 20, 1994, PerImmune (the Predecessor Company) was
formed as a wholly-owned corporation of OTC with the issuance of 1,000 shares of
common stock in exchange for all the assets and liabilities related to the
PerImmune business. Effective August 3, 1996, the Company was acquired by
Holdings through a leveraged buyout (see Note 2). Holdings has no substantive
operations.
The Company is a research oriented healthcare company that applies
biotechnology and other techniques of modern biology and chemistry to develop,
produce and sell products intended to improve the quality of life by diagnosing,
preventing and treating human disease. The Company's focus is on the development
of human monoclonal antibodies for cancer and infectious disease applications,
as well as, cancer vaccines, specific and non-specific immunotherapy and
cardiovascular disease test products. Historically, the Company's primary
sources of revenue have been research and development contracts with affiliated
companies, revenues generated from government contracts and sales of products
and services. PerImmune markets its products in the United States, Europe and
other geographic regions.
While the Company was held by OTC, it successfully developed a number of
profitable products for the Parent Company including bladder cancer therapeutic,
food pathogen and HIV tests. Most of PerImmune's products are intended for human
use and are, therefore, regulated by the United States Food and Drug
Administration.
Basis of Presentation
The consolidated financial statements as of December 31, 1996 and for the
period from August 3, 1996 through December 31, 1996 include the accounts of
Holdings and the Company. All significant intercompany accounts and transactions
have been eliminated in consolidation.
The financial statements for the year ended December 31, 1995 and for the
period from January 1, 1996 through August 2, 1996 represent the stand-alone
results of operations of PerImmune, Inc., a wholly-owned subsidiary of OTC.
Due to the change in ownership of the Company, the comparability of the
financial statements is affected. In particular, equity has changed
significantly due to the new ownership and debt related to the acquisition. Cash
and cash equivalents is also different as balances are no longer managed by the
former Parent Company. In addition, certain liabilities which were paid for by
the Parent Company and allocated to the division or the subsidiary through the
intercompany accounts have been recognized by the Company subsequent to the LBO
transaction (see Note 3). Also, certain research and development activities
performed prior to the leveraged buyout for affiliates and were reimbursed under
the contractual arrangements described in Note 3, are subsequently performed for
the Company's benefit and are not reimbursed.
F-61
<PAGE> 148
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
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 materially from those estimates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original
maturities of three months or less at the date of investment by the Company.
Inventories
Inventories are stated at the lower of cost or market using the FIFO cost
method.
Plant and Equipment
Plant and equipment are stated at cost. Depreciation on plant and equipment
is computed by the straight-line method over the estimated useful lives of the
assets of 3 to 7 years. Leasehold improvements are amortized on a straight-line
basis over the remaining lease term or asset useful life, whichever is shorter.
Construction in progress represents buildings, leasehold improvements and
other capital expenditures for facilities under construction and machinery
pending installation. This includes the costs of construction, plant and
machinery and costs related to obtaining appropriate regulatory approvals.
Construction in progress costs are transferred to other plant and equipment
categories when the construction/installation is completed, appropriate
regulatory approvals have been obtained and the asset is ready for use.
Acquisition Costs
Acquisition costs represent costs incurred related to the leveraged buyout
transaction (see Note 2). Amortization of acquisition costs is computed on a
straight-line basis over 5 years.
Income Taxes
The Company was included in the Akzo Nobel, Inc. consolidated Federal
income tax return for the year ended December 31, 1995, and for the period
January 1, 1996 through August 2, 1996. The Company will file a separate
consolidated Federal income tax return for the period August 3, 1996 through
December 31, 1996. Prior to August 3, 1996, deferred income taxes were reflected
in stockholders' equity (deficit).
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The measurement of deferred tax assets is
reduced, if necessary, by a valuation allowance for any tax benefits which are
not expected to be realized. The effect on deferred tax assets and liabilities
of changes in tax rates is recognized in the period that such tax rate changes
are enacted.
Fair Value of Financial Instruments
The carrying amount of current financial instruments approximate fair value
because of the short-term nature of these instruments. The Company has notes
payable related to the leveraged buyout for which it is
F-62
<PAGE> 149
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
not practicable to estimate the fair value of these notes since they are not
traded, and no quoted values are readily available for similar financial
instruments. However, management believes that there has been no permanent
impairment in the value of these notes.
Stock-based Compensation
The Company accounts for share option issuances in accordance with the
provisions of APB No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, deferred compensation is recorded to the extent that
the market value of the underlying stock exceeds the exercise price on the date
of grant. Such deferred compensation is amortized over the respective vesting
periods of such option grants. On January 1, 1996, the Company adopted the
disclosure requirements of SFAS No. 123, Accounting for Stock-Based
Compensation, which allows entities to continue to apply the provisions of APB
No. 25 for financial statement reporting purposes and provide pro forma net
income (loss) footnote disclosures for employee stock option grants made in 1995
and 1996 as if the fair-value based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the financial statement
reporting provisions of APB No. 25 and to provide the pro forma disclosure
provisions of SFAS No. 123. Transactions with non-employees, in which goods or
services are the consideration received for the issuance of equity instruments,
are accounted for under the fair-value based method defined in SFAS No. 123 (see
Note 11).
Revenue Recognition
Revenue from sales of products is recognized on the date of delivery to
customers or upon shipment, based upon the contractual terms of applicable
agreements.
The Company has entered into various research and development and licensing
agreements (see Notes 3 and 4). Research and development revenue from
cost-reimbursement agreements is recorded as the related expenses are incurred,
up to contractual limits and when the Company meets its performance obligations
under the respective agreements. Contract revenue is recognized under other
agreements when milestones are met and the Company's performance obligations
have been satisfied in accordance with the terms of the respective agreements.
Cash received that is related to future performance under such contracts is
deferred and recognized as revenue when earned.
The Company engages in research and development contracts with Organon
Teknika International (OT BV) and Organon International (OI). Through August 2,
1996, these contracts were funded by OT BV and OI at the Company's costs plus a
7% fee. Amounts due under these funding commitments were recorded as
contributions from Parent Company as the related costs were incurred. Subsequent
to August 2, 1996, the contract revenue was recorded on a cost-plus-fixed-fee
basis.
The Company also engages in contracts with commercial entities and agencies
of the U.S. government (Department of Defense and the National Institutes of
Health) on either a cost-plus-fixed-fee, fixed price or a
cost-plus-percentage-fee basis. Revenue on cost-plus-fixed-fee, fixed price and
cost-plus-percentage-fee contracts is recognized based on the total direct and
indirect costs incurred during the period to total estimated costs using the
percentage-of-completion method. Estimates to complete are reviewed periodically
and revised as required in the period the revision is determined. Provisions are
made for the full amount of anticipated losses, if any, on all contracts in the
period in which they are first known and estimable. Contracts with the U.S.
government are subject to government audit upon contract completion and
therefore, all contract costs are potentially subject to adjustment, even after
reimbursement. Management believes adequate provisions for such adjustments, if
any, have been made in the financial statements. Expense recovery rates have
been audited through 1995.
F-63
<PAGE> 150
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development, Patent and Royalty Costs
Research and development, patent and royalty costs are expensed as
incurred.
Concentration of Credit Risk
The Company performs research and development services to both affiliated
and non-affiliated entities. The Company generally does not require collateral
or other security in extending credit to its customers. The Company had three
customers which contributed ten percent or more of revenues. OTC contributed 7%,
41% and 55% of total revenues in the period from August 3, 1996 through December
31, 1996, the period from January 1, 1996 through August 2, 1996 and the year
ended 1995, respectively. The U.S. Federal Government contributed 62%, 28% and
34% of total revenues in the period from August 3, 1996 through December 31,
1996, the period from January 1, 1996 through August 2, 1996 and the year ended
1995, respectively. In addition, Baxter Healthcare Corporation contributed 14%
of the Company's revenue for the period from August 3, 1996 through December 31,
1996.
(2) LEVERAGED BUYOUT
In May 1996, Holdings engaged an investment advisor to advise Holdings with
regards to the purchase of PerImmune from Akzo Nobel, Inc., for which the
investment advisor's fee totaled $1,250,000 of which $1,225,000 is included in
accounts payable as of December 31, 1996. The investment advisor also received
8.5 shares of the Company's common stock in exchange for funding certain related
legal expenses on behalf of the Company totaling $100,000. The shares are
protected from dilution through certain future third-party financings.
Effective August 3, 1996, 100% of the Company's common stock was acquired
by Holdings from OTC in exchange for a $9,234,935 note payable (see Note 8). The
transaction was accounted for in accordance with EITF No. 88-16, Basis in
Leveraged Buyout Transactions. Because the transaction was wholly financed by
OTC, all such consideration was determined to be nonmonetary and, under the
provisions of EITF 88-16, the assets and liabilities of PerImmune were carried
over at historical cost.
Concurrent with the leveraged buyout, the ownership rights of certain
patents and other technology rights developed under the research and development
contracts with affiliates, which pertain to the business of PerImmune, were
transferred to Holdings. Under the terms of the transfer, Holdings is required
to make certain milestone payments of up to $10 million if specific future
conditions are met, and will make payments of between 5% and 7.5% of net product
sales and 50% of license revenue. Any future milestone payments will be recorded
as research and development expense when the milestone is achieved.
(3) RELATIONSHIPS WITH RELATED PARTIES
Akzo Nobel, NV
Prior to the leveraged buyout of PerImmune, ownership rights or patents
developed under the research and development contracts with OT BV and OI
belonged to these affiliates. Expenses incurred by the Company in developing and
obtaining these patents plus a fee (Note 1) were charged to Akzo Nobel, NV and
were recorded as contributions from Parent Company prior to August 3, 1996 and
as contract research and development revenue thereafter.
Organon Teknika Corporation
Prior to the incorporation of PerImmune, Inc., OTC provided certain
accounting, computer and other administrative services to PerImmune for a
management fee which was based on PerImmune's proportionate share of total OTC
expenses using a formula considering revenues, property and equipment and
payroll factors. OTC also paid all payroll taxes, medical claims, pension and
other employee benefit expenses which
F-64
<PAGE> 151
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) RELATIONSHIPS WITH RELATED PARTIES (CONTINUED)
were allocated to PerImmune and other affiliates based on the total wages of the
respective participating entities. In addition, OTC paid PerImmune's payroll,
bonuses, general insurance, relocation and personal property tax expenses, which
were charged to PerImmune on a specific identification basis. OTC also provided
materials at its cost for certain products for resale by PerImmune. Subsequent
to PerImmune, Inc.'s incorporation, the Company was responsible for paying its
own payroll taxes, personal property taxes and certain other items. Amounts
arising from the transactions described above were treated as expenses and
contributions from Parent Company by PerImmune. Product sales to OTC were
$432,645, $605,703 and $643,434 in the period from August 3, 1996 through
December 31, 1996, the period from January 1, 1996 through August 2, 1996 and
the year ended 1995, respectively.
Effective August 3, 1996, Holdings and OTC entered into a services
agreement to provide each party, including PerImmune, with mutually agreed-upon
services. OTC will provide Holdings for varying periods of time with such
services as employee benefit plan administration, administrative regulatory
support, patent and trademark prosecution and computer and other services.
Holdings will provide OTC with various product support and research services.
Each party is compensated for services as defined in the agreement, generally
cost plus a fee. Revenues and costs related to the research activities are
recorded as affiliates revenue and costs in the statement of operations.
(4) CONTRACTS AND AGREEMENTS
PerImmune has a license agreement with the Arch Development Corporation
(Arch) to make and sell products under the patent rights for Apotek Lp(a)
developed at the University of Chicago. The agreement requires the Company to
pay Arch a royalty of 4 percent of product sales. PerImmune is also
collaborating with Stanford University to develop an active-specific
immunotherapy vaccine for low grade B-cell lymphomas.
Agreement with Baxter
On January 1, 1996, PerImmune entered into a research collaboration and
license agreement with Baxter Healthcare Corporation (Baxter) whereby the
Company agreed to provide certain research, development and pilot manufacturing
services for Baxter in exchange for reimbursement of research and development
costs, milestone payments and certain royalty payments. The Company received a
non-refundable milestone payment of $1,500,000 in January 1996 which was
recognized upon receipt as commercial contract research and development revenue.
Furthermore the Company is reimbursed for actual costs incurred plus a fee of
16% during the term of the agreement. Baxter is also obligated to make up to
$3,000,000 in additional milestone payments, if the Company achieves certain
stages of U.S. and European regulatory approvals for the serotherapy products
for infectious and autoimmune diseases under development. In addition, the
Company earns a royalty ranging between 4% and 8% of gross profit with a minimum
royalty ranging between 2% and 4% of net sales, as defined in the agreement, on
sales of products depending on whether the product is a result of previously
existing technology of the Company or new technology resulting from this
development agreement. As of December 31, 1996, no royalty or additional
milestone payments were earned. The agreement has a term of three years with an
option for a fourth year. Either party may terminate this agreement at any time
without cause. All patents and technology developed under this agreement are the
property of Baxter.
Other Contracts and Agreements
The Company has entered into various other licensing and research and
development agreements whereby they are committed to participate in research and
development projects, either on a best efforts basis or upon attainment of
certain performance milestones, as defined, or both, for various periods unless
canceled
F-65
<PAGE> 152
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) CONTRACTS AND AGREEMENTS (CONTINUED)
by the respective parties. Such future amounts to be paid to the Company will
primarily be determined on a cost-plus basis, and are subject to specific
performance criteria.
(5) INVENTORIES
Inventories at December 31, 1996, are summarized as follows:
<TABLE>
<S> <C>
Finished goods............................................ $186,837
Work-in-process........................................... 1,337
Raw materials............................................. 187,314
--------
$375,488
========
</TABLE>
(6) PLANT AND EQUIPMENT
Plant and equipment at December 31, 1996, are summarized as follows:
<TABLE>
<S> <C>
Leasehold improvements.................................. $ 990,573
Computers............................................... 453,946
Machinery and equipment................................. 3,735,691
Construction in progress................................ 5,935,047
-----------
11,115,257
Less accumulated depreciation and amortization.......... 3,831,542
-----------
$ 7,283,715
===========
</TABLE>
(7) COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS
The following is a summary of costs and estimated earnings in excess of
billings on uncompleted contracts as of December 31, 1996:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts..................... $28,548,030
Estimated earnings.......................................... 2,154,438
-----------
Total costs and estimated earnings.......................... 30,702,468
Less:
Billings to date.......................................... 29,836,800
Allowance for losses...................................... 116,629
-----------
$ 749,039
===========
</TABLE>
(8) DEBT OBLIGATIONS
Current notes payable at December 31, 1996 is summarized as follows:
<TABLE>
<S> <C>
Secured promissory note -- OTC, 8% interest, due January
1997...................................................... $3,600,000
Working capital secured note -- OTC, 8% interest, due August
1997...................................................... 2,000,000
----------
$5,600,000
==========
</TABLE>
In August 1996, in connection with the leveraged buyout, Holdings issued an
8% secured promissory note to OTC for $9,234,935 to purchase the outstanding
common stock of PerImmune, Inc. The note matures in
F-66
<PAGE> 153
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(8) DEBT OBLIGATIONS (CONTINUED)
August 1998. In addition, Holdings issued an 8% secured note for a credit
facility permitting draws of $720,000 per month up to $3,600,000 and a
$2,871,532 working capital facility to provide capital for operations, both with
OTC. The Company has borrowed $3,600,000 and $2,000,000, respectively, against
the facilities as of December 31, 1996. These notes mature on January and August
1997, respectively, when all principal and accrued interest is due. The note
which matured in January 1997 was repaid in full at that time. These notes are
all secured by the patents, patent applications and trademarks acquired in the
leveraged buyout. The secured promissory note is also secured by the plant and
equipment acquired in the leveraged buyout.
(9) ACCRUED LIABILITIES
Accrued liabilities at December 31, 1996, are summarized as follows:
<TABLE>
<S> <C>
Accrued payroll............................................. $ 166,853
Accrued bonuses............................................. 313,004
Accrued interest -- OTC promissory note..................... 306,990
Other....................................................... 600,487
----------
$1,387,334
==========
</TABLE>
(10) EMPLOYEE RETIREMENT BENEFIT PLANS
Pension Plan
The Company has a noncontributory defined benefit pension plan (the Plan)
covering substantially all of its employees. In December 1996, the Company
decided to establish a noncontributory defined benefit pension plan retroactive
to the date of the leveraged buyout. This plan has terms similar to those of the
Akzo Nobel Retirement Plan (ANRP) and covers substantially all of the Company's
employees. Under the terms of this plan employees are given credit for prior
service. Pursuant to the term of the purchase agreement, the fair value of the
plan assets equal to the present value of the accumulated pension benefit
accrued as determined by an actuarial valuation as of the date of the leveraged
buyout were transferred from the ANRP to PerImmune's new pension trust in April
1997.
F-67
<PAGE> 154
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(10) EMPLOYEE RETIREMENT BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status of the plan at December
31, 1996 and the composition of net periodic pension cost and significant
assumptions for the period from August 3, 1996 through December 31, 1996:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $1,133,561................................. $1,362,971
Effect of anticipated increase in compensation levels..... 718,744
----------
Projected benefit obligation................................ 2,081,715
Plan assets at fair value................................... 1,238,260
----------
Excess of projected benefit obligation over plan assets..... (843,455)
Unrecognized prior service cost............................. --
Unrecognized net investment gain............................ (92,424)
----------
Total pension liability..................................... $ (935,879)
==========
Net periodic pension cost includes the following components:
Service cost -- benefits earned during the period......... $ 93,606
Interest cost on projected benefit obligation............. 61,916
Actual return on assets................................... (135,097)
Net amortization and deferred investment gain............. 92,424
----------
Net periodic pension cost................................... $ 112,849
==========
</TABLE>
Significant assumptions used were as follows:
<TABLE>
<S> <C>
Discount rate............................................... 7.5%
Rate of increase in compensation levels (graded by age of
participant).............................................. 4.0 to 10.5%
Expected rate of return of assets........................... 9.5%
============
</TABLE>
Retirement Savings Plan
The Company maintains a defined-contribution savings plan under Section
401(k) of the Internal Revenue Code. The plan covers substantially all full-time
employees. Participating employees may defer a portion of their pretax earnings
up to the Internal Revenue Service annual contribution limit. The Company
matches employee contributions according to a specified formula. The Company's
matching contributions totaled $72,779, $101,890 and $168,040 in the period from
August 3, 1996 through December 31, 1996, the period from January 1, 1996
through August 2, 1996, and the year ended 1995, respectively.
(11) STOCKHOLDERS' EQUITY
Common Stock
On December 20, 1994, PerImmune, Inc. was incorporated and authorized
100,000 shares and issued 1,000 shares of common stock.
On June 28, 1996, PerImmune Holdings, Inc. was formed. A total of 1,000
shares of common stock were authorized and 585 shares were issued for $105,850.
Holding's investment advisor was also issued 8.5 shares of common stock in 1996
in connection with the leveraged buyout (see Note 2).
F-68
<PAGE> 155
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(11) STOCKHOLDERS' EQUITY (CONTINUED)
Options
In August 1996, Holdings granted 255 stock options to members of
management. The options vest over three years and expire ten years from the date
of grant. Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE
------- ----------------
<S> <C> <C>
Outstanding at August 3, 1996....................... -- $ --
Granted............................................. 255 2,725
Exercised........................................... -- --
Canceled............................................ -- --
--- ------
Outstanding at December 31, 1996.................... 255 $2,725
=== ======
Options exercisable at December 31, 1996............ -- --
=== ======
</TABLE>
Options outstanding and exercisable by price range as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------- -----------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
RANGE OF OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE
EXERCISE AS OF REMAINING EXERCISE AS OF EXERCISE
PRICES DECEMBER 31, 1996 CONTRACTUAL LIFE PRICES DECEMBER 31, 1996 PRICES
-------- ----------------- ---------------- --------- ----------------- ---------
<S> <C> <C> <C> <C> <C> <C>
$2,725 255 9.75 years $2,725 -- --
====== === ========== ====== === ======
</TABLE>
Pro forma Option Information
The per share weighted average fair value of all stock options granted
during 1996 was $1,377 on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions: expected
dividend yield 0%, risk-free interest rate of 6.28%, volatility of 70% and an
expected life of 3 years.
The Company applies APB No. 25 and related interpretations in accounting
for its stock options granted to employees. Accordingly, the Company has
recognized no compensation expense in connection with its stock option grants
for the period from August 3, 1996 through December 31, 1996, the period from
January 1, 1996 through August 2, 1996, and the year ended 1995. Had
compensation expense been determined based on the fair value at date of grant
for its stock option under SFAS No. 123, net income (loss) would have been
reported as the pro forma amounts indicated below:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
AUGUST 3, 1996 JANUARY 1, 1996
THROUGH THROUGH YEAR ENDED
NET LOSS DECEMBER 31, 1996 AUGUST 2, 1996 1995
-------- ----------------- --------------- ------------
<S> <C> <C> <C>
As reported.................................... $(4,575,320) $(4,515,118) $(10,002,928)
----------- ----------- ------------
Pro forma...................................... $(4,604,552) $(4,515,118) $(10,002,928)
=========== =========== ============
</TABLE>
Pro forma net income (loss) reflects only options granted from August 31,
1996 through December 31, 1996. The effects of applying SFAS No. 123 in the pro
forma net income (loss) above may not be representative of the effects on such
pro forma information for future years.
F-69
<PAGE> 156
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(12) COMMITMENTS
PerImmune leases laboratory, office and manufacturing facilities and
equipment under noncancellable operating leases which expire at various times
through January 1, 2007 (including the lease transaction described in Note 14
which is also reflected in the amounts below).
Future minimum lease payments under these leases are as follows:
<TABLE>
<S> <C>
1997............................................ $ 1,744,809
1998............................................ 1,797,334
1999............................................ 1,771,120
2000............................................ 1,798,251
2001............................................ 1,849,638
Thereafter...................................... 10,298,844
-----------
$19,259,996
===========
</TABLE>
Rent expense was $588,311 for the period from August 3, 1996 through
December 31, 1996, $782,088 for the period from January 1, 1996 through August
2, 1996 and $1,238,370 for the year ended December 31, 1995. Rent expense is
included in both selling, general and administrative expenses and costs of
contracts in the statements of operations.
(13) INCOME TAXES
The Company was included in the Akzo Nobel, Inc., consolidated Federal
income tax return for the year ended December 31, 1995, and for the period
January 1, 1996 through August 2, 1996. They are presented below, however, on a
separate company basis. The Company will file a separate consolidated Federal
income tax return for the period August 3, 1996 through December 31, 1996.
The amount computed by applying the Federal corporate income tax rate of
34% to loss before income taxes is reconciled to the provision for income taxes
as follows:
<TABLE>
<CAPTION>
PERIMMUNE
HOLDINGS
CONSOLIDATED PREDECESSOR COMPANY
------------ ---------------------------
PERIOD FROM PERIOD FROM
AUGUST 3, JANUARY 1,
1996 THROUGH 1996 THROUGH
DECEMBER 31, AUGUST 2, YEAR ENDED
1996 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Income tax benefit computed at statutory
rates..................................... $(1,555,609) $(1,535,140) $(3,400,996)
State income tax benefit net of Federal
tax....................................... (205,675) (206,748) (472,696)
Expenses not deductible for tax purposes.... 1,623 3,036 3,818
Valuation allowance adjustment.............. 1,759,661 1,738,852 3,869,874
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
</TABLE>
F-70
<PAGE> 157
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(13) INCOME TAXES (CONTINUED)
Deferred income tax (assets)and liabilities as of December 31, 1996 are
summarized as follows:
<TABLE>
<S> <C>
Excess of book over tax (tax over book) basis of assets..... $ (193,529)
Allowance for doubtful accounts and other reserves.......... (11,539)
Accrued expenses............................................ (520,257)
Non-SRLY net operating loss carryovers...................... (1,802,118)
Other....................................................... (11,567)
-----------
(2,539,010)
Valuation allowance......................................... 2,539,010
-----------
$ --
===========
</TABLE>
Prior to the leveraged buyout, the provision for Federal and state income
taxes is recorded using the overall effective tax rate of the consolidated group
applied to the Company's pre-tax earnings before adjustments for permanent
differences. Deferred income tax assets and liabilities are recorded for the
Company's temporary differences using the same effective tax rate. Prior to the
leveraged buyout, the total provision for income taxes represents income taxes
currently payable to the former Parent Company and has been treated as
contributions from parent.
At December 31, 1996, the Company has a net operating loss carryforward for
both Federal and state purposes of $4,681,000 which expires in the year 2011.
This net operating loss carryforward relates to the period August 3, 1996
through December 31, 1996 and as such, is not limited under existing tax laws.
However, this carryforward may be significantly limited under the Internal
Revenue Code as a result of future ownership changes by the Company.
It is more likely than not that the net deferred tax assets reflected above
will not be realized in future years. Therefore, a valuation allowance of
$2,539,010 has been established for the year ended December 31, 1996. The
$478,887 difference between the $2,107,355 net increase in the valuation
allowance from December 31, 1995 to December 31, 1996, and the $1,628,468
increase that reconciles expected to actual tax expense in 1996, is related to
the increase in deferred tax assets which results from the LBO transaction.
Future reductions of the valuation allowance will be reported as reductions of
income tax expense in the period(s) in which it becomes more likely than not
that the tax benefits will be realized.
(14) SUBSEQUENT EVENTS
Sale Leaseback of Facility
On January 15, 1997, PerImmune exercised its option to purchase the land
and building it occupies in Rockville, Maryland for a pre-established price of
$7.9 million. Concurrent to the purchase, PerImmune sold the property to a
third-party (Buyer). The sale included part of the building, improvements,
certain equipment and other items previously owned by the Company and shown in
Plant and Equipment at December 31, 1996. The sales price excluding settlement
and transfer costs was $14,150,000, and the loss resulting from this transaction
was approximately $350,000, after consideration of estimated costs for repairs
described below. The Company received approximately $5.2 million at the closing
of the transaction. This transaction will be treated as a sale-leaseback. As
such, the plant and equipment previously owned by the Company will be removed
from the balance sheet and the loss will be recognized immediately.
In conjunction with the sale, PerImmune has agreed to make certain repairs
at its own expense and to obtain the release of certain liens against the
property. To ensure compliance with these provisions of the agreement, PerImmune
deposited $500,000 and $100,000 into escrow accounts. In addition, PerImmune has
F-71
<PAGE> 158
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(14) SUBSEQUENT EVENTS (CONTINUED)
agreed to deposit, on a monthly basis from February 1997 through January 2002,
$3,333 for costs to be used for elevator repairs and refurbishment. The Company
is entitled to any amounts not spent for the described purpose.
PerImmune also issued to Buyer in connection with the sale leaseback
transaction a warrant for the purchase of 25,000 shares of PerImmune common
stock if the company consummates an initial public offering (IPO) or if certain
other events occur, such as a capital reorganization, recapitalization,
dissolution or liquidation. The warrants are exercisable on or for three years
following the date of one of the previously described events. The warrants
expire in July 1999 if one of the above events has not occurred. The warrant
purchase price in an IPO would be the offering price and in one of the other
events described above, the price would be determined by a formula described in
the warrant agreement.
In January 1997, Holdings issued three uncollateralized, non-interest
bearing promissory notes, for a total face amount of $232,500, to its advisors
on the sale leaseback transaction. Each promissory note is convertible into two
shares of Holdings $0.01 par value common stock and have no specified maturity
date.
Syncor Agreement
On April 23, 1997, Holdings issued 100 shares of its Series A Mandatorily
Redeemable Convertible Preferred Stock (par value .01/share) (Series A) to
Syncor International Corporation (Syncor) for $4.5 million. Dividends are
payable if and when declared by the Board of Directors at the rate of 7% of the
Liquidation Preference per annum, where the Liquidation Preference is initially
defined as $45,000, subject to certain adjustments. Each share of Series A may
be converted into common stock before the Redemption Date (as defined below) at
the option of the holder, or is automatically converted on the date of a
qualifying initial public offering, using a conversion rate as defined in the
agreement. The Company shall redeem the Series A five years after the issuance
date (the Redemption Date) in the event that all shares have not been converted
by this date. If such redemption occurs, the redemption price shall equal the
amount of the Liquidation Preference plus any declared but unpaid dividends. In
the event of liquidation or dissolution, Syncor shall be entitled to be paid
from the assets of Holdings, in preference to the common stockholders, but on an
equal basis with Series B stockholders (see below), the Liquidation Preference
plus all declared but unpaid dividends. Holdings shall also have the right of
first refusal to repurchase these shares should Syncor wish to sell them. In
connection with this issuance, Syncor and the holders of Holding's common stock
were also granted certain registration rights as contained in the Registration
Rights Agreement.
On April 1, 1997, the Company also entered into a distribution agreement
for certain products with Syncor. Under this agreement, Syncor will pay the
Company 50% of net sales, as defined, and right of return exists in certain
situations. The Company is obligated annually to spend 15% of sales of products
covered by this agreement on research and development to improve upon the
existing or develop new products. The Company will also reimburse Syncor for all
expenses related to marketing these products up to $1.5 million, plus 50% of
amounts over $1.5 million provided the expenditures are in accordance with the
annual market plan as prepared by the two companies. This agreement has a term
of five years and is renewable for two additional two-year terms.
Mentor Agreement
On June 16, 1997, the Company issued 20 shares of Series B Mandatorily
Redeemable Convertible Preferred Stock (par value .01/share) (Series B) to
Mentor Corporation (Mentor) for $1 million. Dividends are payable if and when
declared by the Board of Directors at the rate of 7% of the Liquidation
Preference per annum, where Liquidation Preference is defined as $50,000,
subject to certain adjustments. Each share of
F-72
<PAGE> 159
PERIMMUNE HOLDINGS, INC. AND SUBSIDIARY,
AND PREDECESSOR COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(14) SUBSEQUENT EVENTS (CONTINUED)
Series B shall have the same rights, preferences and terms as Series A described
above. Series A and B shall have equal preference.
On June 16, 1997, the Company also entered into a distribution agreement
for certain products with Mentor with an initial term of 5 years. Under this
agreement, Mentor will pay the Company 50% of net sales, as defined in the
agreement. The Company is obligated to provide up to 12,000 units of products
per year to be used by Mentor for promotional purposes, which will not be
reimbursed by Mentor.
F-73
<PAGE> 160
- ---------------------------------------------------------
- ---------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER
OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 8
The Company................................... 20
Use of Proceeds............................... 21
Dividend Policy............................... 21
Capitalization................................ 22
Dilution...................................... 23
Pro Forma Consolidated Financial
Information................................. 24
Selected Financial Data....................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 27
Business...................................... 35
Management.................................... 66
Principal and Selling Stockholders............ 74
Description of Capital Stock.................. 76
Shares Eligible for Future Sale............... 81
Underwriting.................................. 82
Legal Matters................................. 83
Experts....................................... 83
Available Information......................... 84
Index to Consolidated Financial Statements.... F-1
</TABLE>
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THIS
OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
4,000,000 SHARES
LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
PIPER JAFFRAY INC.
, 1999
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 161
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with the issuance and distribution of the
securities to be registered hereunder, all of which will be paid by the
Registrant, will be substantially as follows:
<TABLE>
<CAPTION>
ITEM AMOUNT
<S> <C>
Commission Registration Fee................................. $17,602
*Nasdaq National Market Filing Fee.......................... 90,000
*NASD filing fee............................................ 6,480
*Blue Sky Fees and Expenses (including legal fees).......... +
*Accounting Fees and Expenses............................... +
*Legal Fees and Expenses.................................... 650,000
*Printing and Engraving..................................... +
*Registrar and Transfer Agent's Fees........................ +
*Underwriters' Expenses..................................... +
*Miscellaneous Expenses..................................... +
-------
Total............................................. $ +
=======
</TABLE>
- ---------------
* Estimated
+ To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty as a director, except for
liability, to the extent imposed by applicable law, for: (i) any breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) liability for payments of dividends or stock purchases
or redemptions in violation of Section 174 of the Delaware Law; or (iv) any
transaction from which the director derived an improper personal benefit. The
Bylaws provide for the indemnification of officers and directors to the full
extent permitted by the DGCL, as it now exists or may in the future by amended
(but, in the case of such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than permitted
prior thereto), or by other applicable law as then in effect, against all
expenses, liabilities and losses actually and reasonably incurred or suffered in
connection with service for or on behalf of the Company, including payment of
expenses in defending an action or proceeding upon receipt of any undertaking by
the person indemnified to repay such payment if it is ultimately determined that
such person is not entitled to indemnification. Such indemnification will
continue to an indemnified person who has ceased to be a director, officer,
employee or agent and will inure to the benefit of the indemnified person's
heirs, executors and administrators.
The Company's Bylaws provide that the Company may maintain insurance, at
its expense, to protect itself and any indemnified party against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the DGCL. The Company,
without further stockholder approval, may enter into contracts with any
indemnified person in furtherance of the indemnification provisions contained in
the Bylaws and may create a trust fund, grant a security interest or use other
means (including without limitation, a letter of credit) to ensure the payment
of such amounts as may be necessary to effect indemnification as provided in the
Bylaws.
The Company has agreed to indemnify the Underwriters and their controlling
persons, and the Underwriters have agreed to indemnify the Company and its
controlling persons, against certain liabilities,
II-1
<PAGE> 162
including liabilities under the Securities Act. Reference is made to the
Underwriting Agreement filed as Exhibit 1 hereto.
For information regarding the Company's undertaking to submit to
adjudication the issue of indemnification for violation of the securities, see
Item 17 hereof.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
All references in this Item 15 to common stock reflect a 2-for-1 split
effective December 31, 1997 and a 2-for-3 reverse stock split approved by the
Board of Directors on December 28, 1998. All sales, unless otherwise noted, were
made in reliance on Section 4(2) of the Securities Act and/or Regulation D or
Rule 701 promulgated under the Securities Act and were made without general
solicitation or advertising. The purchasers were sophisticated investors with
access to all relevant information necessary to evaluate these investments, and
who represented to the Registrant that the shares were being acquired for
investment.
COMMON STOCK
<TABLE>
<CAPTION>
DATE OF ISSUANCE SHARES ISSUED CONSIDERATION PAID NAME OF PURCHASER
- ------------------------------ ------------- ------------------ -----------------------------------
<S> <C> <C> <C>
April 8, 1996................. 2,149 $8,050 Walter Kiel
(exercise ($2.50
of options) exercise price)
October 18, 1996.............. 591 $3,937 Perry Rosenthal
November 18, 1997............. 212,099 $1,431,657 CoreStates Enterprise Fund
74,221 $500,994 Thomas Ole Dial
81,400 $549,450 Dublind Partners Inc.
924 $6,327 John Erdman
39,183 $264,483 Scott Fleming
38,257 $258,237 Mark Lieb
40,149 $271,008 Charles Lindsay (Gales & Co.)
2,962 $19,998 Charles Lindsay C/F Maxwell Lindsay
2,962 $19,998 Charles Lindsay C/F Michael Lindsay
2,962 $19,998 Charles Lindsay C/F Sally Lindsay
2,962 $19,998 Charles Lindsay C/F Susan Lindsay
148,148 $999,999 Northstar Balance Sheet Opportunities
22,221 $149,994 Nestor Olivier
129,659 $875,196 Security Insurance Company of
Hartford
463 $3,123 William Trice
7,407 $715,833 Charles Lindsay (Gales & Co.)
November 18, 1997 (exercise of 924 $5,544 John Erdman
warrants)................... ($4 exercise
price)
924 $5,544 Mark Lieb
1,849 $11,096 Scott Fleming
20,800 $124,800 Security Insurance Company of
Hartford
December 31, 1997............. 70,794 $60,000 Simon McKenzie
January 2, 1998 (merger)...... 57,686 9.5 shares of Craigie Company
PerImmune
Holdings, Inc.
Common Stock
</TABLE>
II-2
<PAGE> 163
<TABLE>
<CAPTION>
DATE OF ISSUANCE SHARES ISSUED CONSIDERATION PAID NAME OF PURCHASER
- ------------------------------ ------------- ------------------ -----------------------------------
<S> <C> <C> <C>
3,594,767 592 shares of Michael Hanna (voting trust)
PerImmune
Holdings, Inc.
Common Stock
March 11, 1998................ 46,683 $315,108 Dublind Securities
April 29, 1998................ 26,666 $100,000 Alexander Klibanov
(exercise
of option)
May 26, 1998.................. 45,541 $20,438 Janet Hanlon
(exercise
option)
June 9, 1998.................. 133 $500 Stephen Vehslage
(exercise
of option)
</TABLE>
PREFERRED STOCK
Series A-1 Preferred
<TABLE>
<CAPTION>
COMMON SHARES
SHARES CONSIDERATION ISSUABLE UPON
DATE OF ISSUANCE ISSUED PAID CONVERSION NAME OF PURCHASER
---------------- ------- ------------- ------------- --------------------------------------
<S> <C> <C> <C> <C>
September 22, 1995... 6,250 $ 50,000 8,333 Charles J. Lindsay,
IRA Acct
43,750 $ 350,000 58,333 Dublind Partners
6,250 $ 50,000 8,333 Mark Lieb
200,000 $1,600,000 266,666 Northstar Advantage
High Total Return Fund II
12,500 $ 100,000 16,666 Northstar High Yield Fund
12,500 $ 100,000 16,666 Raymond Schuyler
12,500 $ 100,000 16,666 Scott Fleming
125,000 $1,000,000 166,666 Security Insurance Company of Hartford
125,000 $1,000,000 166,666 TD Partners
November 18, 1995.... 125,000 $1,000,000 166,666 Credianstalt American Corporation
</TABLE>
Series A-2 Preferred
<TABLE>
<CAPTION>
COMMON SHARES
SHARES CONSIDERATION ISSUABLE UPON
DATE OF ISSUANCE ISSUED PAID CONVERSION NAME OF PURCHASER
---------------- ------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C>
March 12, 1997....................... 40,000 $4,000,000 Series A-2 not Northstar High
convertible into Total Return Fund
common stock
</TABLE>
Series A-3 Preferred
<TABLE>
<CAPTION>
COMMON SHARES
SHARES CONSIDERATION ISSUABLE UPON
DATE OF ISSUANCE ISSUED PAID CONVERSION NAME OF PURCHASER
---------------- ------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
June 25, 1997.................... 139,390 Series A-1 185,853 Creditanstalt
Preferred Shares American
exchanged for an Corporation
equal number of
Series A-3
Preferred Shares
</TABLE>
II-3
<PAGE> 164
Series B-1 Preferred
<TABLE>
<CAPTION>
COMMON SHARES
SHARES CONSIDERATION ISSUABLE UPON
DATE OF ISSUANCE ISSUED PAID CONVERSION NAME OF PURCHASER
---------------- ------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
January 2, 1998.................. 100 100 Shares of 607,288 Syncor Corporation
PerImmune
Holdings, Inc.
Series A
Preferred Stock
</TABLE>
Series B-2 Preferred
<TABLE>
<CAPTION>
COMMON SHARES
SHARES CONSIDERATION ISSUABLE UPON
DATE OF ISSUANCE ISSUED PAID CONVERSION NAME OF PURCHASER
---------------- ------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C>
January 2, 1998................. 120 120 Shares of Per- 728,598 Mentor Corporation
Immune Holdings,
Inc. Series B
Convertible
Preferred Stock
</TABLE>
OPTIONS
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS EXERCISE
DATE OF GRANT GRANTED PRICE/SHARE NAME OF GRANTEE
------------- ---------- ----------- ---------------
<S> <C> <C> <C>
January 8, 1996....................... 13,333 $ 3.75 Scott Bleczinski
July 1, 1996.......................... 40,000 $ 3.75 Matthew Root
August 14, 1996....................... 13,333 $ 3.75 Ingo Beck
6,666 $ 3.75 Rebecca Fuller
September 1, 1996..................... 13,333 $ 6.00 Cheryl Cataldo
13,333 $ 6.00 Glenn Pilkington
13,333 $ 3.75 Raymond Schuyler
20,000 $ 3.75 Bruce Jensen
40,000 $ 3.75 William Wong
2,666 $ 3.75 Patricia Walker
December 6, 1996...................... 3,000 $ 3.75 Patricia Harris
September 12, 1997.................... 13,333 $ 6.75 Pete Finlon
December 31, 1997..................... 6,666 $ 6.75 Ingo Beck
13,333 $ 6.75 Larry Bloom
13,333 $ 6.75 Pete Carbonaro
13,333 $ 6.75 Michael Carrcasino
3,333 $ 6.75 Alex Denogean
3,333 $ 6.75 John Kohl
3,333 $ 6.75 Scott Snyder
13,333 $ 6.75 Persis Strong
3,333 $ 6.75 Debbie Zumerling
January 2, 1998....................... 1,560,554 $ 6.75 Holders of PerImmune
Holdings Options
January 12, 1998...................... 13,333 $ 6.75 Peggy McGaw
February 16, 1998..................... 66,667 $11.25 Robert Pevenstein
March 9, 1998......................... 66,667 $11.25 Daniel Reale
April 8, 1998......................... 10,000 $11.25 Larry Bloom
10,000 $11.25 Persis Strong
1,666 $11.25 Roger Sweaney
</TABLE>
II-4
<PAGE> 165
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS EXERCISE
DATE OF GRANT GRANTED PRICE/SHARE NAME OF GRANTEE
------------- ---------- ----------- ---------------
<S> <C> <C> <C>
May 8, 1998........................... 3,333 $11.25 Michael Chioti
16,666 $11.25 Herbert C. Hoover
3,333 $11.25 Ronald Levy
3,333 $11.25 Kim H. Lyerly
3,333 $11.25 Bruce Wolf
16,667 $11.25 H.M. Pinedo
June 15, 1998......................... 66,667 $15.00 Carl Foster
June 22, 1998......................... 6,666 $15.00 Carrie Mulherin
August 25, 1998....................... 23,333 $15.00 Patricia Barnett
August 31, 1998....................... 7,500 $15.00 Roger Sweaney
December 28, 1998..................... 66,667 $15.00 Lawerence Bloom
</TABLE>
WARRANTS
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS
DATE OF ISSUANCE ISSUED EXERCISE PRICE NAME OF PURCHASER
---------------- --------- -------------- -----------------
<S> <C> <C> <C>
September 27, 1995................... 115,283 $ 6.00 Dublind Partners
November 21, 1995.................... 121,570 $10.50 Creditanstalt American
Corporation
125,347 $10.50 Northstar High Yield Fund
June 11, 1996........................ 212,098 $10.50 CoreStates Enterprise Fund
June 21, 1996........................ 106,049 $10.50 Northstar Advantage High Total
Return Fund
January 2, 1998...................... 452,896 $ 6.75 Simon McKenzie
April 1, 1998........................ 32,711 $11.46 Northstar High Total Return
Fund
December 28, 1995.................... 32,711 $11.46 Northstar High Yield Fund
August 25, 1998...................... 118,903 $15.00 Northstar High Yield Fund
686,996 $15.00 Northstar High Total Return
Fund
237,806 $15.00 Northstar High Total Return
Fund II
39,634 $15.00 Northstar Strategic Income
Fund
</TABLE>
II-5
<PAGE> 166
PROMISSORY NOTES
<TABLE>
<CAPTION>
DATE OF ISSUANCE PRINCIPAL AMOUNT AMOUNT OF DISCOUNT NAME OF PAYEE
---------------- ---------------- ------------------ -------------
<S> <C> <C> <C>
October 1995................. $ 1,500,000 none Zynaxis, Inc.
November 16, 1995............ $ 9,000,000 none Creditanstalt Bankervein
November 15, 1995............ $ 4,667,000 none Dade International, Inc.
December 1995................ $ 6,265,000 $1,565,000 Northstar Advantage High Total
Return Fund
December 6, 1996............. $ 500,000 none Transamerica Business Credit
Corporation
June 11, 1996................ $ 4,000,000 none Corestates Enterprise Fund
June 21, 1996................ $ 2,000,000 $ 140,000 Northstar Advantage High Total
Return Fund
September 30, 1997........... $ 1,500,000 none Washington Economic Development
Finance Authority
April 1, 1998................ $ 4,000,000 none Northstar High Yield Fund
April 1, 1998................ $ 6,000,000 none Northstar High Total Return Fund
II
August 1998.................. $ 3,841,463 none Northstar High Yield
Fund
$22,195,122 none Northstar High Total
Return Fund
$ 7,682,927 none Northstar High Total
Return Fund II
$ 1,280,488 none Northstar Strategic
Income Fund
$ 658,537 none Northstar High Yield
Fund
$ 3,804,878 none Northstar High Total
Return Fund
$ 1,317,073 none Northstar High Total
Return Fund II
$ 219,512 none Northstar Strategic
Income Fund
January 1999................. $ 2,000,000 none Dublind Investments LLC
</TABLE>
II-6
<PAGE> 167
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
I. EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
1 Form of Underwriting Agreement by and among the
Representatives, the Selling Stockholder and the Company.*
3.1 Amended and Restated Certificate of Incorporation of the
Company, as amended.*
3.2 Bylaws of the Company.*
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Common Stock Certificate.
4.3 Registration Rights Agreement, dated as of August 25, 1998,
by and among Intracel Corporation and Northstar High Total
Return Fund, Northstar High Total Return Fund II, Northstar
High Yield Fund, Northstar Strategic Income Fund, Northstar
Balance Sheet Opportunities.*
4.4 Registration Rights Agreement dated as of January 2, 1998 by
and among Intracel Corporation and the Holders set forth
therein.
4.5 Amendment to Registration Rights Agreement dated July 9,
1998 among Intracel Corporation and Mentor Corporation.
4.6 Agreement dated as of June 25, 1997 among Intracel
Corporation and Creditanstalt American Corporation.
4.7 Registration Rights Agreement dated as of November 16, 1995
by and between Intracel Corporation and Creditanstalt
American Corporation.
4.8 Waiver and Agreement dated as of January 21, 1999 by and
among Intracel Corporation and Bank Austria AG, Grand Cayman
Branch (assignee of Creditanstalt American Corporation).
4.9 Registration Rights Agreement dated as of September 22, 1995
by and between Intracel Corporation and each of the
Purchasers set forth therein.
4.10 Waiver and Amendment Agreement dated as of January 11, 1999
among Intracel Corporation, Security Insurance Company of
Hartford, TD Partners, Northstar High Yield Fund and
Northstar High Total Return Fund.
4.11 Registration Rights Agreement dated as of July 22, 1994 by
and between Intracel Corporation and each of the Purchasers
set forth therein.
4.12 Waiver and Amendment Agreement dated as of January 20, 1999
among Intracel Corporation and Security Insurance Company of
Hartford, TD Partners and Charles J. Lindsay
4.13 Form of Stock Purchase Agreement dated June 7, 1991 by and
among American Bio-Technologies, Inc. and The Louisiana Seed
Capital Fund, L.P.
4.14 Waiver dated as of January 20, 1999 by and among Intracel
Corporation (formerly known as American Bio-Technologies,
Inc.) and The Louisiana Seed Capital Fund, L.P.
4.15 Reference is made to Exhibits 10.14, 10.15 and 10.16.
5 Opinion of Morrison & Foerster LLP.
10.1 Lease, dated January 15, 1997, between PW Acquisitions 1,
LLC and PerImmune, Inc.*
10.2 Lease Agreement, dated April 30, 1991, between Ward
Corporation and Organon Teknika Corporation.
10.3 Commercial Lease Agreement, dated June 1, 1993, between
Rowley Enterprises, Inc. and Polymer Technology
International for the property located at 1871 NW Gilman
Blvd., Issaquah, Washington.
</TABLE>
II-7
<PAGE> 168
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.4 Lease Agreement, dated August 22, 1988, between Issaquah #1
Limited Partnership and Baxter Healthcare Corporation for
the premises located at I-90 Lake Place, 2005 N.W. Sammish
Road, Issaquah, Washington.
10.5 Lease, dated February 1, 1998, between P.K. Projects Ltd.
and Intracel Corporation for the premises located at
Commerce Parkway, Richmond, British Colombia.
10.6 Agreement and Plan of Reorganization, dated November 26,
1997, among PerImmune Holdings, Inc., Intracel Corporation
and Intracel Acquisition Sub, Inc.
10.7 Employment Agreement, dated January 2, 1998, between Michael
G. Hanna, Jr. and Intracel Corporation.*
10.8 Employment Agreement, dated January 2, 1998, between Simon
R. McKenzie and Intracel Corporation.*
10.9 Employment Agreement between Daniel Reale and Intracel
Corporation.*
10.10 Employment Agreement between Persis Strong and Intracel
Corporation.
10.11 Employment Agreement between Lawrence Bloom and Intracel
Corporation.
10.12 Employment Agreement between Carl Foster and Intracel
Corporation.*
10.13 Preferred Stock Purchase Agreement, dated as of March 12,
1997, between Intracel Corporation and Northstar High Total
Return Fund.
10.14 Note and Series A-IV Warrant Purchase Agreement, dated as of
June 21, 1996, between Intracel Corporation and Northstar
Advantage High Total Return Fund.
10.15 Note and Series A-III Warrant Purchase Agreement, dated as
of June 11, 1996, between Intracel Corporation and
CoreStates Enterprise Fund.
10.16 Note and Series A-V Warrant Purchase Agreement, dated as of
April 1, 1998, between Intracel Corporation and Northstar
High Yield Fund and Northstar High Total Return Fund II.
10.17 Loan and Security Agreement, dated September 30, 1997,
between the Washington Economic Development Finance
Authority and Intracel Corporation.
10.18 Tax Certificate and Regulatory Agreement, dated September
11, 1997 between the Washington Economic Development Finance
Authority and Intracel Corporation.
10.19 Stock Purchase Agreement, dated July 1, 1996, between
PerImmune Holdings, Inc. and Organon Teknika Corporation.
10.20 Agreements between the Intracel Corporation and Thomas
Jefferson University.
10.21 Product Development and License Agreement, between
PerImmune, Inc, and Sigma Diagnostics, Inc.
10.22 Research, Collaboration and Distribution Agreement, dated
December 22, 1997, between PerImmune, Inc. and Mentor
Corporation.
10.23 Distribution Agreement, dated June 16, 1997, between
PerImmune, Inc. and Mentor Corporation.
10.24 Intellectual Property Agreement, dated August 2, 1996, by
and among Akzo Nobel Pharma International, B.V. and
PerImmune Holdings, Inc.
10.25 Intellectual Property Security Agreement, dated August 13,
1996, by and among PerImmune Holdings, Inc., PerImmune,
Inc., Akzo Nobel Pharma International, B.V. and Organon
Teknika Corporation.
10.26 1989 Stock Option Plan.*
10.27 1996 Stock Option Plan of PerImmune Holdings, Inc.*
10.28 1999 Stock Incentive Plan.*
</TABLE>
II-8
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.29 Securities Purchase Agreement, dated as of August 25, 1998,
among Intracel Corporation, Bartels, Inc., PerImmune
Holdings, Inc., PerImmune, Inc. and Northstar High Yield
Fund, Northstar High Total Return Fund, Northstar High Total
Return Fund II, Northstar Strategic Income Fund.
10.30 Interest Escrow Security Agreement, dated as of August 25,
1998, among Northwestern Trust and Investors Advisory
Company, Northstar High Yield Fund, Northstar High Total
Return Fund, Northstar High Total Return Fund II, Northstar
Strategic Income Fund and Intracel Corporation.
10.31 Security Agreement, dated as of August 25, 1998, among
Intracel Corporation, Bartels, Inc., PerImmune Holdings,
Inc., PerImmune, Inc. and Northstar High Yield Fund,
Northstar High Total Return Fund, Northstar High Total
Return Fund II, Northstar Strategic Income Fund.
10.32 Intellectual Property Security Agreement, dated as of August
25, 1998, among Intracel Corporation, Bartels, Inc.,
PerImmune Holdings, Inc., PerImmune, Inc. and Northstar High
Yield Fund, Northstar High Total Return Fund, Northstar High
Total Return Fund II, Northstar Strategic Income Fund.
10.33 Pledge Agreement, dated as of August 25, 1998, between
Intracel Corporation and PerImmune Holdings, Inc. and
Northstar High Yield Fund, Northstar High Total Return Fund,
Northstar High Total Return Fund II, Northstar Strategic
Income Fund.*
10.34 Funded Commitment Facility Escrow Agreement, dated as of
August 24, 1998, by and among Northstar High Yield Fund,
Northstar High Total Return Fund, Northstar High Total
Return Fund II, Northstar Strategic Income Fund, Intracel
Corporation and Bank of America NT & SA (doing business as
Seattle First National Bank).
10.35 Agreement, dated as of August 20, 1998, by and between
Intracel Corporation and First National Bank.*
10.36 Amendment No. 1, dated July 31, 1998, between Organon
Teknika Corporation, PerImmune Holdings, Inc., Akzo Nobel
Pharma International, B.V. and PerImmune, Inc., to (a) the
Promissory Note, dated August 2, 1996, by and among
PerImmune Holdings, Inc. to Organon Teknika Corporation, (b)
the Intellectual Property Security Agreement, dated as of
August 13, 1996, by and among PerImmune Holdings, Inc.,
PerImmune, Inc., Akzo Nobel Pharma International, B.V. and
Organon Teknika Corporation, and (c) the Intellectual
Property Agreement, dated August 2, 1996, by and among
PerImmune Holdings, Inc. and Akzo Nobel International, B.V.*
10.37 Joint Venture Agreement dated December 11, 1998 by and
between Intracel Corporation and Lehigh Valley Hospital and
Health Network.
10.38 Amended and Restated OncoVAX Center Lease dated as of
December 11, 1998 by and between Lehigh Valley Hospital and
Health Network, as landlord and Intracel Corporation, as
Tenant.*
10.39 Initial Medical Director Services Agreement dated as of
December 11, 1998, by and between Intracel Corporation and
Lehigh Valley Hospital and Health Network.*
10.40 Research and Center Agreement, dated December 28, 1998,
between Intracel Corporation and Duke University.*
10.41 First Amendment and Waiver Agreement, dated as of
January 20, 1999, by and among Intracel Corporation,
PerImmune Holdings, Inc., PerImmune, Inc., Bartels, Inc. and
Northstar High Yield Fund, Northstar High Total Return Fund,
Northstar High Total Return Fund II and Northstar Strategic
Income Fund.*
10.42 Senior Note Purchase Agreement, dated January 27, 1999, by
and among Intracel Corporation and Dublind Investments LLC.
</TABLE>
II-9
<PAGE> 170
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.43 Letter of Intent, dated December 10, 1998, by and between
Intracel Corporation and Vanderbilt University Medical
Center.
10.44 Letter of Intent, dated January 5, 1999, by and between
Intracel Corporation and Northwestern University.
10.45 Letter of Intent, dated December 23, 1998, by and between
Intracel Corporation and University of Rochester Medical
Center of the University of Rochester.
10.46 Letter of Intent, dated October 9, 1998, by and between
Intracel Corporation and Hoag Memorial Hospital
Presbyterian.
10.47 Employment Agreement between Patricia Barnett and Intracel
Corporation.
10.48 Distribution Agreement dated April 1, 1997 between Syncor
International Corporation and PerImmune, Inc.
10.49 Commitment Letter dated January 20, 1999 from Raymond J.
Schuyler, Simon R. McKenzie, Michael G. Hanna Jr. Ph.D. and
Lawrence A. Bloom in favor of Intracel Corporation.
10.50 Second Amendment Agreement dated as of February 6, 1999 by
and among Intracel Corporation, PerImmune Holdings, Inc.,
PerImmune, Inc., Bartels, Inc. and Northstar High Yield
Fund, Northstar High Total Return Fund, Northstar High Total
Return Fund II and Northstar Strategic Fund.
21 List of Subsidiaries of the Company.*
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants -- Intracel Corporation.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants -- PerImmune Holdings, Inc.
23.3 Consent of Ernst & Young LLP, independent auditors.
23.4 Consent of KPMG LLP, independent certified public
accountants.
24 Power of Attorney (set forth on signature page to
Registration Statement).*
27.1 Financial Data Schedule for the year ended December 31,
1997.*
27.2 Financial Data Schedule for the three months ended March 31,
1998.*
27.3 Financial Data Schedule for the six months ended June 30,
1998.*
27.4 Financial Data Schedule for the nine months ended September
30, 1998.*
</TABLE>
- ---------------
* Previously filed.
+ To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denomination and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered in the Offering, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such
II-10
<PAGE> 171
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act, shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-11
<PAGE> 172
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 4 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Seattle, State of Washington, on February 8,
1999.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
------------------------------------
Simon R. McKenzie
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act, this Amendment No. 4 to
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
<S> <C> <C>
* Chairman of the Board and February 8, 1999
- ----------------------------------------------------- Chief Scientific Officer
Michael G. Hanna
/s/ SIMON R. McKENZIE President, Chief Executive February 8, 1999
- ----------------------------------------------------- Officer and Director
Simon R. McKenzie (principal executive officer)
/s/ LAWRENCE A. BLOOM Chief Financial Officer February 8, 1999
- ----------------------------------------------------- (principal financial officer)
Lawrence A. Bloom
* Director February 8, 1999
- -----------------------------------------------------
Raymond Schuyler
* Director February 8, 1999
- -----------------------------------------------------
Joseph Caligiuri
* Director February 8, 1999
- -----------------------------------------------------
Steven Gerber
* Director February 8, 1999
- -----------------------------------------------------
Alexander Klibanov
*By: /s/ SIMON R. McKENZIE
---------------------------------------------------
Simon R. McKenzie as Attorney-in-fact
</TABLE>
II-12
<PAGE> 173
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
1 Form of Underwriting Agreement by and among the
Representatives, the Selling Stockholder and the Company.
3.1 Amended and Restated Certificate of Incorporation of the
Company, as amended.
3.2 Bylaws of the Company.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Common Stock Certificate.
4.3 Registration Rights Agreement, dated as of August 25, 1998,
by and among Intracel Corporation and Northstar High Total
Return Fund, Northstar High Total Return Fund II, Northstar
High Yield Fund, Northstar Strategic Income Fund, Northstar
Balance Sheet Opportunities.*
4.4 Registration Rights Agreement dated as of January 2, 1998 by
and among Intracel Corporation and the Holders set forth
therein.
4.5 Amendment to Registration Rights Agreement dated July 9,
1998 among Intracel Corporation and Mentor Corporation.
4.6 Agreement dated as of June 25, 1997 among Intracel
Corporation and Creditanstalt American Corporation.
4.7 Registration Rights Agreement dated as of November 16, 1995
by and between Intracel Corporation and Creditanstalt
American Corporation.
4.8 Waiver and Agreement dated as of January 21, 1999 by and
among Intracel Corporation and Bank Austria AG, Grand Cayman
Branch (assignee of Creditanstalt American Corporation).
4.9 Registration Rights Agreement dated as of September 22, 1995
by and between Intracel Corporation and each of the
Purchasers set forth therein.
4.10 Waiver and Amendment Agreement dated as of January 11, 1999
among Intracel Corporation, Security Insurance Company of
Hartford, TD Partners, Northstar High Yield Fund and
Northstar High Total Return Fund.
4.11 Registration Rights Agreement dated as of July 22, 1994 by
and between Intracel Corporation and each of the Purchasers
set forth therein.
4.12 Waiver and Amendment Agreement dated as of January 20, 1999
among Intracel Corporation and Security Insurance Company of
Hartford, TD Partners and Charles J. Lindsay
4.13 Form of Stock Purchase Agreement dated June 7, 1991 by and
among American Bio-Technologies, Inc. and The Louisiana Seed
Capital Fund, L.P.
4.14 Waiver dated as of January 20, 1999 by and among Intracel
Corporation (formerly known as American Bio-Technologies,
Inc.) and The Louisiana Seed Capital Fund, L.P.
4.15 Reference is made to Exhibits 10.14, 10.15 and 10.16.
5 Opinion of Morrison & Foerster LLP.
10.1 Lease, dated January 15, 1997, between PW Acquisitions 1,
LLC and PerImmune, Inc.*
10.2 Lease Agreement, dated April 30, 1991, between Ward
Corporation and Organon Teknika Corporation.
10.3 Commercial Lease Agreement, dated June 1, 1993, between
Rowley Enterprises, Inc. and Polymer Technology
International for the property located at 1871 NW Gilman
Blvd., Issaquah, Washington.
10.4 Lease Agreement, dated August 22, 1988, between Issaquah #1
Limited Partnership and Baxter Healthcare Corporation for
the premises located at I-90 Lake Place, 2005 N.W. Sammish
Road, Issaquah, Washington.
10.5 Lease, dated February 1, 1998, between P.K. Projects Ltd.
and Intracel Corporation for the premises located at
Commerce Parkway, Richmond, British Colombia.
</TABLE>
<PAGE> 174
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.6 Agreement and Plan of Reorganization, dated November 26,
1997, among PerImmune Holdings, Inc., Intracel Corporation
and Intracel Acquisition Sub, Inc.
10.7 Employment Agreement, dated January 2, 1998, between Michael
G. Hanna, Jr. and Intracel Corporation.*
10.8 Employment Agreement, dated January 2, 1998, between Simon
R. McKenzie and Intracel Corporation.*
10.9 Employment Agreement between Daniel Reale and Intracel
Corporation.*
10.10 Employment Agreement between Persis Strong and Intracel
Corporation.
10.11 Employment Agreement between Lawrence Bloom and Intracel
Corporation.
10.12 Employment Agreement between Carl Foster and Intracel
Corporation.*
10.13 Preferred Stock Purchase Agreement, dated as of March 12,
1997, between Intracel Corporation and Northstar High Total
Return Fund.
10.14 Note and Series A-IV Warrant Purchase Agreement, dated as of
June 21, 1996, between Intracel Corporation and Northstar
Advantage High Total Return Fund.
10.15 Note and Series A-III Warrant Purchase Agreement, dated as
of June 11, 1996, between Intracel Corporation and
CoreStates Enterprise Fund.
10.16 Note and Series A-V Warrant Purchase Agreement, dated as of
April 1, 1998, between Intracel Corporation and Northstar
High Yield Fund and Northstar High Total Return Fund II.
10.17 Loan and Security Agreement, dated September 30, 1997,
between the Washington Economic Development Finance
Authority and Intracel Corporation.
10.18 Tax Certificate and Regulatory Agreement, dated September
11, 1997 between the Washington Economic Development Finance
Authority and Intracel Corporation.
10.19 Stock Purchase Agreement, dated July 1, 1996, between
PerImmune Holdings, Inc. and Organon Teknika Corporation.
10.20 Agreements between the Intracel Corporation and Thomas
Jefferson University.
10.21 Product Development and License Agreement, between
PerImmune, Inc, and Sigma Diagnostics, Inc.
10.22 Research, Collaboration and Distribution Agreement, dated
December 22, 1997, between PerImmune, Inc. and Mentor
Corporation.
10.23 Distribution Agreement, dated June 16, 1997, between
PerImmune, Inc. and Mentor Corporation.
10.24 Intellectual Property Agreement, dated August 2, 1996, by
and among Akzo Nobel Pharma International, B.V. and
PerImmune Holdings, Inc.
10.25 Intellectual Property Security Agreement, dated August 13,
1996, by and among PerImmune Holdings, Inc., PerImmune,
Inc., Akzo Nobel Pharma International, B.V. and Organon
Teknika Corporation.
10.26 1989 Stock Option Plan.*
10.27 1996 Stock Option Plan of PerImmune Holdings, Inc.*
10.28 1999 Stock Incentive Plan.*
10.29 Securities Purchase Agreement, dated as of August 25, 1998,
among Intracel Corporation, Bartels, Inc., PerImmune
Holdings, Inc., PerImmune, Inc. and Northstar High Yield
Fund, Northstar High Total Return Fund, Northstar High Total
Return Fund II, Northstar Strategic Income Fund.
10.30 Interest Escrow Security Agreement, dated as of August 25,
1998, among Northwestern Trust and Investors Advisory
Company, Northstar High Yield Fund, Northstar High Total
Return Fund, Northstar High Total Return Fund II, Northstar
Strategic Income Fund and Intracel Corporation.
</TABLE>
<PAGE> 175
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.31 Security Agreement, dated as of August 25, 1998, among
Intracel Corporation, Bartels, Inc., PerImmune Holdings,
Inc., PerImmune, Inc. and Northstar High Yield Fund,
Northstar High Total Return Fund, Northstar High Total
Return Fund II, Northstar Strategic Income Fund.
10.32 Intellectual Property Security Agreement, dated as of August
25, 1998, among Intracel Corporation, Bartels, Inc.,
PerImmune Holdings, Inc., PerImmune, Inc. and Northstar High
Yield Fund, Northstar High Total Return Fund, Northstar High
Total Return Fund II, Northstar Strategic Income Fund.
10.33 Pledge Agreement, dated as of August 25, 1998, between
Intracel Corporation and PerImmune Holdings, Inc. and
Northstar High Yield Fund, Northstar High Total Return Fund,
Northstar High Total Return Fund II, Northstar Strategic
Income Fund.*
10.34 Funded Commitment Facility Escrow Agreement, dated as of
August 24, 1998, by and among Northstar High Yield Fund,
Northstar High Total Return Fund, Northstar High Total
Return Fund II, Northstar Strategic Income Fund, Intracel
Corporation and Bank of America NT & SA (doing business as
Seattle First National Bank).
10.35 Agreement, dated as of August 20, 1998, by and between
Intracel Corporation and First National Bank.*
10.36 Amendment No. 1, dated July 31, 1998, between Organon
Teknika Corporation, PerImmune Holdings, Inc., Akzo Nobel
Pharma International, B.V. and PerImmune, Inc., to (a) the
Promissory Note, dated August 2, 1996, by and among
PerImmune Holdings, Inc. to Organon Teknika Corporation, (b)
the Intellectual Property Security Agreement, dated as of
August 13, 1996, by and among PerImmune Holdings, Inc.,
PerImmune, Inc., Akzo Nobel Pharma International, B.V. and
Organon Teknika Corporation, and (c) the Intellectual
Property Agreement, dated August 2, 1996, by and among
PerImmune Holdings, Inc. and Akzo Nobel International, B.V.*
10.37 Joint Venture Agreement dated December 11, 1998 by and
between Intracel Corporation and Lehigh Valley Hospital and
Health Network.
10.38 Amended and Restated OncoVAX Center Lease dated as of
December 11, 1998 by and between Lehigh Valley Hospital and
Health Network, as landlord and Intracel Corporation, as
Tenant.*
10.39 Initial Medical Director Services Agreement dated as of
December 11, 1998, by and between Intracel Corporation and
Lehigh Valley Hospital and Health Network.*
10.40 Research and Center Agreement, dated December 28, 1998,
between Intracel Corporation and Duke University.*
10.41 First Amendment and Waiver Agreement, dated as of January
20, 1999, by and among Intracel Corporation, PerImmune
Holdings, Inc., PerImmune, Inc., Bartels, Inc. and Northstar
High Yield Fund, Northstar High Total Return Fund, Northstar
High Total Return Fund II and Northstar Strategic Income
Fund.*
10.42 Senior Note Purchase Agreement, dated January 27, 1999, by
and among Intracel Corporation and Dublind Investments LLC.
10.43 Letter of Intent, dated December 10, 1998, by and between
Intracel Corporation and Vanderbilt University Medical
Center.
10.44 Letter of Intent, dated January 5, 1999, by and between
Intracel Corporation and Northwestern University.
10.45 Letter of Intent, dated December 23, 1998, by and between
Intracel Corporation and University of Rochester Medical
Center of the University of Rochester.
10.46 Letter of Intent, dated October 9, 1998, by and between
Intracel Corporation and Hoag Memorial Hospital
Presbyterian.
10.47 Employment Agreement between Patricia Barnett and Intracel
Corporation.
</TABLE>
<PAGE> 176
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
10.48 Distribution Agreement dated April 1, 1997 between Syncor
International Corporation and PerImmune, Inc.
10.49 Commitment Letter dated January 20, 1999 from Raymond J.
Schuyler, Simon R. McKenzie, Michael G. Hanna Jr. Ph.D and
Lawrence A. Bloom in favor of Intracel Corporation.
10.50 Second Amendment Agreement dated as of February 6, 1999 by
and among Intracel Corporation, PerImmune Holdings, Inc.,
PerImmune, Inc., Bartels, Inc. and Northstar High Yield
Fund, Northstar High Total Return Fund, Northstar High Total
Return Fund II and Northstar Strategic Fund.
21 List of Subsidiaries of the Company.*
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants -- Intracel Corporation.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants -- PerImmune Holdings, Inc.
23.3 Consent of Ernst & Young LLP, independent auditors.
23.4 Consent of KPMG LLP, independent certified public
accountants.
24 Power of Attorney (set forth on signature page to
Registration Statement).*
27.1 Financial Data Schedule for the year ended December 31,
1997*
27.2 Financial Data Schedule for the three months ended March 31,
1998*
27.3 Financial Data Schedule for the six months ended June 30,
1998.*
27.4 Financial Data Schedule for the nine months ended September
30, 1998.*
</TABLE>
- ---------------
* Previously filed.
+ To be filed by amendment.
<PAGE> 1
EXHIBIT 4.2
[GRAPHIC -- SPECIMEN COMMON STOCK CERTIFICATE]
102
<PAGE> 2
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________ Custodian ___________
TEN ENT - as tenants by the entireties (Cust.) (Minor)
JT TEN - as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as tenants Act ___________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, ________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _______________________
______________________________________________________________________
NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the certificate in every
particular, without alteration or enlargement or any change
whatever.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR DAVID SOKOLOFF: 215-830-7197
680 BLAIR MILL ROAD PROOF OF FEBRUARY 2, 1999
HORSHAM, PA 73044 INTRACEL CORPORATION
(215) 687-3480 H 60665 bk
- -----------------------------------------------------------------------------------------------------
SALES: L TOGIJA: 212-593-8700 OPERATOR: JW
- -----------------------------------------------------------------------------------------------------
/NET/BANKNOTE/HOME 12/INTRACEL 60646 NEW
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 4.4
INTRACEL CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of January 2, 1998, by and among Intracel
Corporation, a Delaware corporation (the "Company"), and the Holders (as
hereinafter defined).
PREAMBLE
In light of the fact the Company desires to extend registration rights
to the Holders in connection with the Agreement and Plan of Reorganization
dated November 26, 1997 by and between the Company, PerImmune Holdings, Inc.
and Intracel Acquisition Sub, Inc. (the "Transaction").
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the Company and the Stockholders agree as follows:
Section 1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission,
or any other federal agency at the time administering the Securities Act.
(b) "Common Stock" means the common stock, par value $ .0001 per
share, of the Company.
1
<PAGE> 2
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(d) "Holder" shall mean any holder of outstanding Registrable
Securities or anyone who holds outstanding Registrable Securities to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
(e) "Initiating Holders" shall mean any Holder or Holders of at
least twenty percent (20%) of the Registrable Securities then outstanding.
(f) "Preferred Stock" means the preferred stock, par value $ .0001
per share, of the Company.
(g) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registrable Securities.
(h) "Registrable Securities" shall mean all of the following to the
extent the same have not been sold to the public: (i) any and all shares of
Common Stock of the Company issued in connection with the Transaction; (ii) any
and all shares of Common Stock of the Company issued upon conversion of shares
of Preferred Stock issued in connection with the Transaction; (iii) stock issued
in respect of stock referred to in (i) or (ii) above in any reorganization; or
(iv) stock issued in respect of the stock referred to in (i) or (ii) or (iii) as
a result of a stock split, stock dividend, recapitalization or combination.
Notwithstanding the foregoing, Registrable Securities shall not include
otherwise Registrable Securities (i) sold by a person
2
<PAGE> 3
in a transaction in which his rights under this Agreement are not properly
assigned; or (ii) (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions,
and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale or (C) the registration rights associated with such
securities have been terminated pursuant to Section 16 of this Agreement.
(i) "Rule 144" shall mean Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144A.
(j) "Rule 144A" shall mean Rule 144A under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
Section 2. Restrictions on Transferability. The Registrable Securities
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. Each Holder will cause any proposed
purchaser, assignee, transferee, or pledgee of the Registrable Securities held
by a Holder to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Agreement.
Section 3. Restrictive Legend. Each certificate representing Registrable
Securities shall (unless other permitted by the provisions of Section 4 below)
be stamped or otherwise imprinted with a legend substantially in the following
form (in
3
<PAGE> 4
addition to any legend required under applicable state securities laws or
otherwise):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AND WERE ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT. THESE SHARES MAY NOT BE
RESOLD, REOFFERED, TRANSFERRED, PLEDGED, HYPOTHECATED, CONVEYED, OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH SAID ACT.
Each Holder consents to the Company making a notation on its records and
giving instructions to any transfer agent of the Registrable Securities in order
to implement the restrictions on transfer established in this Agreement.
Section 4. Notice of Proposed Transfer. The Holder of each certificate
representing Registrable Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 4. Each such Holder agrees not
to make any disposition of all or any portion of any Registrable Securities
unless and until:
(a) There is in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
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(b) (i) Such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and
(ii) If reasonably by the Company, such Holder shall furnish
the Company with an opinion of counsel, reasonably satisfactory to the Company
that such disposition shall not require registration of such shares under the
Securities Act. It is agreed, however, that no such opinion will be required for
Rule 144 or Rule 144A transactions.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is a partnership to a partner of such partnership or
a retired partner of such partnership who retires after the date hereof, or to
the estate of any such partner or retired partner or the transfer by gift, will
or intestate succession of any partner to his spouse or siblings, lineal
descendants or ancestors of such partner or spouse, provided, that such
transferee agrees in writing to be subject to all of the terms hereof to the
same extent as if he were an original Holder hereunder.
Section 5. Requested Registration.
(a) If the Company shall receive from Initiating Holders a written
request that the Company effect any registration with respect to all or any
portion of the issued and outstanding Registrable Securities held by Initiating
Holders, the Company shall:
(i) promptly give written notice of the proposed registration
to all other Holders, which notice shall include the approximate date that the
registration statement is expected to be filed with the Commission; and
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(ii) as soon as practicable use its best efforts to register
(including, without limitation, the execution of an undertaking to file
post-effective amendments and any other governmental requirements) all
Registrable Securities which the Initiating Holders request to be registered and
all Registrable Securities which the other Holders request to be registered
within twenty (20) days after receipt of such written notice from the Company;
provided, that the Company shall not be obligated to file a registration
statement pursuant to this Section 5:
(A) in any particular state in which the Company would be required
to execute a general consent to service of process in effecting such
registration;
(B) within 120 days following the effective date of any registered
offering of the Company's securities to the general public in which the Holders
of Registrable Securities shall have been able effectively to register all
Registrable Securities as to which registration shall have been requested; or
(C) after the Company has effected two such registrations pursuant
to this Section 5 and such registrations have been declared or ordered
effective, except as provided in Section 7.
Subject to the foregoing clauses (A) through (C), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practical, but in any event within forty-five (45) days
after receipt of the request or requests of the Initiating Holders and shall use
reasonable best efforts to have such registration statement promptly declared
effective by the Commission whether or not all Registrable Securities requested
to be registered can be included; provided, however, that if the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed within such forty-five (45) day period and it is therefore
essential to defer the
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filing of such registration statement, the Company shall have an additional
period of not more than forty-five (45) days after the expiration of the initial
forty-five (45-day) period within which to file such registration statement;
provided, that during such first forty-five (45) day period the Company may not
file a registration statement for securities to be issued and sold for its own
account.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request. In such event or if an
underwriting is required by subsection 5(c), the Company shall include such
information in the written notice referred to in subsection 5(a)(i). In either
such event, if so requested in writing by the Company, the Initiating Holders
shall negotiate with an underwriter selected by the Company with regard to the
underwriting of such requested registration; provided, however, that if a
majority in interest of the Initiating Holders have not agreed with such
underwriter as to the terms and conditions of such underwriting within twenty
(20) days following commencement of such negotiations, a majority in interest of
the Initiating Holders may select an underwriter of their choice for the
underwriting of all of such Registrable Securities being registered. The right
of any Holder to registration pursuant to Section 5 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. The Company shall (together with all Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 5, if the managing underwriter advises the Initiating Holders in writing
that marketing factors require a limitation of the number of shares to be
underwritten, the Company shall so advise all Holders, and the number of shares
of Registrable
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Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof who are affiliates (as such term is defined
in SEC Rule 145 (as hereinafter defined)) of the Company in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders and, to the extent that thereafter, any security to be
registerred among Holders who are not affiliates of the Company; provided,
however, that securities to be included in such registration statement as a
result of piggyback registration rights as well as any securities to be offered
by the Company, its officers and employees shall be excluded from the
registration statement prior to the exclusion of any Registrable Securities held
by the Holders. If any Holder disapproves of the terms of the underwriting, he
may elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Initiating Holders. If, by the withdrawal of such
Registrable Securities, a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the limit imposed by the
underwriters) the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the limitation
as set forth above. Any Registrable Securities which are excluded from the
underwriting by reason of the underwriter's marketing limitation or withdrawn
from such underwriting shall be withdrawn from such registration.
(c) Any registration pursuant to this Section 5 must be firmly
underwritten if the registration exceeds two percent (2%) of the Company's
outstanding Common Stock on an as-converted basis.
Section 6. Piggyback Registration.
(a) If at any time or from time to time, the Company shall determine
to register any of its securities, for its own account or the account of any of
its shareholders, other than a registration relating solely to employee benefit
plans, or a
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registration relating solely to a transaction of the type subject to Rule 145
("SEC Rule 145") promulgated under the Securities Act, or a registration on any
form (other than Form S-1, S-2 or S-3, or their successor forms) which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, the
Company will:
(i) give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement which notice shall
include the approximate date that the registration statement is expected to be
filed with the Commission; and
(ii) include in such registration and in any underwriting
involved therein on the same terms and conditions as the securities otherwise
being sold through the underwriters, all the Registrable Securities specified in
a written request or requests, made within thirty (30) days after receipt of
such written notice from the Company, by any Holder or Holders, except as set
forth in subsection (b) below.
(b) If the registration is for a registered public offering
involving an underwriting, the Company shall so advise the Holders as a part of
the written notice given pursuant to subsection 6(a)(i). In such event, the
right of any Holder to registration pursuant to Section 6 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
6, if the managing underwriter in good faith determines that marketing factors
require a limitation of the number of shares to be
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<PAGE> 10
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting. The Company
shall so advise all Holders and the other holders distributing their securities
through such underwriting pursuant to piggy-back registration rights similar to
this Section 6, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among all Holders and other holders who are affiliates (as such term
is defined in SEC Rule 145) of the Company in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders and other securities with such piggy-back registration rights held by
other holders at the time of filing the registration statement and, to the
extent that, thereafter, any additional security to be registered, among Holders
and other holders who are not affiliates of the Company and have such piggy-back
registration rights. If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. If, by the withdrawal of such Registrable
Securities, a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the limit imposed by the underwriters),
the Company shall offer to all Holders who have requested to have Registrable
Securities included in the registration the right to include additional
Registrable Securities in the same proportion used in determining the limitation
as set forth above. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
Section 7. Form S-3. The Company shall use its best efforts to qualify for
registration on Form S-3 or its successor form. After the Company has qualified
for the use of Form S-3, Initiating Holders shall have the right at any time to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of shares by such Holders), subject only to the
following:
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(a) The Company shall not be required to file a registration
statement pursuant to this Section 7 within ninety (90) days of the effective
date of any registration referred to in Sections 5 and 6 above in which the
Holders shall have been entitled to join pursuant to Section 5 or 6, provided
that there shall have been effectively registered all shares of Registrable
Securities as to which registration shall have been requested.
(b) The Company shall not be required to file more than two
registration statements pursuant to this Section 7 within any twelve-month
period.
The Company shall give written notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this Section
7 and shall provide a reasonable opportunity for other Holders to participate in
the registration which notice shall include the approximate date that the
registration statement is expected to be filed with the Commission; provided,
that if the registration is for an underwritten offering, the following terms
shall apply to all participants in such offering: The right of any Holder to
registration pursuant to Section 7 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other Holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 7, if the managing
underwriter in good faith determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all Holders of Registrable Securities
which would otherwise be registered and underwritten pursuant hereto, and the
number of shares of Registrable Securities and other securities that may be
included in
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<PAGE> 12
the registration and underwriting shall be allocated among the Holders and other
holders who are affiliates (as such term is defined in SEC Rule 145) of the
Company in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders and other securities with such
registration rights requested by such Holders to be included in such
registration and, to the extent that thereafter, any security to be registered
among Holders who are not affiliates of the Company. If any Holder disapproves
of the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. If, by the withdrawal of such
Registrable Securities, a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the limit imposed by the
underwriters), the Company shall offer to all Holders who have requested to have
Registrable Securities included in the registration the right to include
additional Registrable Securities in the same proportion used in determining the
limitation as set forth above. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration. Subject to the
foregoing, the Company will use its best efforts to effect promptly the
registration of all shares of Registrable Securities on Form S-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition.
(c) The Company shall file a registration statement on Form S-3
covering the Registrable Securities so requested to be registered as soon as
practical, but in any event within forty-five (45) days after receipt of the
requests of the Initiating Holders and shall use reasonable best efforts to have
such registration statement promptly declared effective by the Commission.
Section 8. Expenses of Registration. In addition to the fees and expenses
contemplated by Section 9 hereof, all expenses incurred in connection with one
registration pursuant to Section 5 hereof and all registrations pursuant to
Sections 6 and 7 hereof, including without limitation all registration, filing
and qualification
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fees, printing, messenger, telephone and delivery expenses, fees and
disbursements of counsel and independent public accountants for the Company,
expenses of any special audits of the Company's financial statements incidental
to or required by such registration, reasonable fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance,
reasonable fees and disbursements for one counsel for the Holders of Registrable
Securities, shall be borne by the Company, except that the Company shall not be
required to pay underwriters' fees, discounts or commissions relating to the
sale of the Registrable Securities.
Section 9. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder participating therein advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense the Company will:
(a) keep such registration pursuant to Sections 5, 6 and 7
continuously effective for periods of one hundred eighty (180) days for each or,
in each case, such reasonable period necessary to permit the Holder or Holders
to complete the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) promptly prepare and file with the Commission such amendments
(both pre- and post-effective) and supplements to such registration statement
and the prospectus used in connection therewith as may be requested by any
Holder of Registrable Securities (including in the event any Holder notifies the
Company that such Holder wishes to amend or supplement such information
previously provided by such Holder) or as may be necessary to comply with the
provisions of the Securities Act, and to keep such registration statement
effective for that period of time specified in Section 9(a) above;
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(c) furnish such number of registration statements, prospectuses and
other documents incident thereto (including exhibits to such registration
statements) as a Holder from time to time may reasonably request for such
Holder's review;
(d) use reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction, at the earliest possible moment;
(e) subject to Section 5(a)(ii)(B), prior to any public offering of
Registrable Securities, if required by the applicable blue sky laws, register or
qualify such Registrable Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as any Holder or underwriter reasonably
requires, and keep such registration or qualification effective during the
period set forth in Section 9(a) above;
(f) cause all Registrable Securities covered by such registrations
to be listed on each securities exchange, including NASDAQ, on which similar
securities issued by the Company are then listed or, if no such listing exists,
use reasonable best efforts to list all Registrable Securities on one of the New
York Stock Exchanges the American Stock Exchange or NASDAQ; and
(g) cause its accountants to issue to the underwriter, if any, and
the Holders, comfort letters and updates thereof, in customary form and covering
matters of the type customarily covered in such letters with respect to
underwritten offerings;
(h) enter into such customary agreements (including underwriting
agreements in customary form, including customary representations and warranties
and indemnification provisions similar to those set forth in Section 10 of this
Agreement) and take all such other actions as the holders of a majority of the
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Registrable Securities being sold or the underwriters, if any, reasonably,
request in order to expedite or facilitate the disposition of such Registrable
Securities (including, without limitation, effecting a stock split or a
combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement; and
(j) if the offering is underwritten, at the request of any Holder of
Registrable Securities, furnish on the date that Registrable Securities are
delivered to the underwriters for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Company for the purposes of
such registration, addressed to the underwriters and to such Holder, stating
that such registration statement has become effective under the Securities Act
and that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements or other financial data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such Holder or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such Holder, stating that they are independent public
accountants within the meaning of the Securities Act and that,
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<PAGE> 16
in the opinion of such accountants, the financial statements of the Company
included in the registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
(k) immediately notify each Holder, at any time a prospectus covered
by such registration statement is required to be delivered under the Securities
Act, of the happening of any event of which it has knowledge 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 a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and promptly
prepare a post-effective amendment with prospectus supplement, as counsel to
Company shall then advise the Company, revising such untrue statement or curing
such omission;
(l) notify each Holder at such time as such registration statement
becomes effective;
(m) notify each Holder upon the receipt of a request from the
Commission for amendments or supplements to such registration statement;
(n) notify each Holder in the event the Commission or any agency in
any state in which Registrable Securities are to be or have been sold either
issues a stop order with respect to such registration statement or notifies the
Company that it is initiating proceedings therefor; or
(o) take such other actions as shall be reasonably requested by any
Holder.
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Section 10. Indemnification.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 5, 6 or 7, the Company
will indemnify and hold harmless each Holder of such Registrable Securities
thereunder, each underwriter of such Registrable Securities thereunder and each
officer, director, employee or agent of any such Holder or underwriter and each
other person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act, against any losses, expenses, claims, damages or
liabilities, joint or several, to which such Holder, underwriter or other person
may become subject under the Securities Act or otherwise, insofar as such
losses, expenses, 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
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, 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 promulgated under the Securities Act or any state securities
law applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, and will reimburse each such
Holder, each of its officers, directors, employees, agents and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any reasonable legal and any other expenses
incurred in connection with investigating, defending or settling any such claim,
expense, loss, damage, liability or action, provided that the Company will not
be liable in any such case to the extent that any such claim, expense, loss,
damage, liability or action arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
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instrument duly executed by such Holder or underwriter specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by or issuable
to such Holder are included in the registration statement as to which such
registration is being effected, indemnify and hold harmless the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company and each underwriter within the meaning of the Securities Act, and
each other such Holder, each of its officers, directors and partners and each
person controlling such Holder, against all claims, losses, expenses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, any prospectus contained therein, or any
amendment or supplement thereof, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, partners, persons or underwriters for any reasonable
legal or any other expenses incurred in connection with investigating, defending
or settling any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein; provided, however,
the total amount for which any Holder, its officers, directors and partners, and
any person controlling such Holder, shall be liable under this Section 10(b)
shall be limited to the proportion of any such loss, claim, damage, liability or
expense which is equal to the proportion that the public offering price of the
Registrable Securities sold by the Holder under such registration statement
bears to the total public offering price of all securities sold thereunder, and
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shall not in any event exceed the aggregate proceeds received by such Holder
from the sale of Registrable Securities sold by such Holder in such
registration.
(c) Each party entitled to indemnification under this Section 10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in actual detriment to
the Indemnifying Party, provided, that in the event counsel to the Indemnified
Party determines that the Indemnified Party and Indemnifying Party have
conflicting interests, the Indemnified Party may employ one (1) separate counsel
at the expense of the Indemnifying Party to conduct a separate defense for the
Indemnified Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement (i) which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation or (ii) which involves any relief against the Indemnified Party other
than the payment of money which is to be paid in full by the Indemnifying Party.
(d) Notwithstanding the foregoing, to the extent that the provisions
on indemnification contained in the underwriting agreements entered into among
the selling Holders, the Company and the underwriters in connection with the
underwritten public
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offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall be controlling as to the Registrable Securities
included in the public offering; provided, however, that if, as a result of this
Section 10(d), any Holder, its officers, directors, and partners and any person
controlling such Holder is held liable for an amount which exceeds the aggregate
proceeds received by such Holder from the sale of Registrable Securities
included in a registration, as provided in Section 10(b) above, pursuant to such
underwriting agreement (the "Excess Liability"), the Company shall reimburse any
such Holder for such Excess Liability.
(e) If the indemnification provided for in this Section 10 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or 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. Notwithstanding the
foregoing, the amount any Holder, its officers, directors and partners and any
person controlling
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such Holder shall be obligated to contribute pursuant to this Section 10(e)
shall be limited to an amount equal to the proceeds received by such Holder from
the sale of the Restricted Securities sold pursuant to the registration
statement which gives rise to such obligation to contribute (less the aggregate
amount of any damages which the Holder has otherwise been required to pay in
respect of such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the sale of such
Restricted Securities).
Each party agrees that it would not be just and equitable if
contribution pursuant to this Section 10 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above.
(f) Survival of Indemnity. The indemnification provided by this
Section 10 shall be a continuing right to indemnification and shall survive the
registration and sale of any securities by any Person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
Section 11. Lockup Agreement. In consideration for the Company agreeing to
its obligations under this Agreement, each Holder agrees in connection with any
registration of the Company's securities (whether or not such Holder is
participating in such registration) upon the request of the Company and the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days in the case of the Company's initial public offering) from the effective
date of such registration as the Company and the underwriters may specify, so
long as all Holders or stockholders holding more than one percent of the
outstanding
21
<PAGE> 22
common stock and all officers and directors of the Company are bound by a
comparable obligation provided, however, that nothing herein shall prevent any
Holder that is a partnership or corporation from making a distribution of
Registrable Securities to the partners or shareholders thereof that is otherwise
in compliance with applicable securities laws, so long as such distributees
agree to be so bound.
Section 12. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration referred to herein.
Section 13. Rule 144 and 144A Reporting. With a view to making available
to Holders of Registrable Securities the benefits of certain rules and
regulations of the Commission which may permit the sale of the Registrable
Securities to the public without registration, the Company agrees at all times
after ninety (90) days after the effective date of the first registration filed
by the Company for an offering of its securities to the general public (or the
Company shall otherwise have become subject to the periodic reporting
requirements of the Securities Exchange Act) to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 and Rule 144A (including earning statements
of the Company complying with Section 11(a) of the Securities Act no later than
45 days after the end of each of the Company's fiscal quarters (or 90 days after
the end of its fiscal year)), and make such information available to each Holder
upon written request;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
22
<PAGE> 23
(c) furnish to each Holder upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such Holder may reasonably request in availing itself of an
exemption for the sale of Registrable Securities without registration under the
Securities Act.
For purposes of facilitating sales pursuant to Rule 144A, so long as the
Company is not subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, each Holder and any prospective purchaser of such Holder's
securities shall have the right to obtain from the Company, upon request of the
Holder prior to the time of sale, a brief statement of the nature of the
business of the Company and the products and services it offers; and the
Company's most recent balance sheet and profit and loss and retained earnings
statements, and similar financial statements for the two preceding fiscal years
(the financial statements should be audited to the extent reasonably available).
Section 14. Transfer of Registration Rights. The rights granted hereunder
may be assigned by a Holder to any partner or shareholder of such Holder, to any
other Holder, or to a transferee or assignee who receives at least 500 shares of
Registrable Securities (as adjusted for stock splits and the like); provided,
that the Company is given written notice by the Holder at the time of or within
a reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned.
Section 15. Limitations on Subsequent Registration Rights. From and after
the date these registration rights are granted, the Company shall not, without
the prior written consent of the Holders of not less than fifty percent (50%) of
the Registrable Securities then held by Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company which
23
<PAGE> 24
would allow such holder or prospective holder to include such securities in any
registration filed under Sections 5, 6 or 7 hereof other than rights identical
or subordinate to the rights of any Holder hereunder.
Section 16. Termination of Rights.
(a) The rights of any particular Holder to cause the Company to
register Registrable Securities under Sections 5, 6 and 7 shall terminate with
respect to such Registrable Securities at such time, following a bona fide,
firmly underwritten public offering of shares of the Company's Common Stock
registered under the Securities Act (provided that the aggregate gross offering
price equals or exceeds $10,000,000), when such security is transferable
pursuant to paragraph (k) of Rule 144 (or any successor provision thereto) or
when all of such Holder's Registrable Securities are transferable in one sale
under the other provisions of Rule 144.
(b) Notwithstanding the provisions of paragraph (a) of this Section
16, all rights of any particular Holder under this Agreement shall terminate at
5:00 p.m. Eastern time on the date seven (7) years after the closing date of the
Company's first firmly underwritten public offering.
Section 17. Representations and Warranties of the Company. The Company
represents and warrants to the Holders as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Articles of Organization or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under
24
<PAGE> 25
any such indenture, agreement or other instrument or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to (i) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and other
laws of general application affecting enforcement of creditors' rights generally
and (ii) the availability of equitable remedies as such remedies may be limited
by equitable principles of general applicability (regardless of whether
enforcement is sought in a proceeding in equity or at law).
Section 18. Miscellaneous.
(a) Amendments. This Agreement may be amended only by a writing
signed by the Holders of more than fifty percent (50%) of the Registrable
Securities, as constituted from time to time. The Holders hereby consent to
future amendments to this Agreement that permit future investors, other than
employees, officers or directors of the Company, to be made parties hereto and
to become Holders of Registrable Securities; provided, however, that no such
future amendment may materially impair the rights of the Holders hereunder
without obtaining the requisite consent of the Holders, as set forth above. For
purposes of this Section, Registrable Securities held by the Company or
beneficially owned by any officer or employee of the Company shall be
disregarded and deemed not to be outstanding.
(b) Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute a single instrument.
25
<PAGE> 26
(c) Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and may be sent initially by facsimile
transmission and shall be mailed by registered or certified mail, postage
prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to a
Holder, at such Holder's address set forth on the books of the Company, or at
such other address as such Holder shall have furnished to the Company in
writing, or (b) if to any other holder of any Registrable Securities, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such securities who has so furnished an address to
the Company, or (c) if to the Company, one copy should be sent to the Company's
current address at 1871 N.W. Gilman Blvd., Issaqual, Washington 98027, or at
such other address as the Company shall have furnished to the Holders. Each such
notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by first class, postage pre-paid mail, at the earlier of
its receipt or seventy-two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
(d) Non public Information. Any other provisions of this agreement
to the contrary notwithstanding, the Company's obligation to file a registration
statement, or cause such registration statement to become and remain effective,
shall be suspended for a period not to exceed thirty (30) days (and for periods
not exceeding, in the aggregate, sixty (60) days in any twenty-four (24) month
period) if there exists at the time material non-public information relating to
the Company which, in the reasonable opinion of the Company, should not be
disclosed.
(e) Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid
26
<PAGE> 27
or unenforceable any other provision of this Agreement, and this Agreement shall
be carried out as if any such illegal, invalid or unenforceable provision were
not contained herein.
(f) Dilution. If, and as often as, there is any change in the Common
Stock by way of a stock split, stock dividend, combination or reclassification,
or through a merger, consolidation, reorganization or recapitalization, or by
any other means, appropriate adjustment shall be made in the provisions hereof
so that the rights and privileges granted hereby shall continue with respect to
the Registrable Securities as so changed.
(g) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York other than such laws as would result in
the application of the laws of a state other than the State of New York.
27
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holders:
----------------------------------
Bryan T. Butman
----------------------------------
Joseph Caliqiuri
----------------------------------
Steven Gerber
----------------------------------
Diana M. Goroff
----------------------------------
Janet M. Hanlon
----------------------------------
Martin V. Haspel
----------------------------------
Leslie Ivy
----------------------------------
Jerry Klein
----------------------------------------
Barry Kobrin
----------------------------------------
Nicholas A. Pomato
----------------------------------------
Janet H. Ransom
----------------------------------------
Manny R. Subramanian
----------------------------------------
Gordon Wynant
CRAIGIE INCORPORATED
By:
-------------------------------------
Name:
Title:
SYNCOR INTERNATIONAL CORPORATION
By:
-------------------------------------
Name:
Title:
MENTOR CORPORATION
By:
-------------------------------------
Name:
Title:
28
<PAGE> 1
EXHIBIT 4.5
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
Reference is made to that certain Registration Rights Agreement dated
January 2, 1998 by and among Intracel Corporation, a Delaware corporation (the
"Company"), and the Holders set forth therein (the "Registration Rights
Agreement").
Pursuant to Section 18(a) of the Registration Rights Agreement, the
undersigned hereby agree that the Registration Rights Agreement is hereby
amended to provide that:
(a) under Section 5(a)(ii)(B) of the Registration Rights Agreement, the
Initiating Holders may not request the filing of, and the Company shall not be
obligated to file, a registration statement until 180 days following the
effective date of the registration statement filed by the Company relating to
the initial public offering of the Company's Common Stock (the "Initial Public
Offering"), which Initial Public Offering is to be co-managed by Donaldson,
Lufkin & Jenrette Securities Corporation and Nationsbanc Montgomery Securities
LLC; and
(b) the rights of the Holders of Registrable Securities set forth in
Section 6 thereof will not apply to the Initial Public Offering.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them under the Registration Rights Agreement.
IN WITNESS WHEREOF, this Amendment has been executed as of the 9th day of
July, 1998.
INTRACEL CORPORATION
By:
-------------------------------------
Name:
Title:
MENTOR CORPORATION
By:
-------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.6
AGREEMENT
AGREEMENT dated as of June 25, 1997 (the "Closing Date") by and between
Intracel Corporation, a Delaware corporation (the "Company") and Creditanstalt
American Corporation (the "Purchaser").
WHEREAS, the Purchaser currently owns 139,390 shares of the Company's
Series A-1 Preferred Stock, par value $.01 per share (the "Securities");
WHEREAS, the Purchaser wishes to purchase from the Company, and the
Company wishes to issue and sell to the Purchaser, 139,390 shares of its
Series A-3 Preferred Stock, par value $.01 per share (the "Exchange
Securities"), the purchase price for which shall be paid by exchanging the
Securities for the Exchange Securities, all on the terms and conditions
hereinafter set forth; and
WHEREAS, the Purchaser and the Company wish to extend to the Exchange
Securities the registration rights the Purchaser currently enjoys with respect
to the Securities pursuant to that certain Registration Rights Agreement Series
A-I Preferred Stock, dated November 16, 1995 (the "Registration Rights
Agreement").
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements contained herein, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Sale of Securities.
1.1 Transfer of Securities, etc. The Company hereby issues and sells to
the Purchaser, and the Purchaser hereby purchases and acquires from the Company
on the date hereof (the "Closing Date"), the Exchange Securities.
1.2 Payment of Purchase Price. The purchase price being paid by the
Purchaser for the Exchange Securities (the "Purchase Price") is the Securities.
The Purchase Price is being paid by delivery by the Purchaser on the date
hereof of certificates representing the Securities, and the Purchaser hereby
conveys, transfers, assigns and delivers to the Company all right, title and
interest, legal and equitable, in and to the Securities to the Company, free
and clear of all liens, claims and encumbrances.
1.3 Closing. The closing with respect to the transactions provided for in
this Agreement is taking place on the date hereof at the offices of Morrison &
Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104.
2. Representations, Warranties and Covenants of the Purchaser. The
Purchaser hereby represents, warrants and covenants as follows:
2.1 Ownership of Securities. The Purchaser has good and marketable title
to the Securities. Upon the consummation of the transactions contemplated
hereby, the Purchaser will
1
<PAGE> 2
have transferred to the Company, and the Company will have acquired, good and
valid title to the Securities, free and clear of all liens, claims and
encumbrances.
2.2. Authorization, etc. The Purchaser has full corporate power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser. This Agreement constitutes a valid and binding
agreement of the Purchaser, enforceable against the Purchaser in accordance
with its terms.
2.3 No Conflict. The execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby will not
conflict with, violate or constitute a breach or default under any of its
material agreements.
2.4 Purchase for Investment, etc. The Purchaser represents and warrants
that it understands that the Exchange Securities have not been registered under
the Securities Act of 1933, as amended, or any applicable state securities laws.
The Purchaser represents and warrants that it is an "accredited investor"
within the meaning of the Federal securities laws and the rules and regulations
thereunder. The Purchaser represents and warrants that it is purchasing the
Exchange Securities for investment and not with a view toward the distribution
thereof.
2.5 No Control. The Purchaser will not exercise or attempt to exercise,
directly or indirectly, a controlling influence over the management or the
policies of the Company.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
3.1 Authorization, etc. The Company has full corporate power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company. This Agreement constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms.
3.2 Designation. A Certificate of Designation with respect to the
Exchange Securities has been filed with the Secretary of State of the State of
Delaware. Upon the issuance of the Exchange Securities pursuant to this
Agreement, and the payment of the Purchase Price, the Exchange Securities will
be validly issued, fully paid and non-assessable.
3.3 No Conflict. The execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with, violate or constitute a breach or default under any of its
material agreements.
4. The Closing.
4.1 Company Closing Documents. On the Closing Date, the Company will be
delivering to the Purchaser a certificate representing the Exchange Securities.
2
<PAGE> 3
4.2 Purchaser Closing Documents. On the Closing Date, the Purchaser
will be delivering to the Company the Purchase price through delivery of a
certificate representing the Securities.
5. Miscellaneous.
5.1 Counterparts. This Agreement may be executed in one or more
counterparts, but all such counterparts shall constitute one and the same
instrument.
5.2 Amendments: Non-assignability of Rights. This Agreement may be
amended only with the prior written consent of the parties hereto.
5.3 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, without regard to the
conflicts of laws and rules thereof.
5.4 Integration and Severability. The covenants and agreements of the
parties hereto (or their predecessor) set forth in that certain Convertible
Preferred Stock Purchase Agreement dated as of November 16, 1995 (the "Original
Agreement") are incorporated by reference as if set forth in full herein. In
addition, the parties hereto agree that all references in the Registration
Rights Agreement to the Securities shall be deemed to be references to the
Exchange Securities and that, except for such change, the Registration Rights
Agreement shall continue in full force and effect in accordance with its terms.
This Agreement (including such incorporation by reference of the Original
Agreement set forth in this Section 5.4) and the Registration Rights Agreement
as amended by this Section 5.4 embodies the entire agreement and understanding
among the parties hereto, and supersedes all prior agreements and
understandings, relating to the subject matter hereof. In case any one or more
of the provisions contained in this Agreement or in any instrument contemplated
hereby, or any application thereof, shall be invalid, illegal or unenforceable
in any respect, under the laws of any jurisdiction, the validity, legality and
enforceability of the remaining provisions contained herein and therein, and any
other application thereof, shall not in any way be affected or impaired thereby
or under the laws of any other jurisdiction.
5.5 Headings. The headings of the articles, sections and subsections
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part of this Agreement.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereby have executed this Agreement on
the date first above stated.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
-------------------------------------
CREDITANSTALT AMERICAN CORPORATION
By: /s/ GREGORY F. MATHIS
-------------------------------------
Gregory F. Mathis
Vice President
By: /s/ KATY LYNNE HERBERT
-------------------------------------
Katy Lynne Herbert
Senior Vice President
General Counsel
4
<PAGE> 1
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
SERIES A-1 PREFERRED STOCK
November 16, 1995
Agreement dated this 16th day of November, 1995, by and between Intracel
Corporation, a Massachusetts corporation (the "Company") and Creditanstalt
American Corporation (the "Investor").
WHEREAS: The Investor has purchased or may purchase from the Company shares of
the Company's Series A-I Preferred Stock pursuant to the Purchase
Agreement, and
WHEREAS: As a condition to such purchase, the Company has agreed to grant to the
Investor registration rights with respect to certain securities of the
Company held by the Investor.
AGREEMENT
NOW, THEREFORE, it is agreed as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission,
or any other federal agency at the time administering the Securities
Act.
"Common Stock" shall mean the Common Stock, no par value per
share, of the Company, as constituted as of the date of this Agreement.
"Company" shall mean Intracel Corporation, a Massachusetts
corporation.
"Conversion Stock" shall mean shares of Common Stock issued upon
conversion of shares of the Series A-I Preferred Stock issued pursuant
to the terms of the Purchase Agreement.
<PAGE> 2
"Dividend Stock" shall mean shares of Series A-I Preferred Stock
issued in lieu of cash dividends on shares of the Series A-I Preferred Stock.
"Exchange Act" shall mean 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 at the time.
"Purchase Agreement" shall mean the Convertible Preferred Stock
Purchase Agreement, of even date herewith.
"Registration Expenses" shall mean the expenses so described in
Section 7.
"Registerable Stock" shall mean the Conversion Stock, but only so long
as such shares continue to be Restricted Stock. Notwithstanding the foregoing,
Registerable Stock shall not include otherwise Registerable Stock (i) sold by a
person in a transaction in which his rights under this Agreement are not
properly assigned; or (ii)(A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (B)
sold in a transaction exempt from the registration and prospectus delivery
requirements of the 1933 Securities Act under Section 4(l) thereof so that all
transfer restrictions, and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale or (C) the registration rights
associated with such securities have been terminated pursuant to Section 11(f)
of this Agreement.
"Restricted Stock" shall mean securities of the sort described in Rule
144(a)(3) promulgated pursuant to the Securities Act.
"Securities Act" shall mean 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.
"Series A-I Preferred Stock" shall mean the Company's Series A-I
Preferred Stock, no par value per share.
"Selling Expenses" shall mean the expenses so described in Section 7.
2. Restrictive Legend. Each certificate representing Preferred Shares or
Conversion Stock shall, except as otherwise provided in this Section 2, be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT
HAS BEEN REGISTERED
-2-
<PAGE> 3
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company, which opinion shall be addressed to each holder of
Series A-I Preferred Stock, the securities may be publicly sold without
registration under the Securities Act.
3. Required Registration. (a) At any time beginning twelve months
after a registration statement covering an initial public offering of
securities of the Company under the Securities Act shall have become effective,
the holder or holders of Registerable Stock constituting at least 51% of the
total shares of Registerable Stock then outstanding may request the Company to
register under the Securities Act all or any portion of the shares of
Registerable Stock held by such requesting holder or holders for resale in the
manner specified in such notice. In addition, at any time after July 22, 1996,
if a registration statement on Form S-3 or any successor thereto has not yet
become effective, the holder or holders of Registerable Stock constituting at
least 51% of the total shares of Registerable Stock then outstanding may
request the Company to register under the Securities Act all or any portion of
the shares of Registerable Stock held by such requesting holder or holders for
sale in the manner specified in such notice. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 3 within
120 days after the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering in which the
holders of Registerable Stock shall have been entitled to join pursuant to
Sections 4 or 5 provided that there shall have been effectively registered all
shares of Registerable Stock as to which registration shall have been requested.
(b) Following receipt of any request under this Section 3,
the Company shall notify all holders of Registerable Stock from whom a request
has not been received and shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
specified in such request from requesting holders, the number of shares of
Registerable Stock specified in such request (and in all requests received by
the Company from other holders within 15 days after the giving of such notice by
the Company). The Company shall be obligated to register Registerable Stock
pursuant to this Section 3 on two occasions only and shall use its best efforts
to cause each such Registration Statement to become effective whether or not all
shares requested to be registered can be included. However, the Company's
obligation as to any required registration hereunder shall be deemed satisfied
only if that registration statement has become effective, has remained effective
for a period of 120 days (or such shorter period in which all securities
registered have been sold) and includes all shares of Registerable Stock
specified in requests received as aforesaid, for sale in accordance with the
method of disposition specified by the requesting holders, and, if such method
of disposition is a firm commitment underwritten public offering, all such
shares shall have been sold pursuant thereto.
-3-
<PAGE> 4
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 3, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account or for sale by others, except as and to
the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Registerable Stock to be sold (including
the price at which such securities can be sold) or reduce the number of shares
of Registerable Stock otherwise able to be included in the Registration
Statement. Except for registration statements on Form S-8 or any successor
thereto, the Company will not file with the Commission any other registration
statement with respect to its Common Stock, whether for its own account or that
of other stockholders, from the date of receipt of a notice from requesting
holders pursuant to this Section 3 until the completion of the
distribution of the shares covered by such registration.
4. Incidental Registration. (a) If the Company at any time (other than
pursuant to Section 3 or Section 5) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Registerable Stock for sale to the public), each such time it
will give written notice to all holders of outstanding Registerable Stock of its
intention to do so. Upon the written request of any such holder, received by the
Company within 15 days after the giving of any such notice by the Company to
register any of its Registerable Stock (which request shall state the intended
method of disposition thereof), the Company will cause the Registerable Stock as
to which registration shall have been so requested to be included in the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or other disposition
by the holder (in accordance with its written request) of such Registerable
Stock so registered. The Company shall be obligated to the Investor to register
Registerable Stock of the Investor pursuant to this Section 4 on one occasion
only; provided, however, that such obligation shall be deemed satisfied as to
the Investor only when a registration statement covering all shares of
Registerable Stock specified in notices from the Investor received as aforesaid,
for sale in accordance with the method of disposition specified by the
requesting holders, shall have become and shall have remained effective as
provided in this Agreement and, if such method of disposition is a firm
commitment underwritten public offering, all such shares shall have been sold
pursuant thereto.
(b) In the event that any registration pursuant to this Section 4
shall be, in whole or in part, an underwritten public offering of Common Stock,
the number of shares of Registerable Stock to be included in such an
underwriting may be reduced (pro rata among the requesting holders based upon
the number of shares of Registerable Stock owned by such holders) if and to the
extent that the managing underwriter shall be of the opinion that such inclusion
would adversely affect the marketing of the securities to be sold by the Company
therein (including the price at which such securities can be sold), provided,
however, that
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<PAGE> 5
such number of shares of Registerable Stock shall not be reduced if any shares
are to be included in such underwriting for the account of any person other than
the Company or requesting holders of Registerable Stock; and provided, further,
that in no event may less than twenty-five (25%) percent of the total number of
shares of Common Stock to be included in such underwriting be made available for
shares of Registerable Stock. Notwithstanding the foregoing provisions, the
Company may withdraw any registration statement referred to in this Section 4
without thereby incurring any liability to the holders of Registerable Stock.
5. Registration Procedures. If and whenever the Company is required
by the provisions of Sections 3 or 4 to effect the registration of any shares of
Registerable Stock under the Securities Act, the Company will, as expeditiously
as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant
to Section 3, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and
comply with the provisions of the Securities Act with respect to the
disposition of all Registerable Stock covered by such registration
statement in accordance with the sellers' intended method of disposition as
set forth in such registration statement for such period;
(c) furnish to each seller of Registerable Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or
other disposition of the Registrable Stock covered by such registration
statement;
(d) use its best efforts to register or qualify the Registerable
Stock covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registerable Stock or, in
the case of an underwritten public offering, the managing underwriter
reasonably shall request; provided, however, that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
-5-
<PAGE> 6
(e) use its best efforts to list the Registerable Stock covered by such
registration statement with any securities exchange on which the Common Stock
of the Company is then listed;
(f) in addition to its obligations under Section 5(b) hereof,
immediately notify each seller of Registerable Stock and each underwriter under
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated herein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(g) if the offering is underwritten, at the request of any seller of
Registerable Stock furnish on the date that Registerable Stock is delivered to
the underwriters for sale pursuant to such registration: (i) an opinion dated
such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such seller, stating that
such registration statement has become effective under the Securities Act and
that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for the purpose have
been instituted or are pending or contemplated under the Securities Act, (B)
the registration statement, the related prospectus and each amendment or
supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements or other financial data contained
therein) and (C) to such other effects as reasonably may be requested by
counsel for the underwriters or by such seller or its counsel and (ii) a letter
dated such date from the independent public accountants retained by the
Company, addressed to the underwriters and to such seller, stating that they
are independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act, and such
letter shall additionally cover such other financial matters (including
information as to the period ending no more than five business days prior to
the date of such letter) with respect to such registration as such underwriters
reasonably may request; and
(h) make available for inspection by each seller of Registerable Stock,
by any underwriter participating in any distribution pursuant to such
registration statement, and by any attorney, accountant or other agent retained
by such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller.
-6-
<PAGE> 7
underwriter, attorney, accountant or agent in connection with such
registration statement.
For purposes of this Agreement, the period of distribution, if not
otherwise described in the Registration Statement of Registerable Stock in a
firm commitment underwritten public offering shall be deemed to extend until
each underwriter has completed the distribution of all securities purchased by
it, and the period of distribution of Registerable Stock in any other
registration shall be deemed to extend until the earlier of the sale of all
Registerable Stock covered thereby or 120 days after the effective date thereof.
In connection with each registration hereunder, the sellers of
Registerable Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Sections 3 or 4 covering
an underwritten public offering, the Company and each seller agree to enter
into a written agreement with the managing underwriter selected in the manner
herein provided in such form and containing such provisions as are customary in
the securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
6. Expenses. All expenses incurred by the Company in complying with
Sections 3 or 4, including all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants for the
Company, reasonable fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance and reasonable fees and
disbursements of one counsel for the sellers of Registerable Stock but
excluding any Selling Expenses, are called "Registration Expenses". "Selling
Expenses" shall include only such underwriting discounts and selling
commissions applicable to the sale of any Registerable Stock which would not
have been incurred in the absence of the registration and sale of the
Registerable Stock.
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Sections 3 and 4; provided, however,
that in connection with a registration statement filed under Section 4, the
Company shall not be obligated to pay fees and expenses (including counsel
fees) incurred in connection with complying with state securities laws in any
state in which the Company is not otherwise registering for sale any of the
shares the Company proposes to sell in the offering. All Selling Expenses in
connection with each registration statement filed pursuant to Sections 3 or 4
shall be borne by the participating sellers in proportion to the number of
shares sold by each, or by such participating sellers as they may agree.
-7-
<PAGE> 8
7. Indemnification and Contribution. (a) In the event of a
registration of any of the Registerable Stock under the Securities Act pursuant
to Section 3 or 4, the Company will indemnify and hold harmless each seller of
such Registerable Stock thereunder, each underwriter of such Registerable Stock
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter 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 Registerable Stock was registered under the
Securities Act pursuant to Section 3 or 4, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them 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 if and 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 so made
in conformity with information furnished by any seller, underwriter or
controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registerable Stock
under the Securities Act pursuant to Sections 3 or 4, each seller of such
Registerable Stock thereunder, severally and not jointly, will indemnify and
hold harmless the Company, each person, if any, who controls the Company within
the meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter 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 the registration statement under which such Registerable
Stock was registered under the Securities Act pursuant to Sections 3 or 4, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and each such officer, director, underwriter and controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that such seller will be liable hereunder in any such case
only if and to the extent that any such loss, claim, damage or liability arises
out of or is based upon
-8-
<PAGE> 9
an untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Company by such seller
specifically for use in such registration statement or prospectus; provided,
further, that the liability of each seller hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the public offering price of the shares sold by such
seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not in any event to exceed the
proceeds received by such seller from the sale of Registerable Stock covered by
such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to such indemnified party other than under this Section 7 and
shall only relieve it from any liability which it may have to such indemnified
party under this Section 7 if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel reasonably satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified party under this Section 7 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; provided, however, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified
party reasonably may be considered by the indemnified party to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred. No
indemnifying party, in defense of any such action, shall, except with the
consent of each indemnified party, consent to the entry of any judgment or
enter into any settlement (i) which does not include as an unconditional term
thereof the giving, by the claimant or plaintiff, to such indemnified party of
a release from all liability in respect to such action or (ii) which involves
any relief against the indemnified party other than the payment of money which
is to be paid in full by the indemnifying party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder
of Registerable Stock
-9-
<PAGE> 10
exercising rights under this Agreement, or any controlling person of any such
holder, makes a claim for indemnification pursuant to this Section 7 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 7 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of any such selling holder or any such controlling person in circumstances
for which indemnification is provided under this Section 7; then, and in each
such case, the Company and such holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such holder is responsible for the
portion represented by the percentage that the public offering price of its
Registerable Stock offered by the registration statement bears to the public
offering price of all securities offered by such registration statement, and the
Company is responsible for the remaining portion; provided, however, that, in
any such case, (A) no such holder will be required to contribute any amount in
excess of the public offering price of all such Registerable Stock sold by such
holder pursuant to such registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
8. Changes in Common Stock or Series A-1 Preferred Stock. If, and as
often as, there is any change in the Common Stock or the Series A-1 Preferred
Stock by way of a stock split, stock dividend, combination or reclassification,
or through a merger, consolidation, reorganization or recapitalization, or by
any other means, appropriate adjustment shall be made in the provisions hereof
so that the rights and privileges granted hereby shall continue with respect to
the Common Stock or the Series A-1 Preferred Stock as so changed.
9. Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registerable Stock to the public without registration, at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective (or the Company shall otherwise have become subject to the periodic
reporting requirements of the Exchange Act), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
-10-
<PAGE> 11
(c) furnish to each holder of Registerable Stock forthwith
upon request a written statement by the Company as to its compliance
with the reporting requirements of such Rule 144 and of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by
the Company as such holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing such holder to sell
any Registerable Stock without registration
10. Representations and Warranties of the Company. The Company
represents and warrants to the Investor as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of
any court or other agency of government, the Articles of Organization or
By-laws of the Company or any provision of any indenture, agreement or
other instrument to which it or any of its properties or assets is
bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture,
agreement or other instrument or result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally and (ii) the
availability of equitable remedies as such remedies may be limited by
equitable principles of general applicability (regardless of whether
enforcement is sought in a proceeding in equity or at law).
11. Miscellaneous. (a) All covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including transferees of any Registerable Stock), whether so expressed
or not; provided, however, that registration rights conferred herein on the
Investor shall only inure to the benefit of a transferee of Registerable Stock
if (i) there is transferred to a direct or indirect transferee of the Investor
at least 40% of the total shares of Registerable Stock purchased by the
Investor pursuant to the Purchase Agreement or (ii) such transferee is a
partner, shareholder or affiliate of the Investor. The Company shall be
notified of any transfers of Registerable Stock at the time thereof.
(b) All notices, requests, consents and other
communications hereunder shall be in writing and shall be mailed by certified
or registered mail, return receipt
-11-
<PAGE> 12
requested, postage pre-paid, or telexed, in the case of non-U.S. residents,
addressed as follows:
if to the Company or the Investor, at the address of such party
set forth in the Purchase Agreement;
if to any subsequent holder of Registerable Stock, to it at such
address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Registerable
Stock) or to the holders of Registerable Stock (in the case of the Company) in
accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts (without giving
effect to its choice of law principles).
(d) The Company may not, without the prior written consent
of the holders of at least two-thirds of the then outstanding shares of
Registerable Stock, grant any rights to any persons to register shares of
capital stock or securities of the Company unless such rights are, by their
terms, substantially identical to the rights of the holders of Registerable
Stock granted pursuant to this Agreement.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument
(f) The obligations of the Company to register shares of
Registerable Stock under Sections 3 or 4 shall terminate on July 1, 2002,
unless such obligations terminate earlier in accordance with the terms of this
Agreement.
(g) If requested in writing by the underwriters for the
initial underwritten public offering of securities of the Company, each holder
of Registerable Stock who is a party to this Agreement or one of the several
separate agreements of even date herewith with other purchasers of Series A-I
Preferred Stock shall agree not to sell publicly any shares of Registerable
Stock or any other shares of Common Stock (other than shares of Registerable
Stock or other shares of Common Stock being registered in such offering),
without the consent of such underwriters, for a period of not more than 120
days following the effective date of the registration statement relating to
such initial public offering; provided, however, that the Company shall have
certified to each such holder that all persons entitled to registration rights
with respect to shares of Common Stock who are not parties to this Agreement,
all other persons selling shares of Common Stock in such offering and all
executive officers and directors of the Company shall also have agreed not to
sell publicly
-12-
<PAGE> 13
their Common Stock under the circumstances and pursuant to the terms set forth
in this Section 11(g).
(h) Notwithstanding the provisions of Section 5(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become and remain effective, shall be suspended for a period not
to exceed 30 days (and for periods not exceeding, in the aggregate, 60 days in
any 24-month period) if there exists at the time material non-public
information relating to the Company which, in the reasonable opinion of the
Company, should not be disclosed.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(j) Except as otherwise provided herein, neither this Agreement nor
any provision hereof can be modified, changed, discharged or terminated except
by an instrument in writing signed by the party against whom the enforcement of
any modification, change, discharge or termination is sought or by the written
consent of the Company and the holders of at least two-thirds of the then
outstanding shares of Registerable Stock; provided, however, that no
modification or amendment shall be effective to reduce the percentage of the
shares of Registerable Stock the consent of the holders of which is required
under this Section 11(j).
-13-
<PAGE> 14
IN WITNESS WHEREOF, the Company and the Investor have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
-------------------------------------
[Corporate Seal] Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
INVESTOR:
CREDITANSTALT AMERICAN CORPORATION
By: /s/ GREGORY F. MATHIS
-------------------------------------
Name: Gregory F. Mathis
Title: Vice President
By: /s/ STACY HARMON
-------------------------------------
Name: Stacy Harmon
Title: Senior Associate
<PAGE> 1
Exhibit 4.8
WAIVER AND AGREEMENT
WAIVER AND AGREEMENT, dated as of the 21st day of January, 1999, by and
among Intracel Corporation, (the "Company"), and Bank Austria AG, Grand Cayman
Branch (assignee of Creditanstalt American Corporation) (the "Stockholder").
WHEREAS, the Stockholder and the Company are parties to a certain
Registration Rights Agreement, dated November 16, 1995 which agreement was
amended and restated on June 25, 1997, pursuant to which the Stockholder was
granted certain registration rights relating to all of the securities of the
Company held by it (the "Registration Rights Agreement"); and
WHEREAS, the Company intends to register under the Securities Act of
1933, as amended, shares of its Common Stock for sale to the public pursuant to
an initial public offering (the "Offering"); and
WHEREAS, the representatives for the underwriters in the Offering, led by
Donaldson, Lufkin & Jenrette Securities Corporation, have determined that
inclusion of the Stockholder's securities in the Offering would adversely
affect the marketing of the securities to be sold by the Company in the
Offering; and
WHEREAS, the Stockholder acknowledges and agrees that it would be in the
best interest of the Company to consummate the Offering as contemplated by
Donaldson, Lufkin & Jenrette Securities Corporation, as a representative for the
underwriters and that, solely with respect to the Offering, the Stockholder
waive any registration rights with respect to the securities of the Company held
by it;
WHEREAS, under that certain Registration Rights Agreement dated as of
August 25, 1998 among the Company and Northstar High Yield Fund, Northstar High
Total Return Fund, Northstar High Total Return Fund II and Northstar Strategic
Income Fund, the Company is obligated to file a registration statement (the
"New Registration Statement") to register the Registrable Securities and use
its best efforts to cause such New Registration Statement to become effective
on the 181st day after the Company consummates the Offering (the "Target Date")
or as soon as practicable thereafter;
WHEREAS, the Stockholder desires to have its shares of Common Stock of
the Company issuable upon conversion of its Series A-3 Preferred Stock of the
Company and exercise of its Series A-1 Warrants (collectively, the "Conversion
Shares") registered on the Target Date.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereby agree with each other as follows:
1. Waiver. The Company and the Stockholder hereby agree that the
operation of Section 4 of the Registration Rights Agreement (Incidental
Registration) is hereby waived as it may apply to the registration by the
Company of shares of its Common Stock pursuant to the
<PAGE> 2
Offering, pursuant to which Donaldson, Lufkin & Jenrette Securities Corporation
is acting as a representative of the underwriters.
2. Agreement to Register the Conversion Shares. (a) The Company hereby
agrees (i) to prepare and file on or before the Target Date a registration
statement (which registration statement may be the New Registration Statement)
in appropriate form in compliance with the Securities Act of 1933, as amended
and applicable state securities laws of such states as the Stockholder shall
request, and (ii) to use its best efforts to cause such registration statement
to be declared effective by the Securities and Exchange Commission as soon as
practicable after the Target Date.
(b) The Company shall, promptly following the date on which the
registration statement has been declared effective, furnish to the Stockholder
such number of copies of the prospectus and preliminary prospectus and such
other documents related to the offering as the Stockholder may reasonably
request.
(c) The Company shall pay all costs and expenses incident to the
performance and compliance by the Company with this Agreement, including
without limitation all fees and disbursements of counsel for the Company and
the Stockholder.
3. Representation. The Company hereby represents and warrants that all
other shareholders of the Company (other than shareholders participating in the
Offering) have waived all piggyback and incidental registration rights in
connection with the Offering, and the Company is not required to file any
registration statement for any shareholder on or prior to the Target Date
(other than the New Registration Statement).
4. No Modifications. Except as waived hereby, the terms and conditions
of the Registration Rights Agreement shall continue in full force and effect
and are hereby in all respects ratified and confirmed.
5. GOVERNING LAW. THIS WAIVER AND AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICTS OF LAW PRINCIPLES.
2
<PAGE> 3
IN WITNESS WHEREOF, this Waiver and Agreement has been executed as of the date
and year first written above.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
--------------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive Officer
BANK AUSTRIA AG, GRAND CAYMAN BRANCH
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
3
<PAGE> 4
IN WITNESS WHEREOF, this Waiver and Agreement has been executed as of the date
and year first written above.
INTRACEL CORPORATION
By:
--------------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive Officer
BANK AUSTRIA AG, GRAND CAYMAN BRANCH
By: /s/ CLIFFORD L. WELLS
----------------------------------------------
Name: Clifford L. Wells
Title: Vice President
By: /s/ CATHERINE K. MacDONALD
----------------------------------------------
Name: Catherine K. MacDonald
Title: Vice President
3
<PAGE> 1
Exhibit 4.9
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
SERIES A-I PREFERRED STOCK
September 22, 1995
Agreement dated this 22nd day of September, 1995, by and between Intracel
Corporation, a Massachusetts corporation (the "Company") and each of the several
Purchasers of shares of the Convertible Preferred Stock, Series A-I, of the
Company (the "Investors") named herein.
WHEREAS: Each Investor has purchased or may purchase from the Company shares of
the Company's Series A-I Preferred Stock pursuant to the Purchase
Agreement, and
WHEREAS: As a condition to such purchase, the Company has agreed to grant to
each Investor registration rights with respect to certain securities
of the Company held by such Investor.
AGREEMENT
NOW, THEREFORE, it is agreed as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meaning:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, no par value per share, of
the Company, as constituted as of the date of this Agreement.
"Company" shall mean Intracel Corporation, a Massachusetts
corporation.
"Conversion Shares" shall mean shares of Common Stock issued upon
conversion of shares of the Series A-I Preferred Stock issued pursuant to
the terms of the Purchase Agreement.
<PAGE> 2
"Dividend Shares" shall mean shares of Series A-I Preferred Stock
issued in lieu of cash dividends on shares of the Series A-I Preferred Stock.
"Exchange Act" shall mean 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 at the time.
"Purchase Agreement" shall mean the Convertible Preferred Stock
Purchase Agreement, of even date herewith.
"Registration Expenses" shall mean the expenses so described in
Section 7.
"Registerable Stock" shall mean the Conversion Stock, but only so long
as such shares continue to be Restricted Stock. Any such shares shall continue
to be Restricted Stock until such time as such shares (i) have been disposed of
in accordance with a Registration Statement which has become effective under
the Securities Act or (ii) have been publicly sold in compliance with Rule 144
(or any similar provision then in force) under the Securities Act.
"Restricted Stock" shall mean securities of the sort described in Rule
144(a)(3) promulgated pursuant to the Securities Act.
"Securities Act" shall mean 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.
"Series A-I Preferred Stock" shall mean the Company's Series A-I
Preferred Stock, no par value per share.
"Selling Expenses" shall mean the expenses so described in Section 7.
2. Restrictive Legend. Each certificate representing Preferred Shares or
Conversion Shares shall, except as otherwise provided in this Section 2, be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT
HAS BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION
IS AVAILABLE."
-2-
<PAGE> 3
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company, which opinion shall be addressed to each holder of
Series A-I Preferred Stock, the securities may be publicly sold without
registration under the Securities Act.
3. Required Registration. (a) At any time beginning six months
after a registration statement covering an initial public offering of
securities of the Company under the Securities Act shall have become effective,
the holder or holders of Registerable Stock constituting at least 51% of the
total shares of Registerable Stock then outstanding may request the Company to
register under the Securities Act all or any portion of the shares of
Registerable Stock held by such requesting holder or holders for sale in the
manner specified in such notice. In addition, at any time after July 22, 1996,
if a registration statement on Form S-1 or any successor thereto has not yet
become effective, the holder or holders of Registerable Stock constituting at
least 51% of the total shares of Registerable Stock then outstanding may
request the Company to register under the Securities Act all or any portion of
the shares of Registerable Stock held by such requesting holder or holders for
sale in the manner specified in such notice. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 3 within
120 days after the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering in which the
holders of Registerable Stock shall have been entitled to join pursuant to
Sections 4 or 5 provided that there shall have been effectively registered all
shares of Registerable Stock as to which registration shall have been requested.
(b) Following receipt of any notice under this Section 3,
the Company shall notify all holders of Registerable Stock from whom notice
has not been received and shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting holders, the number of shares of
Registerable Stock specified in such notice (and in all notices received by
the Company from other holders within 15 days after the giving of such notice by
the Company). The Company shall be obligated to register Registerable Stock
pursuant to this Section 3 on two occasions only and shall use its best efforts
to cause each such Registration Statement to become effective whether or not all
shares requested to be registered can be included. However, the Company's
obligation as to any required registration hereunder shall be deemed satisfied
only if that registration statement has become effective, has remained effective
for a period of 120 days (or such shorter period in which all securities
registered have been sold) and includes all shares of Registerable Stock
specified in notices received as aforesaid, for sale in accordance with the
method of disposition specified by the requesting holders, and, if such method
of disposition is a firm commitment underwritten public offering, all such
shares shall have been sold pursuant thereto.
(c) The Company shall be entitled to include in any
registration statement referred to in this Section 3, for sale in accordance
with the method of disposition specified by the requesting holders, shares of
Common Stock to be sold by the Company for its own account or for sale by
others, except as and to the extent that, in the opinion of the managing
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<PAGE> 4
underwriter (if such method of disposition shall be an underwritten public
offering), such inclusion would adversely affect the marketing of the
Registerable Stock to be sold (including the price at which such securities can
be sold) or reduce the number of shares of Registerable Stock otherwise able to
be included in the Registration Statement. Except for registration statements on
Form S-8 or any successor thereto, the Company will not file with the Commission
any other registration statement with respect to its Common Stock, whether for
its own account or that of other stockholders, from the date of receipt of a
notice from requesting holders pursuant to this Section 3 until the completion
of the distribution of the shares covered by such registration.
4. Incidental Registration. (a) If the Company at any time (other than
pursuant to Section 3 or Section 5) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Registerable Stock for sale to the public), each such time it
will give written notice to all holders of outstanding Registerable Stock of its
intention to do so. Upon the written request of any such holder, received by the
Company within 15 days after the giving of any such notice by the Company to
register any of its Registerable Stock (which request shall state the intended
method of disposition thereof), the Company will cause the Registerable Stock as
to which registration shall have been so requested to be included in the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or other disposition
by the holder (in accordance with its written request) of such Registerable
Stock so registered. The Company shall be obligated to each Investor to register
Registerable Stock of that Investor pursuant to this Section 4 on one occasion
only; provided, however, that such obligation shall be deemed satisfied as to
any Investor only when a registration statement covering all shares of
Registerable Stock specified in notices from that Investor received as
aforesaid, for sale in accordance with the method of disposition specified by
the requesting holders, shall have become and shall have remained effective as
provided in this Agreement and, if such method of disposition is a firm
commitment underwritten public offering, all such shares shall have been sold
pursuant thereto.
(b) In the event that any registration pursuant to this Section 4
shall be, in whole or in part, an underwritten public offering of Common Stock,
the number of shares of Registerable Stock to be included in such an
underwriting may be reduced (pro rata among the requesting holders based upon
the number of shares of Registerable Stock owned by such holders) if and to the
extent that the managing underwriter shall be of the opinion that such inclusion
would adversely affect the marketing of the securities to be sold by the Company
therein (including the price at which such securities can be sold), provided,
however, that such number of shares of Registerable Stock shall not be reduced
if any shares are to be included in such underwriting for the account of any
person other than the Company or requesting holders of Registerable Stock; and
provided, further, that in no event may less than twenty-five (25%) percent of
the total number of shares of Common Stock to be
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<PAGE> 5
included in such underwriting be made available for shares of Registerable
Stock. Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 4 without thereby incurring
any liability to the holders of Registerable Stock.
5. Registration Procedures. If and whenever the Company is required
by the provisions of Sections 3 or 4 to effect the registration of any shares of
Registerable Stock under the Securities Act, the Company will, as expeditiously
as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant
to Section 3, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and
comply with the provisions of the Securities Act with respect to the
disposition of all Registerable Stock covered by such registration
statement in accordance with the sellers' intended method of disposition as
set forth in such registration statement for such period;
(c) furnish to each seller of Registerable Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or
other disposition of the Registerable Stock covered by such registration
statement;
(d) use its best efforts to register or qualify the Registerable
Stock covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registerable Stock or, in
the case of an underwritten public offering, the managing underwriter
reasonably shall request; provided, however, that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) use its best efforts to list the Registerable Stock covered by
such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;
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<PAGE> 6
(f) in addition to its obligations under Section 5(b) hereof, immediately
notify each seller of Registerable Stock and each underwriter under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an 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 not misleading in
light of the circumstances then existing;
(g) if the offering is underwritten, at the request of any seller of
Registerable Stock furnish on the date that Registerable Stock is delivered to
the underwriters for sale pursuant to such registration: (i) an opinion dated
such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such seller, stating that
such registration statement has become effective under the Securities Act and
that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B)
the registration statement, the related prospectus and each amendment or
supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements or other financial data contained
therein) and (C) to such other effects as reasonably may be requested by
counsel for the underwriters or by such seller or its counsel and (ii) a letter
dated such date from the independent public accountants retained by the
Company, addressed to the underwriters and to such seller, stating that they
are independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act, and such
letter shall additionally cover such other financial matters (including
information as to the period ending no more than five business days prior to
the date of such letter) with respect to such registration as such underwriters
reasonably may request; and
(h) make available for inspection by each seller of Registerable Stock, by
any underwriter participating in any distribution pursuant to such registration
statement, and by any attorney, accountant or other agent retained by such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
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<PAGE> 7
For purposes of this Agreement, the period of distribution, if not
otherwise described in the Registration Statement of Registerable Stock in a
firm commitment underwritten public offering shall be deemed to extend until
each underwriter has completed the distribution of all securities purchased by
it, and the period of distribution of Registerable Stock in any other
registration shall be deemed to extend until the earlier of the sale of all
Registerable Stock covered thereby or 120 days after the effective date thereof.
In connection with each registration hereunder, the sellers of Registerable
Stock will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 3 or 4 covering an
underwritten public offering, the Company and each seller agree to enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
6. Expenses. All expenses incurred by the Company in complying with
Sections 3 or 4, including all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants for the
Company, reasonable fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, cost of insurance,and reasonable fees and
disbursements of one counsel for the sellers of Registerable Stock, but
excluding any Selling Expenses, are called "Registration Expenses". "Selling
Expenses" shall include only such underwriting discounts and selling commissions
applicable to the sale of any Registerable Stock which would not have been
incurred in the absence of the registration and sale of the Registerable Stock.
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Sections 3 and 4; provided, however,
that in connection with a registration statement filed under Section 4, the
Company shall not be obligated to pay fees and expenses (including counsel fees)
incurred in connection with complying with state securities laws in any state in
which the Company is not otherwise registering for sale any of the shares the
Company proposes to sell in the offering. All Selling Expenses in connection
with each registration statement filed pursuant to Sections 3 or 4 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers as they may agree.
7. Indemnification and Contribution. (a). In the event of a registration of
any of the Registerable Stock under the Securities Act pursuant to Sections 3 or
4, the Company
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<PAGE> 8
will indemnify and hold harmless each seller of such Registerable Stock
thereunder, each underwriter of such Registerable Stock thereunder and each
other person, if any, who controls such seller or underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such seller, underwriter 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 Registrable Stock was
registered under the Securities Act pursuant to Sections 3 or 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each such seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them 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 if and 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 so
made in conformity with information furnished by any seller, underwriter or
controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registerable Stock under
the Securities Act pursuant to Sections 3 or 4, each seller of such Registerable
Stock thereunder, severally and not jointly, will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter 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 the registration statement under which such Registerable Stock was registered
under the Securities Act pursuant to Section 3 or 4, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that such seller will be liable hereunder in any such case only if and 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 reliance upon and in conformity with information pertaining to
such seller, as such, furnished
-8-
<PAGE> 9
in writing to the Company by such seller specifically for use in such
registration statement or prospectus; provided, further, that the liability of
each seller hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense which is equal to the proportion that the
public offering price of the shares sold by such seller under such registration
statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the proceeds received by such seller
from the sale of Registerable Stock covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 7 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 7 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent
it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 7 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be considered by the
indemnified party to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action with reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred. No indemnifying party, in defense of any such action, shall,
except with the consent of each indemnified party, consent to the entry of any
judgment or enter into any settlement (i) which does not include as an
unconditional term thereof the giving, by the claimant or plaintiff, to such
indemnified party of a release from all liability in respect to such action or
(ii) which involves any relief against the indemnified party other than the
payment of money which is to be paid in full by the indemnifying party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder
of Registerable Stock exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 7 but it is judicially determined (by the
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<PAGE> 10
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 7, provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling holder or any such controlling person in circumstances for which
indemnification is provided under this Section 7; then, and in each such case,
the Company and such holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that such holder is responsible for the portion
represented by the percentage that the public offering price of its Registerable
Stock offered by the registration statement bears to the public offering price
of all securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such holder will be required to contribute any amount in excess of
the public offering price of all such Registerable Stock sold by such holder
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
8. CHANGES IN COMMON STOCK OR SERIES A-I PREFERRED STOCK. If, and as often
as, there is any change in the Common Stock or the Series A-I Preferred Stock by
way of a stock split, stock dividend, combination or reclassification, or
through a merger, consolidation, reorganization or recapitalization, or by any
other means, appropriate adjustment shall be made in the provisions hereof so
that the rights and privileges granted hereby shall continue with respect to the
Common Stock or the Series A-I Preferred Stock as so changed.
9. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registerable Stock to the public without registration, at all times
after 90 days after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become effective
(or the Company shall otherwise have become subject to the periodic reporting
requirements of the Exchange Act), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Registerable Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a
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<PAGE> 11
copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed by the Company as such holder
may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Registerable Stock
without registration.
10. Representations and Warranties of the Company. The Company represents
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other
agency of government, the Articles of Organization or By-laws of the
Company or any provision of any indenture, agreement or other instrument
to which it or any of its properties or assets is bound, conflict with,
result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument or
result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance
and moratorium laws and other laws of general application affecting
enforcement of creditors' rights generally and (ii) the availability of
equitable remedies as such remedies may be limited by equitable principles
of general applicability (regardless of whether enforcement is sought in a
processing in equity or at law).
11. Miscellaneous. (a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including transferees of any Registerable Stock), whether so expressed or not;
provided, however, that registration rights conferred herein on an Investor
shall only inure to the benefit of a transferee of Registerable Stock if (i)
there is transferred to a direct or indirect transferee of the Investor at
least 40% of the total shares of Registerable Stock purchased by the Investor
pursuant to the Purchase Agreement or (ii) such transferee is a partner,
shareholder or affiliate of the Investor. The Company shall be notified of
any transfers of Registerable Stock at the time thereof.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage pre-paid, or telexed, in the case of
non-U.S. residents, addressed as follows:
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<PAGE> 12
if to the Company or an Investor, at the address of such party set
forth in the Purchase Agreement;
if to any subsequent holder of Registerable Stock, to it at such
address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Registerable
Stock) or to the holders of Registerable Stock (in the case of the Company) in
accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts (without giving effect to
its choice of law principles).
(d) The Company may not, without the prior written consent of the
holders of at least two-thirds of the then outstanding shares of Registerable
Stock, grant any rights to any persons to register shares of capital stock or
securities of the Company unless such rights are, by their terms, substantially
identical to the rights of the holders of Registerable Stock granted pursuant
to this Agreement.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) The obligations of the Company to register shares of
Registerable Stock under Sections 3 or 4 shall terminate on July 1, 2002,
unless such obligations terminate earlier in accordance with the terms of this
Agreement.
(g) If requested in writing by the underwriters for the initial
underwritten public offering of securities of the Company, each holder of
Registerable Stock who is a party to this Agreement or one of the several
separate agreements of even date herewith with other purchasers of Series A-I
Preferred Stock shall agree not to sell publicly any shares of Registerable
Stock or any other shares of Common Stock (other than shares of Registerable
Stock or other shares of Common Stock being registered in such offering),
without the consent of such underwriters, for a period of not more than 120 days
following the effective date of the registration statement relating to such
initial public offering: provided, however, that the Company shall have
certified to each such holder that all persons entitled to registration rights
with respect to shares of Common Stock who are not parties to this Agreement,
all other persons selling shares of Common Stock in such offering and all
executive officers and directors of the Company shall also have agreed not to
sell publicly their Common Stock under the circumstances and pursuant to the
terms set forth in this Section 11(g).
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<PAGE> 13
(h) Notwithstanding the provisions of Section 5(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become and remain effective, shall be suspended for a period not
to exceed 30 days (and for periods not exceeding, in the aggregate, 60 days in
any 24-month period) if there exists at the time material non-public
information relating to the Company which, in the reasonable opinion of the
Company, should not be disclosed.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(j) Except as otherwise provided herein, neither this Agreement nor any
provision hereof can be modified, changed, discharged or terminated except by
an instrument in writing signed by the party against whom the enforcement of
any modification, change, discharge or termination is sought or by the written
consent of the Company and the holders of at least two-thirds of the then
outstanding shares of Registerable Stock; provided, however, that no
modification or amendment shall be effective to reduce the percentage of the
shares of Registerable Stock the consent of the holders of which is required
under this Section 11(j).
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<PAGE> 14
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
--------------------------------------------
[Corporate Seal] Name: Simon R. McKenzie
Title: President and Chief Executive Officer
PURCHASER:
SECURITY INSURANCE COMPANY OF HARTFORD
By: /s/ MICHAEL P. MALONEY
----------------------------------------------
Name: Michael P. Maloney
Title: Senior Vice President
Address: c/o Orion Capital Corporation
600 Fifth Avenue
24th Floor
New York, New York 10020
<PAGE> 15
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
--------------------------------------------
[Corporate Seal] Name: Simon R. McKenzie
Title: President and Chief Executive Officer
PURCHASERS:
By: /s/ SCOTT T. FLEMING
--------------------------------------------
Name: Scott Fleming, individually
Address: c/o Spectrum Asset Management
4 High Ridge Park
Stamford, CT 06905
By: /s/ MARK LIEB
--------------------------------------------
Name: Mark Lieb, individually
Address: c/o Spectrum Asset Management
4 High Ridge Park
Stamford, CT 06905
<PAGE> 16
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By: /s/ Simon R. McKenzie
--------------------------------------------
[Corporate Seal] Name: Simon R. McKenzie
Title: President and Chief Executive Officer
PURCHASER:
TD PARTNERS
By: /s/ Thomas Ole Dial
----------------------------------------------
Name: Thomas Ole Dial
Title: General Partner
Address: 2 Pickwick Plaza
Greenwich, CT 06830
<PAGE> 17
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By: /s/ Simon R. McKenzie
------------------------------------------
[Corporate Seal] Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASER:
By: /s/ Raymond J. Schuyler
------------------------------------------
Name: Raymond J. Schuyler, individually
Address: 7 Walsh Way
Morris Plains, NJ 07950
<PAGE> 18
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By: /s/ Simon R. McKenzie
------------------------------------------
[Corporate Seal] Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASER:
DUBLIND PARTNERS, INC.
By: /s/ Charles J. Lindsay
------------------------------------------
Name: Charles J. Lindsay
Title: President
Address: 2 Greenwich Plaza
Suite 100
Greenwich, CT 06830
<PAGE> 19
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written
INTRACEL CORPORATION
By: /s/ Simon R. McKenzie
--------------------------------------
[Corporate Seal] Name: Simon R. Mckenzie
Title: President and Chief Executive
Officer
PURCHASER:
NORTHSTAR ADVANTAGE HIGH
TOTAL RETURN
By: /s/ Thomas Ole Dial
--------------------------------------
Name: Thomas Ole Dial
Title: Vice President
Address: 2 Pickwick Plaza
Greenwich, CT 06830
<PAGE> 20
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written
INTRACEL CORPORATION
By: /s/ Simon R. McKenzie
--------------------------------------
[Corporate Seal] Name: Simon R. Mckenzie
Title: President and Chief Executive
Officer
PURCHASER:
NORTHSTAR HIGH YIELD FUND
By: /s/ Thomas Ole Dial
--------------------------------------
Name: Thomas Ole Dial
Title: Vice President
Address: 2 Pickwick Plaza
Greenwich, CT 06830
<PAGE> 21
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
[Corporate Seal] -------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASER
CHARLES J. LINDSAY IRA ACCOUNT
TRUST UA #0001233610
By: /s/ CHARLES J. LINDSAY
-------------------------------------
Name: Charles J. Lindsay
Title:
Address: 2 Greenwich Plaza
Suite 100
Greenwich, CT 06830
<PAGE> 1
EXHIBIT 4.10
WAIVER AND AMENDMENT AGREEMENT
Reference is made to that certain Registration Rights Agreement dated
September 22, 1995 by and among Intracel Corporation (the "Company"), and the
Investors set forth therein (the "Registration Rights Agreement").
Pursuant to Section 11(j) of the Registration Rights Agreement, the
undersigned hereby agree that the provisions set forth in Section 4 of the
Registration Rights Agreement are hereby waived in connection with the initial
public offering of the Company's Common Stock (the "Initial Public Offering"),
which Initial Public Offering is to be co-managed by Donaldson, Lufkin &
Jenrette Securities Corporation and Nationsbanc Montgomery Securities LLC and
that the Registration Rights Agreement is hereby amended to provide that the
rights of the holders of Registrable Stock set forth in Section 4 thereof will
not apply to the Initial Public Offering.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them under the Registration Rights Agreement.
IN WITNESS WHEREOF, this Amendment has been executed as of the 11th day of
January, 1999.
INTRACEL CORPORATION
By:
----------------------------------
Name: Simon R. McKenzie
Title:
SECURITY INSURANCE COMPANY OF
HARTFORD
By:
----------------------------------
Name: John J. McCann
Title: Executive Vice President
TD PARTNERS
By:
----------------------------------
Name: Jeff Aurijemma
Title: Vice President
<PAGE> 2
NORTHSTAR HIGH YIELD FUND
By:
----------------------------------
Name: Jeff Aurijemma
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND
By:
----------------------------------
Name: Jeff Aurijemma
Title: Vice President
<PAGE> 1
EXHIBIT 4.11
REGISTRATION RIGHTS AGREEMENT
July 22, 1994
Agreement dated this 22nd day of July, 1994, by and between Intracel
Corporation, a Massachusetts corporation (the "Company") and each of the several
Purchasers of shares of the Convertible Preferred Stock, Series A, of the
Company (the "Investors") named herein
WHEREAS: Each Investor has purchased or may purchase from the Company shares
of the Company's Series A Preferred Stock and a Warrant to purchase
shares of the Company's Common Stock pursuant to the Purchase
Agreement, and
WHEREAS: As a condition to such purchase, the Company has agreed to grant to
each Investor registration rights with respect to certain securities
of the Company held by such Investor.
AGREEMENT
NOW, THEREFORE, it is agreed as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, no par value per share, of
the Company, as constituted as of the date of this Agreement.
"Company" shall mean Intracel Corporation, a Massachusetts
corporation.
"Conversion Shares" shall mean shares of Common Stock issued upon
conversion of shares of the Series A Preferred Stock issued pursuant to
the terms of the Purchase Agreement.
<PAGE> 2
"Dividend Shares" shall mean shares of Series A Preferred Stock issued
in lieu of cash dividends on shares of the Series A Preferred Stock.
"Exchange Act" shall mean 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 at the time.
"Purchase Agreement" shall mean the Convertible Preferred Stock
Purchase Agreement, of even date herewith.
"Registration Expenses" shall mean the expenses so described in
Section 7.
"Registerable Stock" shall mean the Conversion Shares and the Warrant
Shares, but only so long as such shares continue to be Restricted Stock.
Any such shares shall continue to be Restricted Stock until such time as
such shares (i) have been disposed of in accordance with a Registration
Statement which has become effective under the Securities Act or (ii) have
been publicly sold in compliance with Rule 144 (or any similar provision
then in force) under the Securities Act.
"Restricted Stock" shall mean securities of the sort described in Rule
144(a)(3) promulgated pursuant to the Securities Act.
"Securities Act" shall mean 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.
"Series A Preferred Stock" shall mean the Company's Series A Preferred
Stock, no par value per share.
"Selling Expenses" shall mean the expenses so described in Section 7.
"Warrant Shares" shall mean shares of Common Stock issued upon
exercise of the Warrants.
"Warrants" shall mean the warrants granted to the holders of the
Series A Preferred Stock to purchase shares of Common Stock.
2. Restrictive Legend. Each certificate representing Preferred Shares,
Warrant Shares or Conversion Shares shall, except as otherwise provided in this
Section 2, be stamped or otherwise imprinted with a legend substantially in the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED OR
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<PAGE> 3
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE"
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company, which opinion shall be addressed to each holder
of Series A Preferred Stock, the securities may be publicly sold without
registration under the Securities Act.
3. Required Registration. (a) At any time beginning six months after a
registration statement covering an initial public offering of securities of the
Company under the Securities Act shall have become effective, the holder or
holders of Registerable Stock constituting at least 51% of the total shares of
Registerable Stock then outstanding may request the Company to register under
the Securities Act all or any portion of the shares of Registerable Stock held
by such requesting holder or holders for sale in the manner specified in such
notice. In addition, at any time following the second anniversary of the date of
this Agreement, if a registration statement on Form S-1 or any successor thereto
has not yet become effective, the holder or holders of Registerable Stock
constituting at least 51% of the total shares of Registerable Stock then
outstanding may request the Company to register under the Securities Act all or
any portion of the shares of Registerable Stock held by such requesting holder
or holders for sale in the manner specified in such notice. Notwithstanding
anything to the contrary contained herein, no request may be made under this
Section 3 within 120 days after the effective date of a registration statement
filed by the Company covering a firm commitment underwritten public offering in
which the holders of Registerable Stock shall have been entitled to join
pursuant to Sections 4 or 5 provided that there shall have been effectively
registered all shares of Registerable Stock as to which registration shall have
been requested.
(b) Following receipt of any notice under this Section 3, the Company
shall notify all holders of Registerable Stock from whom notice has not been
received and shall use its best efforts to register under the Securities Act,
for public sale in accordance with the method of disposition specified in such
notice from requesting holders, the number of shares of Registerable Stock
specified in such notice (and in all notices received by the Company from other
holders within 15 days after the giving of such notice by the Company). The
Company shall be obligated to register Registerable Stock pursuant to this
Section 3 on two occasions only and shall use its best efforts to cause each
such Registration Statement to become effective whether or not all shares
requested to be registered can be included. However, the Company's obligation as
to any required registration hereunder shall be deemed satisfied only if that
registration statement has become effective, has remained effective for a period
of 120 days (or such shorter period in which all securities registered have been
sold) and includes all shares of Registerable Stock specified in notices
received as aforesaid, for sale in accordance with the method of disposition
specified by the requesting holders, shall have become effective and, if such
method of disposition is a firm commitment underwritten public offering, all
such shares shall have been sold pursuant thereto.
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<PAGE> 4
(c) The Company shall be entitled to include in any registration
statement referred to in this SECTION 3, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account or for sale by others, except as and to
the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Registerable Stock to be sold (including
the price at which such securities can be sold) or reduce the number of shares
of Registerable Stock otherwise able to be included in the Registration
Statement. Except for registration statements on Form S-8 or any successor
thereto, the Company will not file with the Commission any other registration
statement with respect to its Common Stock, whether for its own account or that
of other stockholders, from the date of receipt of a notice from requesting
holders pursuant to this SECTION 3 until the completion of the distribution of
the shares covered by such registration.
4. INCIDENTAL REGISTRATION. (a) If the Company at any time (other than
pursuant to SECTION 3 or SECTION 5) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Registerable Stock for sale to the public), each such time it
will give written notice to all holders of outstanding Registerable Stock of its
intention to do so. Upon the written request of any such holder, received by the
Company within 15 days after the giving of any such notice by the Company to
register any of its Registerable Stock (which request shall state the intended
method of disposition thereof), the Company will cause the Registerable Stock as
to which registration shall have been so requested to be included in the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or other disposition
by the holder (in accordance with its written request) of such Registerable
Stock so registered. The Company shall be obligated to each Investor to register
Registerable Stock of that Investor pursuant to this SECTION 4 on one occasion
only; PROVIDED, HOWEVER, that such obligation shall be deemed satisfied as to
any Investor only when a registration statement covering all shares of
Registerable Stock specified in notices from that Investor received as
aforesaid, for sale in accordance with the method of disposition specified by
the requesting holders, shall have become and shall have remained effective as
provided in this Agreement and, if such method of disposition is a firm
commitment underwritten public offering, all such shares shall have been sold
pursuant thereto.
(b) In the event that any registration pursuant to this SECTION 4
shall be, in whole or in part, an underwritten public offering of Common Stock,
the number of shares of Registerable Stock to be included in such an
underwriting may be reduced (pro rata among the requesting holders based upon
the number of shares of Registerable Stock owned by such holders) if and to the
extent that the managing underwriter shall be of the opinion that such inclusion
would adversely affect the marketing of the securities to be sold by the Company
therein (including the price at which such securities can be sold), PROVIDED,
HOWEVER, that
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<PAGE> 5
such number of shares of Registerable Stock shall not be reduced if any shares
are to be included in such underwriting for the account of any person other
than the Company or requesting holders of Registerable Stock; and provided,
further, that in no event may less than twenty-five (25%) percent of the total
number of shares of Common Stock to be included in such underwriting be made
available for shares of Registerable Stock. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement referred to in
this Section 4 without thereby incurring any liability to the holders of
Registerable Stock.
5. Registration Procedures. If and whenever the Company is required by
the provisions of Sections 3 or 4 to effect the registration of any shares of
Registerable Stock under the Securities Act, the Company will, as expeditiously
as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section
3, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided)
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of
the distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and
comply with the provisions of the Securities Act with respect to the
disposition of all Registerable Stock covered by such registration
statement in accordance with the sellers' intended method of disposition
as set forth in such registration statement for such period;
(c) furnish to each seller of Registerable Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as
such persons reasonably may request in order to facilitate the public sale
or other disposition of the Registerable Stock covered by such
registration statement;
(d) use its best efforts to register or qualify the Registerable
Stock covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registerable Stock or,
in the case of an underwritten public offering, the managing underwriter
reasonably shall request; provided, however, that the Company shall not
for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified
or to consent to general service of process in any such jurisdiction;
-5-
<PAGE> 6
(e) use its best efforts to list the Registerable Stock covered by such
registration statement with any securities exchange on which the Common Stock
of the Company is then listed;
(f) in addition to its obligations under Section 5(b) hereof, immediately
notify each seller of Registerable Stock and each underwriter under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an 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 not misleading in
light of the circumstances then existing;
(g) if the offering is underwritten, at the request of any seller of
Registerable Stock to furnish on the date that Registerable Stock is delivered
to the underwriters for sale pursuant to such registration: (i) an opinion
dated such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such seller, stating that
such registration statement has become effective under the Securities Act and
that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B)
the registration statement, the related prospectus and each amendment or
supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements or other financial data contained
therein) and (C) to such other effects as reasonably may be requested by
counsel for the underwriters or by such seller or its counsel and (ii) a letter
dated such date from the independent public accountants retained by the
Company, addressed to the underwriters and to such seller, stating that they
are independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects
with the applicable accounting requirements of the Securities Act, and such
letter shall additionally cover such other financial matters (including
information as to the period ending no more than five business days prior to
the date of such letter) with respect to such registration as such underwriters
reasonably may request; and
(h) make available for inspection by each seller of Registerable Stock,
by any underwriter participating in any distribution pursuant to such
registration statement, and by any attorney, accountant or other agent retained
by such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller,
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<PAGE> 7
underwriter, attorney, accountant or agent in connection with such
registration statement.
For purposes of this Agreement, the period of distribution, if not
otherwise described in the Registration Statement of Registerable Stock in a
firm commitment underwritten public offering shall be deemed to extend until
each underwriter has completed the distribution of all securities purchased by
it, and the period of distribution of Registerable Stock in any other
registration shall be deemed to extend until the earlier of the sale of all
Registerable Stock covered thereby or 120 days after the effective date thereof.
In connection with each registration hereunder, the sellers of
Registerable Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Sections 3 or 4 covering
an underwritten public offering, the Company and each seller agree to enter
into a written agreement with the managing underwriter selected in the manner
herein provided in such form and containing such provisions as are customary in
the securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
6. Expenses. All expenses incurred by the Company in complying with
Sections 3 or 4, including all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants for the
Company, reasonable fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance and reasonable fees and
disbursements of one counsel for the sellers of Registerable Stock, but
excluding any Selling Expenses, are called "Registration Expenses". "Selling
Expenses" shall include only such underwriting discounts and selling
commissions applicable to the sale of any Registerable Stock which would not
have been incurred in the absence of the registration and sale of the
Registerable Stock.
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Sections 3 and 4; provided, however,
that in connection with a registration statement filed under Section 4, the
Company shall not be obligated to pay fees and expenses (including counsel
fees) incurred in connection with complying with state securities laws in any
state in which the Company is not otherwise registering for sale any of the
shares the Company proposes to sell in the offering. All Selling Expenses in
connection with each registration statement filed pursuant to Sections 3 or 4
shall be borne by the participating sellers in proportion to the number of
shares sold by each, or by such participating sellers as they may agree.
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<PAGE> 8
7. Indemnification and Contribution. (a) In the event of a registration of
any of the Registerable Stock under the Securities Act pursuant to Sections 3 or
4, the Company will indemnify and hold harmless each seller of such Registerable
Stock thereunder, each underwriter of such Registerable Stock thereunder and
each other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, underwriter 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
Registerable Stock was registered under the Securities Act pursuant to Sections
3 or 4, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each such seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them 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
if and 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 so made in conformity with information furnished by any
seller, underwriter or controlling person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the Registerable Stock under
the Securities Act pursuant to Sections 3 or 4, each seller of such Registerable
Stock thereunder, severally and not jointly, will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter 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 the registration statement under which such Registerable Stock was registered
under the Securities Act pursuant to Sections 3 or 4, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that such seller will be liable hereunder in any such case only if and to the
extent that any such loss, claim, damage or liability arises out of or is based
upon
-8-
<PAGE> 9
an untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Company by such seller specifically
for use in such registration statement or prospectus; provided, further, that
the liability of each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expenses which is equal to the proportion
that the public offering price of the shares sold by such seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by such seller from the sale of Registerable Stock covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 8 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 8 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 8 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be defenses available to it which are different from or
additional to those available to the indemnifying party or if the interests of
the indemnified party reasonably may be considered by the indemnified party to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred. No
indemnifying party, in defense of any such action, shall, except with the
consent of each indemnified party, consent to the entry of any judgment or enter
into any settlement (i) which does not include as an unconditional term thereof
the giving, by the claimant or plaintiff, to such indemnified party of a release
from all liability in respect to such action or (ii) which involves any relief
against the indemnified party other than the payment of money which is to be
paid in full by the indemnifying party.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder
of Registerable Stock
-9-
<PAGE> 10
exercising rights under this Agreement, or any controlling person of any such
holder, makes a claim for indemnification pursuant to this Section 7, but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 7 provides for indemnification
in such case, or (ii) contribution under the Securities Act may be required on
the part of any such selling holder or any such controlling person in
circumstances for which indemnification is provided under this Section 7; then,
and in each such case, the Company and such holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such holder is
responsible for the portion represented by the percentage that the public
offering price of its Registerable Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case (A) no holder will be
required to contribute any amount in excess of the public offering price of all
such Registerable Stock sold by such holder pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
8. Changes in Common Stock or Series A Preferred Stock. If, and as
often as there is any change in the Common Stock or the Series A Preferred
Stock by way of a stock split, stock dividend, combination or reclassification,
or through a merger, consolidation, reorganization or recapitalization, or by
any other means, appropriate adjustment shall be made in the provisions hereof
so that the rights and privileges granted hereby shall continue and respect to
the Common Stock or the Series A Preferred Stock as so changed.
9. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit
the sale of the Registerable Stock to the public without registration, at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective (or the Company shall otherwise have become subject to the periodic
reporting requirements of the Exchange Act), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act:
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Registerable Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting
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<PAGE> 11
requirements of such Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company,
and such other reports and documents so filed by the Company as such holder
may reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Registerable Stock without
registration.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other
agency of government, the Articles of Organization or By-laws of the
Company or any provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument or result
in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the Company,
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and
moratorium laws and other laws of general application affecting enforcement
of creditors' rights generally and (ii) the availability of equitable
remedies as such remedies may be limited by equitable principles of general
applicability (regardless of whether enforcement is sought in a proceeding
in equity or at law).
11. MISCELLANEOUS. (a) All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including transferees of any Registerable Stock), whether so expressed or not;
provided, however, that registration rights conferred herein on an Investor
shall only inure to the benefit of a transferee of Registerable Stock if (i)
there is transferred to a direct or indirect transferee of the Investor at least
40% of the total shares of Registerable Stock purchased by the Investor pursuant
to the Purchase Agreement or (ii) such transferee is a partner, shareholder or
affiliate of the Investor. The Company shall be notified of any transfers of
Registerable Stock at the time thereof.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be mailed by certified or registered mail,
return receipt requested, postage pre-paid, or telexed, in the case of
non-U.S. residents, addressed as follows:
-11-
<PAGE> 12
if to the Company or an Investor, at the address of such party set
forth in the Purchase Agreement;
if to any subsequent holder of Registerable Shares, to it at such
address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Registerable
Stock) or to the holders of Registerable Stock (in the case of the Company) in
accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts (without giving effect to
its choice of law principles).
(d) The Company may not, without the prior written consent of the
holders of at least two-thirds of the then outstanding shares of Registerable
Stock, grant any rights to any persons to register shares of capital stock or
securities of the Company unless such rights are, by their terms, substantially
identical to the rights of the holders of Registerable Stock granted pursuant
to this Agreement.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) The obligations of the Company to register shares of Registerable
Stock under Sections 3 or 4 shall terminate on July 1, 2001, unless such
obligations terminate earlier in accordance with the terms of this Agreement.
(g) If requested in writing by the underwriters for the initial
underwritten public offering of securities of the Company, each holder of
Registerable Stock who is a party to this Agreement or one of the several
separate agreements of even date herewith with other purchasers of Series A
Preferred Stock shall agree not to sell publicly any shares of Registerable
Stock or any other shares of Common Stock (other than shares of Registerable
Stock or other shares of Common Stock being registered in such offering),
without the consent of such underwriters, for a period of not more than 120
days following the effective date of the registration statement relating to
such initial public offering; provided, however, that the Company shall have
certified to each such holder that all persons entitled to registration rights
with respect to shares of Common Stock who are not parties to this Agreement,
all other persons selling shares of Common Stock in such offering and all
executive officers and directors of the Company shall also have agreed not to
sell publicly their Common Stock under the circumstances and pursuant to the
terms set forth in this Section 11(g).
-12-
<PAGE> 13
(h) Notwithstanding the provisions of Section 5(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become and remain effective, shall be suspended for a period not
to exceed 30 days (and for periods not exceeding, in the aggregate, 60 days in
any 24-month period) if there exists at the time material non-public
information relating to the Company which, in the reasonable opinion of the
Company, should not be disclosed.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(j) Except as otherwise provided herein, neither this Agreement nor
any provision hereof can be modified, changed, discharged or terminated except
by an instrument in writing signed by the party against whom the enforcement
of any modification, change, discharge or termination is sought or by the
written consent of the Company and the holders of at least two-thirds of the
then outstanding shares of Registerable Stock; provided, however, that no
modification or amendment shall be effective to reduce the percentage of the
shares of Registerable Stock the consent of the holders of which is required
under this Section 11(j).
-13-
<PAGE> 14
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By:
-------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASER
SECURITY INSURANCE COMPANY
OF HARTFORD
By:
-------------------------------------
Name: Raymond J. Schuyler
Title: Senior Vice President
Address: c/o Orion Capital Corporation
30 Rockefeller Plaza
Suite 2820
New York, New York 10112
<PAGE> 15
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By:
--------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASERS:
--------------------------------------
Name: Scott Fleming, individually
Address: c/o Spectrum Asset Management
4 High Ridge Park
Stamford, CT 06905
--------------------------------------
Name: Mark Lieb, individually
Address: c/o Spectrum Asset Management
4 High Ridge Park
Stamford, CT 06905
<PAGE> 16
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By:
------------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASER:
TD PARTNERS
By:
------------------------------------------
Name:
Title:
Address: 2 Pickwick Plaza
Greenwich, CT 06830
<PAGE> 17
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By:
------------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASER:
By:
------------------------------------------
Name: Andrew Levison, individually
Address: c/o Donaldson Lufkin & Jenrette
140 Broadway
New York, NY 10005
<PAGE> 18
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By:
------------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASER:
TD PARTNERS
By:
------------------------------------------
Name: John Erdman, individually
Address:
<PAGE> 19
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By:
------------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
PURCHASER:
DUBLIND PARTNERS, INC.
By:
------------------------------------------
Name: Charles J. Lindsay
Title: President
Address: 2 Greenwich Plaza
Suite 100
Greenwich, CT 06830
<PAGE> 20
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By:
--------------------------------------
Name: Simon R. Mckenzie
Title: President and Chief Executive
Officer
PURCHASER:
By:
--------------------------------------
Name: Eckley B. Coxe, individually
Address: c/o Scudder, Stevens & Clark
345 Park Avenue
New York, NY 10154
<PAGE> 1
EXHIBIT 4.12
WAIVER AND AMENDMENT AGREEMENT
Reference is made to that certain Registration Rights Agreement dated July
22, 1994 by and among Intracel Corporation (the "Company"), and the Investors
set forth therein (the "Registration Rights Agreement").
Pursuant to Section 11(j) of the Registration Rights Agreement, the
undersigned hereby agree that the provisions set forth in Section 4 of the
Registration Rights Agreement are hereby waived in connection with the initial
public offering of the Company's Common Stock (the "Initial Public Offering"),
which Initial Public Offering is to be co-managed by Donaldson, Lufkin &
Jenrette Securities Corporation and Nationsbanc Montgomery Securities LLC and
that the Registration Rights Agreement is hereby amended to provide that the
rights of the holders of Registrable Stock set forth in Section 4 thereof will
not apply to the Initial Public Offering.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them under the Registration Rights Agreement.
IN WITNESS WHEREOF, this Amendment has been executed as of the 20th day of
January, 1999.
INTRACEL CORPORATION
By:
------------------------------------
Name: Simon R. McKenzie
Title: President
SECURITY INSURANCE COMPANY OF
HARTFORD
By:
------------------------------------
Name: John J. McCann
Title: Executive Vice President
TD PARTNERS
By:
------------------------------------
Name: Jeff Aurijemma
Title: Vice President
29
<PAGE> 2
CHARLES J. LINDSAY
By:
------------------------------------
Name: Charles J. Lindsay
<PAGE> 1
EXHIBIT 4.13
STOCK PURCHASE AGREEMENT
BETWEEN
AMERICAN BIO-TECHNOLOGIES, INC.
AND
THE LOUISIANA SEED CAPITAL FUND, L.P.
JUNE 7, 1991
<PAGE> 2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into as
of this 7th day of June, 1991, by and between The Louisiana Seed Capital Fund,
L.P., (referred to as "Purchasers"), and American Bio-Technologies, Inc. a
corporation domiciled in Boston, Massachusetts, represented herein by its duly
authorized President, Simon McKenzie (referred to as "Seller"), and concerns
the purchase from Seller for $200,000 of 50,000 shares (the "Common Shares") of
unissued Common Stock of Seller, having no par value per share.
NOW THEREFORE, Purchaser and Seller agree as follows
1. Sale and Purchase of the Common Shares. Subject to the
applicable terms and conditions hereof, and in reliance on the representations
and warranties contained herein, Seller hereby agrees to sell and issue to
Purchaser, and Purchaser hereby agrees to purchase from Seller for $200,000 in
cash (receipt of which is hereby acknowledged by Seller) 50,000 shares of
Common Stock (hereinafter referred to as the "Shares").
2. Purchasers' Representations and Warranties. As an inducement to
Seller to sell and issue the Shares to Purchasers, Purchasers hereby severally,
and not jointly, represent and warrant as follows:
2.1 Authority to Purchase. The execution of this Agreement has been
duly authorized by all necessary action on the part of Purchaser, has been duly
executed and delivered, and constituted a valid, legal, binding and enforceable
agreement of Purchaser, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and applicable securities laws.
2.2 Purchase for Investment. The Purchaser is acquiring its Shares
in good faith for its own account, for investment and not with a view to the
distribution of any shares (as hereinabove defined) or for the purpose of
effecting or causing to be effected a public offering of any Shares in
violation of the Securities Act of 1933, as amended, the "Act") and the rules
promulgated by the Securities and Exchange Commission pursuant to the Act and
the applicable State securities laws and regulations. Purchaser has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of the purchase of its Shares and is able to
bear the economic risk of such purchase. Purchaser recognizes that by reason of
the limitations on disposition of the Shares arising under the Act, Purchaser
must bear the economic risk of its or his investment for an indefinite period
of time as the Shares have not been registered under the Act and, therefore,
cannot be sold unless they are subsequently registered under the Act or an
exemption from such registration requirement is available.
3. Seller's Representations and Warranties. As an inducement to
Purchaser to purchase the Shares, Seller represents and warrants as follows:
3.1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts, with corporate power and authority to carry on its business as
presently and proposed to be conducted, and each is qualified to do business in
every jurisdiction in which the character and location of the assets owned by
it or the nature of the business transacted and proposed to be transacted by it
or both require qualification and failure to be so qualified would have an
adverse effect on the business or financial condition of Seller. A copy of the
Amended and Restated Articles of Incorporation and Bylaws of the Corporation
are attached hereto as Exhibit 3.1.
<PAGE> 3
3.2 Authority to Sell. The execution of this Agreement has been duly
authorized by a necessary action on the part of the Seller has been duly
executed and delivered, and constitutes a valid, legal, binding and enforceable
agreement of the Seller, subject to laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and applicable securities
laws.
3.3 Capital Stock. The authorized capital stock of Seller consists of
2,100,000 shares of Common Stock, without par value. The only shares issued are
the 1,840,058 shares of the Common Stock presently outstanding and issued to the
Stockholders listed on Exhibit 3.3 which were validly issued and outstanding,
fully paid and nonassessable. As of the date hereof, no warrants or other rights
convertible into any capital stock of the Seller are outstanding except the
options granted management as described in Exhibit 3.3.
3.4 Financial Statements. Seller has delivered to Purchaser copies of its
unaudited financial statements as of March 31, 1991, and Audited statements as
of June 30, 1990. Copies of which are attached hereto as Exhibit 3.4. These
financial statements are true and correct and have been prepared in accordance
with generally accepted accounting principles consistently applied during the
periods indicated, except as set forth in such financial statements and the
notes thereto, and the balance sheet included in the Financial Statements
presents fairly as of its date the financial condition and assets and
liabilities of the Company. Except as and to the extent reflected or reserved
against in such balance sheet (including the notes thereto), Seller and its
subsidiaries (if any) did not have, as of March 31, 1991 and as of the date
hereof do not have any material liabilities or obligations (absolute or
contingent) of a nature customarily reflected in a balance sheet or notes
thereto prepared in accordance with generally accepted accounting principles.
The statement of income and retained earnings and statement of changes in
financial position included in the Financial Statements present fairly the
results of operations and changes in financial position of Seller and its
subsidiaries, (if any) for the periods indicated.
As of the date of this Agreement and prior to receipt of the purchase price for
the Shares, Seller represents that it has cash in excess of $350.000.
3.5 Absence of Certain Changes. Except as disclosed on Exhibit 3.5, since
the date of the incorporation of Seller, Seller has not:
(a) sold or transferred or agreed to sell or transfer a substantial
part of its assets, property or rights or cancelled or agreed to
cancel any material debts or claims due to it or claimed by it.
(b) entered or agreed to enter into any agreement or arrangement
granting any preferential rights to purchase part of its assets,
property rights;
(c) suffered or been notified of any event which could cause a
material adverse change in its financial condition, assets,
properties or business;
(d) amended or voted to amend its Articles of Incorporation or
By-Laws, except as set forth on Exhibit 3.1; or
(e) declared any dividend (stock or otherwise) or other distribution
of assets payable to its shareholders.
3.6 Litigation and Proceedings. Except as described in the Financial
Statements or Exhibit 3.6 (a list of any such matter not set forth in the
Financial Statements) hereto, or both, there are no actions, suits or
proceedings (whether or not purportedly on behalf of Seller or any of its
subsidiaries, if any) pending or, to the knowledge of Seller, threatened against
or affecting Seller or any of its subsidiaries, at law or in equity or before or
by any governmental department,
<PAGE> 4
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, which are not fully covered by insurance in
excess of a reasonable deductible amount customarily maintained in the line of
business involved which may result in an adverse change in the business,
operations, properties or assets or in the condition, financial or otherwise,
of Seller and its subsidiaries; and neither Seller nor any of its subsidiaries,
if any, is in default on its part with respect to any judgment, order, writ,
injunction or decree of any court, arbitrator, governmental department,
commission, bureau, board, agency or instrumentality.
3.7 No Conflict With Other Instruments. The execution and performance of
this Agreement by Seller will not conflict with or result in a breach of any
term or provision of or constitute a default under any indenture, mortgage,
deed of trust or other agreement or instrument to which Seller is a party or to
which it is subject or by which any of its properties or assets are bound, or
result in the creation of any lien, encumbrance or charge upon any of the
properties or assets of Seller where such conflict, breach, default, lien,
encumbrance or charge would have an adverse effect on the financial condition
of Seller.
3.8 Consents. No authorizations, approvals or consents of any
governmental department, commission, bureau, agency or other public body or
authority are required for the sale or issue of the Shares.
3.9 Approval of Agreement. The execution and delivery of this Agreement
and the sale and issuance of the Shares to Purchaser have been duly and validly
authorized by the Board of Directors of Seller and no approval of the
stockholders of Seller is necessary in connection therewith.
3.10 Private Placement and Agent. Subject to the truth and accuracy of the
representations and warranties made by Purchaser, the offer, issuance and
delivery of the Shares to Purchaser pursuant to this Agreement constitute an
exempted transaction under the Act, as now in effect, and the registration
thereof under the Act is not now required. Seller has not, directly or
indirectly, sold, offered, disposed of or attempted to sell, offer or dispose of
any securities to or solicited any offers to buy from or otherwise approached or
negotiated in respect thereof with any person or persons in such manner or to
such extent as would disqualify the sale or offer of the Shares from exemption
from registration under the Act or any applicable state's securities laws or
regulations. No agent has been authorized or employed by Seller to negotiate or
solicit the purchase of the Shares.
3.11 Use of Proceeds. The net cash proceeds received by Seller from the
sale contemplated by this Agreement, after payment of legal fees, accounting
fees and other expenses incurred in connection herewith, will be used to the
extent required, to make leasehold improvements to and to furnish and equip
newly developed laboratories leased by Seller and located at 300 Putnam Avenue,
Cambridge, Massachusetts, 02139.
3.12 Material Misstatements or Omissions. No representation or warranty by
Seller in this Agreement and no document, written statement, certificate or
schedule furnished by Seller pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
4. Additional Obligations and Covenants of Seller.
4.1 Access to Information. Seller agrees to make available to Purchaser
and to representatives designated by Purchaser the opportunity to ask questions
of and receive answers from responsible officers of Seller, its attorneys and
accountants concerning the terms and conditions of this Agreement and any
additional information in Seller's possession or which Seller
<PAGE> 5
can produce or acquire with our unreasonable effort or expense and which is
reasonably necessary to verify the accuracy of Seller's disclosures under this
Agreement. Seller's commitments under this paragraph 4.1 are made with the
understanding that Purchaser's representatives (a) shall keep confidential any
information (other than information which is readily ascertainable from public
or trade sources of published information) obtained from Seller concerning its
properties, operations and business, and (b) will not trade in securities of
Seller at any time when they have received from Seller material information
which has not theretofore been disclosed to the public.
4.2 Best Efforts. Seller agrees to use its best efforts to satisfy or
cause to be satisfied all of the obligations of Seller under this Agreement, to
the extent that Seller's action or inaction can control or influence the
satisfaction of such conditions.
5. Conditions Precedent to the Obligation of Purchaser. Seller shall
issue and deliver to Purchaser a Stock Certificate (receipt of which is hereby
acknowledged) for 50,000 shares of Common Stock in Seller. Said Stock
Certificate shall be signed by the President of the company and countersigned
by the Clerk of the company and shall be absolute evidence of Purchaser's
ownership in and to the 50,000 shares represented therein, which Shares are
fully paid and non assessable.
5.1 No Adverse Changes. There shall have been no changes as of the date
of this Agreement in the results of operations, assets, liabilities, financial
condition or affairs of Seller which have not been disclosed to Purchaser and
have in their effect been adverse to Seller.
5.2 Officer's Certificate. Seller shall have delivered to Purchaser
certificates (Exhibit 5.2) dated the date of this Agreement executed by the
President and the Clerk of Seller to the effect that to the best of the
knowledge and belief of each: (a) all of the representations and warranties of
Seller contained in this Agreement are true and accurate; (b) all of the
conditions precedent to the obligations of Purchaser on the Closing Date have
been fulfilled; and (c) Seller has duly performed all obligations and covenants
to be performed by it under this Agreement on or before the date of this
Agreement.
6. Registration under the Securities Act.
6.1 Notice of Proposed Transfers. The holder of each certificate
representing Shares by acceptance thereof, agrees prior to any proposed transfer
thereof, to give written notice to Seller of such holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, shall contain an undertaking by the
person giving such notice to furnish such further information as may be required
to enable counsel to render the opinions referred to below and shall name the
counsel for the person giving such notice. Promptly upon receiving any such
notice, Seller shall submit copies thereof to its counsel and to counsel
designated by the person giving such notice. Such proposed transfer may be
effected only if in the opinion of each such counsel the proposed transfer may
be effected without registration under the Act of such Shares. If such counsel
are of the opinion that the transfer may be effected, Seller shall so notify the
holder of such Shares and such holder shall thereupon be entitled to transfer
such shares in accordance with the terms of the notice delivered by such holder
to Seller. Each certificate evidencing the Shares to be transferred as above
provided shall bear the appropriate restrictive legend set forth in paragraph
7.1 below.
6.2 Incidental Registration. If at any time Seller proposes to register
any of its securities under the Act (other than on form S-8 or S-14 or other
form related to an offering of the type to which such forms relate), it will
each such time give written notice to all holders of Shares of its intention so
to do and, upon the written request of any holders of Shares, given within 20
days after the giving of any such notice (which request shall state the
intended method of disposition of such Shares by the prospective seller),
Seller will use its best efforts to cause all
<PAGE> 6
Shares, the holders of which shall have so requested registration thereof, to be
registered under the Act, all to the extent requisite to permit the sale or
other disposition (in accordance with the intended methods thereof, as
aforesaid) by the prospective seller or sellers of the Shares so registered.
6.3 Registration Procedures and Expenses. If and whenever Seller effects
the registration of any of its securities under the Act, Seller will as
expediently as possible:
(a) prepare and file with the Commission a registration statement
with respect to the offering of such securities. Such
registration statement to become and remain effective for such
period as may be required or permitted by law for the sale of all
shares proposed to be sold by the holders, not exceeding 180
days:
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective as may be required by the
immediately preceding subdivision and to comply with the
provisions of the Act with respect to the transfer of all
securities covered by such registration statement whenever, prior
to the expiration of 180 days after the effective date thereof, a
seller desires to transfer the same:
(c) furnish to each selling shareholder such numbers of copies of a
summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and
such other documents as such seller may reasonably request in
order to facilitate the transfer of the securities owned by such
seller, and
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as each such
seller shall request and do any and all other acts and things
which may be necessary or advisable to enable such seller to
consummate the transfer in such jurisdictions of the securities
owned by such seller.
All expenses incurred by Seller in complying with this paragraph 6.3, including
without limitation all registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel to Seller and the expense of any
special audits incident to or required by any such registration are herein
called "Registration Expenses"; and all underwriting discounts applicable to the
Shares and all fees disbursements of counsel for any seller are herein called
"Selling Expenses".
6.4 Allocation of Expenses. The Company will pay all Registration Expenses
in connection with each registration statement pursuant to paragraph 6.3 hereof.
6.5 Indemnification. In the event of any registration of any of the Shares
under the Act pursuant to this paragraph 6, Seller will indemnify and hold
harmless each seller of such Shares, each underwriter of such Shares, and each
other person, if any, who controls such seller or underwriter within the meaning
of the Act, against any losses, claims, damages or liabilities joint or several,
to which such seller, underwriter or controlling person may become subject under
the 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, on the effective
date thereof, in any registration statement under which such Shares was
registered under the Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or arise out of or
are based upon the omission or
<PAGE> 7
alleged omission to state therein a material fact required to be suited therein
or necessary to make the statements therein not misleading; and will reimburse
such seller, underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such seller, underwriter or such controlling
person in connection with investigating or defending any such loss, claim,
damage or liability, provided, however, that Seller 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 any untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement, said
preliminary prospectus or said prospectus or said amendment or supplement in
reliance upon and conformity with written information furnished to Seller
through an instrument duly executed by such seller or underwriter specifically
for use in the preparation thereof.
It shall be a condition precedent to the obligation of Seller to complete
any action pursuant to paragraph 6.3 hereof that Seller shall have received an
undertaking satisfactory to it from each prospective seller of Shares to be
registered under each registration pursuant to paragraphs 6.2 and 6.3 hereof,
and from each underwriter of such, to indemnify and hold harmless (in the same
manner and to the same extent as set forth above in this paragraph with respect
to Seller) Seller, each director of Seller, each officer of Seller who shall
sign such registration statement and each person who controls Seller within the
meaning of the Act, with respect to any statement in or omission from any such
registration statement or preliminary or final prospectus, if such statement
or omission was made in reliance upon and in conformity with information
furnished in writing to Seller by or on behalf of such seller specifically for
use in connection with the preparation of such registration statement or
prospectus.
The foregoing notwithstanding, in the event a claim for reimbursement of
liabilities under the Act by reason of the foregoing indemnity provisions of
this Agreement is asserted by any director of Seller or by any person in control
of Seller within the meaning of the Act in the absence of controlling precedent,
Seller will have the right to submit to a court of appropriate jurisdiction the
question of whether such reimbursement by it is against public policy as
expressed in the Act and Seller and each such director and controlling person
will be governed by the final adjudication of such issue.
6.6 Termination of Restrictions. Nothwithstanding the foregoing
provisions of this paragraph 6, the restrictions imposed by this paragraph 6
upon the transferability of the Shares, shall cease and terminate as to any
Share, when such Shares shall have been effectively registered under the Act.
Whenever the restrictions imposed by this paragraph 6.6 shall terminate, as
hereinabove provided, the holder of any Shares as to which such restrictions
shall have terminated shall be entitled to receive from Seller, without expense,
a new stock certificate or certificates in such denominations as the holder may
reasonably request not bearing the restrictive legend set forth in paragraph 6.1
below and not containing any other reference to the restrictions imposed by this
paragraph 6, provided, however, that in the event that any such Shares shall
not, in fact, have been sold pursuant to such registration under the Act, such
holder shall promptly redeliver the new stock certificate received as aforesaid
to Seller in exchange for a stock certificate bearing the restrictive legend set
forth in paragraph 7.1 below.
7. Restrictions.
7.1 Legend. The Shares and all shares issued hereafter and prior to any
registration under the Act shall bear the following restrictive legend:
''The transfer of the Shares represented by this Certificate is
restricted as provided for the in the Securities Act of 1933 (the ''Act''). Said
Shares cannot be transferred unless registered under the Act or pursuant to an
opinion from Seller's counsel that such transfer is exempt from the provisions
of the Act.''
<PAGE> 8
8. Affirmative Covenants. Seller agrees that subject to any binding
majority vote of is shareholders it will:
8.1 Insure and keep insured and cause any subsidiary to insure and keep insured
its inventory, machinery, equipment and buildings against loss or damage by fire
(with extended coverage), explosion and other hazards, including, without
limiting the generality of the foregoing, maintain and cause each of its
subsidiaries to maintain adequate insurance against liability due to damage to
persons and property; and maintain all such workmen's compensation insurance as
may be required under the laws of any state or jurisdiction in which it may be
engaged in business, except that the Seller may effect workmen's compensation or
similar insurance in respect of operations in any jurisdiction by causing to be
maintained a system or systems of self-insurance which is in accord with
applicable laws, and cause each of its subsidiaries so to do in each state or
jurisdiction in which it may be engaged in business: all such insurance (except
war damage insurance carried with a government or governmental agency) to be
carried in financially sound and reputable insurance companies, and provided,
further, however, that the Seller's obligation to maintain such insurance shall
be limited by the types of insurance and limits of coverage thereof which are
available at the time or times at premiums the Seller deems reasonable in the
light of prevailing conditions against such casualties and contingencies in such
types and amounts as are consistent with the practice and policy as to insurance
followed by the Seller at the time hereof.
8.2 Duly pay and discharge, or cause to be paid and discharged, all rates,
assessments and other governmental charges imposed upon it or any subsidiary and
its or their properties or any part thereof or upon the income or profits
therefrom as well as all claims for labour, materials or supplies which if
unpaid by law become a lien or charge upon any such property, except such items
as are being in good faith appropriately contested and for which adequate
reserves have been established.
8.3 Carry on and conduct its business in substantially the same manner and
in substantially the same fields as such business is now and heretofore been
carried on, and maintain its corporate existence and comply with all valid and
applicable statutes, rules and regulations.
8.4 Maintain for itself, and each subsidiary, a modern system of
accounting and furnish to the holders of the Shares (i) within 120 days after
the close of each fiscal year audited financial statements prepared by an
independent certified public accountants acceptable to the Board of Directors
including consolidated balance sheets as of the end of such period and related
profit and loss and surplus statements of the Seller, (ii) within 30 days after
the end of each quarter balance sheets and profit and loss and surplus
statements of the Seller as of the close of such quarter, and statements of
income and reconciliation of surplus for the year to date of such statements of
the Seller certified as accurate in all material respects by a responsible
officer of the Seller as having been prepared in accordance with generally
accepted accounting principles consistently applied, (iii) Promptly upon
becoming available all statements and reports that may be required to be filed
with the Securities Exchange Commission or furnished to the Shareholders of the
Seller, and (v) such other information as the Purchaser may from time to time
reasonably request including access to the books and records of the Seller and
to examine such books and records, take memoranda and extracts therefrom.
8.5 Prepare and submit to the Board of Directors of Seller a preliminary
budget in summary form for each fiscal year of the Seller at least thirty (30)
days prior to the beginning of such fiscal year followed by a comprehensive
budget not later than the first day of such year which comprehensive budget
shall be accompanied by management's written discussion and analysis of such
budget. The budget shall be presented to the directors for approval not later
than the first meeting of the Board of Directors in each year and shall be
accepted as the budget for such fiscal year when it has been approved by a
majority of the full Board of Directors of the Seller.
<PAGE> 9
Management shall review the budget periodically and shall advise the Board of
Directors of all changes therein and all material deviations therefrom.
8.6 Shall maintain key man life insurance, on which the Seller is
beneficiary on the life Dr. Jay Raina in the amount of $500,000.
9. Negative Convenants. Without the affirmative action of a majority of
the Shares of Shareholders present at a duly convened Shareholders Meeting
Seller shall not:
9.1 Merge with or into or consolidate with any other entity or lease or
sell all, or substantially all, of its property, assets and business to any
other entity, or dispose of any of its assets, property or business except
(i) in the ordinary course of business (ii) subsidiaries may merge into the
Seller or into another subsidiary.
9.2 Issue any preferred stock or other securities, other than pursuant to
the rights set forth in the existing Articles of Incorporation.
9.3 Alter or amend its Articles of Incorporation or Bylaws.
10. Affirmative Actions of the Board of Directors. Seller agrees that,
without the affirmative action of a majority of the members of the Board of
Directors, neither Seller nor any subsidiary shall:
(i) Create or incur, or suffer to exist any pledge, mortgage,
assignment for security or other encumbrance.
(ii) Declare or pay any dividends or make or declare any other
distributions on its capital stock or redemption thereof.
(iii) Make or permit to exist investments.
(iv) Sell or otherwise dispose of more than 10% of aggregate
fixed assets determined by book value during any 12
consecutive month period.
(v) Sell any notes or accounts receivable with or without
recourse other than as permitted by Section 10(vii).
(vi) Sell, pledge, mortgage or otherwise dispose or transfer of
any shares of stock in Seller or another corporation, or all
or substantially all, the assets of any subsidiary of Seller.
(vii) Incur, or permit to exist.
(viii) Expend or contract to expend any sum for any fixed assets
(including but not limited to, sums expended to acquire
equity in any entity) in an amount exceeding $50,000 per
expenditure.
(ix) Alter or amend its Bylaws
(x) Pay any bonuses to employees who are shareholders of the
company.
11. Notices. All notices, requests, demands and other communication under
this Agreement shall be in writing and shall be deemed to have been duly given
at the time given or mailed, first class postage prepaid.
<PAGE> 1
EXHIBIT 4.14
WAIVER
WAIVER, dated as of the 20th day of January, 1999, by and among Intracel
Corporation, a Delaware corporation, formerly known as American
Bio-Technologies, Inc., a Massachussetts corporation (the "Company"), and The
Louisiana Seed Capital Fund, L.P. (the "Stockholder").
WHEREAS, the Stockholder is a party to that certain Stock Purchase
Agreement dated as of June 7, 1991 pursuant to which the Stockholder was granted
certain registration rights relating to all of the securities of the Company
held by it (the "Stock Purchase Agreement"); and
WHEREAS, the Company intends to register under the Securities Act of
1933, as amended, shares of its Common Stock for sale to the public pursuant to
an initial public offering (the "Offering"); and
WHEREAS, the representatives for the underwriters in the Offering,
Donaldson, Lufkin & Jenrette Securities Corporation and NationsBanc Montgomery
Securities LLC, have determined that inclusion of the Stockholder's securities
in the Offering would adversely affect the marketing of the securities to be
sold by the Company in the Offering; and
WHEREAS, the Stockholder acknowledges and agrees that it would be in the
best interest of the Company to consummate the Offering as contemplated by
Donaldson, Lufkin & Jenrette Securities Corporation and NationsBanc Montgomery
Securities LLC and that, solely with respect to the Offering, the Stockholder
waives any registration rights with respect to the securities of the Company
held by it.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereby agree with each other as follows:
1. Waiver. The Company and the Stockholder hereby agree that the
operation of Section 6.2 of the Stock Purchase Agreement (Incidental
Registration) is hereby waived as it may apply to the registration by the
Company of shares of its Common Stock pursuant to the Offering, pursuant to
which Donaldson, Lufkin & Jenrette Securities Corporation and NationsBanc
Montgomery Securities LLC are acting as representatives of the underwriters.
2. No Modifications. Except as waived hereby, the terms and conditions
of the Stock Purchase Agreement shall continue in full force and effect and are
hereby in all respects ratified and confirmed.
1
<PAGE> 2
IN WITNESS WHEREOF, this Waiver has been executed as of the date and
year first written above.
INTRACEL CORPORATION (formerly known as
American Bio-Technologies, Inc.)
By:
-------------------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
THE LOUISIANA SEED CAPITAL FUND, L.P.
By:
-------------------------------------
Name: Kevin H. Coulty
Title President and General Partner
2
<PAGE> 1
EXHIBIT 5
[MORRISON & FOERSTER LLP LETTERHEAD]
February 8, 1999
Intracel Corporation
2005 NW Sammamish Road, Suite 107
Issaquah, WA 98027
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-1
filed by Intracel Corporation, a Delaware corporation (the "Company"), with the
Securities and Exchange Commission (the "SEC") on July 9, 1998 (Registration No.
333-58819), as amended (collectively, the "Registration Statement"), with
exhibits as filed in connection therewith, and the form of prospectus contained
therein, relating to the registration under the Securities Act of 1933, as
amended (the "Securities Act"), of up to 4,600,000 shares of the Company's
common stock, $0.0001 par value per share (the "Common Stock") (including shares
of Common Stock subject to the underwriters' over-allotment option and 300,000
presently issued and outstanding shares being offered by a selling stockholder
(the "Selling Stockholder")) pursuant to the underwriters' over-allotment
option. The Common Stock is to be sold to the underwriters named in the
Registration Statement for resale to the public.
As counsel to the Company, we have examined such corporate records,
documents, instruments, certificates of public officials and of the Company and
such questions of law as we have deemed necessary for the purpose of rendering
the opinions set forth herein. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to originals of all documents submitted to us as
certified, photostatic or conformed copies, and the authenticity of the
originals of all such latter documents. We have also assumed the due execution
and delivery of all documents where due execution and delivery are prerequisites
to the effectiveness thereof. We have relied upon certificates of public
officials and certificates of officers of the Company for the accuracy of
material, factual matters contained therein which we have not independently
established.
We are of the opinion that (a) the shares of Common Stock to be offered
and sold by the Company have been duly authorized and, when issued and sold by
the Company in the manner described in the Registration Statement and in
accordance with the resolutions adopted by the Board of Directors of the
Company, will be legally issued, fully paid and nonassessable, and (b) the
shares of Common Stock that may be
5
<PAGE> 2
Intracel Corporation
January 20, 1999
Page Two
sold by the Selling Stockholder are legally and validly issued, fully paid and
nonassessable.
We consent to the use of our name under the caption "Legal Matters" in
the Prospectus, constituting part of the Registration Statement, and to the
filing of this opinion as an exhibit to the Registration Statement.
By giving you this opinion and consent, we do not admit that we are
experts with respect to any part of the Registration Statement or Prospectus
within the meaning of the term "expert" as used in Section 11 of the Securities
Act or the rules and regulations promulgated thereunder by the Commission, nor
do we admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act.
Very truly yours,
/s/ Morrison & Foerster LLP
------------------------------
Morrison & Foerster LLP
<PAGE> 1
EXHIBIT 10.2
LEASE AGREEMENT
---------------
BETWEEN
WARD CORPORATION, a Maryland Corporation, as Landlord
AND
Organon Teknika Corporation, a Delaware Corporation,
as Tenant
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Sections Description Page No.
-------- ----------- --------
<S> <C> <C>
1. Definitions 3
2. Rent; Additional Rent 3
3. Additional Rent 3
4. Delivery and Condition of Premises 4
5. Operation of Building and Real Property 4
6. Conduct of Business by Tenant 4
7. Alterations and Tenant's Property 4
8. Repairs 5
9. Liens 5
10. Subordination and Modification
11. Inability to Perform 5
12. Destruction 5
13. Eminent Domain 5
14. Assignment and Subletting 6
15. Building Services 6
16. Default; Remedies 6
17. Insolvency or Bankruptcy 7
18. Fees and Expenses; Indemnity; Liability Insurance 7
19. Access to Premises 8
20. Waiver; Release 8
21. Tenant's Certificates 8
22. Rules and Regulations 8
23. Tax on Tenant's Personal Property 8
24. Authority 8
25. Signage 8
26. Parking 8
27. Miscellaneous 9
Exhibits "A" and "C"
Addendum to Lease
</TABLE>
<PAGE> 3
LEASE
THIS LEASE is made and entered into as of this 30th day of April, 1991,
by and between WARD CORPORATION, a Maryland corporation (herein called
"Landlord), and Organon Teknika Corporation, a Delaware Corporation (herein
called "Tenant").
W I T N E S S E T H:
Upon and subject to the terms, covenants and conditions hereinafter set
forth, Landlord leases to Tenant and Tenant leases from Landlord the Premises
(as hereinafter defined) in the Building.
1. Definitions
1.1 Additional Rent: As defined in Section 2.4, below.
1.2 Basic Rent: As defined in Section 2.1, below.
1.3 Building: The building located at 1300 Piccard Drive, Rockville,
Maryland 20850, upon the Real Property.
1.4 Guarantor(s): N/A
1.5 Lease: This Lease, as amended from time to time, and all
Exhibits attached hereto.
1.6 Lease Commencement Date: June 1, 1991.
1.7 Lease Year: Each period of twelve (12) calendar months during
the Term, commencing on the Lease Commencement Date and Partial Lease Year
ending on the Term Expiration Date.
1.8 Operating Expenses Base Amount. Intentionally Deleted.
1.9 Premises: Approximately Eight Hundred Three (803) square feet of
rentable floor area, located on the Lower Level, within the Building, and
outlined on Exhibit A, attached hereto.
1.10 Real Estate Taxes Base Amount. Intentionally Deleted.
1.11 Real Property: The land comprising all that certain parcel of
land situated in Montgomery County, Maryland, and identified as Lot Six (6) in a
subdivision known as "Lots Four (4), Five (5) and Six (6) and dedication of part
of Piccard Drive, 70-S Industrial Park" as per plat thereof recorded in Plat
Book 87 at plat 9281 among the land records of Montgomery County, Maryland (Tax
Account Number 4-201-1457).
1.12 Term: The four year (4) period commencing on the Lease
Commencement Date and ending on the Term Expiration Date, unless the Term shall
sooner terminate as hereinafter provided.
1.13 Term Expiration Date: May 31, 1995
2. Rent; Additional Rent
2.1 Basic Rent. Commencing on the Lease Commencement Date, Tenant
shall pay to Landlord during the Term a base rental ("Basic Rent") equal to Six
Hundred Two and 25/100 Dollars ($602.25) per month in gross. Basic Rent shall be
payable by Tenant in lawful money of the United States in equal consecutive
monthly installments of one-twelfth the Basic Rent on or before the first day of
each calendar month, in advance, at the address specified for Landlord below, or
such other place as Landlord shall designate, without any prior demand therefor
and without any deductions or setoff whatsoever. Rent for any partial month
shall be prorated at the rate of one-thirtieth (1/30th) of the monthly Basic
Rent per day.
2.2 Above Standard Improvement Rental Rate. Intentionally Deleted.
2.3. Adjustment of Rent. The Basic Rent set forth in Paragraph 2.1
hereinabove shall be increased as follows:
<TABLE>
<CAPTION>
Date New Monthly Rent
---- ----------------
<S> <C>
6/1/92 $ 620.32
6/1/93 $ 639.05
6/1/94 $ 658.46
</TABLE>
2.4 Additional Rent. Tenant shall pay to Landlord as additional rent
hereunder, all charges and other amounts required under this Lease. All such
amounts and charges shall be payable to Landlord at the time and at the place
where Basic Rent is payable. Landlord shall have the same remedies for a default
in the payment of additional rent as for a default in the payment of Basic Rent.
2.5 Late Payment Charge. If Tenant shall fail to pay any Basic Rent
or Additional Rent within five (5) days after the same is due and payable, such
unpaid amounts shall be subject to a late payment charge equal to ten percent
(10%) of such unpaid amounts in each instance to cover Landlord's additional
administrative costs resulting from Tenant's failure. Such late payment charge
shall be paid to Landlord together with such unpaid amounts.
2.6 Returned Check Charge. A service charge of Fifty and 00/100
Dollars ($50.00) will be automatically made for each instance in which a check
is returned unpaid for any reason by the Tenant's bank.
3
<PAGE> 4
3. Intentionally Deleted.
4. Delivery and Condition of Premises. Tenant agrees to accept the
Premises in their "as is" condition and further agrees to be fully responsible
for any alterations or improvements thereto. However, it is understood and
agreed that Tenant will obtain all necessary permits to construct the premises
as required by Code. Landlord shall furnish six (6) 2' X 4' fluorescent light
fixtures for installation by Tenant.
5. Operation of the Building and the Real Property
5.1 Maintenance of Building. The manner in which the Building and
the Real Property are maintained and operated and the expenditures therefor
shall be at the sole discretion of Landlord, in a manner consistent with similar
office buildings in Montgomery County.
5.2 Alterations or Additions. Landlord hereby reserves the right, at
any time and from time to time, to make alterations or additions to the
Building and the Real Property. Landlord also reserves the right at any time and
from time to time to construct other improvements in the Building and to enlarge
same and make alterations therein or additions thereto.
6. Conduct of Business by Tenant
6.1 Permitted Use. Tenant shall use and occupy the Premises during
the Term of the Lease solely for use for storage of files, as permitted by law,
and for no other use or uses without the prior written consent of Landlord.
6.2 Uses Not Permitted. Tenant shall not use or occupy, or permit
the use or occupancy of, the Premises or any part thereof for any use other than
the use specifically set forth in Section 6.1 hereof, or in any manner that, in
Landlord's judgment, would adversely affect or interfere with any services
required to be furnished by Landlord to Tenant or to any other tenant or
occupant of the Building, or with the proper and economical rendition of any
such service, or with the use or enjoyment of any part of the Building by any
other tenant or occupant.
6.3 Tenant's Compliance with Laws. Tenant, at Tenant's cost and
expense, shall comply with all laws, orders and regulations of federal and
municipal authorities, and with all directions, pursuant to law, of all public
officers, that shall impose any duty upon Landlord or Tenant with respect to the
Premises or the use or occupancy thereof.
6.4 Tenant's Compliance with Insurance Requirements, etc. Tenant
shall not do anything, or permit anything to be done, in or about the Premises
which shall conflict with the provisions of any insurance policies covering the
Building or any property located therein, or result in a refusal by any
insurance company to insure the Building or any such property, in amounts
reasonably satisfactory to Landlord, or subject Landlord to any liability or
responsibility for injury to any person or property by reason of any business
operation being conducted in the Premises, or cause any increase in the
insurance rates applicable to the Building or property located therein. Tenant,
at Tenant's expense, shall comply with all rules, orders, regulations or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and with any similar body that shall hereafter perform the
function of such Association.
7. Alterations and Tenant's Property
7.1 Initial Improvements. Intentionally Deleted.
7.2 Approved Alterations. Tenant shall make no alterations,
installations, additions or improvements in or to the Premises or any portion
thereof or any alteration to the mechanical systems of the Premises or any
portion thereof, including, without limitation, the plumbing and air
conditioning systems of the Premises or any portion thereof or to the apparatus
of the Premises or any portion thereof of other or like nature without
Landlord's prior written consent, which shall not be unreasonably withheld.
7.3 Requirements for Approved Alterations. Each alteration,
installation, addition or improvement, shall be subject to the limitations that
such Alteration (a) does not adversely affect the structural strength of the
Premises or any portion thereof; (b) does not adversely affect the mechanical,
plumbing, electrical and HVAC systems of the Premises or any portion thereof;
(c) does not materially affect the external appearance or value of the Premises
or any portion thereof; and
(d) does not diminish or impair the use of the Building as a first class office
building. Prior to making any alteration, plans and specifications therefor in
such detail as Landlord may request shall be submitted to Landlord and the
mortgagees of the Building for approval.
7.4 Standards for Approved Alterations. All Alterations made by
Tenant in the Premises or any portion thereof shall be constructed and completed
in a good and workmanlike manner at Tenant's sole cost and expense by
contractors approved by Landlord. Prompt payment shall be made by Tenant and
Tenant shall keep the Premises free of mechanics' and materialmen's liens and
cause the same to be promptly discharged or bonded. Tenant shall deliver to
Landlord written and unconditional waivers of mechanics' and materialmen's liens
upon the Real Property for all work, labor and services to be performed and
material to be furnished in connection with the proposed Alterations. Tenant
shall obtain all necessary governmental permits, licenses and approvals, and
shall promptly comply with all applicable laws. The Alterations shall be
completed in accordance with the approved plans and specifications where such
approvals are required.
7.5 Tenant's Property. All appurtenances, fixtures, improvements,
additions and other property attached to or installed in the Premises, whether
by Landlord or by or on behalf of Tenant, and whether at Landlord's expense or
Tenant's expense, or at the joint expense of Landlord and Tenant, shall be and
remain the property of Landlord. Any furnishings and personal property placed in
the Premises that are removable without material damage to the Building or the
Premises, whether the property of Tenant or leased by Tenant, are herein called
"Tenant's Property". Any replacements of any property of Landlord, whether made
at Tenant's expense or otherwise, shall be and remain the property of Landlord.
4
<PAGE> 5
7.6 Removal of Tenant's Property. Any of Tenant's Property on
the Premises prior to the Term Expiration Date shall be removed by Tenant at
Tenant's cost and expense, and Tenant shall, at its cost and expense, repair
any damage to the Premises or the Building caused by such removal, all on or
before the Term Expiration Date. Any of Tenant's Property not removed from the
Premises prior to the expiration of the Term shall, at Landlord's option,
become the property of Landlord or Landlord may remove such Tenant's Property,
and Tenant shall pay to Landlord Landlord's costs of removal and of any repairs
in connection therewith within ten (10) days after the receipt of a bill
therefor. Tenant's obligation to pay any such costs shall survive any
termination of this Lease.
8. REPAIRS
8.1 Maintenance of Premises. Tenant shall maintain the
Premises and, at Tenant's cost and expense, shall make all repairs and
replacements to preserve the Premises in good working order and in clean, safe
and sanitary condition.
8.2 Repairs by Tenant. All repairs and replacements made by or
on behalf of Tenant or any person claiming through or under Tenant shall be
made and performed (a) at Tenant's cost and expense and at such time and in
such manner as Landlord may designate, (b) by contractors or mechanics approved
by Landlord, (c) so that same shall be at least equal in quality, value, and
utility to the original work or installation, and (d) in accordance with the
rules and regulations for the Building and the Real Property adopted by
Landlord from time to time, and in accordance with all applicable laws and
regulations of governmental authorities having jurisdiction over the Premises.
If Landlord gives Tenant notice of the necessity of any repairs or replacements
required to be made under Section 8.1 above and Tenant fails to commence
diligently to effect the same within ten (10) days thereafter, Landlord may
proceed to make such repairs or replacements and the expenses incurred by
Landlord in connection therewith shall be due and payable from Tenant upon
demand as Additional Rent; provided, that Landlord's making any such repairs or
replacements shall not be deemed a waiver of Tenant's default in failing to
make the same.
8.3 Maintenance of Common Areas. Landlord shall operate and
maintain the common or public areas of the Real Property and the Building in a
manner deemed by Landlord, in its sole discretion, in a manner consistent with
similar office buildings in Montgomery County.
9. Liens. Intentionally Deleted.
10. Subordination and Modification
10.1 Subordination of Lease. Without the necessity of any
additional document being executed by Tenant for the purpose of effecting a
subordination, Tenant agrees that this Lease and Tenant's tenancy hereunder are
and shall be automatically subject and subordinate at all times to (a) all
ground leases or underlying leases that may now exist or hereafter be executed
affecting the Building or the Real Property or both, (b) the lien of any
mortgage deed of trust or similar security instrument that may now exist or
hereafter be executed in any amount for which the Building, the Real Property,
ground leases or underlying leases, or Landlord's interest or estate in any of
said items is specified as security, and (c) all renewals, modifications,
consolidations, replacements and extensions of any of the foregoing.
Tenant covenants and agrees to execute and deliver, upon
demand by Landlord and in the form requested by Landlord, any additional
documents evidencing the subordination of this Lease with respect to any such
ground lease or underlying lease, or the lien of any such mortgage or deed of
trust. If Tenant fails to execute such instruments within fifteen (15) days
after written request therefor, Landlord is hereby appointed Tenant's
attorney-in-fact to execute, acknowledge and deliver any and all such
instruments for and on behalf of Tenant.
10.2 Attornment. In the event that any ground lease or
underlying lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason,
Tenant shall, notwithstanding any subordination of any ground lease, underlying
lease or lien to this Lease, attorn to and become the Tenant of the successor
in interest to Landlord at the option of such successor in interest.
10.3 Amendment or Modification. If, in connection with any loan
secured by a mortgage or deed of trust affecting the Building, Real Property or
both, the lender should require any amendment or modification of the terms
hereof, Tenant shall duly execute and deliver any instrument reasonably
requested by such lender to affect such amendment or modification; provided,
that such amendment or modification shall not enlarge the term hereof or
increase the amount of Basic Rent payable hereunder.
11. Inability to Perform; No Delay to Constitute Eviction.
Intentionally Deleted.
12. Destruction
12.1 Intentionally Deleted.
12.2 Intentionally Deleted.
12.3 Intentionally Deleted.
12.4 Intentionally Deleted.
12.5 No Abatement of Rent if Damage Caused by Tenant. If any
such damage is due to the fault or neglect of Tenant, any person claiming
through or under Tenant, or any of their servants, employees, agents,
contractors, visitors or licensees, then there shall be no abatement of Basic
Rent by reason of such damages, unless Landlord is reimbursed for such
abatement of Basic Rent pursuant to any rental insurance policies that Landlord
may, in its sole discretion, elect to carry.
13. Eminent Domain. Intentionally Deleted.
5
<PAGE> 6
14. Assignment and Subletting
14.1 No Assignment or Subletting Permitted. Tenant shall not
directly or indirectly, voluntarily or by operation of law, sell, assign,
sublease, pledge or otherwise transfer or hypothecate all or any part of the
Premises or Tenant's leasehold estate hereunder, without first obtaining
Landlord's prior written consent, which consent will not be unreasonably
withheld. A transfer of fifty percent (50%) or more of the ownership interests
of Tenant within any twelve (12) month period shall be deemed equivalent to an
assignment or subletting requiring the consent of Landlord. Notwithstanding the
foregoing, a corporate reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986 shall not be considered an assignment or
subletting within the meaning of this Section 14.1. Tenant agrees that any
permitted assignment or subletting hereunder may be conditioned upon payment of
consideration to be agreed upon by Landlord and Tenant.
14.2 Procedure for Assignment, Subletting. If Tenant desires at
any time to assign, sublease or otherwise transfer the Premises or any portion
thereof, it shall send a written notice to Landlord, which notice shall contain
(a) the name of the proposed occupant or subtenant, (b) the nature of the
proposed occupant's or subtenant's business to be carried on in the Premises,
(c) the portion(s) of the Premises to be subject to such assignment or sublease
and the other terms and provisions of the proposed assignment or sublease, (d)
such financial information as Landlord may reasonably request concerning the
proposed occupant or subtenant, and (e) a true copy of a proposed assignment or
sublease.
14.3 No Release of Tenant. No assignment or sublease by Tenant
shall relieve Tenant of any obligation to be performed by Tenant under this
Lease, whether arising before or after the assignment or sublease. Any
assignment or sublease that is not in compliance with this Section 14 shall be
void and, at the option of Landlord, shall constitute a default by Tenant under
this Lease.
15. Building Services.
15.1 Standard Services. Landlord shall furnish reasonably
adequate electrical power for all normal office machines and lighting, and
water without additional cost to Tenant. Landlord shall furnish hot and cold
water at those points of supply provided for the general use of all of the
tenants in the Building. Landlord shall provide routine maintenance, painting
and electrical lighting service for all public areas and special service areas
of the Building, in the manner and to the extent deemed by the Landlord to be
standard. In the event an air conditioner unit or units (in excess of Building
Standard Improvements), for the purposes of cooling computers or other office
machinery, are installed by Tenant, the operation of the unit(s) shall be under
Tenant's control, and the maintenance costs shall be the obligation of Tenant.
Failure by Landlord to any extent to furnish these defined services unless
caused by Landlord's gross negligence, or any cessation thereof, or delay
thereof caused by breakdown, maintenance, repairs, strikes, scarcity of labor
or materials, acts of God or from any other cause, shall not render Landlord
liable in any respect for damages to either person or property, nor shall such
events be construed an eviction of Tenant, nor work an abatement of Basic Rent
or Additional Rent, nor relieve Tenant from the fulfillment of any term,
condition, covenant or agreement contained in this Lease. Should any of the
Building equipment or machinery break down, or for any cause or reason cease to
function properly, Landlord shall use reasonable diligence to repair the same
promptly, but Tenant shall have no claim for rebate of Basic Rent or Additional
Rent or for any damages on account of any interruptions in service occasioned
thereby or resulting therefrom. Where the Landlord does not pursue said cause
diligently, Tenant may, upon written notice to Landlord, have said repairs or
maintenance performed by Landlord's approved contractors and deduct the
reasonable cost for same from the amount owed to Landlord thereafter.
15.2 Additional Services. Intentionally Deleted.
16. Default; Remedies
16.1 Events of Default. The following shall constitute an
event of default under this Lease:
(a) The failure to pay any amount of Basic Rent or
Additional Rent in full within five (5) days after the same is due.
(b) The failure to perform or honor any other covenant or
condition made under this Lease, provided Tenant shall have a grace period of
ten (10) days from the date of written notice from Landlord within which to
cure any such failure governed by this subparagraph but not specifically by the
other subparagraphs of this Section 16-1; provided however, that with respect
to any such default, that cannot reasonably be cured within such ten (10) day
grace period, Tenant shall not be deemed in default if Tenant commences to cure
within ten (10) days from Landlord's notice and continues to prosecute
diligently the curing thereof to completion within a reasonable time; and
provided, further, that if any such failures which would be deemed defaults
hereunder upon expiration of such grace period occur more often than twice in
any twelve month period, the foregoing requirements of written notice and a
grace period shall be deemed waived with respect to any such subsequent
failures for the remainder of the Term.
(c) If any representation or warranty made by Tenant, or
others on behalf of Tenant, under or pursuant to the Lease shall prove to have
been false or misleading in any material respect (including by way of material
omissions) as of the date on which such representation or warranty was made.
(d) If Tenant makes or consents to an assignment for the
benefit of creditors or a common law composition of creditors, or a receiver of
Tenant's assets is appointed, or Tenant files a voluntary petition in any
bankruptcy or insolvency proceeding, or an involuntary petition in bankruptcy
or insolvency proceeding is filed against Tenant and not discharged or
dismissed within thirty (30) days, or Tenant is adjudicated bankrupt or
admits in writing its inability to pay its debts or that it is insolvent.
(e) Final judgment for the payment of money in excess of
Ten Thousand Dollars ($10,000) shall be rendered against Tenant and Tenant
shall not discharge the same or cause it to be discharged within ten (10) days
from the entry thereof, or shall not appeal therefrom or from the order,
judgment, decree or process.
(f) If Tenant shall dissolve or liquidate, and such
dissolution or liquidation is not in connection with a reorganization, merger
or consolidation approved in writing by Landlord.
6
<PAGE> 7
16.2 Landlord's Remedies. Upon the occurrence of an Event of Default
which is not cured by Tenant within the grace periods specified in Section 16.1
hereof, Landlord shall have all rights or remedies available to Landlord in law
or equity.
(a) Landlord may terminate this Lease by notice to Tenant (and
Tenant hereby expressly waives any other or additional notice to quit or notice
of Landlord's intention to re-enter), whereupon this Lease and the Term shall
terminate, Tenant shall quit, vacate and surrender the Premises and all amounts
accrued and unpaid Basic Rent and Additional Rent shall be due and payable in
full.
(b) Intentionally Deleted.
(c) Intentionally Deleted.
(d) Intentionally Deleted.
17. Insolvency or Bankruptcy. Intentionally Deleted.
18. Fees and Expenses; Indemnity; Liability Insurance.
18.1 Performance by Landlord. If Tenant shall default in the
performance of its obligations under this Lease, Landlord, at any time
thereafter and without notice, may remedy such default for Tenant's account and
at Tenant's expense, without thereby waiving any other rights or remedies of
Landlord with respect to such default.
18.2 Indemnification by Tenant. Tenant agrees to indemnify
Landlord, its employees, agents, contractors, mortgagees and successors in
interest against and save Landlord, its employees, agents, contractors,
mortgagees and successors in interest harmless from any and all loss, cost,
liability, damage and expense including without limitation, penalties, fines
and reasonable counsel fees, incurred in connection with or arising from any
cause whatsoever in, on or about the Premises, including, without limiting the
generality of the foregoing (a) any default by Tenant in the observance or
performance of any of the terms, covenants or conditions of this Lease on
Tenant's part to be observed or performed, or (b) the use or occupancy or
manner of use or occupancy of the Premises by Tenant or any person or entity
claiming through or under Tenant contrary to the permitted use provided in
6.1, or (c) intentionally deleted, or (d) any acts, omissions or negligence of
Tenant or any person or entity claiming through or under Tenant, or of the
contractors, agents, servants, employees, visitors or licensees of Tenant or
any such person or entity, in, or about the Premises or the Building, either
prior to, during, or after the expiration of the Term, including without
limitation, any acts, omissions or negligence in the making or performing of
any Alterations. Tenant further agrees to indemnify and save harmless Landlord,
Landlord's agents, and the lessor or lessors under all ground or underlying
leases, from and against any and all loss, cost, liability, damage and expense
including, without limitation, reasonable counsel fees, incurred in connection
with or arising from any claims by any persons by reason of injury to persons
or damage to property occasioned by any negligent act or omission referred to
in the preceding sentence.
18.3 Liability Insurance. Tenant shall procure at its cost and
expense and keep in effect during the Term comprehensive general liability
insurance including contractual liability naming Landlord as an additional
insured thereunder, with a minimum combined single limit of liability of One
Million Dollars ($1,000,000.00). Such insurance shall specifically include the
liability assumed hereunder by Tenant (provided that the amount of such
insurance shall not be construed to limit the liability of Tenant hereunder),
and shall provide that it is primary insurance, and not excess over or
contributory with any other valid, existing and applicable insurance in force
for or on behalf of Landlord, and shall provide that Landlord shall receive
thirty (30) days' written notice from the insurance prior to any cancellation
or change of coverage. Tenant shall provide such additional insurance as
Landlord may require in connection with the storage of any items subject to the
special provisions of Section 6.1 hereof.
18.4 Delivery of Policies. Tenant shall deliver policies of all
required insurance, or certificates thereof, to Landlord on or before the Lease
Commencement Date, and thereafter at least thirty (30) days before the
expiration dates of expiring policies. In the event Tenant shall fail to
procure such insurance, or to deliver such policies or certificates, Landlord
may, at its option, procure same for the account of Tenant, and the cost
thereof shall be paid to Landlord as Additional Rent within five (5) days after
delivery to Tenant of bills therefor. Tenant's compliance with the provisions
of this Section 18.5 shall in no way limit Tenant's liability under any of the
other provisions of this Section.
18.5 Landlord Not Liable. Landlord shall not be responsible for
or liable to Tenant for any loss or damage that may be occasioned by or through
the acts or omissions of persons occupying adjoining premises or any part of
the premises adjacent to or in connection with the Premises or any part of the
Building or of third parties either legally or illegally within the Premises or
the Building or for any loss or damage resulting to Tenant or its property from
burst, stopped or leaking water, gas, sewer or steam pipes or for any damage or
loss or property within the Premises from any causes whatsoever, including
theft or vandalism, except that Landlord shall indemnify Tenant for any
negligent acts or omissions.
18.6 Payment by Tenant. Except as specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, within five (5) days
after notice by Landlord to Tenant of the amount thereof: (a) sums equal to all
expenditures made and monetary obligations incurred by Landlord including,
without limitation, expenditures made and obligations incurred for reasonable
counsel fees, in connection with the remedying by Landlord for Tenant's account
pursuant to the provisions of Section 18.1 hereof; (b) sums equal to all
losses, costs, liabilities, damages and expenses referred to in Section 18.2
hereof; and (c) sums equal to all expenditures made and monetary obligations
incurred by Landlord, including, without limitation, expenditures made and
obligations incurred for reasonable counsel fees, in collecting or attempting
to collect the Basic Rent, Additional Rent or any other sum of money accruing
under this Lease or in enforcing or attempting to enforce any rights of
Landlord under this Lease or pursuant to law. Any sum of money (other than
Basic Rent) accruing from Tenant to Landlord pursuant to any provision of this
Lease, whether prior to or after the Lease Commencement Date, may, at Landlord's
option, be deemed Additional Rent. Tenant's obligations under this 18.7 shall
survive the expiration or earlier termination of the Term.
7
<PAGE> 8
19. Access to Premises; Landlord's Right to Enter. Landlord reserves and shall
have the right to enter the Premises at all reasonable times during normal
business hours with Landlord providing forty-eight (48) hours advance notice to
Tenant, except in the case of an emergency, to inspect same, to show the
Premises to prospective purchasers, mortgagees or tenants, to post notices of
nonresponsibility, and to alter, improve or repair the Premises, adjacent
premises and any other portion of the Building or any systems serving any of the
same, without abatement of Basic Rent or Additional Rent, and may for that
purpose erect, use and maintain scaffolding, pipes, conduits and other necessary
structures in and through the Premises where reasonably required by the
character of the work to be performed; provided that the entrance to the
Premises shall not be blocked thereby. Landlord and its agents shall also have
unrestricted access to the Premises at any time in the event of an emergency,
without abatement of Basic Rent or Additional Rent. Tenant hereby waives any
claim for damages for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises or
any other loss occasioned thereby. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the Premises, and Landlord shall have the right to use any
and all means that Landlord may deem necessary or proper to open said doors in
an emergency, in order to obtain entry to any portion of the Premises, and any
entry to the Premises or portions thereof obtained by Landlord by any of said
means, or otherwise, shall not under any circumstances be construed or deemed to
be a forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction, actual or constructive, of Tenant from the Premises or any portion
thereof. Landlord shall also have the right at any time, without same
constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement and/or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets and other public parts of the Building.
20. Waiver; Release
20.1 No Waiver. No failure by Landlord to insist upon the strict
performance of any obligation of Tenant under this Lease or to exercise any
right, power or remedy consequent upon a breach thereof, no acceptance of full
or partial Basic Rent or Additional Rent during the continuance of any such
breach, and no acceptance of the keys to or possession of the Premises prior to
the termination of the Term by any employee of Landlord shall constitute a
waiver of any such breach or of such term, covenant or condition or operate as
a surrender of this Lease. No payment by Tenant or receipt by Landlord or a
lesser amount than the aggregate of all Basic Rent and Additional Rent then due
under this Lease shall be deemed to be other than on account of the first
items of such Basic Rent and Additional Rent then accruing or becoming due,
unless Landlord elects otherwise; and no endorsement or statement on any check
and no letter accompanying any check or other payment of Basic Rent or
Additional Rent in any such lesser amount and no acceptance of any such check
or other such payment by Landlord shall constitute an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such Basic Rent or Additional Rent or to pursue
any other legal remedy.
20.2 Modifications in Writing. Neither this Lease nor any term or
provision hereof may be changed, waived, discharged or terminated orally, and
no breach thereof shall be waived, altered or modified, except by a written
instrument signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. No waiver of any breach shall
affect or alter this Lease, but each and every term, covenant and condition of
this Lease shall continue in full force and effect with respect to any other
then existing or subsequent breach thereof.
21. Tenant's Certificates. Tenant, at any time and from time to time upon
not less than fifteen (15) days' prior written notice from Landlord, will
execute, acknowledge and deliver to Landlord and, at Landlord's request, to any
prospective purchaser, ground or underlying lessor or mortgagee of any part of
the Building and Real Property, a certificate of Tenant stating: (a) that
Tenant has accepted the Premises (or, if Tenant has not done so, that Tenant
has not accepted the Premises and specifying the reasons therefor), (b) the
Commencement and Term Expiration Dates of this Lease, (c) that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that same is in full force and effect as modified and stating the
modifications), (d) whether or not there are then existing any defenses against
the enforcement of any of the obligations of Tenant under this Lease (and, if
so, specifying same), (f) the dates, if any, to which the Basic Rent and
Additional Rent and other charges under this Lease have been paid, and (g) any
other information that may reasonably be required by any of such persons,
including but not limited to current financial statements for Tenant (and any
Guarantors of Tenant's obligation hereunder). It is intended that any such
certificate of Tenant delivered pursuant to this Section 21 may be relied upon
by Landlord and any prospective purchaser, ground or underlying lessor or
mortgagee of any part of the Real Property.
22. Rules and Regulations. Tenant, its agents, employees, invitees,
licensees, customers, clients and guests shall at all times faithfully observe
and comply with the rules and regulations attached hereto as Exhibit C, and
such other rules and regulations as may be promulgated from time to time by
Landlord, and all modifications thereof and additions thereto, from time to
time, put into effect by Landlord. Landlord shall not be responsible for the
nonperformance by any other tenant or occupant of the Building of any said
rules and regulations. In the event of an express and direct conflict between
the terms, covenants, agreements and conditions of this Lease and the terms,
covenants, agreements and conditions of such rules and regulations, as modified
and amended from time to time by Landlord, this Lease shall control.
23. Tax on Tenant's Personal Property. At least ten (10) days prior to
delinquency, Tenant shall pay all taxes levied or assessed upon Tenant's
equipment, furniture, fixtures and other personal property located in or about
the Premises. If the assessed value of Landlord's property is increased by the
inclusion therein of a value placed upon Tenant's equipment, furniture,
fixtures or other personal property, Tenant shall pay to Landlord, upon demand,
the taxes so levied against Landlord, or the portion thereof resulting from
said increase in assessment.
24. Authority. The persons executing this Lease on behalf of Tenant
hereby covenant and warrant that Tenant is a duly authorized and existing
entity, that Tenant has and is qualified to do business in the State of
Maryland and Delaware, that Tenant has full right and authority to enter into
this Lease, and each person signing on behalf of Tenant is authorized to do so.
Upon Landlord's request, Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord confirming the foregoing covenants and warranties.
25. Signage. Intentionally Deleted.
26. Parking. Intentionally Deleted.
8
<PAGE> 9
27. Miscellaneous
27.1 Notices. Except as otherwise expressly provided in this
Lease, any bills, statements, notices, demands, requests or other
communications given or required to be given under this Lease shall be
effective only if rendered or given in writing, sent by mail or delivered
personally as follows:
to Tenant: Organon Teknika Corporation
1330-A Piccard Drive
Rockville, MD 20850-4373
Attention: Richard J. James
to Landlord: Ward Corporation
1300 Piccard Drive
Rockville, MD 20850
Attention: Richard E. Ward
or to such other address as either Landlord or Tenant may designate as its new
address for such purpose by notice to the other in accordance with the
provisions of this Section. Any such bill, statement notice, demand, request or
other communication shall be deemed to have been rendered or given two (2) days
after the date when it shall have been mailed as provided in this Section if
sent by registered or certified mail, or upon the date personal delivery is
made. If Tenant is notified of the identity and address of Landlord's mortgagee
or ground or underlying lessor, Tenant shall give to such mortgagee or ground
or underlying lessor notice of any default by Landlord under the terms of this
Lease in writing sent by registered or certified mail, and such mortgagee or
ground or underlying lessor shall be given a reasonable opportunity to cure such
default prior to Tenant's exercising any remedy available to it.
27.2 Interpretation. The words "Landlord" and "Tenant" as used
herein shall include the plural as well as the singular. The words used in the
neuter gender include the masculine and the feminine. The captions preceding
the articles of this Lease have been inserted solely as a matter of
convenience and such captions in no way define or limit the scope or intent of
any provision of this Lease.
27.3 Successors and Assigns. The terms, covenants and conditions
contained in this Lease shall bind and inure to the benefit of Landlord and
Tenant and, except as otherwise provided herein, their respective personal
representatives and successors and assigns; provided, however, upon the sale,
assignment or transfer by the Landlord named herein (or by any subsequent
landlord) of its interest in the building as owner or lessee, including any
transfer by operation of law, the Landlord (or subsequent landlord) shall be
relieved from all subsequent obligations or liabilities under this Lease, and
all obligations subsequent to such sale, assignment or transfer (but not any
obligations or liabilities that have accrued prior to the date of such sale,
assignment or transfer) shall be binding upon the grantee, assignee or other
transferee of such interest, and any such grantee, assignee or transferee, by
accepting such interest, shall be deemed to have assumed such subsequent
obligations and liabilities.
27.4 Severability. If any provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such provisions to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforced to the full extent permitted by law.
27.5 Applicable Law. This Lease shall be construed and enforced
in accordance with the laws of the State of Maryland.
27.6 No Option to Lease. Intentionally Deleted.
27.7 Entire Agreement. This instrument, including the Exhibits
hereto, which are made a part of this Lease, contains the entire agreement
between the parties and all prior negotiations and agreements are merged
herein. Neither Landlord nor Landlord's agents have made any representations or
warranties with respect to the Premises, the Building, the Real Property or
this Lease except as expressly set forth herein, and no rights, easements or
licenses are or shall be acquired by Tenant by implication or otherwise unless
expressly set forth herein.
27.8 Inspection by Landlord. The review, approval, inspection or
examination by Landlord of any item to be reviewed, approved, inspected or
examined by Landlord under the terms of this Lease or the Exhibits attached
hereto shall not constitute the assumption of any responsibility by Landlord
for either the accuracy or sufficiency of any such item or the quality or
suitability of such item for its intended use. Any such review, approval,
inspection or examination by Landlord is for the sole purpose of protecting
Landlord's interests in the Building and under this Lease, and no third
parties, including, without limitation, Tenant or any person or entity claiming
through or under Tenant, or the contractors, agents, servants, employees,
visitors or licensees of Tenant or any such person or entity, shall have any
rights hereunder.
27.9 Legal Fees Paid by Prevailing Party. In the event that
either Landlord or Tenant fails to perform any of its obligations under this
Lease or in the event a dispute arises concerning the meaning or interpretation
of any provision of this Lease, the defaulting party or the party not
prevailing in such dispute, as the case may be, shall pay any and all costs and
expenses incurred by the other party in enforcing or establishing its rights
hereunder, including, without limitation, court costs and reasonable counsel
fees.
27.10 Surrender of Premises. Upon the expiration or sooner
termination of the Term, Tenant will quietly and peacefully surrender to
Landlord the Premises in the condition in which they are required to be kept as
provided hereunder, ordinary wear and tear excepted.
27.11 Quiet Enjoyment. Upon Tenant paying the Basic Rent and
Additional Rent and performing all of Tenant's obligations under this Lease,
Tenant may peacefully and quietly enjoy the Premises during the Term as against
all persons or entities lawfully claiming by or through Landlord; subject,
however, to the provisions of this Lease and to any mortgages, ground or
underlying lease referred to herein.
9
<PAGE> 10
27.12 No Reduction in Rent. Tenant covenants and agrees that no
diminution of light, air or view by any structure that may hereafter be erected
(whether or not by Landlord) shall entitle Tenant to any reduction of Basic
Rent or Additional Rent under this Lease, result in any liability of Landlord
to Tenant, or in any other way affect this Lease or Tenant's obligations
hereunder.
27.13 Holding Over by Tenant. Any holding over after the Term
Expiration Date or the termination of the Term if sooner with the consent of
Landlord shall be construed to be a tenancy from month to month at a rental
equal to one hundred twenty-five percent (125%) of the Basic Rent herein
specified unless Landlord shall specify a different rent in its sole
discretion, together with an amount estimated by Landlord for the monthly
Additional Rent payable under this Lease, and shall otherwise be on the terms
and conditions herein specified so far as applicable. Any holding over without
Landlord's consent shall constitute a default by Tenant and entitle Landlord to
reenter the Premises as provided in Section 16 hereof.
27.14 Broker; Indemnification Therefor. Intentionally Deleted.
27.15 No Recordation of Lease by Tenant. Tenant will not record this
Lease or any memorandum or short form hereof, but at the request of Landlord,
Tenant shall execute, acknowledge and deliver to Landlord in proper form for
recordation a memorandum of this Lease, setting forth the terms and provisions
hereof in summary form.
27.16 No Merger of Estates. The fee title of Landlord and the
leasehold estate of Tenant shall at all times be separate and apart, and shall
in no event be merged, notwithstanding the fact that this Lease or the leasehold
estate created hereby, or any interest in either thereof, may be held directly
or indirectly by or for the account of any person who shall own the fee estate
in the Premises or any portion thereof; and no such merger of estates shall
occur by operation of law, or otherwise, unless and until all persons at the
time having any interest in the fee estate and all persons having any interest
in the Lease or the leasehold estate, including any mortgagee or leasehold
mortgagee, shall join in the execution of a written instrument affecting such
merger of estates.
27.17 Security Deposit. Simultaneously with the execution of this
Lease, Tenant shall deposit with Landlord the sum of Six Hundred and 00/100
Dollars ($600.00), as a security deposit for the performance by Tenant of the
provisions of this Lease. Such deposit shall be considered as security for the
payment and performance by Tenant of all Tenant's obligations, covenants,
conditions and agreements under this Lease. In the event of any default by
Tenant hereunder, Landlord shall have the right, but shall not be obligated to
apply all or any portion of the deposit to cure such default, in which event
Tenant shall be obligated to promptly deposit with Landlord the amount
necessary to restore the deposit to its original amount. If Tenant is not in
default at the expiration of the Term, Landlord shall return the security
deposit to Tenant. Landlord shall not be required to pay Tenant interest on the
security deposit.
27.18 Right to Relocate. Landlord shall have the right, exercisable by
giving Tenant reasonable notice, and without liability to Tenant for damage or
injury to property, person or business, all claims for damage being hereby
released by Tenant, and without affecting an eviction or disturbance of Tenant's
use or possession or giving rise to any claim for set offs, or abatement of rent
to relocate Tenant to another location of equal size within the Building at
Landlord's expenses; provided however, that such other location shall have at
least as many square feet of exterior windows as the Premises, and shall contain
improvements that are at least equal in quality, function, etc. to those to be
contained in the Premises, and provided further that Landlord shall use every
reasonable effort to minimize disturbance that any such relocation might cause.
27.19 Additional Documents. Intentionally Deleted.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
Agreement as of the day and year first above written.
LANDLORD: TENANT:
WARD CORPORATION ORGANON TEKNIKA CORPORATION
By: /s/ RICHARD E. WARD By: /s/ MICHAEL G. HANNA, Ph.D.
------------------- ---------------------------
Richard E. Ward Michael G. Hanna, Ph.D.
Its President Its Vice President
ATTEST: ATTEST:
By: /s/ MARIA M. INGLESBY By: /s/ RICHARD J. JAMES
--------------------- --------------------------
Maria M. Inglesby Richard J. James
Commercial Leasing Its Witness
[Corporate Seal] [Corporate Seal]
10
<PAGE> 11
ADDENDUM
THIS ADDENDUM is incorporated in and made a part of the foregoing and
annexed Lease dated April 30th, 1991 (the "Lease") between Ward Corporation (the
"Landlord") and Organon Teknika Corporation, (the "Tenant") covering Eight
Hundred Three (803) net rentable square feet in Landlord's building known by the
street address of 1300 Piccard Drive, Rockville, MD 20850, the provisions of
this Addendum being as follows:
1. The Lease is hereby amended by adding a new Section 28 as follows:
28. Cancellation Option. Tenant shall have the option to terminate this
Lease at the end of the thirty-six (36) month of the Lease Term provided
Tenant has notified Landlord in writing on or before the thirtieth
(30th) month of the Lease Term, of its election to terminate this Lease.
Except as hereinafter amended, the Lease remains in full force and
effect, unmodified. In the event of any conflict between a provision of
this Addendum or the Lease, the provisions of the Addendum shall
prevail.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Addendum as
of the day and year first above written.
LANDLORD: TENANT:
WARD CORPORATION ORGANON TEKNIKA CORPORATION
By: /s/ RICHARD E. WARD By: /s/ MICHAEL G. HANNA, PH.D.
--------------------------- -----------------------------
Richard E. Ward Michael G. Hanna, Ph.D.
Its President Its Vice President
ATTEST: ATTEST:
By: /s/ MARIA M. INGLESBY By: /s/ RICHARD J. JAMES
--------------------------- -----------------------------
Maria M. Inglesby Richard J. James
Commercial Leasing Its Witness
(Corporate Seal]
(Corporate Seal]
1
<PAGE> 12
SECOND ADDENDUM
THIS SECOND ADDENDUM is incorporated in and made a part of the foregoing
and annexed Lease dated April 30, 1991 (the "Lease") between Ward Corporation
(the "Landlord") and Organon Teknika Corporation, (the "Tenant") covering Eight
Hundred Three (803) net rentable square feet in Landlord's building known by the
street address of 1300 Piccard Drive, Rockville, MD 20850, the provisions of
this Second Addendum being as follows:
1. Section 1.9 of the Lease is hereby amended by adding the following
sentence at the end thereof:
"Commencing November 15, 1991, the Premises shall contain an additional
One Thousand One Hundred Fifty-One (1,151) net rentable square feet
(hereinafter the "Additional Lease Space") which space is shown on
Attachment "A", thereby causing the entire leased premises to contain a
total of One Thousand Nine Hundred Twenty-Four (1,924) net rentable
square feet."
2. Section 2.1 of the Lease is hereby amended by adding the following
sentence at the end thereof:
"Commencing November 15, 1991, Tenant shall pay to Landlord during the
Term a base rental ("Basic Rent") for the Additional Lease Space equal
to Nine Hundred Fifty-Nine and 17/100 Dollars ($959.17) per month in
gross."
3. Section 2.3 of the Lease is hereby amended by adding the following
sentence at the end thereof:
"The Basic Rent for the Additional Lease Space (as defined in Item 2
hereinabove) shall be increased as follows:
<TABLE>
<CAPTION>
Date New Monthly Rent
---- ----------------
<S> <C>
6/1/92 $ 987.94
6/1/93 $1,017.68
6/1/94 $1,048.37
</TABLE>
4. Section 4 of the Lease is hereby amended by adding the following
sentence at the end thereof:
"Tenant agrees to accept the Additional Lease Space in their "as-is"
condition and further agrees to be fully responsible for any alterations
or improvements thereto. However, it is understood and agreed that
Tenant will obtain all necessary permits to construct the premises as
required by Code. Landlord shall furnish ten (10) 2' X 4' fluorescent
light fixtures for installation by Tenant."
5. Section 6.1 of the Lease is hereby amended by adding the following
sentence at the end thereof:
"Tenant shall use and occupy the Additional Lease Space during the term
of the Lease solely for use as storage of non-hazardous research
supplies, as permitted by law, and for no other use or uses without the
prior written consent of Landlord."
[signatures appear on next page]
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THIRD ADDENDUM
THIS THIRD ADDENDUM is incorporated in and made a part of the foregoing
and annexed Lease dated April 30, 1991 (the "Lease") between Ward Corporation
(the "Landlord") and Organon Teknika Corporation, (the "Tenant") covering Eight
Hundred Three (803) of net rentable square feet of storage space ("Leased
Premises") in Landlord's building known by the street address of 1300 Piccard
Drive, Rockville, MD 20850, the provisions of this Third Addendum being as
follows:
1. Section 1.2 of the Lease is hereby amended by deleting "May 31, 1995"
and replacing with the following:
"May 31, 1997".
2. Section 1.12 of the Lease is hereby amended by deleting "The four year
(4) period" and replacing with the following:
"The six year (6) period."
3. Section 2.1 of the Lease is hereby amended:
"Rent for the Leased Premises shall be increased as follows:
<TABLE>
<CAPTION>
Date 803 sf New Monthly Amount
---- ------ ------------------
<S> <C> <C>
6/1/95 $10.13 $677.87
6/1/96 $10.43 $697.94
6/1/97 $10.74 $719.69
</TABLE>
4. The Lease is hereby amended by adding a new Section 29 as follows:
Section 29. Renewal Option. Tenant shall have the right to renew this
Lease for two (2) two (2) year periods by giving Landlord six (6) months
written notice prior to the expiration of the then current Lease term. A
three percent (3%) escalator will follow this Lease throughout the
Renewal periods. If Tenant should choose not to exercise those options
Landlord may begin to show the space to prospective tenants ninety (90)
days prior to the Lease Expiration Date.
Except as hereinafter amended, the Lease remains in full force and
effect, unmodified. In the event of any conflict between a provision of
this Third Addendum or the Lease, the provisions of the Third Addendum
shall prevail.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Third
Addendum as of the ____ day of_______________, 1995.
LANDLORD: TENANT:
WARD CORPORATION PERIMMUNE, INC.
By: /s/ RICHARD E. WARD By: /s/ MICHAEL G. HANNA, JR.
------------------------------- ---------------------------------
Richard E. Ward Michael G. Hanna, Jr., Ph.D.
Its President President & CEO
By:
---------------------------------
ATTEST: WITNESS:
By: [SIG] By: /s/ RICHARD JAMES
------------------------------- ---------------------------------
------------------------------- ---------------------------------
<PAGE> 14
EXHIBIT A
[DIAGRAM OF WARD BUILDING, LOWER LEVEL]
<PAGE> 15
EXHIBIT C
RULES AND REGULATIONS
Reference is made to a certain Lease dated March ___, 1991 to which
these Rules and Regulations are attached. Definition of terms is set forth in
the Lease.
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, halls or other parts of the Building not occupied by any
tenant shall not be obstructed or encumbered by any tenant or used for any
purpose other than ingress and egress to and from the Leased Premises. Landlord
shall have the right to control and operate the public portions of the
Building, and the facilities furnished for the common use of the tenants, in
such manner as Landlord deems best for the benefit of the tenants generally. No
tenant shall permit the visit to the Leased Premises of persons in such numbers
or under such conditions as to interfere with the use and enjoyment by other
tenants of the entrances, passages, courts, elevators, vestibules, stairways,
corridors, halls and other public portions or facilities of the Building.
2. No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of the Landlord. No
drapes, blinds, shades or screens shall be attached to, hung in, or used in
connection with any window or door of the Leased Premises, without the prior
written consent of the Landlord. Such awnings, projections, curtains, blinds,
shades, screens or other fixtures must be of a quality, type, design and color,
and attached in the manner approved by Landlord.
3. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any tenant on any part of the
outside or inside of the Leased Premises or the Building without the prior
written consent of the Landlord. In the event of the violation of the foregoing
by any tenant, Landlord may remove same without incurring any liability, and
may charge the expense incurred by such removal to the tenant or tenants
violating this rule. Interior signs on doors and directory tablets shall be
inscribed, painted or affixed for each tenant by the Landlord at the expense of
such tenant, and shall be of a size, color and style acceptable to the Landlord.
4. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, not placed in the halls, corridors
or vestibules without the prior written consent of the Landlord.
5. The water, wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
6. There shall be no marking, painting, drilling into or in any way
defacing any part of the Leased Premises or the Building. No boring, cutting,
or stringing of wires shall be permitted. Tenant shall not construct, maintain,
use or operate within the Leased Premises or elsewhere within or on the outside
of the Building, any electric device, wiring or apparatus in connection with a
loud speaker system or other sound system.
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7. No vehicles or animals, birds or pets or any kind shall be brought
into or kept in or about the Leased Premises, and no cooking shall be done or
permitted by any tenant on said Leased Premises. No tenant shall cause or permit
any unusual or objectionable odors to be produced upon or permeate from the
Leased Premises.
8. No space in the Building shall be used for the sale of merchandise,
goods or property of any kind at auction.
9. No tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises of those having businesses with them, whether by the use of any
musical instrument, radio, talking machine, unmusical noise, whistling, singing,
or in any other way. No tenant shall throw anything out of the doors or windows
or down the corridors or stairs.
10. No inflammable, combustible or explosive fluid, chemical or substance
shall be brought or kept upon the Lease premises.
11. No additional locks or bolts of any kind shall be placed upon any of
the doors, or windows by any tenant, nor shall any changes be made in existing
locks or the mechanisms thereof. The doors leading to the corridors or main
halls shall be kept closed except as they may be used for ingress or egress.
Each tenant shall, upon the termination of his tenancy, restore to Landlord all
keys of stores, offices, storage and toilet rooms either furnished to, or
otherwise procured by such tenant, and in the event of the loss of any keys, so
furnished, such tenant shall pay to the Landlord the cost thereof.
12. Any person employed by any tenant to do janitor work within the Leased
Premises must obtain Landlord's consent and such person shall, while in the
Building and outside of said Leased Premises, comply with all instructions
issued by the Landlord, its agents or employees. No tenant shall engage or pay
any employees on the Leased Premises, except those actually working for such
tenant on said Leased Premises.
13. Landlord shall have the right to prohibit any advertising by any
tenant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon written notice
from Landlord, tenant shall refrain from or discontinue such advertising.
14. The Landlord reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself to any
building management or watchman on duty. Each tenant shall be responsible for
all persons from whom he authorized entry into or exit out of the Building, and
shall be liable to the Landlord for all acts of such persons.
15. The Leased Premises shall not be used for lodging or sleeping or for
any immoral or illegal purpose.
16. Each tenant, before closing and leaving the Leased Premises at
any time, shall see that all windows are closed and all lights are turned off.
17. Canvasing, soliciting and peddling in the Building is prohibited and
each tenant shall cooperate to prevent the same.
18. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, and hand trucks, except those equipped with rubber tires
and sideguards.
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<PAGE> 17
19. Access plates to underfloor conduits shall be left exposed. Where
carpet is installed, carpet shall be cut around access plates.
20. Mats, trash or other objects shall not be placed in the public
corridors.
21. Drapes installed by the Landlord for the use of the tenant or
drapes installed by the tenant, which are visible from the exterior of the
Building must be cleaned by the tenant at least once a year, without notice, at
said tenant's own expense.
22. The tenant shall refer to the Building only by the name from time
to time designated by the Landlord, and shall use such name only for the
business address of the Leased Premises and not for any promotional or other
purposes.
23. Violation of these rules and regulations, or any amendments
thereto, shall be sufficient cause for termination of this Lease at the option
of the Landlord.
24. Landlord may, upon request by any tenant, waive the compliance by
such tenant of any of the foregoing rules and regulations, provided that (i) no
waiver shall be effective unless signed by Landlord or Landlord's authorized
agent, (ii) any such waiver shall not relieve such tenant from the obligation
to comply with such rule or regulation in the future unless expressly consented
to by Landlord, (iii) no waiver granted to any tenant shall relieve any other
tenant from the obligation of complying with the foregoing rules and
regulations unless such other tenant has received a similar waiver in writing
from Landlord, and (iv) any such waiver by Landlord shall not relieve tenant
from any obligation or liability of tenant to Landlord pursuant to the Lease
for any loss or damage occasioned as a result of tenant's failure to comply
with any such rule or regulation.
<PAGE> 1
EXHIBIT 10.3
(12.25.92.CPI) ROWLEY ENTERPRISES, INC.
1595 NW GILMAN BLVD.
ISSAQUAH, WASHINGTON 98027
(206) 392-6407 OR 455-4781 FAX 391-4009
COMMERCIAL LEASE AGREEMENT
THIS LEASE made this 1st day of June, 1993, by and between ROWLEY
ENTERPRISES INC., A Washington Corp. ("Landlord") and Polymer Technology Intl.,
A Washington Corporation ("Tenant").
WITNESSETH:
1. PREMISES. For the term specified below, Landlord leases to Tenant, the
building, or portion of the building, located at 1871 NW Gilman Blvd.,
Issaquah, Washington 98027 (the "Premises"). The Premises are located upon
property legally described in Exhibit "A" (the "Property"). The Premises are
diagrammed on the Exhibit "B" map.
2. TERM.
*See Exhibit F
2.1 Commencement Date and Expiration. The term of this Lease shall
commence* on September 15, 1993 and end on September 14, 1998. Tenant shall not
enter the Premises prior to the Lease commencement date without the prior
written consent of the Landlord. The Lease term includes any extensions of the
initial term. See Exhibit G.
2.2 Delays. See exhibit "F" Commencement.
3. RENT.
3.1 Minimum Rent. Tenant covenants and agrees to pay Landlord, at 1595
Gilman Boulevard N.W., Issaquah, Wa. 98027 or to such other party or at such
other place as Landlord designates, the Minimum Rent, initially $15,375.00, plus
the additional amounts described in this Lease, in advance, on or before the
first day of each month of the Lease term.
3.2 Inflation Adjustment to Minimum Rent. Minimum Rent shall be
adjusted beginning on the 25th month of this Lease by using the revised Consumer
Price Index (CPI) for all urban consumers as published by the United States
Department of Labor for the Seattle Metropolitan area (the "Index"). As of the
25th month and on each anniversary of the Lease commencement date thereafter,
the percentage of change in the Index from the previous year compared to the
most current Index shall be multiplied by the Minimum Rent amount; the result
shall be added to the Minimum Rent to determine the Minimum Rent for the coming
year, the maximum adjustment increase shall be no more than 5%. In no event
shall Minimum Rent be less than the previous year's Minimum Rent. If the
publication of said Index is discontinued the Landlord in its sole discretion
shall select a similar replacement index from those available.
3.3 Late Rent and Other Charges. If any rent becomes more than 10 days
past due, Tenant will pay a late charge of 10% of the total monthly rent as
additional rent. However, Landlord may additionally exercise a statutory
Three-Day Notice to Quit Premises or Pay Rent as soon as, and anytime after,
rent is not paid on the first of the month. If so, Tenant will pay the
additional sum of $30 as the cost for preparing and serving notice and this
amount will be added to delinquent rent due. Tenant will pay a $20 fee for
special handling of any dishonored check as additional rent. If no rent check is
honored within the first 10 days of the month, Tenant will pay the late charge
and is subject to a Three-Day Notice to Quit Premises or Pay Rent, as above.
3.4 Interest. Interest will be charged by Landlord on the total rent
unpaid, beginning after delivery of the Notice to Quit Premises or Pay Rent, or
upon expiration of the ten day grace period, whichever date is earlier. The
interest shall be treated as additional rent due. Interest shall be at the rate
of 12% per year.
3.5 Rent Offset or Holdback Prohibited. Rent offsets or holding rent
back for any reason is hereby prohibited.
4. SECURITY DEPOSIT. Landlord acknowledges receipt of Fifteen Thousand and
no/100 Dollars ($15,000.00) as a security deposit. Landlord may deduct from
this security deposit amounts owed under this Lease, including Landlord's costs
related to any default by Tenant. Tenant shall then pay to the Landlord any
deficiency for the default costs and pay to the Landlord the amount needed to
bring the security deposit back to its original amount. Repayment shall be made
within ten days of notice from Landlord. All interest earned on the security
deposit belongs to Landlord. Within 60 days from termination of tenancy and
vacation or abandonment of Premises, Landlord will give Tenant a statement of
the basis for retaining any of the security deposit and any additional amounts
due, or refund any amount due to Tenant at Tenant's last known address.
Withholding security deposit monies by Landlord does not relieve Tenant of
responsibility for payment of damages exceeding the security deposit amount.
Landlord may choose to proceed against Tenant for this additional amount,
together with reasonable attorney's fees. The security deposit may not be used
by Tenant for payment of last month's rent. If Landlord transfers its interest
in this Lease, Tenant shall look solely to the new Landlord for return of the
security deposit.
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<PAGE> 2
5. UTILITIES. Tenant agrees to timely pay all charges for light, heat,
trash disposal services and all other utilities to the premises during the full
term of this Lease. If the Leased Premises are part of a building or larger
premises to which such costs are charged as a whole, then Tenant agrees to pay
a proper and fair share of said charges as determined by Landlord. Landlord
shall under no circumstances be liable to Tenant in damages or otherwise for
failure to furnish, or interruption in services of any water, electricity,
trash disposal, sewerage or other utility service for any cause whatsoever.
Landlord may charge as additional rent, on a monthly basis or otherwise, an
estimated amount for Tenant's share of utility charges. Tenant must object to
any final utility charge within two months of Landlord's receipt of the actual
bill or receipt of the final charge, whichever date is later, or is forever
barred.
5.1. Non-Liability for Interruption. Lessor shall under no
circumstances be liable to Lessee in damages or otherwise for failure to
furnish or for any interruption of service of any water, gas, electricity,
garbage disposal or for stoppage of sewerage for any cause whatsoever.
6. NET LEASE; TAXES AND INSURANCE.
6.1. Rent to be Net to Landlord. The parties intend that the rent
payable hereunder shall be "triple net" to Landlord, so that this Lease shall
yield to Landlord the full rent and Tenant shall pay all costs, expenses and
obligations of every kind and nature whatsoever relating to the Premises. The
cost of repair and maintenance of parking lot, landscaping, irrigation, and
HVAC are the responsibility of the Landlord.
6.2. Taxes. In addition to the Minimum Rent, as additional rent,
Tenant agrees to pay all real estate taxes and assessments, including but not
limited to LIDs, ULIDs, RIDs, or other assessments, applicable to the Premises
and due and payable during the Lease term. If the Premises are part of a larger
building, Tenant shall pay its portion of said taxes on the building equal to
the percentage of the total net rentable space in the building leased to
Tenant, plus the prorated portion of the taxes applicable to the land described
in Exhibit "A." Tenant shall pay 1/12th of said real estate taxes and
assessments each month as additional rent. If any other law, statute or
ordinance levies any tax (other than Federal or State income taxes) upon rents,
Tenant shall similarly pay such tax.
6.3. Fees. All fees and charges including all license fees, personal
property taxes and other governmental charges levied on the Premises or upon
Tenant's business will be paid directly by Tenant. If the Premises are a part
of a building or larger premises to which such charges are charged as a whole,
then Tenant agrees to pay a proper and fair share of said charges as additional
rent.
6.4. Landlord's Insurance.
6.4.1. Premiums. When Landlord submits proof of payment of insurance
premium, Tenant agrees to pay as additional rent, premiums for fire, flood,
extended coverage, earthquake and other insurance which may be charged during
the Lease term upon the Premises, or upon the total building of which the
Premises are part. Tenant's premium share shall be pro-rated if the Premises
are part of a building. Tenant shall pay to the Landlord 1/12th of the annual
premium for said insurance each month as additional rent. This Lease imposes no
duty to insure upon Landlord.
6.4.2. Conformity with Insurance Policy. Tenant will not keep, use,
or offer for sale in or upon the Premises any article prohibited by the
standard form fire insurance policy.
7. TENANT'S USE OF PREMISES. Tenant shall use the Premises only for
office & Mfg of Medical devices, equip. or Medicine and no other purpose or
use without the prior written consent of Landlord. Tenant agrees that it has
determined the Premises can be used for the permitted use. Tenant acknowledges
that neither Landlord nor Tenant's agent has made any representation or
warranty as to the suitability of the Premises for the conduct of Tenant's
business. Tenant shall not operate, sublease or assign to any automobile
related business.
8. TENANTS DUTY OF REPAIR AND MAINTENANCE
8.1. Premises "As Is". The Premises have been inspected and are
accepted "as is" by Tenant in their present condition and Tenant acknowledges
the present condition of the Premises is good. Landlord is responsible for
containment or removal of any hazardous material currently on the Premises.
8.2. Tenant Cleaning; Conformance with Law. Tenant shall, at its own
expense and at all times, keep the Premises neat, clean, and in a sanitary
condition, and keep and use the Premises in accordance with applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities.
8.3. Waste. Tenant shall permit no waste, damage or injury to the
Premises or building. For example, Tenant shall protect water, heating, gas,
drainage and other pipes from freezing, breaking, and blockage; repair all
leaks and damage caused by leaks; replace interior and exterior light bulbs or
fixtures as needed; replace glass in windows and doors of the Premises if
cracked or broken; paint interior surfaces as needed; repair or replace floor
coverings as needed; and remove ice and snow from sidewalks adjoining the
Premises.
8.4. Tenant Repairs. Tenant shall make repairs necessary to maintain
the Premises in good condition except for structural repairs to the roof,
exterior walls and foundation, which are the responsibility of the Landlord.
8.5. Electrical Overloading. If Tenant installs any electrical
equipment that overloads the line to the Premises or in the building of which
the Premises are a part, Tenant shall at its own expense make whatever changes
are necessary to comply with the
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requirements of the Insurance Underwriters and/or Governmental authorities
having jurisdiction.
8.6 Landlord's Right to Cure Tenant's Defaults. If Tenant
fails to perform a duty required by this Section 8 to the satisfaction of
Landlord within thirty (30) days after written demand, or less if an emergency,
Landlord may undertake the duty, without liability to Tenant for any loss or
damage that may accrue to Tenant. Tenant shall pay Landlord's costs for
undertaking the duty as additional rent. Landlord's costs will include a markup
of twenty (20%) percent on said costs to cover Landlord's overhead.
9. LANDLORD REPAIR. Landlord shall maintain the structural portions
of the Premises, that is, the exterior of the roof, exterior walls (except
painting) and foundation. If Landlord must make structural repairs due to
Tenant's act or failure to act, the cost of repairs shall become additional
rent. Tenant must give Landlord written notice of necessity for structural
repairs except which are not readily discernible.
10. COMPLIANCE WITH RULES. Tenants shall comply with rules concerning
the Premises provided to Tenant by Landlord. Such rules shall constitute part
of this Lease. Landlord may make amendments and additional rules for the
safety, care, cleanliness and aesthetics of the Premises and the Property. A
violation of any of the rules from time to time in effect shall constitute
default by Tenant under this Lease. These rules are made to enable Landlord to
operate the Property and Premises in a manner beneficial to both Landlord and
Tenants. If there is an express, direct conflict between such rules and this
Lease, the Lease shall control. Landlord shall not be liable to Tenant or to
any third parties for failure of other tenants or occupants of the building to
perform or observe Landlord's rules.
11. SIGNS. No signs or symbols may be placed in the windows or doors
of the Premises, or upon any exterior part of the building or Property, without
Landlord's prior written consent which shall not be unreasonably withheld.
Tenant's failure to remove an unapproved sign or symbol within forty-eight (48)
hours will constitute a default under the Lease. Additionally, Landlord shall
have the right to cause the sign to be removed and the building repaired at
Tenant's sole expense. At the termination of this Lease, Tenant will remove all
signs placed by it upon the Premises, and will repair any damage caused by
removal. All signs must comply with all applicable sign ordinances and be
placed in accordance with required permits.
12. ALTERATIONS.
12.1 Tenant. Tenant shall not make any alterations, additions
or improvements ("Alterations") to the Premises without the prior written
consent of Landlord. Alterations shall be at the sole expense of Tenant, and
shall become the property of the Landlord, at the termination of this Lease,
without disturbance or damage. However, the Landlord may require all or some of
the Alterations be removed and the Premises restored at Tenant's sole expense.
Tenant holds the Landlord free and harmless from damage, loss or expense
arising out of the Alterations. Alterations shall be performed only according
to Landlord approved plans by adequately insured, competent and licensed
contractors.
12.2 Landlord. Tenant agrees that Landlord has the right to
make Alterations to the Premises and to the building in which the Premises are
situate and Landlord shall not be liable for any damage which Tenant might
suffer by reason of such undertaking. Landlord shall notify Tenant 48 hours in
advance for any alteration.
12.3 Liens. Tenant shall keep the Premises and the Property
free and clear from any liens or lien claims arising out of any work performed,
materials furnished or obligations incurred by or on behalf of Tenant. Tenant
shall defend, indemnify and hold Landlord harmless from any liability for
losses or damages resulting directly or indirectly from any such liens or lien
claims and from any work performed on or about the Premises by Tenant, its
agents, employees, contractors or subcontractors. If any lien or lien claim is
filed against any part of the Property or Premises by any person claiming by,
through or under Tenant, Tenant shall, upon Landlord's request, at Tenant's
expense, immediately furnish to Landlord a bond in form and amount and issued
by a surety satisfactory to Landlord indemnifying Landlord and the Property
against all resulting liability, cost and expenses, including attorneys' fees.
If such bond has been furnished to Landlord, Tenant at his sole cost and
expense and after written notice to Landlord, may contest by appropriate
proceedings conducted in good faith and with due diligence any lien,
encumbrance or charge against the Premises arising from work done or materials
provided to or for Tenant if, but only if, such proceedings suspend the
enforcement and collection of the lien or the lien claim and neither the
Premises or the Property is or will be in any danger of being sold, forfeited
or lost.
13. CONDEMNATION.
13.1 General. If a public or quasi public authority, or private
corporation or individual having the power of condemnation (condemnation being
the exercise of power by legal proceedings or otherwise and/or a voluntary sale
or transfer to the condemnor under threat of condemnation) purchases a portion
of or all of the Premises, this Lease shall automatically terminate as to the
portion so taken as of the date the condemnor has right to possession. If a
portion of the Premises taken renders the remaining portion untenantable and
unusable by Tenant, Tenant shall have the option to terminate this Lease.
13.2 Taking of the Property. If a portion of the Property is
taken by condemnation (whether or not the Premises are affected) and (i)
Landlord determines that the remaining portions cannot be economically and
effectively used by it, or (ii) in the opinion of the Landlord the building
should be restored in such a way as to alter the Premises materially, then
Landlord shall have the option to terminate this Lease.
13.3 Restoration and Repair. If a portion of the Premises is
condemned and neither party elects to terminate the Lease, then Landlord
shall, to the extent of severance damages received by Landlord and equitably
allocated by Landlord among the Premises and other portions of the Property,
repair the damage to the Premises at Landlord's cost and expense.
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Tenant must repair, restore or replace alterations or property and at its sole
expense. Any sums received by Tenant due to the taking shall be applied to the
restoration and repair of Alterations.
13.4. Exercise of Options. If either party elects to exercise any
option to terminate the Lease under this Section 13, it shall do so by giving
written notice of the election to the other party not later than ninety (90)
days after the date the nature and extent of the taking by condemnation have
been finally determined (whether by issuance of a certificate of public use and
necessity or its equivalent by a court or other tribunal having jurisdiction
over the Property or otherwise), and if such notice is given, this Lease shall
terminate on the earlier of the date stated in the notice or the date of taking.
13.5 Claims. Any compensation related to the condemnation paid to
Landlord, including compensation for the value of the leasehold, is the
property for the Landlord and Tenant hereby assigns to Landlord any and all
claims to the compensation. However, the Tenant is not precluded from asserting
claims against condemnor, not Landlord, for the taking of Tenant's personal
property or for moving expenses.
14. PARKING. Tenant understands that parking is apportioned in conformity
with controlling zoning ordinances and that Landlord shall have the right to
make such regulations as Landlord deems desirable for the control of parking
vehicles on the Property or other property under Landlord's control, including
the right to designate certain areas for parking of the Tenant, employees of
Tenant, its customers and other Tenants of Landlord's building(s).
15. SUBLETTING OR ASSIGNMENT.
15.1 Landlord's Consent Required. Tenant shall not transfer,
mortgage, pledge, hypothecate, encumber or otherwise assign this Lease or any
interest therein, and shall not sublet or share all or any part of the Premises
(voluntarily, involuntarily or by operation of law), without the prior written
consent of the Landlord; which shall not be unreasonably withheld and any
attempt to do so without such consent shall be void and constitute breach of
this Agreement.
15.2 No Release of Tenant. No assignment or subletting, and no consent
of Landlord to any assignment or subletting, by Tenant or Tenant's sub or
assignees of any tier, shall relieve Tenant of any obligation to be performed
by Tenant under this Lease, whether before or after such consent, assignment or
subletting. The consent of Landlord to an assignment or subletting does not
relieve the obligation to obtain Landlord's prior written consent to any other
assignment or subletting. The acceptance of rent by Landlord from any person or
entity other than Tenant shall not be deemed a waiver by Landlord of any
provision of this Lease or be deemed a consent to any assignment or subletting.
All assignees or subletters shall assume all obligations of this Lease.
15.3 Transfers of Stock or Other Assets. If Tenant (or any of its
permitted successors or assigns) is a corporation or a partnership, any
transfer of the Lease by merger, consolidation, liquidation, dissolution, or
any change in the majority ownership of or power to vote a majority of its
outstanding voting stock, whether voluntary, involuntary, or by operation of
law, shall constitute a voluntary assignment for purposes of this Section 15.
Landlord agrees to such assignment.
15.4 Transfer and Assignment of Premises by Landlord. Landlord shall
have the right to transfer and assign, in whole or in part, its rights and
obligations under this Lease and in the Premises and/or the Property. In the
event of any such transfer or transfers, the transferor shall be automatically
relieved of any and all obligations and liabilities on the part of Landlord
accruing from and after the effective date of the transfer.
16. ACCESS. Landlord shall have the right to enter the Premises at all
reasonable times to clear, inspect, make repairs, additions or alterations, and
to show the Premises to prospective tenants, purchasers or mortgagees. Landlord
agrees to give Tenant 24 hours notice prior to access except in the case of
emergency.
17. DESTRUCTION OF OR DAMAGE TO THE BUILDING.
17.1 Repairs by Landlord. If the Demised Premises or any portion of
the building in which the Demised Premises are located should be damaged or
destroyed during the Lease term by any casualty, the Landlord may either
terminate this Lease or elect to repair and/or restore the damage or
destruction. If the Landlord elects to repair and/or rebuild, the Tenant's
rent shall be abated, as provided below, during the time of restoration.
Landlord shall advise Tenant in writing of Landlord's intentions within ninety
(90) days after the casualty. If the Landlord elects not to repair or rebuild
then this Lease shall terminate without further notice, and all further
obligations under this Lease of either party shall cease as of the date Tenant
was forced to cease business in the Premises. If such damage occurs and this
Lease is not so terminated by Landlord this Lease shall remain in full force and
in effect. The Landlord's obligation under this paragraph shall not exceed the
work done in the original construction of the Premises.
17.2 Continuation of Business. At Tenants option, Tenant agrees
during any period of reconstruction or repair of the Premises and/or of said
building to continue the operation of its business in the Premises to the
extent reasonably practical.
17.3 Repairs of Tenant Alterations. Tenant shall in the event of any
damage or destruction, unless this Lease shall be terminated as provided
above, promptly replace or fully repair all doors, exterior signs, trade
fixtures, equipment and other installations originally installed by Tenant.
Landlord shall have no obligation to do so. Landlord shall have no interest in
the proceeds of any insurance carried by Tenant on Tenant's interest in this
Lease and Tenant shall have no interest in the proceeds of any insurance
carried by the Landlord.
4
<PAGE> 5
17.4 Abatement of Rent. The rent shall be abated, in a fair
proportion as determined by Landlord, during any period in which there is
damage or restoration causing substantial interference with the operation of
Tenant's business. No abatement shall occur if the damage or destruction was
caused in whole or in part by Tenant.
18. TENANT INDEMNIFICATION, LIABILITY AND PERSONAL PROPERTY INSURANCE.
18.1. No Liability. Landlord shall not be liable to Tenant and
Tenant hereby waives all claims against Landlord for any injury or damage to any
person or property in or about Premises or the Property by or from any cause
whatsoever including, but not limited to, water leakage from the roof, walls,
basement or other portion of the Premises or the Property, or caused by repairs,
operations, gas, fire, oil, electricity; provided, that nothing contained in
this Lease relieves Landlord from liability for any such injury or damage caused
solely by Landlord's negligence or failure to perform normal maintenance.
Tenant, as a material part of the consideration to be received by Landlord under
this Lease, assumes all risk of, and waives and releases all claims for, any
damages through Tenant, which damages result from any accident or occurrence in
or upon the Premises or the Building from any cause whatsoever unless caused
solely by the negligence of Landlord, or failure to perform normal maintenance,
its agents or invitees.
18.2. Indemnification. Tenant shall defend, indemnify and hold
Landlord harmless from and against any and all liability, claims, causes of
action, damages, costs and expenses including without limitation, attorney's
fees, for any injury or damage to any person or property: (i) occurring in, on
or about the Premises or any part of the Premises unless caused solely by
Landlord's negligence, or failure to perform normal maintenance, (ii) occurring
in, on or about any part of the Property, the use of which Tenant may have in
conjunction with other tenants or occupants of the Building, when such injury
or damage shall be caused in whole or in part by the act or omission of Tenant,
its officers, agents, contractors, employees, licensees, or invitees, (iii)
arising from the conduct or management of any work or thing done by Tenant in
or about, or from transactions of Tenant concerning, the Premises, or (iv)
arising from any breach or default under this Lease by Tenant, or from any act
or omission of Tenant, or any of its officers, agents, employees, contractors,
licensees, or invitees. The foregoing provisions shall not be construed to
make Tenant responsible for loss, damage, liability or expense resulting from
injuries to third parties caused solely by the negligence or failure to perform
normal maintenance, or of Landlord or its officers, agents, employees,
contractors, licensees, or invitees. The provisions of this Section 18.2 shall
service the expiration of or termination of this Lease with respect to any
events occurring prior to such expiration or termination. Upon notice by
Landlord, Tenant at Tenant's expense shall defend Landlord, in any action or
preceding brought against Landlord by reason of any claim described in this
Section 18.2.
18.3. Public Liability and Property Damage Insurance. Tenant shall,
during the Lease term, at its sole cost, keep full force and effect a policy of
public liability and property damage insurance with respect to the Premises and
the business operated by the Tenant and/or any Sub-Tenant of Tenant in the
Premises, naming Landlord as an additional insured, in which the limits of
public liability shall be not less than $500,000 per person and $1,000,000 per
accident and in which the property damage portion shall not be less than
$500,000.
18.4. Approval of Insurer and Copies of Policies. Whenever Tenant
is hereby required to insure against any risk, said insurance shall be with an
insurance company approved by the Landlord which approval shall not be
unreasonably withheld and a copy of said policy or Certificate of Insurance
carrier endorsed thereon providing that said policy shall remain in full force
and effect until Landlord is notified in advance and in writing thirty days
before any change or cancellation.
18.5. Conformity with Insurance Policy. Tenant will not keep, use,
or offer for sale in or upon the Premises any article prohibited by the
standard form fire insurance policy.
18.6. Personal Property Insurance. All personal property kept on the
Premises shall be at the sole risk of Tenant. Tenant shall take full
responsibility for obtaining casualty, liability and personal property
insurance. Tenant shall indemnify and hold Landlord harmless for any damage,
either to person or property, sustained by Tenant or others for any reason,
including damage caused by any defects now in said Premises or hereafter
occurring, or due to the failure of Tenant to make repairs to the premises that
are the tenant's responsibility, or caused by fire, windstorm, flood, vandalism
or theft, etc., or from any act of God or a third party.
19. ESTOPPEL CERTIFICATE. Tenant shall, from time to time, upon written
request of Landlord, execute, acknowledge and deliver to Landlord or its
designee a written certificate of Tenant stating: that Tenant has accepted the
Premises (or if Tenant has not done so, that Tenant has not accepted the
Premises and specifying the reasons therefore); the commencement and expiration
dates of this Lease; the dates on which rent under this Lease has been paid;
that this Lease is in full force and effect and has not been modified (or if
there have been modifications, that this Lease is in full force and reflect as
modified and stating the modifications); whether or not there are, to Tenant's
knowledge, then existing any defaults by Landlord in the performance of its
obligations under this Lease (and if so, specifying the name); whether or not
there are then existing any defenses against the enforcement of any obligations
of Tenant under this Lease (and if so, specifying the same); the amount of the
security deposit and prepaid rent, if any, that has been deposited with
Landlord; and any other information reasonably requested. It is agreed that any
such certificate deliver pursuant to this paragraph may be relied upon by a
prospective purchaser or mortgagee of any part of Landlord's interest in the
Premises, or an assignee of any mortgage and any part of Landlord's interest.
If Tenant fails to respond within thirty (30) days after receipt by Tenant of
Landlord's written request, Tenant shall be deemed to have admitted the
accuracy of any information supplied by Landlord to such prospective purchaser,
mortgagee or assignee, but such admission shall not relieve Tenant of the
obligation to provide the said Certificate. Further, at Landlord's option, such
failure shall be deemed a breach by Tenant of this Lease.
5
<PAGE> 6
20. SUBORDINATION.
20.1. Priority. This Lease shall be subject and subordinate to the
lien of any mortgage or deed of trust which may now exist or hereafter be
executed in any amount for which all or a portion of the Property or Premises is
specified as security, and all renewals, modifications, extensions,
substitutions, replacements, and/or consolidations of such mortgage or deed of
trust. Not withstanding the foregoing, Landlord shall have the right to
subordinate or cause to be subordinated any such liens to this Lease. Tenant
shall, notwithstanding any subordination, attorn to and become the tenant of the
purchaser at such foreclosure sale or grantee of such deed (the "then owner") if
so requested by the then owner. Tenant covenants and agrees to execute and
deliver any of the instruments or documents described in this paragraph within
thirty (30) days after receipt of written request.
20.2. Mortagee Protection. Tenant agrees to give a copy of any
notice of default served upon Landlord to any mortgagee identified to Tenant by
Landlord. Tenant further agrees that any such mortgagee shall have the right to
cure such default on behalf of the Landlord within thirty (30) days after
receipt of such notice. Tenant further agrees not to invoke any of the remedies
which it may have against Landlord under the Lease until such thirty (30) days
have elapsed, or during any period that the mortgagee is proceeding to cure such
default with due diligence, or is diligently taking steps to obtain the right to
enter the Premises and cure the default, whichever is later.
21. WAIVER OF SUBROGATION RIGHTS. Anything in this Lease to the contrary
notwithstanding. Landlord and Tenant each hereby waive any and all rights of
recovery, claims, actions or causes of action against the other, its agents,
officers, directors, shareholders, or employees, for loss or damage to the
Premises or any improvements to the Premises, or the adjoining property or any
improvements to the Property, or any personal property of such party, that is
caused or results from fire and other perils insured against under the normal
extended coverage clauses of standard insurance policies carried by the parties
and in force at the time of damage or loss.
22. DEFAULT.
22.1. Right to Re-enter. If Tenant fails to pay rent within three
(3) days following delivery to the Premises of a "Notice to Pay Rent"; or if
Tenant fails to perform any provisions of the Lease, other than rent, for more
than ten (10) days after written notice of default has been mailed to Tenant, or
if Tenant becomes bankrupt or insolvent files any debtor proceedings or files,
or has taken against it, any proceedings of any kind under any provisions of a
federal or state bankruptcy, insolvency or suffers this Lease to be taken under
any writ of execution; then Landlord besides other rights or remedies it may
have, may immediately re-enter and remove all persons and property from the
Premises and store such property in a public warehouse or elsewhere at the cost
of and for the account of Tenant, all without service of notice or resort to
legal process and without being deemed guilty of trespass or becoming liable for
any loss or damage which may be occasioned thereby.
22.2. Loss of Tenant's Right to Cure. Despite any provision to the
contrary, if Tenant defaults three (3) times under one or more provisions of
this Lease, at Landlord's option and without further notice, Tenant shall be
deemed to have forfeited its right of cure.
22.3. Landlord's Other Remedies. Notwithstanding Landlord's
above-mentioned remedies for default, those remedies shall not be deemed
exclusive, and Landlord may use and proceed under any legal procedures
available, including eviction pursuant to RCW 59.12.
22.4. Right to Re-let. Should Landlord elect to re-enter as herein
provided for above, or should it take possession pursuant to legal proceedings
or pursuant to any notice provided by law, it may either terminate this Lease or
it may from time to time, without terminating this Lease, make such alterations
and repairs as may be necessary in order to re-let said Premises or any part
thereof for such terms (which may be for a term extending beyond the term of
this Lease) and at such rental or rentals and upon such other terms and
conditions as Landlord in its sole discretion deems advisable.
22.4.1. Application of Rent from Re-letting. Upon each such
re-letting described above, all rentals received by the Landlord from the
re-letting shall be applied first to the payment of any indebtedness other than
rent due hereunder from the Tenant to Landlord; second to the payment of rent
due and unpaid hereunder and the residue, if any, shall be held by Landlord and
applied in payment of future rent on the same basis as listed herein and as the
rentals may become due and payable hereunder. If sub-letting rentals received
during any month after deduction for non-rent obligations of Tenant to Landlord
as described above are less than that to be paid during that month by Tenant
hereunder, Tenant shall pay the deficiency to Landlord. Such deficiency shall be
calculated and paid monthly. Tenant shall have no right to any excess rental.
22.4.2. Termination. No re-entry or taking possession of said
Premises by Landlord shall be construed as an election on Landlord's part to
terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction. Not withstanding any re-letting without termination, Landlord may
at any time thereafter elect to terminate this Lease for such previous breach.
Should Landlord at any time terminate this Lease for any breach, in addition to
any other remedies it may have, it may recover from Tenant all damages it may
incur by reason of the breach including the costs and reasonable attorney's
fees, and including the worth at the time of such termination of the excess, if
any, of the amount of rent and charges equivalent to rent reserved in the Lease
for the remainder of the stated term; all such amounts shall be immediately due
and payable from Tenant to Landlord as additional rent.
22.5. Landlord Default. Landlord shall have fifteen (15) days, or
longer if more time is reasonably required, to cure default after written notice
is received from Tenant.
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<PAGE> 7
23. COSTS AND ATTORNEY'S FEES; ACTIONS. In an action for breach of this
Lease, the losing party agrees to pay the prevailing party's reasonable costs
and attorney's fees. Venue for any legal action brought under this Lease is in
the county in which the Premises are situated. Washington law shall govern this
Lease.
24. NON-WAIVER; NO ACCORD SATISFACTION. The waiver by Landlord of any
breach of any Lease provision is not a waiver of the provision. Acceptance of
rent by Landlord shall not be deemed a waiver of any existing breach by Tenant
regardless of Landlord's knowledge of that breach when accepting the rent.
Landlord's acceptance of keys from the Tenant shall not waive any provision of
the Lease. No payment by tenant, or receipt by Landlord of less than the full
monthly rent, or any endorsement or statement on any check or any letter
accompanying any payment of rent, may be deemed accord and satisfaction. The
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of such rent or pursue any other legal remedy.
25. SURRENDER OF LEASE AND HOLDING OVER.
25.1. Surrender Upon Termination. At the expiration of the Lease
term, Tenant shall surrender the Premises in the same condition of cleanliness,
repair and sightliness the Premises were in upon commencement of the Lease,
ordinary wear and tear excepted. Tenant shall surrender all keys to the
Premises to Landlord at the place then fixed for payment of rent, and shall
inform Landlord of all combination on locks and safes. Tenant shall remove all
its movable personal property at its own expense. Any property not so removed
shall be disposed of by Landlord without account to Tenant. Tenant shall be
liable for Landlord's costs regarding the property. If the Premises are not
surrendered at such time, whether with Landlord's consent or not, Tenant
indemnifies Landlord against loss of liability resulting from delay by Tenant
in surrendering the Premises, including without limitation, any claims made by
any succeeding tenant founded upon the delay. Tenant's obligation to observe or
perform this covenant shall survive termination of the Lease.
25.2 Liquidated Damages. If Tenant at termination of this Lease fails
to yield possession to Landlord, Landlord may require Tenant to pay and Tenant
shall pay as liquidated damages for each day possession is withheld, an amount
equal to double the amount of the daily Minimum Rent last in effect, computed
on a thirty day month basis.
25.3 Holding Over. Any holding over after the expiration of the said
term, with the consent of the Landlord, shall be construed to be a tenancy
from month to month at the monthly rentals herein specified in the paragraph on
Liquidated Damages above and shall otherwise be on the Lease's terms and
conditions.
26. EVENTS BEYOND PARTIES' CONTROL. If either party hereto is delayed or
prevented from performing any act required here-under, except payment of rent
and all other amounts by Tenant, by reason of labor troubles, inability to
procure materials, failure of power or water, restrictive governmental laws or
regulations, riots, war or other reason of like nature not the fault of the
party delayed, then performance of such act is excused for the period of the
delay and the period for the performance extended for a period equal to the
delay.
27. SECURITY MEASURES. Tenant hereby acknowledges that the rental payable
to Landlord hereunder does not include the cost of guard service or other
security measures, and that Landlord shall have no obligation whatsoever to
provide same. Tenant assumes all responsibility for the protection of Tenant,
its agents and invitees from acts of third parties.
28. RECYCLING. Tenant will recycle materials including, but not limited
to, the following: Newspaper, Aluminum/Metal/Tin, Glass, #1 PET & #2 HDPE
Plastics, Paperboard Milk & Juice Cartons, Copy/Ledger Paper, Mixed Paper and
Cardboard.
Methods of participation are at the tenant's discretion (for example:
Commercial Pick-up, transfer stations, buy back centers, etc.) Landlord's
recycling coordinator is available for assistance in program development and
implementation.
29. GENERAL.
29.1 Form. The grammatical changes needed to make this Lease apply in
the plural sense, where there is more than one Tenant, and to either
corporations, associations, partnerships or individuals and males or females,
shall be assumed as though fully expressed.
29.2 Captions. The captions of the several articles contained herein
are for convenience only and do not define, limit, describe or construe the
contents of the articles.
29.3 Notice. Any notice required to be given by either party to the
other shall be deposited in the United States mail, postage prepaid, addressed
to the Landlord at 1595 N.W. Gilman Blvd., Issaquah, WA 98027 or to the Tenant
at 1871 N.W. Gilman Blvd., Issaquah, WA 98027 OR at such other address as either
party may designate to the other in writing from time to time.
29.4. Commissions. Each party represents that it has not had dealings
with any real estate broker, finder or other person who would be entitled to any
commission or fee in connection with the negotiation, execution or delivery of
this Lease except N/A. Each party shall indemnify, defend and hold the other
party harmless from all claims, including attorneys' fees, that may be asserted
against the other party by any broker, finder or other person with whom the
party giving the indemnity has or purportedly has dealt, except the broker named
above.
29.5 Joint and Several Obligations. If the Tenant is more than one
person or entity, the obligations imposed on the Tenant shall be joint and
several.
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<PAGE> 8
29.6. Severability. The unenforceability, invalidity, or illegality
of any provision of this Lease shall not render any other provisions
unenforceable, invalid or illegal.
29.7. Recordation. Tenant shall not record this Lease or any
memorandum of Lease which refers to this Lease. Any such recording shall be a
breach under this Lease.
30. ENTIRE AGREEMENT. This Lease contains the entire agreement between the
parties; there are no verbal promises. Any written promises between them are
attached hereto as an addendum. Any agreement hereafter made shall not change,
modify, discharge or effect an abandonment of this lease in whole or in part,
unless the agreement is in writing and signed by the party against whom
enforcement of this Lease or of any changes, modifications, discharge or
abandonment is sought. This Lease becomes effective as a Lease only upon
execution and delivery by Landlord and Tenant.
31. SUCCESSORS. The covenants and conditions herein contained shall,
subject to the provisions as to assignment, apply to and bind and inure to the
benefit of the respective heirs, successors, executors, administrators and
assigns of the parties hereto and in any case where there is more than one
Tenant, each Tenant shall be jointly and severally liable hereunder.
32. TIME IS OF THE ESSENCE OF THIS LEASE.
33. RIDERS. Riders, if any, attached hereto are made a part of this Lease
by reference and are described as follows: EXHIBIT "A" (legal description of
Property), EXHIBIT "B" (map showing Premises location), EXHIBIT "C" (Landlord
Rules and Regulations), EXHIBIT "D" (Hazardous Substances Warranty) Exhibit "E"
(Tenant Improvements) Exhibit "F" (Commencement Date), Exhibit "G" (Option to
Extend)
IN WITNESS WHEREOF, the parties hereto have executed the above
instrument upon this 1st day of June, 1993.
<TABLE>
<S> <C>
LANDLORD: TENANT:
ROWLEY ENTERPRISES INCORPORATED /s/ [SIG]
A Washington Corporation ----------------------------
/s/ [SIG] Polymer Technology Int'l
- ---------------------------- ----------------------------
President
----------------------------
DATE 6-1-93 DATE 5/26/93
----------------------- -----------------------
</TABLE>
8
<PAGE> 9
STATE OF WASHINGTON )
) ss
County of )
On this 26th day of May, 1993, personally appeared before me Terry G. Kelley, to
me known to be the President of Polymer Technology Int'l the corporation that
executed the within and foregoing instrument to be the free and voluntary act
and deed of said corporation for the uses and purposes therein mentioned, and on
oath stated that they were authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal,
the day and year first above written.
/s/ BEVERLY BABIS
- -------------------------------------------------
NOTARY PUBLIC, in and for the State of Washington
Residing at: 16501 Saybrook Dr. NE Woodinville 98072
[NOTARY SEAL]
<PAGE> 10
STATE OF WASHINGTON )
) ss
County of King )
On this 1st day of June, 1993, personally appeared before me Richard S. Symms,
to me known to be the President of Rowley Enterprises, Inc. the corporation that
executed the within and foregoing instrument to be the free and voluntary act
and deed of said corporation for the uses and purposes therein mentioned, and on
oath stated that they were authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal,
the day and year first above written.
/s/ JULIE LAPRARIE
- -------------------------------------------------
NOTARY PUBLIC, in and for the State of Washington
Residing at: Issaquah
<PAGE> 11
AMENDMENT TO LEASE
This Amendment of Lease made this 1st day of November, 1996 affects that
certain Lease Agreement between Rowley Enterprises, Inc., a Washington
Corporation as Landlord and Polymer Technology International Corporation, as
Tenant and which is dated June 1, 1993. Polymer Technology International
Corporation subsequently assigned its interest to Intracel Corporation. Said
Lease Agreement is for that certain office/manufacturing space located at 1871
NW, Gilman Blvd. Issaquah, Washington 98027.
WHEREAS, the parties hereto agree to certain changes or modifications of said
Lease Agreement.
NOW THEREFORE, LANDLORD AND TENANT AGREE the above-mentioned Lease Agreement
shall be modified or changed as follows:
1. The security deposit per paragraph 4 (Security Deposit) shall be increased
to Forty Nine Thousand Five Hundred ($49,500.00) Dollars.
2. Exhibit "G" (Optional to Extend) is modified as follows:
Landlord grants to Tenant an Option to Extend the term of this Lease for
one additional five-year term. Tenant shall notify the Landlord in writing no
later than ninety (90) days before the end of the initial Lease term, of
Tenants intent to exercise its option to extend the term. Rent shall be
increased at the beginning date of every year of the extended term by the
percent of change in the Consumer Price Index per paragraph 23. (Inflation
Adjustment to Minimum Rent), but with a maximum increase of 5% over the
previous year.
ALL OTHER TERMS AND CONDITIONS OF THE LEASE AGREEMENT DATED, JUNE 1, 1993
BETWEEN THE PARTIES HERETO, SHALL REMAIN IN EFFECT AND CONTINUE FOR THE FULL
EXTENDED TERM HEREIN.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE SET THEIR HANDS THE DAY AND
YEAR FIRST WRITTEN ABOVE.
LANDLORD: TENANT:
Rowley Enterprises, Inc. Intracel Corporation
By: /s/ [SIG] By: /s/ [SIG]
---------------------- ---------------------
Its: President Its Chief Financial Officer
---------------------- ---------------------
Date: 10-29-96 Date: 10-30-96
---------------------- ---------------------
<PAGE> 12
STATE OF WASHINGTON )
) ss
County of KING )
On this 29th day of October, 1996, personally appeared before me Richard S.
Symms, to me known to be the president of Rowley Enterprises Inc. the
corporation that executed the within and foregoing instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that they were authorized to execute said
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal,
the day and year first above written.
/s/ JULIE LAPRARIE
- -------------------------------------------------
NOTARY PUBLIC, in and for the State of Washington
Commission Expires 2/5/98
Print Name Julie LaPrarie
Residing at: Issaquah
STATE OF WASHINGTON )
) ss
County of KING )
On this 30th day of October, 1996, personally appeared before me Matthew L.
Root, to me known to be the CFO of Intracel Corporation the corporation
that executed the within and foregoing instrument to be the free and voluntary
act and deed of said corporation for the uses and purposes therein mentioned,
and on oath stated that they were authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal,
the day and year first above written.
/s/ DIANA K. CAREY
- -------------------------------------------------
NOTARY PUBLIC, in and for the State of Washington
Commission Expires 5-29-00
Print Name Diana K. Carey
Residing at: Seattle WA
<PAGE> 13
ASSIGNMENT OF LEASE
THIS ASSIGNMENT OF LEASE is made this 30 day of October, 1996 by POLYMER
TECHNOLOGY INTERNATIONAL CORPORATION ("Assignor") in favor of INTRACEL
CORPORATION ("Assignee"), with respect to the following:
1. Assignor is Debtor and Debtor in Possession in a Chapter 11
Bankruptcy Case pending in the United States Bankruptcy Court for the Western
District of Washington at Seattle ("Court") in Case No. 95-06304 ("Case"); and
2. Assignor is Tenant under a certain Commercial Lease Agreement dated
June 1, 1993 under which Rowley Enterprises Inc. is Landlord, covering real
property commonly known as 1871 N.W. Gilman Blvd., in Issaquah, Washington
("Lease") a copy of which is attached hereto as Exhibit A; and
3. On October 23, 1996, the Court entered its Order Authorizing Polymer
to Assume and Reject Leases of Nonresidential Real Property ("Order"), which,
among other things, approves Assignor's assignment to Assignee of the Lease, a
copy of which Order is attached hereto as Exhibit B.
NOW, THEREFORE, for and in consideration of the sum of $100,000 ($50,000
due on October 31, 1997 and $43,700 to Polymer due on execution and $6,300 to
Rowley on execution) and the terms of the Order,
1. Assignor hereby assigns all of its rights, title and interest in the
Lease to Assignee subject to modifications in the terms of the Lease pursuant
to the Order.
2. This assignment by Assignor is without recourse and without
representations or warranties of any kind or nature whatsoever except as
expressly set forth above.
3. Landlord and Assignee agree to amend the Lease Agreement paragraph 4.
"Security Deposit" so that Assignee agrees to pay to the Landlord, upon
execution of this Agreement, the sum of Forty Nine Thousand Five Hundred
($49,500.00) as the security deposit for said Lease Agreement. Upon receipt of
Assignee's payment to the security deposit, Landlord shall release its currently
held security deposit of Fifteen Thousand ($15,000.00) Dollars to Polymer
Technology International Corporation, Assignor.
4. As further consideration of this Assignment of Lease, Landlord and
Assignee agree to amend the Lease Agreement, Exhibit "G" "Option To Extend" so
that the Assignee shall have one five-year option to extend the term of the
Lease.
5. As partial consideration for this Assignment of Lease, the Assignee
shall pay to the Landlord the sum of Six Thousand Three Hundred ($6300.00)
Dollars as Landlord's attorney's fees related to the above-mentioned bankruptcy.
POLYMER TECHNOLOGY INTERNATIONAL CORPORATION
By
---------------------------
Its
--------------------
1
<PAGE> 14
CONSENT BY LANDLORD
The undersigned, Landlord under the Lease, hereby consents to the
Assignment of the Lease as amended to Intracel Corporation described herein.
This consent shall apply only to this transaction and shall not be deemed to be
a consent to any other assignment or sublease.
<TABLE>
<S> <C>
LANDLORD: ROWLEY ENTERPRISES INC.
By [ILLEGIBLE]
-----------------------------
Its President
------------------------
10-29-96
</TABLE>
AGREED BY ASSIGNEE
The undersigned, Assignee, hereby agrees to the terms of the order
mentioned above and to the modifications of the Lease as specified therein.
<TABLE>
<S> <C>
ASSIGNEE: INTRACEL CORPORATION
By [ILLEGIBLE]
-----------------------------
Its Chief Financial Officer
------------------------
</TABLE>
2
<PAGE> 15
SECOND AMENDMENT TO LEASE
This Amendment of Lease made this 22nd day of June, 1998 affects that
certain Lease Agreement between Rowley Enterprises Inc., a Washington
Corporation as Landlord and Intracel Corporation, a Delaware Corporation as
Tenant; and Dated June 1, 1993. Said Lease was originally between said Landlord
and Polymer Technology International Corporation as Tenant, whose leasehold
interest was assigned to Intracel Corporation October 30, 1996.
WHEREAS, the parties hereto agree to certain changes or modifications of
said Lease Agreement.
NOW THEREFORE, LANDLORD AND TENANT AGREE the above-mentioned Lease
Agreement shall be modified or changed as follows:
1. Landlord and Tenant hereby extend the term of said Lease Agreement for an
additional term beginning at the expiration date of the current Lease term
and ending the thirty first (31st) day of December, 1998.
2. Tenant shall grant access to the Landlord or his representative for the
purpose of showing the Premises to prospective tenants during business
hours.
3. Tenant agrees to surrender the Premises on December 31, 1998, in the same
condition of cleanliness, repair and as presently equipped and will not
remove fixed property without written consent of the Landlord.
4. Rent shall be adjusted to Seventeen Thousand Eight Hundred Eighty
($17880.00) Dollars per month beginning the first day of October, 1998.
ALL OTHER TERMS AND CONDITIONS OF THE ABOVE-MENTIONED LEASE AGREEMENT
BETWEEN THE PARTIES HERETO, SHALL REMAIN IN EFFECT AND CONTINUE FOR THE FULL
EXTENDED TERM HEREIN.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE SET THEIR HANDS THE DAY AND
YEAR FIRST WRITTEN ABOVE.
LANDLORD: TENANT:
Rowley Enterprises Inc. Intracel Corporation, Inc.
By: [SIG] By: [SIG]
-------------------- --------------------
Its President Its VP, Operations
DATE: June 23, 1998 DATE: June 22, 1998
----------------- -----------------
<PAGE> 16
EXHIBIT "A"
LEGAL NW 160
Commonly known as:
1871 NW GILMAN BLVD. ISSAQUAH, WA 98027
THAT PORTION OF THE SOUTHEAST QUARTER OF SECTION 20 AND THE NORTHEAST QUARTER OF
SECTION 29, ALL IN TOWNSHIP 24 NORTH, RANGE 6 EAST, WILLAMETTE MERIDIAN, IN
KING COUNTY, WASHINGTON, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT OF THE SOUTH LINE OF SAID SECTION 20, 1883.85 FEET WEST
OF THE SOUTHEAST CORNER THEREOF; THENCE SOUTH 4.98 FEET; THENCE SOUTH 71
DEGREES 00'00" WEST A DISTANCE OF 162.22 FEET; THENCE NORTH 20 DEGREES 14'30"
WEST A DISTANCE OF 365.85 FEET, MORE OR LESS, TO THE WESTERLY EXTENSION OF THE
SOUTH RIGHT-OF-WAY OF SOUTHEAST 63RD STREET; THENCE NORTH 89 DEGREES 53'48" EAST
ALONG SAID WESTERLY EXTENSION 279.96 FEET; THENCE SOUTH 283.96 FEET, MORE OR
LESS, TO THE POINT OF BEGINNING.
LANDLORD: TENANT:
ROWLEY ENTERPRISES, INC. POLYMER TECHNOLOGY INTL.
A WASHINGTON CORPORATION
______________________________ ______________________________
PRESIDENT PRESIDENT
DATE: ________________________ DATE: ________________________
<PAGE> 17
PY INDUSTRIAL PARK
C.20 and 29., T.24N., R.6E., W.M.
ISSAQUAH, KING COUNTY, WASHINGTON
LAND SURVEYORS CERTIFICATE
I HEREBY CERTIFY that this plat of Rowley Industrial Park is based upon an
actual survey, and that the courses and distances and are shown correctly
thereon and that all permanent exterior control homesites and other household
will be set and that I have completed with the provisions on the statutes and
platting regulations.
POLYMER TECHNOLOGY INTERNATIONAL ROWLEY ENTERPRISES INC.
/s/ Tony L. Kelly [SIG]
- ------------------------------- ---------------------------------
[GRAPHIC -- MAP]
<PAGE> 18
[ROWLEY ENTERPRISES, INC. LETTERHEAD]
EXHIBIT "C"
To be made part of the Lease Agreement dated June 1, 1993.
ROWLEY ENTERPRISES, INC., Landlord, and Polymer Technology International, as
Tenant.
LANDLORD RULES & REGULATIONS
Tenant shall diligently comply with the Landlord rules and regulations and
shall not hold Landlord responsible for nonperformance of any said rules and
regulations by any other tenant or occupants. Periodically Landlord may, on
written notice, make reasonable modifications, deletions, or additional terms
and conditions to those stated herein.
TENANT SHALL OBSERVE THE FOLLOWING:
1.) BUSINESS OPERATIONS: Tenant will comply with all municipal, county and
state codes, statues, ordinances and regulations.
2.) PARKING: Tenant and its employees shall park vehicles in areas which may
be in common with other Tenants and Landlord. Tenant agrees not to overburden
the parking facilities and shall not store materials, vehicles, or any
inoperative vehicle on the Premises. If any vehicle or materials are stored in
parking or common areas, Landlord may, at owners risk and expense, and without
notice to Tenant, have vehicle or materials removed. Upon written notice, Tenant
shall reimburse Landlord for any and all costs incurred.
3.) PLUMBING: Tenant shall maintain and repair the plumbing facilities and no
foreign substance of any kind shall be thrown or disposed of therein.
4.) LOCKS: Tenant may not change or install any new locks or bolts on any
doors or windows without the written consent of Landlord. Tenant shall provide
to Landlord a pass-key in order to enable Landlord's employees, workmen or
subcontractors to examine the Premises from time to time for general
maintenance purposes or to gain access in the event of an emergency.
5.) ALTERATIONS: Upon receipt of Landlords written consent for any
alterations, Landlord reserves the right at any time to post and maintain on the
Premises notices deemed necessary to protect the Premises and Landlord from all
liens including but not limited to mechanic's liens and materialman's liens.
6.) NUISANCE: Each Tenant shall not permit noise or conduct themselves in any
manner which would create a nuisance or disturbance to other tenants in the
building or surrounding buildings. Nor shall Tenant use, keep or permit to be
used any foul or noxious gas or substance in the Premises which may be
offensive or objectionable to the Landlord or other occupants of the Building.
Furthermore, Landlord reserves the right to remove from the premises any person
who, in the opinion of the Landlord, is intoxicated or under the influence of
drugs.
7.) APPEARANCE: The interior and exterior of the Premises will be kept in a
clean condition. All waste paper, refuse and garbage shall be contained and
properly disposed of.
8.) RESTRICTED USE: Premises shall not be used for: conducting an auction,
fire or bankruptcy sale; lodging; or for any improper, objectionable or immoral
purpose.
9.) ADVERTISING: Lessee agrees that in any advertising of mailers,
advertisements, in any paper or periodical, publication, signs or any other
form of advertising, the words "Rowley Center" may be used.
<PAGE> 19
EXHIBIT "D"
HAZARDOUS SUBSTANCES WARRANTY AND AGREEMENT
RIDER TO LEASE AGREEMENT DATED June 1, 1993 BETWEEN ROWLEY ENTERPRISES, INC.
AND Polymer Technology International REGARDING PREMISES LOCATED AT 1871 NW
Gilman Blvd., Issaquah, Washington.
IT IS HEREBY AGREED THAT THE LEASE AGREEMENT IDENTIFIED ABOVE SHALL BE
SUPPLEMENTED AND MODIFIED AS FOLLOWS:
1. HAZARDOUS SUBSTANCES ON PREMISES. Without the express written
permission of Lessor, Lessee shall not store, use or have present on or adjacent
to the premises any hazardous or toxic substances, including those substances
defined as "hazardous" or "extremely hazardous" under federal or Washington
State environmental statutes or regulation (including but not limited to 42 USC
9601 et. seq. 40 CFR Part 302, PCW Chapter 70.105D.020 and WAC 173-340-200, and
any successor statutes and regulations), except as follows:
2. STORAGE AND USE OF HAZARDOUS SUBSTANCES. Lessee agrees at all times
to restrict its storage and use of substances identified in Paragraph 1 to the
inside of the permanent building(s) at the premises, and specifically to those
locations within such building(s) having concrete flooring or such other
impermeable flooring as lessor may in its sole discretion approve in writing
upon request by lessee.
2.A HANDLING AND DISPOSAL. The Lessee agrees to use said substances
identified in paragraph 1 only on areas which have impermeable surfaces and
other means for preventing accidental contact by such substances with the soils
upon the leasehold or its surrounding area.
3. RELEASES OF HAZARDOUS SUBSTANCES PROHIBITED. Lessee shall not release,
dispose of, or permit a release of, any of the substances described or
identified in Paragraph 1 onto the premises or into the environment surrounding
the premises.
4. REGULATORY COMPLIANCE. Lessee warrants and agrees that, during the
term of this lease and any extensions thereof, it will take all steps necessary
to comply with all applicable federal, state and local requirements for the
containment, storage, use and disposal of any and all hazardous or toxic
substances at the premises, including but not limited to obtaining and
maintaining all necessary federal, state and local permits or licenses, and
obtaining any required federal or state hazardous waste generator or transporter
identification numbers. Lessee shall provide to Lessor a copy of each such
existing permit, license, and identification number before occupancy, and shall
provide a copy of such permit, license, and identification number which Lessee
may obtain in the future within seven days of receipt by Lessee.
5. DISPOSAL OF HAZARDOUS WASTES. In the event Lessee has occasion or need
to dispose of hazardous or toxic substances or wastes, and unless otherwise
agreed to in writing, Lessee shall retain an independent hazardous waste
disposal firm to dispose of any and all such substances at an off-site facility
which has been properly approved, licensed and authorized to accept such
substance. Lessee shall ensure that he disposal firm is properly licensed and in
good standing with the applicable regulatory authorities for such work, and that
it has all required transporter identification numbers.
6. LESSEE'S WARRANTY OF NO CONTAMINATION. Except as may be disclosed in
Attachment NO. 1 hereto, Lessee warrants and represents (1) that it has not
released any toxic or hazardous substances onto the premises or into the
environment in connection with its activities at the premises, (2) that it has
inspected the premises and is not aware of any indication that a release of any
hazardous substances has ever occurred at the premises, including prior to
Lessee's occupancy, (3) that it has never been formally accused or cited, at the
premises or elsewhere, for any violation of environmental laws, regulations or
any hazardous waste-related governmental permit, and (4) that no claims or
litigation have ever been pending against it by any person or governmental
agency involving any use, storage, release or disposal of hazardous or toxic
waste. If any such releases, formal accusations, citations, claims or litigation
against Lessee arise during the term of this lease of any extension thereof,
then Lessee shall notify Lessor in writing within seven (7) days of such event,
and shall provide Lessor with a copy of each document reflecting such event.
7. INDEMNIFICATION AND HOLD HARMLESS. Lessee shall indemnify and hold
Lessor harmless with respect to any and all direct or indirect expenses, losses
or damages, including all consequential damages, attorney's fees, and
litigation-related expenses and costs, incurred by Lessor which result from (1)
Lessee's breach of any provision of this Rider, (2) claims, actions, suits,
proceedings, judgements, fines or remedial orders (including orders to clean up
contamination at the Premises) which arise because of Lessee's breach of this
Rider, (3) Lessee's violation of environment laws or regulations, or (4)
Lessee's release of a toxic or hazardous substance onto the premises or into
the surrounding environment. This provision
<PAGE> 20
9. COPIES OF ENVIRONMENTAL CORRESPONDENCE. Lessee agrees to provide
Lessor with copies of all past and future correspondence to or from the
Washington Department of Ecology, the U.S. Environmental Protection Agency, and
any other government agency which has had or may have contact with Lessee
regarding environmental concerns pertaining to the premises.
10. NOTIFICATION OF SPILLS OR RELEASES. Lessee shall comply with all
notification requirements under the applicable federal, state and local
environmental statutes and regulations, including but not limited to the timely
notification of the appropriate government authorities of any spills or releases
of toxic or hazardous substances into the environment or onto the premises.
Lessee shall notify Lessor within 24 hours of discovery of any such spills or
releases, and shall provide copies of all correspondence and documents related
to such spills or releases to Lessor within seven days after receipt or
creation, as the case may be.
11. LESSOR'S REMEDY FOR BREACH OR VIOLATION. In the event Lessee
permits a release of a hazardous substance to occur at or near the premises, or
breaches any provision of this Rider, Lessor shall be entitled (1) to terminate
the lease agreement immediately, (2) to require Lessee to cease all operation
which pose a risk of releasing a hazardous substance into the environment, and
(3) to require Lessee to begin an immediate cleanup of any and all contamination
at the premises to the extent necessary to achieve full compliance with the
applicable environmental laws and regulations. Lessor shall be entitled to
obtain immediate injunctive relief from a court of competent jurisdiction to
enforce this provision. These remedies shall be in addition to, and not in
substitution for, any other remedies available to Lessor under applicable law.
12. ANNUAL DECLARATION OF COMPLIANCE. Within ten (10) days of receipt
of a written request by Lessor, Lessee shall provide to Lessor a declaration of
Lessee's compliance or non-compliance with the applicable environmental laws and
regulations and with the provisions of this Rider, in the form set forth in
Attachment No. 2. Lessor anticipates that it will request such a declaration
annually, approximately on the anniversary date of this Rider.
13. INSPECTION OF PREMISES. Lessee agrees to permit and cooperate with
any on-site inspections and testing requested by Lessor, including inspections
and testing conducted by consultants or engineers hired by Lessor to evaluate
Lessee's compliance with the applicable environmental requirements and the
provisions of this Rider. Lessor shall provide Lessee with 24 hours advance
notice of Lessor's intent to conduct such inspection or testing.
14. DESIGNATED REPRESENTATIVE RESPONSIBLE FOR COMPLIANCE: Dr. John H.
Priest whose work telephone number is 391-2650 and whose home telephone number
is 355-2621, shall be the Lessee's designated representative who shall be
primarily responsible (1) for the Lessee's compliance with the provision of
this Rider, (2) for handling contact with Lessor pertaining to environmental
compliance, and (3) for signing on behalf of Lessee the annual declaration of
compliance pursuant to Paragraph 12 above. Lessee shall promptly notify Lessor
of any changes in the identity or telephone numbers of the designated
representative.
Lessor: Lessee:
/s/ [illegible] /s/ [illegible]
- ------------------------------ ------------------------------
President
/s/ [illegible]
------------------------------
------------------------------
Date: Date:
------------------------- -------------------------
<PAGE> 21
(Attachment No. 1 to Hazardous Substances Rider)
DISCLOSURE BY LESSEE
Lessee makes the following disclosure pursuant to Paragraph 6 of the
Hazardous Substances Warranty and Agreement (attach additional page(s) if
necessary):
1. Release(s) of Hazardous Substances by Lessee:
(if none, initial here: ______)
2. Indication(s) of Contamination at Premises:
(if none, initial here: ______)
3. Lessee Violation(s) of Environmental Regulations:
(if none, initial here: ______)
4. Environmental Claims or Litigation Against Lessee:
(if none, initial here: ______)
Lessee: [SIG]
----------------------------------------------------
By: [SIG]
--------------------------------------------------------
BY:
--------------------------------------------------------
Date: 5/26/93
------------------------------------------------------
<PAGE> 22
(Attachment No. 2 to Hazardous Substances Rider)
DECLARATION OF COMPLIANCE
Dr. John H. Priest, as the designated representative of Lessee primarily
responsible for environmental compliance pursuant to Paragraph 12 of the
Hazardous Substances Warranty and Agreement dated June 1, 1993, hereby declares
and represents as follows on behalf of Lessee:
1. I have read, and am familiar with, Lessee's obligations and
representations as set forth in the Hazardous Substances Warranty and Agreement
applicable to Lessee.
2. I am not aware of, and do not believe there have been any violations
by Lessee of any of the provisions in the Hazardous Substances Warranty and
Agreement, or of any requirements imposed on Lessee by federal, state or local
environment laws and regulations.
3. I have no reason to believe, and do not believe, that any of the
representations in Paragraph ? of the Hazardous Substances Warranty and
Agreement are inaccurate as of the date indicated below.
4. Lessee has not stored, used or had present on or adjacent to the
premises any hazardous or toxic substances except those which have been
disclosed in writing to lessor.
5. Lessee has not released, disposed of, or permitted the release of,
any hazardous or toxic substances onto the premises or into the environment
surrounding the premises, except as has been disclosed in writing to Lessor.
Lessee: Polymer Technology, Int'l
By: Tony C. Kelly for
By:
------------------------
Title: President
---------------------
Date: 5/26/03
----------------------
<PAGE> 23
EXHIBIT "E"
TENANT IMPROVEMENTS
TO THAT CERTAIN LEASE BETWEEN ROWLEY ENTERPRISES, INC., LANDLORD AND POLYMER
TECHNOLOGY, INTL., TENANT, FOR PROPERTY AT 1871 NW GILMAN BLVD., ISSAQUAH,
WASHINGTON.
TENANT IMPROVEMENTS:
Landlord has contracted with Space Designs, Inc., (Robert Liebling, Architect),
to prepare certain Plans and Specifications dated as revised, May 7, 1993, and
initiated by both Landlord and Tenant ("Plans"). Tenant shall be responsible
for all interior tenant improvements, exterior windows, exterior wall treatment
and the vertical exterior of the building per the Plans.
Landlord shall make monthly draw payments to Tenant's contractor, (William &
Abbott) for the tenant improvements to the Premises per the Plans up to a
maximum amount of Three Hundred Thousand Dollars ($300,000) (Tenant Improvement
Allowance). Tenant shall assume and pay for all costs over and above the Tenant
Improvement Allowance. Landlord's payments to Tenant's contractor shall be made
under the terms of the fully executed Tenant Improvement Construction Contract
between Tenant and Contractor. Landlord must approve the Improvement
Construction Contract terms and conditions in writing. Payment shall be made
within ten (10) days of, A) receipt of invoice approved by Tenant, B) inspection
by the Landlord, and C) receipt of lien release from contractor assuring payment
of all labor, materials and applicable taxes.
Upon completion of construction drawings by Space Designs, Inc., Tenant and
Landlord shall submit for building permit for the remodel of the premises.
Cost for the permit and all work done on the drawings by Space Designs, Inc.,
shall be the responsibility of Landlord and are not included in the Tenant
Improvement Allowance.
LANDLORD IMPROVEMENTS:
Landlord shall be responsible for certain site improvements including, but not
limited to, waterlines, fire hydrants, utility connections, curbs, landscaping,
irrigation, sidewalks, parking lot and any additional site work required by the
City. Landlord agrees to post any bonds required by the City for completion or
maintenance of any site work at no cost to Tenant.
Landlord has made an application to the City of Issaquah for an LUC-A permit
which will list requirements by the City for the improvements, etc. If the
Landlord, in its sole discretion, determines the costs for site improvements
are unreasonable for this leasehold, Landlord may cancel this Agreement and
return to the Tenant any moneys paid by the Tenant to the Landlord as payment
toward rent or deposits for this leasehold.
Landlord may make changes to the westerly parking and curbs and to the
landscaping subject to City approval.
Landlord agrees to assist Tenant in obtaining the Certificate of occupancy ("C
of O") and will use Landlord's best efforts to complete all items the City
requires for site improvements prior to the commencement date of the Lease. If
the reason for the delay in issuing the C of O is that Landlord has not
completed items to the satisfaction of the City, then Tenant would be allowed
to remain in its current space, at current rent rates, until: 1) those items
have been completed, 2) the C of O has been issued, and 3) an additional two (2)
weeks relocation period has passed.
<PAGE> 24
EXHIBIT "F"
COMMENCEMENT DATE
In the event the building permit is not issued by June 15, the commencement
date of this Lease shall be extended by the number of days from June 15 until
the actual issuance of the building permit. Tenant will continue to pay rent on
premises currently occupied by Tenant until the commencement date of this Lease.
Tenant will not pay rent on this Lease space until the commencement date of this
Lease. The lease on the space currently occupied will terminate on the
commencement date of this Lease. The expiration date of this Lease will be
September 14, 1998 regardless of the final commencement date.
In the event the building permit has not been issued within three (3) months of
the date of this Lease, Tenant may terminate this lease by written notice to the
Landlord. In the event of such termination, Landlord shall return any monies
previously deposited by Tenant and the Parties shall have no further rights or
obligations under this Lease.
<PAGE> 25
EXHIBIT "C"
OPTION TO EXTEND
Landlord grants to Tenant an Option to Extend for five additional one (1) year
terms. Tenant shall notify Landlord in writing no later than ninety (90) days
before the end of the initial Lease term, or extended term, of Tenants
intention to exercise Tenants Option to Extend. Rent shall be increased every
year of the Extended Term by the percent of change in the Index from the
previous year with a maximum increase of 5%.
<PAGE> 1
EXHIBIT 10.4
BASIC LEASE INFORMATION
Lease Date: August 22, 1988
Landlord: Issaquah #1 Limited Partnership, a Texas limited partnership
Address of Landlord: 300 120th Avenue N.E.
Building 1, Suite 120
Bellevue, Washington 98005
Tenant: BAXTER HEALTHCARE CORPORATION, a Delaware corporation
Premises: I-90 Lake Place
2005 N.W. Sammamish Road
Building B, Suite 107
Issaquah, Washington 98027
Paragraph 1
"Premises" approximately 44,199 square feet in Building B of approximately
55,225 square feet (computed from measurements to the exterior of outside walls
of the building and to the center of interior walls), such premises being shown
and outlined in red on the plan attached hereto as Exhibit A, and being part of
the real property described in Exhibit B attached hereto.
Paragraph 1
Lease Term: Commencing on the "Commencement Date" as hereinafter defined and
ending 60 months thereafter except that in the event the Commencement Date is a
date other than the first day of a calendar month, said term shall extend for
said number of months in addition to the remainder of the calendar month
following the Commencement Date.
Paragraph 1
Scheduled Term Commencement Date: April 1, 1989
Paragraph 2
Monthly Base Rent: $40,663.00
Paragraph 2B
Security Deposit: $0.00
Paragraph 4A
Tenant's Initial Monthly Escrow Payment for Taxes and Other Charges: $ 2,558.00
Paragraph 7
Tenant's Initial Monthly Common Area Maintenance Charge: $ 1,326.00
Paragraph 13B
Tenant's Initial Monthly Insurance Escrow Payment: $ 442.00
Tenant's Initial Monthly Payment Total: $42,431.00
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to any of the Basic Lease
Information shall mean the respective information herein above set forth and
shall be construed to incorporate all of the terms provided under the
particular Lease paragraph pertaining to such information. In the event of any
conflict between any Basic Lease Information and the Lease, the former shall
control.
<PAGE> 2
LEASE AGREEMENT
Issaquah #1 Limited Partnership,
THIS LEASE AGREEMENT, made and entered into by and between a Texas limited
partnership hereinafter referred to as "Landlord", and Baxter Healthcare
Corporation, a Delaware corporation , hereinafter referred to as
"Tenant":
WITNESSETH
1. PREMISES AND TERM.
A. In consideration of the obligation of Tenant to pay rent as herein
provided, and in consideration of the other terms, provisions and covenants
hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby
takes and leases from Landlord those certain Premises as outlined in red on
Exhibit "A" attached hereto (hereinafter referred to as the "Premises") and
incorporated herein by reference, together with all rights, privileges,
easements, appurtenances, and amenities belonging to or in any way
pertaining to the Premises and together with the buildings and other
improvements situated or to be situated upon land described in Exhibit "B"
attached hereto.
B. TO HAVE AND TO HOLD the same for a term commencing on the
"Commencement Date", as hereinafter declined, and ending thereafter as
specified in the Basic Lease Information, attached hereto, (the "Lease
Term"), provided, however, that, in the event the "Commencement Date" is a
date other than the first day of a calendar month, said term shall extend
for said number of months in addition to the remainder of the calendar
month following the "Commencement Date".
C. The "Commencement Date" shall be the Scheduled Term Commencement Date
shown in the Basic Lease Information, attached hereto and incorporated
herein by reference or the date upon which the Premises shall have been
substantially completed in accordance with the plans and specifications
described in Exhibit "C" and "C-1" excluding the installation of Tenant lab
fixtures and equipment attached hereto and incorporated herein by
reference, as evidenced by the Landlord's Architect's Certificate of
Substantial Completion, whichever is earlier. If the premises shall not
have been substantially completed as aforesaid by the Scheduled Term
Commencement Date, Tenant's obligations to pay rent and its other
obligations for payment under this Lease shall commence on the date the
Premises are substantially completed as aforesaid, and Landlord shall not
be liable to Tenant for any loss or damage resulting from such delay.
Landlord shall notify Tenant in writing as soon as Landlord deems the
Premises to be substantially completed and ready for occupancy. In the
event that the Premises have not in fact been substantially completed as
aforesaid, Tenant shall notify Landlord of its objections. Landlord shall
have a reasonable time after delivery of such notice in which to take such
corrective action as may be necessary, and shall notify Tenant in writing
as soon as it deems such corrective action has been completed so that the
Premises are substantially completed and ready for occupancy. The taking of
possession by Tenant shall be deemed conclusively to establish that the
Premises have been substantially completed in accordance with the plans and
specifications and that the Premises are in good and satisfactory
condition, as of when possession was so taken. Tenant acknowledges that no
representations as to the repair of the Premises have been made by
Landlord, unless such are expressly set forth in this Lease. After the
Commencement Date, Tenant shall, upon demand, execute and deliver to
Landlord a letter of acceptance of delivery of the Premises, specifying the
Commencement Date and the rent commencement date, in recordable form. In
the event of any dispute as to the substantial completion or work performed
or required to be performed by Landlord, the certificate of Landlord's
architect or general contractor shall be conclusive. See additional
provisions in Paragraphs 31, 32, and 33.
2. BASE RENT AND SECURITY DEPOSIT.
A. Tenant agrees to pay to Landlord Base Rent for the premises, in
advance, without demand, deduction or set off, for the entire Lease Term
hereof at the rate specified in the Basic Lease Information, payable in
monthly installments. One such monthly installment shall be due and payable
on the date hereof and a like monthly installment shall be due and payable
on or before the first day of each calendar month succeeding the
Commencement Date recited above during the Lease Term, except that the
rental payment for any fractional calendar month at the commencement or end
of the Lease period shall be prorated on the basis of a 30-day month.
Tenant and Landlord hereby agree that in lieu of Tenant depositing
$43,967.00 as security deposit with Landlord at the beginning of this Lease
Agreement, Tenant will restore the premises to good condition, ordinary
wear and tear excepted.
3. USE. The Premises shall be used only for the purpose of general office,
receiving, storing, shipping, assembly, light manufacturing, and selling
(other than retail) products, materials and merchandise made and/or
distributed by Tenant and for such other lawful purposes as may be
incidental thereto. Outside storage, including without limitation, trucks
and other vehicles, is prohibited without Landlord's prior written consent.
Tenant shall at its own cost and expense obtain any and all licenses and
permits necessary for its use of the Premises. Tenant shall comply with all
governmental laws, ordinances and regulations applicable to the use of the
Premises, and shall promptly comply with all governmental orders and
directives including but not limited to those regarding the correction,
prevention and abatement of nuisances in or upon, or connected with, the
Premises, all at Tenant's sole expense. Tenant shall not permit any
objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the Premises, nor take any other action which would constitute
a nuisance or would disturb or endanger any other tenants of the building
in which the Premises are situated or unreasonably interfere with their use
of their respective Premises. In addition to any other remedies Landlord
may have for a breach by Tenant of the terms of this Section 3, Landlord
shall have the right to have Tenant evicted from the Premises. Without
Landlord's prior written consent, Tenant shall not
<PAGE> 3
receive, store or otherwise handle any product, material or merchandise
which is explosive or highly inflammable. Tenant will not permit the
Premises to be used for any purpose or in any manner (including without
limitation any method of storage) which would render the insurance thereon
void or the insurance risk more hazardous or cause the State Board of
Insurance or other insurance authority to disallow any sprinkler credits.
In the event Tenant's use of Premises shall result in an increase in
insurance premiums, Tenant shall be solely responsible for said increase.
4. TAXES AND OTHER CHARGES.
A. Tenant agrees to pay upon presentation of appropriate tax bill its
proportionate share of any and all real and personal property taxes,
regular and special assessments, license fees and other charges of any
kind and nature whatsoever, payable by Landlord as a result of any public
or quasi-public authority, private party, or owner's association levy,
assessment or imposition against, or arising out of Landlord's ownership
of or interest in, the real estate described in Exhibit "B" attached
hereto, together with the building and the grounds, parking areas,
driveways, roads, and alleys around the building in which the Premises are
located, or any part thereof (hereinafter collectively referred to as the
"Charges"). Tenant's proportionate share of the Charges shall be computed
by multiplying the Charges by a fraction, the numerator of which shall
be the number of gross leasable square feet of floor space in the Premises
and the denominator of which shall be the total applicable gross leasable
square footage or such other equitable apportionment as may be adopted.
B. If Tenant should fail to pay any charges required to be paid by Tenant
hereunder, in addition to any other remedies provided herein, Landlord
may, if it so elects, pay such or taxes, assessments, license fees and
other charges. Any sums so paid by Landlord shall be deemed to be so much
additional rental owing by Tenant to Landlord and due and payable upon
demand as additional rental plus interest at the rate of one percent (1%)
over prime rate at the Seafirst Bank per annum from the date of payment by
Landlord until repaid by Tenant.
C. (1) If at any time during the Lease Term, the present method of
taxation shall be changed so that in lieu of the whole or any part of any
taxes, assessments, fees or charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents
received therefrom and/or a franchise tax, assessment, levy or charge
measured by or based, in whole or in part, upon such rents or the present
or any future building or buildings, then all such taxes, assessments,
fees or charges, or the part thereof so measured or based, shall be deemed
to be included within the term "Charges" for the purposes hereof.
(2) Tenant may, alone or along with Landlord and other tenants of the
building containing the Premises, at its sole cost and expense, in its or
their own name(s) dispute and contest any Charges by appropriate
proceedings diligently conducted in good faith, but only after Tenant
Landlord and all other tenants, if any, joining with Tenant in such
contest have deposited with Landlord the amount so contested and unpaid or
their proportionate shares thereof as the case may be, which shall be held
by Landlord without obligation for interest until the termination of the
proceedings, at which time the amount(s) deposited shall be applied by
Landlord toward the payment of the items held valid (plus any court costs,
interest, penalities and other liabilities associated with the
proceedings), and Tenant's share of any excess shall be returned to
Tenant. Tenant further agrees to pay to Landlord upon demand Tenant's
share (as among all Tenants who participated in the contest) of all court
costs, interest, penalities and other liabilities relating to such
proceedings. Tenant hereby indemnifies and agrees to hold harmless the
Landlord from and against any cost, damage or expense (including
attorney's fees) in connection with any such proceedings.
(3) Any payment to be made pursuant to this Paragraph 4 with respect to
the calendar year in which this Lease commences or terminates shall bear
the same ratio to the payment which would be required to be made for the
full calendar year as that part of such calendar year covered by the Lease
Term bears to a full calendar year.
(D) Tenant shall be liable for all taxes levied against personal property
and trade fixtures placed by Tenant in the Premises. If any such taxes are
levied against Landlord or Landlord's property and if Landlord elects to
pay the same or if the assessed value of Landlord's property is increased
by inclusion of personal property and trade fixtures placed by Tenant in
the Premises and Landlord elects to pay the taxes based on such increase,
Tenant shall pay to Landlord upon demand that part of such taxes for which
Tenant is primarily liable hereunder.
5. TENANT'S MAINTENANCE.
A. After reasonable notice from Landlord, Tenant shall at its own cost and
expense keep and maintain all parts of the Premises (except those for
which Landlord is expressly responsible under the terms of this Lease) in
good condition, promptly making all necessary repair and replacements,
including but not limited to, windows, glass and plate glass, doors, any
special office entry, interior walls and finish work, floor and floor
covering, downspouts, gutters, heating and air conditioning systems, dock
boards, truck doors, dock bumpers, plumbing work and fixtures, termite and
pest extermination, regular removal of trash and debris, keeping the
whole of the Premises in a clean and sanitary condition. Tenant shall not
be obligated to repair any damage caused by fire, tornado, or other
casualty covered by the insurance to be maintained by Landlord pursuant to
subparagraph 13(A) below, except that Tenant shall be obligated to repair
all wind damage to glass except with respect to tornado or hurricane
damage. Landlord shall repair and pay for damage caused by negligence of
Landlord or Landlord's employees.
B. Tenant shall not damage any demising wall or disturb the integrity and
support provided by any demising wall and shall, at its sole cost and
expense, promptly repair any damage or injury to any demising wall caused
by Tenant or it employees, agents, licensees or invitees.
C. Tenant and its employees, customers and licensees shall have the right
to use the parking areas, if any, subject to rights of ingress and egress
of other tenants. Landlord shall not be responsible for enforcing Tenant's
exclusive parking rights against any third parties. If Tenant or any other
particular tenant of the building can be clearly identified as being
responsible for obstructions or stoppage of
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a common sanitary sewage line, then Tenant, if Tenant is responsible, or such
other responsible Tenant, shall pay the entire cost thereof, upon demand, as
additional rent.
D. Tenant shall, at its own cost and expense, enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contract or for
servicing all heating and air conditioning systems and equipment within the
Premises.
6. LANDLORD'S REPAIRS. After reasonable notice from Tenant, Landlord shall
repair the roof, exterior walls, floors and foundations, (normal settling
excepted). Tenant shall repair and pay for any damage to such items to be
maintained by Landlord caused by any act, omission or negligence of Tenant, or
Tenant's employees, agents, licensees or invitees, or caused by Tenant's default
hereunder. The term "walls" as used herein shall not include windows, glass or
plate glass, doors, special store fronts or office entries. Tenant shall
promptly give Landlord written notice of defect or need for repairs, after which
Landlord shall have a reasonable opportunity and time to repair same or cure
such defect. Landlord's liability with respect to any defects, repairs or
maintenance for which Landlord is responsible under any of the provisions of
this Lease shall be limited to the cost of such repairs or maintenance or the
curing of such defect.
7. MONTHLY COMMON AREA MAINTENANCE CHARGE. Tenant agrees to pay as an
additional charge each month for its proportionate share of the cost of
operation and maintenance of the Common Area which shall be defined from time to
time by Landlord. Common Area costs which may be incurred by Landlord at its
discretion, shall include, but not limited to those costs incurred for lighting,
water, sewage, trash removal, exterior painting, exterior window cleaning,
sweeping, management, accounting, policing, inspecting, sewer lines, plumbing,
paving, landscape maintenance, plant material replacement and other like
charges, and Landlord's fees for supervision and administration of the items set
forth in this paragraph, currently at 10%. Landlord shall maintain the Common
Areas in reasonably good condition and repair. The proportionate share to be
paid by Tenant of the cost of operation and maintenance of the Common Area shall
be computed on the ratio that the gross leaseable square feet of the Premises
bears to the total applicable gross leaseable square footage or such other
equitable apportionment as may be adopted. Landlord shall make monthly or other
periodic charges based upon the estimated annual cost of operation and
maintenance of the Common Area, payable in advance but subject to adjustment
after the end of the year on the basis of the actual cost for such year. Any
such periodic charges shall be due and payable upon delivery of notice thereof.
The initial Common Area Maintenance Charge, subject to adjustment as provided
herein, shall be due and payable, as additional rent, at the same time and in
the same manner as the time and manner of the payment of monthly rental as
provided herein. The amount of the initial Common Maintenance Charge shall be as
specified in the Basic Lease Information.
8. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises (including but not limited to roof and wall
penetrations) which cost in excess of $10,000.00 per project without the prior
written consent of Landlord which shall not be reasonably withheld. Tenant may,
without the consent of Landlord, but at its own cost and expense and in a good
workmanlike manner erect such shelves, bins, machinery and trade fixtures as it
may deem advisable, without altering the basic character of the building or
improvements and without overloading or damaging such building or improvements,
and in each case complying with all applicable governmental laws, ordinances,
regulations and other requirements. All alterations, additions, improvements and
partitions erected by Tenant shall be and remain the property of Tenant during
the Term of this Lease and Tenant shall, unless Landlord otherwise elects as
hereinafter provided, remove all alterations, additions, improvements and
partitions erected by Tenant and restore the Premises to their original
condition by the date of termination of this Lease or upon earlier vacating of
the Premises, provided, however, that if Landlord so elects prior to termination
of this Lease or upon earlier vacating of the Premises, such alterations,
additions, improvements and partitions shall become the property of Landlord as
of the date of termination of this Lease or upon earlier vacating of the
Premises and shall be delivered up to the Landlord with the Premises. All
shelves, bins, machinery and trade fixtures installed by Tenant may be removed
by Tenant prior to the termination of this Lease if Tenant so elects, and shall
be removed by the date of termination of this Lease or upon earlier vacating of
the Premises if required by Landlord; upon any such removal Tenant shall restore
the Premises to their original condition. All such removals and restoration
shall be accomplished in good workmanlike manner so as not to damage the primary
structure of structural qualities of the buildings and other improvements
situated on the Premises.
9. SIGNS. Tenant shall not install signs upon the Premises without Landlord's
prior written approval, and any such signage shall be subject to any applicable
governmental laws, ordinances, regulations and other requirements. Tenant shall
remove all such signs by the termination of this Lease. Such installations and
removals shall be made in such a manner as to avoid injury or defacement of the
building and other improvements, and Tenant shall repair any injury or
defacement, including without limitation discoloration, caused by such
installation and/or removal.
10. INSPECTION.
A. Landlord and Landlord's agents and representatives shall have the right
provided Landlord shall give Tenant prior notice and shall be accompanied by
employee of Tenant to enter and inspect the Premises at any reasonable time
during business hours, for the purpose of ascertaining the condition of the
Premises or in order to make such repairs as may be required or permitted to be
made by Landlord under the terms of this Lease. During the period that is six
(6) months prior to the end of the Term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the Premises at any reasonable
time during business hours for the purpose of showing the Premises and shall
have the right to erect on the Premises a suitable sign indicating the Premises
are available.
B. Tenant shall give written notice to Landlord at least thirty (30) days prior
to vacating the Premises and shall arrange to meet with Landlord for a joint
inspection of the Premises prior to vacating. In the event of Tenant's failure
to give such notice or arrange such joint inspection, Landlord's inspection at
or after Tenant's vacating the Premises shall be conclusively deemed correct for
purposes of determining Tenant's responsibility for repairs and restoration. It
shall be the responsibility of Tenant, prior to vacating the Premises, to clean
and repair the Premises and restore them to the condition in which they were in
upon delivery of the Premises to Tenant at the Commencement Date, reasonable
wear and tear excepted. Cleaning, repair and restoration shall include, but not
be limited to, removal of all trash, cleaning of walls, where necessary, of
carpet and flooring broom clean, replacement of light bulbs and tubes, cleaning
and wiping down of all fixtures, maintenance and repair of all heating and air
conditioning systems, and all similar work, which shall be done at the latest
practical date prior to vacation of the Premises.
11. UTILITIES. Landlord agrees to provide at its cost water, electricity and gas
service connections into the Premises; but Tenant shall pay for all water, gas,
heat, light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or from the Premises, together with any taxes, penalties,
surcharges or the
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like pertaining thereto and any maintenance charges for utilities and shall
furnish all electric light bulbs and tubes. If any such services are not
separately metered to Tenant, Tenant shall pay a reasonable proportion as
determined by Landlord of all charges jointly metered with other Premises.
Landlord shall in no event be liable for any interruption or failure of
utility services on the Premises, unless such interruption results from
Landlord's intentional wrongful act and Landlord's negligence in its
efforts to restore.
12. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not have the right, voluntarily or involuntarily, to
assign, convey, transfer, mortgage or sublet the whole or any part of the
Premises under this Lease without the prior written consent of Landlord
which shall not be unreasonably withheld. In the event Tenant applies to
Landlord for consent to assign, convey, transfer or sublet the Premises,
Landlord may condition such consent upon the right to receive one-half of
the profit, if any, which Tenant may realize on account of such assignment,
conveyance, transfer or sublease of the Premises. For purposes of this
paragraph, "profit" shall mean any sum which the assignee, sublessee or
transferree is required to pay, or which is credited to Tenant as rent in
excess of the Rents required to be paid by Tenant to Landlord under this
Lease. Landlord also reserves the right to recapture the Premises or
applicable portion thereof in lieu of giving its consent by notice given to
Tenant within twenty (20) days after receipt of Tenant's written request
for assignment or subletting. Such recapture shall terminate this Lease as
to the applicable space effective on the prospective date of assignment or
subletting, which shall be the last day of a calendar month and not earlier
than sixty (60) days after receipt of Tenant's request hereunder. In the
event that Landlord shall not elect to recapture and shall thereafter give
its consent, Tenant shall pay Landlord a reasonable fee, not to exceed
$200.00 to reimburse Landlord for processing costs incurred in connection
with such consent.
B. Notwithstanding any permitted assignment or subletting, Tenant shall
at all times remain directly, primarily and fully responsible and liable
for the payment of the rent herein specified and for compliance with all of
its other obligations under the terms, provisions and covenants of this
Lease. Upon the occurrence of an "event of default" as hereinafter defined,
if the Premises or any part thereof are then assigned or sublet, Landlord,
in addition to any other remedies herein provided, or provided by law, may
at its option collect directly from such assignee or subtenant all rents
becoming due to Tenant under such assignment, transfer or sublease and
apply such rent against any sums due to Landlord from Tenant hereunder, and
no such collection shall be construed to constitute a novation or a release
of Tenant from the further performance of Tenant's obligations hereunder.
13. INSURANCE, FIRE AND CASUALTY DAMAGE.
A. Landlord agrees to maintain insurance covering the building of which
the Premises are a part in an amount not less than eighty percent (80%) (or
such greater percentage as may be necessary to comply with the provisions
of any co-insurance clauses of the policy) of the "replacement cost"
thereof as such term is defined in the Replacement Cost Endorsement to be
attached thereto, insuring against the perils of Fire, Lightning, Extended
coverage, Vandalism and Malicious Mischief, extended by Special Extended
coverage Endorsement to insure against all other Risks of Direct Physical
Loss, such coverages and endorsements to be as defined, provided and
limited in the standard bureau forms prescribed by the insurance regulatory
authority for the State in which the Premises are situated for use by
insurance companies admitted in such state for the writing of such
insurance on risks located within such state. Subject to the provisions of
subparagraph 13, C,D,E below, such insurance shall be for the sole benefit
of Landlord and under its sole control. In the event the insurance policy
shall contain a deductible, Tenant shall be liable for and pay any
deductible withheld from insurance proceeds of payable under the terms of
the insurance policy in the event of a claim or insured loss thereunder.
B. Tenant agrees to pay its proportionate share of Landlord's cost of
carrying fire and extended coverage insurance ("Insurance") on the
building. During each month of the term of this Lease, Tenant shall make a
monthly escrow deposit with Landlord equal to one-twelfth of its
proportionate share of the Insurance on the buildings and grounds which
will be due and payable for that particular year. Tenant authorizes
Landlord to use the funds deposited by him with Landlord under this
paragraph to pay the cost of such Insurance. Each Insurance Escrow payment
shall be due and payable, as additional rent, at the same time and manner
of the payment of the monthly rental as provided herein. The initial share
of the estimated Insurance for the year in question, and the monthly
Insurance Escrow Payment is subject to increase or decrease as determined
by Landlord to reflect an accurate monthly escrow of Tenant's estimated
proportionate share of this Insurance. The Insurance Escrow Payment account
of Tenant shall be reconciled annually. If the Tenant's total Insurance
Escrow Payments are less than Tenant's actual pro rata share of the
Insurance, Tenant shall pay to Landlord upon demand the difference; if the
total Insurance Escrow Payments of Tenant are more than Tenant's actual pro
rata share of the Insurance, Landlord shall promptly refund the balance of
such excess to Tenant after first crediting the excess to the next monthly
payment by Tenant for its proportionate share of Taxes and Insurance.
Tenant's cost of insurance shall be computed by multiplying the cost of
Insurance by a fraction, the numerator of which shall be the number of
gross leaseable square feet of floor space in the Premises and the
denominator of which shall be the total applicable gross leasable square
footage. The amount of the initial monthly Insurance Escrow Payment will be
as specified in the Basic Lease Information.
C. If the building, of which the Premises are a part, should be damaged
or destroyed by fire, tornado or other casualty, Tenant shall give prompt
written notice thereof to Landlord.
D. If the building, of which the Premises are a part, should be totally
destroyed by fire, tornado or other casualty, or if it should be so damaged
thereby that rebuilding or repairs cannot in Landlord's estimation be
completed within two hundred (200) days after the date of damage, this
Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective upon the date of the occurrence of such
damage. Landlord shall give notice to Tenant in writing of its
determination to terminate this Lease within ninety (90) days following the
date of the occurrence of such damage.
E. If the building, of which the Premises are a part, should be damaged
by any peril covered by the Insurance to be provided by Landlord under
subparagraph 13(A) above, but only to such extent that rebuilding or
repairs can in Landlord's estimation be completed within two hundred (200)
days after the date of such damage, this Lease shall not terminate, and
Landlord shall at its sole cost and expense thereupon proceed with
reasonable diligence to rebuild and repair such building to substantially
the condition in which it existed prior to such damage, except that
Landlord shall not be required to rebuild, repair or replace any part of
the partition, fixtures, additions and other improvements which may have
been placed in, or about the Premises by Tenant. If the Premises are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced
to such extent as may be fair and reasonable under all of the
circumstances. In the event that Landlord shall fail to complete such
repairs and rebuilding within two hundred (200) days after the date
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of such damage, Tenant may at its option terminate this Lease by delivering
written notice of termination to Landlord as Tenant's exclusive remedy,
whereupon all rights and obligations hereunder shall cease and terminate.
F. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering
the Premises requires that the Insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease
by delivering written notice of termination to Tenant within fifteen (15)
days after such requirement is made by any such holder, whereupon all
rights and obligations hereunder shall cease and terminate.
G. Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or any other perils insured through
or under them by way of subrogation or otherwise for any loss or damage to
property caused by fire or any other perils insured in policies of
Insurance covering such property, even if such loss or damage shall have
been caused by the fault or negligence of the other party, or anyone for
whom such party may be responsible; provided, however, that this release
shall be applicable and in force and effect only with respect to loss or
damage occurring during such times as the releasor's policies shall
contain a clause or endorsement to the effect that any such release shall
not adversely affect or impair said policies or prejudice the right of the
releasor to recover thereunder and then only to the extent of the
Insurance proceeds payable under such policies. Each of the Landlord and
Tenant agrees that it will request its Insurance carriers to include in
its policies such a clause or endorsement. If extra cost shall be charged
therefor, each party shall advise the other thereof and of the amount of
the extra cost, and the other party, at its election, may pay the same,
but shall not be obligated to do so.
14. LIABILITY. Landlord shall not be liable to Tenant or Tenant's employees,
agents, servants, guests, invitees or visitors, or to any other person
whomsoever, for any injury to person or damage to property on or about the
Premises, resulting from and/or caused in part or whole by the negligence
or misconduct of Tenant, its employees, agents, servants, guests, invitees
or visitors, or of any other person entering upon the Premises, or caused
by the building and improvements located on the Premises becoming out of
repair, or caused by leakage of gas, oil, water or steam or by electricity
emanating from the Premises, or due to any cause whatsoever, and Tenant
hereby covenants and agrees that it will at all times indemnify and hold
safe and harmless the property, the Landlord (including without limitation
the trustee and beneficiaries if Landlord is a trust), Landlord's
employees, agents, servants, guests, invitees, and visitors from any loss,
liability, claims, suits, costs, expenses, including without limitation
attorney's fees and damages, both real and alleged, arising out of any
such damage or injury; except injury to persons or damage to property the
sole cause of which is the negligence of Landlord or the failure of
Landlord to repair any part of the Premises which Landlord is obligated to
repair and maintain hereunder within a reasonable time after the receipt
of which Landlord is obligated to repair and maintain hereunder within a
reasonable time after the receipt of written notice from Tenant of needed
repairs. Tenant shall procure and maintain throughout the term of this
Lease a policy or policies of Insurance, at its sole cost and expense,
insuring both Landlord and Tenant against all claims, demands or actions
arising out of or in connection with: (i) the Premises; (ii) the
condition of the Premises; (iii) Tenant's operations in and maintenance
and use of the Premises; and (iv) Tenant's liability assumed under this
Lease, the limits of such policy or policies to be in the amount of not
less than $1,000,000 per occurrence in respect of injury to persons
(including death) and in respect of property damage or destruction,
including loss of use thereof. All such policies shall be procured by
Tenant from responsible Insurance companies authorized to do business in
the State of Washington satisfactory to Landlord. Certificates of
Insurance shall be delivered to Landlord prior to the commencement date of
this Lease. Not less that fifteen (15) days prior to the expiration date
of such policies, Certificates of Insurance certified copies of the
renewals thereof shall be delivered to Landlord. Such policies shall
further provide that not less than thirty (30) days written notice shall
be given to Landlord before such policy may be cancelled or changed to
reduce insurance provided thereby.
15. CONDEMNATION.
A. If the whole or any substantial part of the Premises should be taken
for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchases in lieu
thereof and the taking would prevent or materially interfere with the use
of the Premises for the purpose for which they are being used, this lease
shall terminate and the rent shall be abated during the unexpired portion
of this Lease, effective when the physical taking of said Premises shall
occur.
B. If part of the Premises shall be taken for any public or quasi-public
use under any governmental law, ordinance or regulation, or by right of
eminent domain, or by private purchase in lieu thereof, and this Lease is
not terminated as provided in the subparagraph above, this Lease shall not
terminate but the rent payable hereunder during the unexpired portion of
this Lease shall be reduced to such extent as may be fair and reasonable
under all of the circumstances.
C. In the event of any such taking or private purchase on lieu thereof,
Landlord shall be entitled to receive the entire award. Tenant shall be
entitled to make a claim in any condemnation proceedings which does not
reduce the amount of Landlord's award, for the value of any furniture,
furnishings and fixtures installed by and at the sole expense of Tenant.
16. HOLDING OVER. Tenant will, at the termination of this Lease by lapse of
time or otherwise, yield up immediate possession to Landlord. If Landlord
agrees in writing that Tenant may hold over after the expiration or
termination of this Lease, unless the parties hereto otherwise agree in
writing on the terms of such holding over, the hold over tenancy shall be
subject to termination by Landlord at any time upon not less than five (5)
days advance written notice, or by Tenant at any time upon not less than
thirty (30) days advance written notice, and all of the other terms and
provisions of this Lease shall be applicable during that period, except
that Tenant shall pay Landlord from time to time upon demand, as rental
for the period of any hold over, an amount equal to one and one-half
(1-1/2) the Base Rent in effect on the termination date, plus all
additional rental as defined herein, computed on a daily basis for each
day of the hold over period. No holding over by Tenant, whether with or
without consent to Landlord, shall operate to extend this Lease except as
otherwise expressly provided. The preceding provisions of this paragraph
16 shall not be construed as Landlord's consent for Tenant to hold over.
17. QUIET ENJOYMENT. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the Premises, good fee or leasehold
title to the Premises, free and clear of all liens and encumbrances,
excepting only the lien for current taxes not yet due, such mortgage or
mortgages as are permitted by the
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terms of this Lease, zoning ordinances and other building and fire
ordinances and governmental regulations relating to the use of such
property, and easements, restrictions and other conditions of record.
Landlord represents and warrants that it has full right and authority to
enter into this Lease and that Tenant, upon paying the rental herein set
forth and performing its other covenants and agreements herein set forth,
shall peaceably and quietly have, hold and enjoy the Premises for the term
hereof without hindrance or molestation from Landlord subject to the terms
and provisions of this Lease.
18. EVENTS OF DEFAULT. The following events shall be deemed to be events of
default by Tenant under this Lease:
A. Tenant shall fail to pay any installment of the rent herein reserved
when due, or any payment with respect to taxes hereunder when due, or any
other payment or reimbursement to Landlord required herein when due, and
such failure shall continue for a period of ten (10) days from the date
such payment was due.
B. Tenant shall become insolvent, or shall make transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors.
C. Tenant shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of
the United States or any State thereof; or Tenant shall be adjudged
bankrupt or insolvent in proceedings filed against Tenant thereunder.
D. A receiver or trustee shall be appointed for all or substantially all
of the assets of Tenant.
E. Tenant shall desert of the Premises.
F. Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than the foregoing in this Paragraph 18), and shall not
cure such failure within twenty (20) days after written notice thereof to
Tenant.
19. REMEDIES. Upon the occurrence of any such events of default described in
Paragraph 18 hereof, Landlord shall have the option to pursue any one or
more of the following remedies without any notice or demand whatsoever.
A. Landlord may accelerate all rent payments due hereunder which shall
then become immediately due and payable.
B. Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord
may, without prejudice to any other remedy which it may have for possession
or arrearages in rent, enter upon and take possession of the Premises and
expel or remove Tenant and any other person who may be occupying such
Premises or any part thereof, without being liable for prosecution or any
claim of damages therefor, and Tenant agrees to pay to Landlord on demand
the amount of all loss and damage which Landlord may suffer by reason of
such termination, whether through inability to relet the Premises on
satisfactory terms or otherwise.
C. Enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying such Premises or any part
thereof, without being liable for prosecution or any claim for damages
therefor, and relet the Premises for such terms ending before, on or after
the expiration date of the Lease Term, at such rentals and upon such other
conditions (including concessions and prior occupancy periods) as Landlord
in its sole discretion may determine, and receive the rent therefor; and
Tenant agrees to pay to the Landlord on demand any deficiency that may
arise by reason of such reletting. Landlord shall have no obligation to
relet the Premises or any part thereof and shall not be liable for refusal
or failure to relet or in the event of reletting for refusal or failure to
collect any rent due upon such reletting. In the event Landlord is
successful in reletting the Premises at a rental in excess of that agreed
to be paid by Tenant pursuant to the terms of this Lease, Landlord and
Tenant each mutually agree that Tenant shall not be entitled, under any
circumstances, to such excess rental, and Tenant does hereby specifically
waive any claim to such excess rental.
D. Enter upon the Premises, without being liable for prosecution or
any claim for damages therefor, and do whatever Tenant is obligated to do
under the terms of this Lease; and Tenant agrees to reimburse Landlord on
demand for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease, and Tenant further
agrees that Landlord shall not be liable for any damages resulting to the
Tenant from such action, unless caused by the negligence of Landlord.
E. Whether or not Landlord retakes possession or relets the Premises,
Landlord shall have the right to recover unpaid rent and all damages caused
by Tenant's default, including attorney's fees. Damage shall include,
without limitation; all rentals lost, all legal expenses and other related
costs incurred by Landlord following Tenant's default, all costs incurred
by Landlord in restoring the Premises to good order and condition, or in
remodeling, renovating or otherwise preparing the Premises for reletting,
all costs (including without limitation any brokerage commissions and the
value of Landlord's time) incurred by Landlord, plus interest thereon from
the date of expenditure until fully repaid at the rate of eighteen percent
(18%) per annum.
F. In the event Tenant fails to pay any installment of rent, additional
rent or other charges hereunder as and when such installment is due, to
help defray the additional cost to Landlord for processing such late
payments Tenant shall pay to Landlord on demand a late charge in an amount
equal to five percent (5%) of such installment; and the failure to pay
such amount within ten (10) days after demand therefor shall be an event
of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at
law and shall not be construed as liquidated damages or as limiting
Landlord's remedies in any manner.
G. Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided
by law, such remedies being cumulative and non-exclusive, nor shall
pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to Landlord hereunder or of any damages accruing to Landlord
by reason of the violation of any of the terms, provisions and covenants
herein contained. No act or thing done by the Landlord or its agents during
the Lease Term hereby granted shall be deemed a termination of this Lease
or an acceptance of the surrender of the Premises, and no agreement to
terminate this Lease or accept a surrender of said Premises shall be valid
unless in writing signed by Landlord. No waiver by Landlord of any
violation or breach of any of the terms, provisions and covenants herein
contained shall be deemed or construed to constitute a waiver of any other
violation or breach of any of the terms, provisions and covenants herein
contained. Landlord's acceptance of the payment of rental or other
payments hereunder after the occurrence of an event of default shall not
be construed as a
6
<PAGE> 8
waiver of such default, unless Landlord so notifies Tenant in writing.
Forbearance by Landlord to enforce one or more of the remedies herein
provided upon an event of default shall not be deemed or construed to
constitute a waiver of such default or of Landlord's right to enforce any
such remedies with respect to such default or any subsequent default. If,
on account of any breach or default by Tenant in Tenant's obligations under
the terms and conditions of this Lease, it shall become necessary or
appropriate for Landlord to employ or consult with an attorney concerning
or to enforce or defend any of Landlord's rights or remedies hereunder,
Tenant agrees to pay any reasonable attorney's fees so incurred.
20. LANDLORD'S LIEN. Landlord shall have all rights of Landlord's Lien in
accordance with the State of Washington Statutes.
21. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter
constituting a lien or charge upon the Premises or the improvements
situated thereon, provided, however, that if the mortgagee, trustee, or
holder of any such mortgage or deed of trust elects to have Tenant's
interest in this Lease superior to any such instrument, then by notice to
Tenant from such mortgagee, trustee or holder, this Lease shall be deemed
superior to such lien, whether this Lease was executed before or after
said mortgage or deed of trust. Tenant shall at any time hereafter on
demand execute any instruments, releases or other documents which may be
required by any mortgagee for the purpose of subjecting and subordinating
this Lease to the lien of any such mortgage.
22. LANDLORD'S DEFAULT. In the event Landlord should become in default in any
payment due on any such mortgage described in Paragraph 21 hereof or in the
payment of taxes or any other item which might become a lien upon the
Premises and which Tenant is not obligated to pay under the terms and
provisions of this Lease. Tenant is authorized and empowered after giving
Landlord five (5) days prior written notice of such default and Landlord's
failure to cure such default, to pay any such items for and on behalf of
Landlord, and the amount of any item so paid by Tenant for or on behalf of
Landlord, together with any interest or penalty required to be paid in
connection therewith, shall be payable on demand by Landlord to Tenant;
provided, however, that Tenant shall not be authorized and empowered to
make any payment under the terms of this Paragraph 22 unless the item paid
shall be superior to Tenant's interest hereunder. In the event Tenant pays
any mortgage debt in full, in accordance with this paragraph, it shall, at
its election, be entitled to the mortgage security by assignment or
subrogation.
23. MECHANICS LIENS. Tenant shall have no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind, the interest of Landlord in the Premises or
to charge the rentals payable hereunder for any claim in favor of any
person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs, and each such claim shall
affect and each such lien shall attach to, if at all, only the leasehold
interest granted to Tenant by this instrument. Tenant covenants and agrees
that it will pay or cause to be paid all sums legally due and payable by it
on account of any labor performed or materials furnished in connection with
any work performed on the Premises on which any lien is or can be validly
and legally asserted against its leasehold interest in the Premises or the
improvements thereon and that it will save and hold Landlord harmless from
any and all loss, cost or expense based on or arising out of asserted
claims or liens against the leasehold estate or against the right, title
and interest of the Landlord in the Premises or under the terms of this
Lease.
24. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivery of any notice or the making
of any payment by Landlord to Tenant or with reference to the sending,
mailing or delivery of any notice or the making of any payment by Tenant
to Landlord shall be deemed to be complied with when and if the following
steps are taken:
A. All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith. Tenant's obligation to
pay rent and any other amounts to Landlord under the terms of this Lease
shall not be deemed satisfied until such rent and other amounts have been
actually received by Landlord.
B. All payments required to be made by Landlord to Tenant hereunder shall
be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith.
C. Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered when actually received. Certified or
Registered Mail, addressed to the parties hereto at the respective
addressed out below, or at such other address as they have theretofore
specified by written notice delivered in accordance herewith:
LANDLORD: TENANT:
ISSAQUAH #1 LIMITED PARTNERSHIP BAXTER HEALTHCARE CORPORATION
300 120th Avenue N.E. One Baxter Parkway
Building 1, Suite 120 Deerfield, Illinois 60015
Bellevue, Washington 98005 Attn: Director, Corporate Real Estate
If and when include within the term "Landlord", as used in this instrument,
there are more than one person, firm or corporation, all shall jointly
arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of
notices and payments to Landlord: if and when included within the term
"Tenant", as used in this instrument, there are more than one person, firm
or corporation, all shall jointly arrange among themselves for their joint
execution of such a notice specifying some individual at some specific
address within the continental United States for the receipt of notices and
7
<PAGE> 9
payments to Tenant. All parties included within the terms "Landlord" and
"Tenant", respectively, shall be bound by notices given in accordance with the
provisions of this paragraph to the same effect as if each had received such
notice.
25. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held
to include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon, the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly
provided. Landlord shall have the right to assign any of its rights and
obligations under this Lease. Each party agrees to furnish to the other
promptly upon demand, a corporate resolution, proof of due authorization
by partners or other appropriate documentation evidencing the due
authorization of such party to enter into this Lease.
C. The captions inserted in this Lease are for the convenience only and
in no way define, limit or otherwise describe the scope or intent of this
Lease, or any provision hereof, or in any way affect the interpretation of
this Lease.
D. Tenant agrees from time to time within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate stating that this Lease is in full force and effect, the date
to which rent has been paid, the unexpired term of this Lease and such
other matters pertaining to this Lease as may be requested by Landlord. It
is understood and agreed that Tenant's obligation to furnish such estoppel
certificates in a timely fashion is a material inducement for Landlord's
execution of this Lease.
E. This Lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive
the expiration or earlier termination of the Term hereof, including without
limitation all payment obligations with respect to taxes and insurance and
all obligations concerning the condition of the Premises. Tenant shall
also, prior to vacating the Premises, pay to Landlord the amount, as
estimated by Landlord, of Tenant's obligation hereunder for real estate
taxes and insurance premiums for the year in which the Lease expires or
terminates. All such amount shall be used and held by Landlord for payment
of such obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefor upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been determined and
satisfied, as the case may be.
G. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the Term of
this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby, and
it is also the intention of the parties to this Lease that in lieu of each
clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added as part of this Lease contract a clause or
provision as similar in terms to such illegal, invalid or unenforceable
clause or provision as may be possible and be legal, valid and enforceable.
H. Because the Premises are on the open market and are presently being
shown, this Lease shall be treated as an offer with the Premises being
subject to prior Lease and such offer subject to withdrawal or
non-acceptance by Landlord or to other use of the Premises without notice,
and this Lease shall not be valid or binding unless and until accepted by
Landlord in writing and a fully executed copy delivered to both parties
hereto.
I. All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on
which all parties hereto have executed this Lease.
26. LIABILITY OF LANDLORD. Tenant agrees that no trustee, officer, employee,
agent or individual partner of Landlord, or its constituent entitles,
shall be personally liable for any obligation of Landlord hereunder, and
that Tenant must look solely to the interests of Landlord, or its
constituent entities in the subject real estate, for the enforcement of
any claims against Landlord arising hereunder.
27. ADDITIONAL PROVISIONS. Addendum and additional paragraphs attached hereto
and made a part hereof.
LANDLORD: TENANT:
ISSAQUAH #1 LIMITED PARTNERSHIP BAXTER HEALTHCARE CORPORATION
a Texas limited partnership a Delaware corporation
By: /s/ [SIG] By: /s/ [SIG] [J8/30]
-------------------------------- -------------------------------
Title: Vice President
----------------------------
<PAGE> 10
STATE OF ILLINOIS )
) SS.
County of Lake )
BE IT REMEMBERED, That on this 30th day of August, 1988, before me, the
undersigned a Notary Public in and for said County and State, personally
appeared the within named A.F. Stanbitz known to me to be Vice President who
executed the within instrument and acknowledged to me that he executed the same
freely and voluntarily.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed
my official seal the day and year last above written.
[MARILYN L. TALLMAN]
--------------------------------------
Notary Public for State of Illinois
My commission expires October 30, 1988
STATE OF WA )
) SS.
County of King )
BE IT REMEMBERED, That on this 24th day of Oct, 1988, before me, the
undersigned a Notary Public in and for said County and State, personally
appeared the within named Curtis Feeny known to me to be general partner who
executed the within instrument and acknowledged to me that he executed the same
freely and voluntarily.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed
my official seal the day and year last above written.
[SIG ILLEGIBLE]
--------------------------------------
Notary Public for State of WA
My commission expires 7/90
<PAGE> 11
ADDENDUM TO LEASE AGREEMENT:
ISSAQUAH #1 LIMITED PARTNERSHIP
a Texas limited partnership
and
BAXTER HEALTHCARE CORPORATION
a Delaware corporation
Additional Paragraph 28, Landlord's Consent. Whenever a clause of this lease
requires Landlord's consent or approval, the Landlord expressly covenants and
agrees not to withhold or delay his consent unreasonably.
Additional Paragraph 29, Options to Renew. Provided Tenant is not, and has not
been, in default of any of its obligations under this Lease, it shall have three
(3) options to renew this Lease for the Premises in "as-is" condition for a term
of five (5) years each on the same terms and conditions as set forth in this
Lease except that the monthly base rent during the first option period will be
$48,796.00. The monthly base rent for the second and third option periods shall
be at current market rent, as determined by Landlord. In no event will the
monthly rental be less than the rental for the last month of the previous term.
To exercise the first option period, Tenant shall give Landlord written notice
to exercise its option at least 180 days prior to the expiration of the current
lease term.
To exercise the second and third option terms, Tenant shall give Landlord
written notice to exercise its options at least 180 days prior to the expiration
of the then current lease term. Within 15 days after Tenant exercises its option
to renew, Landlord will provide Tenant with the current market rent for the
first five years of the renewal term. Tenant shall have 45 days from
notification by Landlord of renewal rent to accept Landlord's market rent. If
Tenant does not accept Landlord's rental figure within the 45 day period, this
option shall be null and void. Landlord shall have no further obligation to
Tenant and Landlord may enter into leases with a third party.
Notwithstanding anything to the contrary herein contained, Tenant's right to
extend the term by exercise of any of the foregoing options shall be conditioned
upon the following: (i) at the time of the exercise of the option, and at the
time of the commencement of any such extended term, Tenant shall be in
possession of and occupying the Premises for the conduct of its business therein
and the same shall not be occupied by any assignee, subtenant or licensee, the
option to extend being applicable hereunder only with respect to so much of the
Premises as is actually occupied by Tenant, and (ii) the notice of exercise
shall constitute a representation by Tenant to Landlord effective as of the date
of the exercise and as of the date of commencement of the extended term, that
Tenant does not intend to seek to assign the Lease in whole or in part, or
sublet all or any portion of the Premises, the election to extend the term being
for purposes of utilizing the Premises for Tenant's purposes in the conduct of
Tenant's business therein.
<PAGE> 12
Additional Paragraph 30. Option to Expand/First Right of Refusal. For a period
of twelve (12) months after the Commencement Date of this Lease, Landlord hereby
reserves for expansion by Tenant the approximate 4,000 square feet adjacent to
the Premises and outlined in green on Exhibit C attached.
If Tenant has not exercised its option to expand, then after the initial twelve
month period of the Lease, Tenant shall have a first right of refusal for the
approximate 4,000 square feet adjacent to the Premises and outlined in green on
Exhibit C attached. Upon notification of Landlord to Tenant, verbally or in
writing, Tenant shall have five (5) working days to notify Landlord of Tenant's
desire to exercise Tenant's right of first refusal, on the same terms and
conditions as the offer to lease that Landlord has received. In the event Tenant
fails to give Landlord notice of Tenant's election to lease the adjoining space
within the time period, Tenant shall have no further right, title or interest in
the adjacent space and the right of first refusal shall terminate. If on the
other hand Tenant exercises its right of first refusal in the manner provided
above, Tenant shall immediately deliver to Landlord payment for the first
month's rent and security deposit for the adjacent space (in the same manner as
provided for in this Lease), and the lease of the adjacent property shall be
consummated without delay, in accordance with the terms set forth in the lease
offer.
Additional Paragraph 31. Holdover Rent February and March, 1989. Landlord shall
pay to Tenant an amount equal to the Holdover Rent, if any, which exceeds
Tenants current rent, as of January 1, 1989, for their current location by 110%,
for the months of February and March, 1989. That is, the Tenant will pay up to
110% of their current rental amount, as of January 1, 1989, for the months of
February and March 1989 and Landlord will pay the Holdover Rent above that
amount. The Holdover Rent shall be verified by delivery, by Tenant to Landlord,
of the holdover lease agreement. All holdover provisions negotiated by Tenant
with its current landlord are subject to Landlord's (Issaquah #1) approval.
Additional Paragraph 32. Additional Provisions for Paragraph 1C. Date of
Delivery of Premises. Landlord shall use all reasonable efforts to have the
Premises completed and ready for occupancy on or before April 1, 1989.
In the event that the Premises are not Substantially Completed by April 1, 1989,
as defined in Paragraph IC of the Lease, the Landlord shall pay to Tenant an
amount equal to the Holdover Rent. The "Holdover Rent" is defined as the
difference between the normal monthly rent that Tenant is currently paying as of
January 1, 1989 and the rent Tenant is paying as of April 1, 1989. The Holdover
Rent shall be verified by delivery, by Tenant to Landlord, of the holdover lease
agreement. All holdover provisions negotiated by Tenant with its current
landlord are subject to Landlord's (Issaquah #1) approval.
For every month after April 1989 that the Premises are not Substantially
Complete as defined in Paragraph 1C, Landlord shall pay to Tenant the Holdover
Rent as described in the above paragraph. The first day of every month or the
date required for rent payment in the holdover agreement, whichever is later,
shall be the reference date for the month when determining Substantial
Completion.
<PAGE> 13
If Landlord has not Substantially Completed the Premises by September 1, 1989,
then Tenant shall have the right to cancel this Lease by written notice to
Landlord delivered on September 1, 1989. Such cancellation right shall continue
for a period of five (5) working days, then such termination option shall be
null and void. Neither party shall have any further liability to the other party
upon termination.
Notwithstanding anything to the contrary contained in the Lease, the Landlord
shall have no liability to the Tenant hereunder if prevented from achieving the
aforementioned deadlines by reason of (a) any strike, lock-out or other labor
troubles, (b) interruption or availability of electrical power, gas, water, fuel
oil, or other utility or service, (d) riot, war, insurrection or other national
or local emergency, (e) accident, flood, fire or other casualty (f) adverse
weather condition, (g) other acts of God, (h) inability to obtain a building
permit or a certificate of occupancy, or (i) other cause similar or dissimilar
to any of the foregoing and beyond the Landlord's reasonable control. In such
event, (a) the Commencement Date shall be postponed for a period equaling the
length of such delay, (b) the Termination Date shall be determined pursuant to
the provisions of Paragraph 1 by reference to the Commencement Date as so
postponed, (c) The April 1, 1989 and September 1, 1989 deadline dates detailed
above shall be postponed for a period equaling the length of such delay.
Tenant's obligation to commence the payment set forth in the Lease shall not be
affected or deferred and Landlord shall have no liability to the Tenant
hereunder if Landlord shall be delayed in Substantially Completing the Premises
as a result of any one or more of the following:
(i) Tenant's alterations or additions to Exhibit C and/or Exhibit C-1;
(ii) Tenant having not approved the working drawing plans by September
30, 1988;
(iii) Such other acts or omissions by Tenant, or Tenant's agents that
delay completion of the Tenant Improvements.
For each day that Landlord is delayed in Substantially Completing the Premises
due to i) through iii) above, the April 1, 1989 and September 1, 1989 deadline
dates shall be delayed by the same number of days, and the Commencement date
shall be moved forward by the same number of days.
Additional Paragraph 33. Direct Cost Reimbursement. Landlord agrees to reimburse
Tenant for Tenant's direct costs resulting from Landlord's failure to have the
Premises Substantially Complete by April 1, 1989 but not to exceed the sum of
One Thousand Dollars ($1,000.00).
<PAGE> 14
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is made this 21st day of August, 1990, by and between
Issaquah #1 Limited Partnership, a Texas limited partnership (the "Landlord")
and Baxter Healthcare Corporation, a Delaware corporation (the "Tenant").
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated
August 22, 1988 (the "Lease"), for Suite 107 located in Building B, I-90 Lake
Place (The "Premises"), as more fully described in the Lease; and
WHEREAS, Tenant desires to lease an additional 3,626 square feet of
space adjacent to the Premises; and Landlord and Tenant desire to modify the
Lease accordingly;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereby mutually agree as follows:
1. The Lease is hereby amended to reflect that effective October 1,
1990, the Premises shall be increased to approximately 47,825 square feet as
outlined in red on Exhibit A-1 attached hereto, which shall replace and
supersede Exhibit A to the Lease.
2. Effective October 1, 1990, the monthly rent as provided for in
Paragraph 2 of the Lease shall be increased to Forty Three Thousand Nine
Hundred Ninety Nine and no/100 Dollars ($43,999.00).
3. Landlord shall at its sole cost and expense perform tenant
improvements upon the Premises within an allowance of $54,390.00 including
permits, fees and Washington State Sales Tax.
4. In the event any payment due from Tenant to Landlord is made by
a party other than Tenant, such payment shall be deemed to have been made by
and for the account of Tenant, and the party making such payment shall have no
rights under this Lease.
5. No trustee, officer, employee, agent, or individual partner of
Landlord, or its constituent entities, shall be personally liable for any
obligation of Landlord hereunder, and Tenant must look solely to the interests
of Landlord, or its constituent entitles in the subject real estate, for the
enforcement of any claims against Landlord arising hereunder.
6. Tenant warrants that all necessary corporate actions have been
duly taken to permit Tenant to enter into this Amendment to Lease and that each
undersigned officer has been duly authorized and instructed to execute this
Amendment to Lease.
7. Except as expressly modified above, all terms and conditions of
the Lease remain in full force and effect and are hereby ratified and confirmed.
LANDLORD: TENANT:
Issaquah #1 Limited Partnership Baxter Healthcare Corporation,
a Texas limited partnership a Delaware corporation
By: Crow-Seattle #1, Inc., a
Texas corporation
its General Partner
By: /s/ CURTIS FEENY By: /s/ [SIG]
----------------------- ---------------------------
Curtis Feeny, President Its: Director Corporate Real
Estate
<PAGE> 15
STATE OF ILLINOIS )
) SS.
COUNTY OF LAKE )
BE IT REMEMBERED, That on this 3rd day of October, 1990, before me,
the undersigned a Notary Public in and for said County and State, personally
appeared the within named [ILLEGIBLE] known to me to be Director of Corporate
Real Estate who executed the within Instrument and acknowledged to me that he
executed the same freely and voluntarily.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year
last above written.
/s/ RACHEL G. HINSHELWOOD
-------------------------------------------------
[OFFICIAL SEAL]
Notary Public for the State of Illinois
My commission expires 4/15/91
STATE OF WASHINGTON )
) SS.
COUNTY OF KING )
On this 18th day of October, 1990, before me, the undersigned, a
Notary Public in and for the State of Washington, duly commissioned and sworn,
personally appeared Curtis Feeny, to me known to be the person who signed as
President of Crow-Seattle #1, Inc., General Partner of Issaquah #1 Limited
Partnership, the Partnership that executed the within and foregoing Instrument,
and acknowledged said Instrument to be the free and voluntary act and deed of
Crow-Seattle #1, Inc. for the uses and purposes therein mentioned; and on oath
stated that he was authorized to execute the said Instrument on behalf on said
Crow-Seattle #1, Inc. and that the corporation was authorized to execute said
Instrument on behalf of Issaquah #1 Limited Partnership.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the
day and year first above written.
/s/ [SIG]
--------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at [ILLEGIBLE]
My appointment Expires 4/26/92.
<PAGE> 16
BASIC LEASE INFORMATION
Lease Date: August 22, 1988
Landlord: Issaquah #1 Limited Partnership, a Texas limited
partnership
Address of Landlord: 300 120th Avenue N.E.
Building 1
Suite 120
Bellevue, Washington 98005
Tenant: BAXTER HEALTHCARE CORPORATION, a Delaware Corporation
Premises: I-90 Lake Place
2005 N.W. Sammamish Road
Building B, Suite 107
Issaquah, Washington 98027
PARAGRAPH 1 "Premises" approximately 43,133 square feet in Building B of
approximately 54,600 square feet (computed from measurements to
the exterior of outside walls of the building and to the center
of interior walls), such premises being shown and outlined in red
on the plan attached hereto as Exhibit A, and being part of the
real property described in Exhibit B attached hereto.
PARAGRAPH 1 Lease Term: Commencing on the "Commencement Date" as hereinafter
defined and ending 60 months thereafter except that in the event
the Commencement Date is a date other than the first day of a
calendar month, said term shall extend for said number of months
in addition to the remainder of the calendar month following the
Commencement Date.
PARAGRAPH 1 Scheduled Term Commencement Date: April 1, 1989*
* Revised to Sept 1st, 1989 per Nov 16th
letter. ______ 6/28/90
PARAGRAPH 2 Monthly Base Rent: $39,683.00
PARAGRAPH 2B Security Deposit: $0.00
Tenant's Initial Monthly Escrow Payment for Taxes
and Other Charges:
PARAGRAPH 7 Tenant's Initial Monthly Common Area Maintenance
Charge: $1,294.00
PARAGRAPH 13B Tenant's Initial Monthly Insurance Escrow Payment: $432.00
Tenant's Initial Monthly Payment Total: 41,409.00
The foregoing Basic Lease Information is hereby incorporated into
and made a part of this Lease. Each reference in this Lease to
any of the Basic Lease Information shall mean the respective
information herein above set forth and shall be construed to
incorporate all of the terms provided under the particular Lease
paragraph pertaining to such information. In the event of any
conflict between any Basic Lease Information and the Lease, the
former shall control.
<PAGE> 17
THIRD AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is made this 21st day of March 1994, by and between
Department of Natural Resources, Successor in Interest to Issaquah #1 Limited
Partnership, a Texas Limited Partnership, Successor in Interest to Crow-Seattle
#1, a Texas corporation, (the "Landlord") and Baxter Diagnostics, Inc., a
Delaware Corporation (the "Tenant").
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated August
22, 1988, as amended August 13, 1990 and August 21, 1990 (the "Lease"), for
Suite 107 located in Building B, 2005 NW Sammamish Road (the "Premises"), as
more fully described in the Lease; and
WHEREAS, Tenant desires to reduce the square footage of the Premises; and
WHEREAS, the current term of the Lease expires August 31, 1994, and
Landlord and Tenant desire to extend the term of the Lease, and to modify the
Lease accordingly;
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties hereby mutually agree as follows:
1. The term of the Lease is hereby extended for a period of sixty (60)
months commencing September 1, 1994, and terminating August 31, 1999.
2. Effective September 1, 1994, the Premises shall be reduced from
approximately 47,825 square feet to approximately 35,935 square feet as outlined
in red on Exhibit A-2 attached hereto, which shall replace and supersede
Exhibit A-1 to the Lease provided, however, that an acceptable lease has been
fully executed between Landlord and Bartels Prognostics, Inc., ("Prognostics")
prior to August 31, 1994. The Premises shall include approximately 572 square
feet of common area corridor and restrooms as shown on Exhibit A-2.
3. Effective September 1, 1994, the Monthly Rate Rent as provided for in
Paragraph 2 of the Lease shall be reduced to Third-two Thousand One Hundred
Ninety One and 99/100 Dollars ($32,191.77), which is the equivalent of $10.75
per square foot per year, triple net. Effective September 1,1997, the Monthly
Base Rent as provided for in Paragraph 2 of the Lease shall be Thirty-three
Thousand Six Hundred Eighty Nine and 06/100 Dollars ($33,689.06), which is the
equivalent of $11.25 per square foot per year, triple net.
4. If a lease between Prognostics and Landlord is not consummated prior
to August 31, 1994, or if a lease with Prognostics is consummated prior to
August 31, 1994 but terminates for any reason during the term of this Lease
extended hereunder and Prognostics vacates the Premises ("Prognostics
Termination"), then effective August 31, 1994 or upon termination of the
Prognostics Lease Tenant hereby agrees that the Premises shall be increased to
approximately 39,043 square feet as outlined on Exhibit A-3 attached hereto
which shall replace and supersede Exhibit A-2 previously referenced herein. The
Premises shall include approximately 563 square feet of common area corridor and
restrooms as shown on Exhibit A-3.
<PAGE> 18
5. If the Premises are increased pursuant to conditions described in
Paragraph 4 above, then the Monthly Base Rent as provided for in Paragraph 2 of
the Lease shall be increased based upon the equivalent Monthly Base Rent per
square foot per year, triple net as set forth in Paragraph 3 above.
6. Tenant agrees to extend the term as referenced above and accept the
Premises in as-is condition. If a lease with Prognostics is not consummated
prior to August 31, 1994, or if a lease with Prognostics is consummated prior to
August 31, 1994 but that Prognostics lease terminates for any reason thereafter,
Landlord shall have the right to perform certain tenant improvements, at
Landlord's expense and at Landlord's sole discretion as required to separate the
Premises from "Northwing Space" and "Eastwing Space" as outlined on Exhibit A-3
and said work shall interfere with Tenant's operations as little as possible.
Separating the space may include but is not limited to constructing
tenant demising walls, modifying electrical and HVAC systems to provide separate
service as is determined by Landlord to be reasonably feasible. Landlord and
Tenant agree to use best efforts to facilitate the separation of the Northwing
and Eastwing from the Premises in a timely and efficient manner.
7. If Prognostics leases space then Tenant shall allow Prognostics free
and unrestricted access to the following common areas:
1. Second Floor Restrooms 4. Central Staircase
2. Hallways & Corridors 5. First Floor Main
on Second Floor Building Entry
3. Elevator 6. First Floor Restrooms and Common
Corridors located at North Wing
Tenant agrees to indemnify, defend and hold Landlord harmless from and against
any claims, liabilities or damages (including attorneys fees and costs) relating
to Prognostics use of these areas, unless caused by Landlord's gross negligence
or willful misconduct.
8. Paragraph 5D of the Lease shall be deleted and replaced with the
following:
Landlord shall enter into a regularly scheduled normal preventative
maintenance agreement/service contract with a mutually agreeable maintenance
contractor ("Service Contractor") for the servicing of all heating,
air-conditioning and exhaust systems and equipment (including but not limited to
the hydronic heat pump system, roof top gas pack HVAC units, gas fired space
heaters and equipment and other exhaust fans: collectively referred to as
"Building Air Systems") serving the Premises, the Northwing Space and the
Eastwing Space. Tenant shall be responsible for (a) its Proportionate Share or
directly attributable costs of such Service Agreement as reasonably determined
by Landlord and (b) its Proportionate Share or directly attributable costs of
repairs, replacements or other services related to the Building Air Systems as
reasonably determined by Landlord, which costs shall be included in the monthly
Common Area Maintenance Charge per Paragraph 7 of the Lease.
9. Paragraph 7 of the Lease "Monthly Common Area Maintenance Charge"
shall be amended to include the following:
Tenant agrees to pay its proportionate share of the cost of
maintaining the corridor and
<PAGE> 19
restroom common area located between the Premises and Northwing space ("Common
Area North"), as shown on Exhibit A-2. Such costs shall include but are not
limited to janitorial service, and restroom supplies, repairs, light replacement
and those costs required to maintain the Common Area North in reasonably good
condition and repair.
10. Paragraph 11 of the Lease, "Utilities" shall be amended to add the
following:
For the purposes of this Lease Agreement, electricity and/or gas
service shall be jointly metered with the Northwing (except for approximately
2,500 square feet located at the northend of the Northwing Space which is
currently separately metered for gas and electricity) and Eastwing spaces.
11. Landlord represents and warrants to the Tenant the following, which
will survive termination of the lease:
(a) To the best of Landlord's actual knowledge, which knowledge is limited to
the report dated September 11, 1990 prepared by Dames & Moore, Inc., the
property is in compliance with all applicable Environmental Laws. "Environmental
Laws" means any federal, state or local law, rule, regulation or ordinance
relating to environmental, health or safety matters.
(b) To the best of Landlord's actual knowledge, which knowledge is limited to
the knowledge of Rod Rennie, Project Manager, of State of Washington Department
of Natural Resources, subsequent to the Dames & Moore, Inc., report dated
September 11, 1990, Landlord has received no notice of any litigation,
investigation or proceeding pending or threatened against Landlord or the
property regarding the presence or Release of Hazardous Materials at the
property. "Hazardous Materials" means any substance or waste governed by any
Environmental Law.
(c) To the best of Landlord's actual knowledge, which knowledge is limited to
the report dated September 11, 1990 prepared by Dames & Moore, Inc., the
property does not contain: any underground storage tanks or surface
impoundments; any asbestos or asbestos-containing material; any polychlorinated
biphenyls (PCBs); or Release or threatened Release of any Hazardous Materials,
nor are any Hazardous Wastes generated. Landlord will remove and/or encapsulate
any asbestos, at Landlord's expense, in the leased property if required to do so
by any federal, state, or local laws or regulations.
(d) To the best of Landlord's actual knowledge, which knowledge is limited to
the knowledge of Rod Rennie, Project manager, subsequent to the Dames & Moore,
Inc., report dated September 11, 1990, the property is in compliance with all
applicable environmental laws.
(e) If there is a Release of Hazardous Materials at the property that is caused
by landlord, Landlord will cleanup the Release in compliance with all applicable
Environmental laws. If there is a Release of Hazardous Materials at the property
that is not caused or permitted by Tenant, Landlord will indemnify Tenant for
any cleanup, litigation or penalties incurred.
(f) If Landlord breaches any environmental provision in this agreement which
interferes with Tenant's use of the property, Tenant may terminate this Lease
unless Landlord remedies the condition within a reasonable time.
<PAGE> 20
Tenant represents and warrants to the Landlord the following, which will
survive termination of this lease:
(a) If there is a Release of Hazardous Materials at the property caused or
permitted by Tenant, Tenant will clean up the Release in compliance with
all applicable Environmental Law.
(b) Tenant will use the leased property in compliance with all applicable
Environmental Laws.
12. Additional Paragraphs 29, 30, 31, 32, and 33 of the original Lease
dated August 22, 1988, shall be of no further force or effect.
13. In the event any payment due from Tenant to Landlord is made by a
party other than Tenant, such payment shall be deemed to have been made by and
for the account of Tenant, and the party making such payment shall have no
rights under this Lease.
14. No trustee, officer, employee, agent, or individual partner of
Landlord, or its constituent entities, shall be personally liable for any
obligation of Landlord hereunder, and Tenant must look solely to the interests
of Landlord, or its constituent entities in the subject real estate, for the
enforcement of any claims against Landlord arising hereunder.
15. Tenant warrants that all necessary corporate actions have been duly
taken to permit Tenant to enter into this Amendment to Lease and that each
undersigned officer has been duly authorized and instructed to execute this
Amendment to Lease.
16. Except as expressly modified above, all terms and conditions of the
Lease remain in full force and effect and are hereby ratified and confirmed.
LANDLORD: TENANT:
State of Washington Department of Baxter Diagnostics, Inc.,
Natural Resources, Successor in a Delaware Corporation
Interest to Crow Seattle #1 Limited
Partnership, a Texas Limited
Partnership, Successor in Interest
to Crow Seattle #1, A Texas
corporation
By: /s/ RICK CASPER By: /s/ [SIG]
------------------------------- -----------------------------------
Its: Real Estate Division Manager Its: Vice President
Approved as to form only this 3rd
day of May, 1994, by the Washington
State Attorney General's Office,
Jim Schwartz, Assistant Attorney
General.
<PAGE> 21
STATE OF ILLINOIS )
) SS.
County of Lake )
BE IT REMEMBERED, That on this 14th day of April, 1994, before me,
the undersigned a Notary Public in and for said County and State, personally
appeared the within named [SIG] known to me to be Vice President who
executed the within Instrument and acknowledged to me that he executed the same
freely and voluntarily.
IN TESTIMONY WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year
last above written.
/s/ RACHEL G. HINSHELWOOD
-----------------------------------------------
[OFFICIAL SEAL]
Notary Public for the State of Illinois
My commission expires 4/15/95
STATE OF WASHINGTON )
) SS.
County of THURSTON )
On this 6th day of May, 1994, before me, the undersigned a Notary
Public in and for the State of Washington, duly commissioned and sworn,
personally appeared Rick Cooper, to me known to be the person who signed as
Agent of the Department of Natural Resources that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of the Department of Natural Resources for the uses and
purposes therein mentioned; and on oath stated that ______ was authorized to
execute the said instrument on behalf of said Department of Natural Resources.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the
day and year first above written.
/s/ STEVEN R. CARLSON
---------------------------------------
[NOTARY SEAL] NOTARY PUBLIC in and for the State of
Washington, residing at Olympia
My appointment Expires 9/30/95
<PAGE> 22
[MAP]
EXHIBIT A
<PAGE> 23
EXHIBIT B
LEGAL DESCRIPTION
PARCEL A:
THAT PORTION OF THE NORTH HALF OF THE NORTH HALF OF THE SOUTHEAST QUARTER OF
SECTION 20, TOWNSHIP 24 NORTH, RANGE 6 EAST, W.M., IN KING COUNTY, WASHINGTON,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID SUBDIVISION; THENCE SOUTH 89 DEGREES
41'43" WEST ALONG THE NORTH LINE OF SAID SUBDIVISION SAID NORTH LINE ALSO BEING
THE CENTERLINE OF SOUTHEAST 56TH STREET, A DISTANCE OF 2451.66 FEET; THENCE
SOUTH 0 DEGREES 18'17" EAST 20.00 FEET TO A POINT ON SOUTH MARGIN OF SAID
SOUTHEAST 56TH STREET AND TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING
SOUTH 0 DEGREES 16'17" EAST 182.15 FEET TO A POINT ON THE NORTHEASTERLY MARGIN
OF PRIMARY STATE HIGHWAY NO. 2; THENCE SOUTH 59 DEGREES 25'17" EAST ALONG SAID
NORTHEASTERLY MARGIN, A DISTANCE OF 157.13 FEET; THENCE NORTH 0 DEGREES 18'17"
WEST 263.80 FEET TO A POINT ON SOUTH MARGIN OF SAID SOUTHEAST 56TH STREET;
THENCE SOUTH 89 DEGREES 41'43" WEST ALONG SAID SOUTH MARGIN, A DISTANCE OF
134.85 FEET, MORE OR LESS, TO THE TRUE POINT OF BEGINNING; EXCEPT THAT PORTION
THEREOF, IF ANY, LYING WITHIN THE WEST 250 FEET OF SAID SOUTHEAST QUARTER, AS
CONVEYED TO THE STATE OF WASHINGTON BY DEED RECORDED UNDER RECORDING NUMBER
4132499, IN KING COUNTY, WASHINGTON.
PARCEL B:
LOT A OF CITY OF ISSAQUAH SHORT PLAT NO. 83-01, ACCORDING TO THE SHORT PLAT
SURVEY RECORDED UNDER RECORDING NUMBER 8308220868, IN KING COUNTY, WASHINGTON.
<PAGE> 24
[FLOOR PLAN]
EXHIBIT A-1
I-90 LAKE PLACE BUILDING D
<PAGE> 25
[FLOOR PLAN]
EXHIBIT A-2
<PAGE> 26
[FLOOR PLAN]
EXHIBIT A-2
<PAGE> 27
[FLOOR PLAN]
EXHIBIT A-3
<PAGE> 28
[FLOOR PLAN FOR EXHIBIT A-3]
<PAGE> 1
EXHIBIT 10.5
LEASE
THIS INDENTURE is made as of the 1st day of February, 1998.
BETWEEN:
P.K. PROJECTS LTD., a British Columbia Company with an office at
1203 - 20800 Westminster Highway, Richmond, B.C., V6V 2W3
(hereinafter called the "Landlord")
OF THE FIRST PART
AND:
INTRACEL CORPORATION, a company incorporated under the laws of
the State of Washington, U.S.A., with an office at 1871 NW
Gilman Boulevard, Issaqua, Washington, 98027
(hereinafter called the "Tenant")
OF THE SECOND PART
1. LEASED PREMISES
1.1 WITNESSETH that in consideration of the rents, covenants, and agreements
hereinafter reserved and contained on the part of the Tenant to be paid,
observed and performed, the Landlord does demise and lease unto the Tenant the
premises known as Units 1123, 1128 and 1133 - 13351 Commerce Parkway, Richmond,
B.C. (hereinafter called the "Leased Premises") being all that portion of a
Building as shown outlined in dark outline on the Plan attached hereto as
Schedule "A" and containing a Rentable Area (hereinafter called the "Tenant's
Rentable Area") deemed and agreed by the parties to be 6,541 square feet and
being situate on the lands and premises owned by the Landlord at 13351 Commerce
Parkway, in the City of Richmond, in the Province of British Columbia, described
as:
PID: 023-310-006
Lot 1, Section 5, Block 4 North, Range 5 West,
New Westminster District, Plan LMP26739
(hereinafter called the "Lands")
<PAGE> 2
-2-
2. TERM
2.1 To have and to hold the Leased Premises for and during the term (hereinafter
called the "Term") of five (5) years to be computed from the 1st day of
February, 1998 and from thenceforth next ensuing and to be fully complete and
ended on the 31st day of January, 2003.
3. BASIC RENT
3.1 Yielding and paying therefor during the Term unto the Landlord, as basic
rent, the sum of SIXTY-TWO THOUSAND ONE HUNDRED THIRTY-NINE DOLLARS AND FIFTY
CENTS ($62,139.50) of lawful money of Canada to be paid in advance in equal
monthly installments of FIVE THOUSAND ONE HUNDRED SEVENTY-EIGHT DOLLARS AND
TWENTY-NINE CENTS ($5,178.29) on the first day of each and every month in each
and every year during the Term, commencing on the first day of February, 1998.
If the Term commences on any day other than the first or ends on any day other
than the last day of a month, rent for the fractions of the month at the
commencement and at the end of the Term shall be adjusted pro rata. The Landlord
acknowledges having received from the Tenant the sum of FIFTEEN THOUSAND FOUR
HUNDRED FIFTY-FIVE DOLLARS AND EIGHTY-FOUR CENTS ($15,455.84) to be applied
towards the first and last months' rent hereunder.
3.2 The parties agree that the commencement date of February 1, 1998 shall be
delayed, if necessary, until the Landlord substantially completes construction
of the Leased Premises. If for any reason the Landlord is unable to give
possession of the Leased Premises to the Tenant on February 1, 1998, then:
(a) the Tenant shall take possession of the Leased Premises when the
Landlord delivers possession of the Leased Premises to the
Tenant such date to be not later than March 1, 1998 (herein
referred to as the "Outside Date");
(b) the Lease shall not be void or voidable nor shall the Landlord
be liable for any claims of the Tenant resulting from any such
delay in possession;
(c) the Term shall commence on the date the Landlord makes the
Leased Premises available for occupancy;
(d) no rent shall be payable by the Tenant until the date possession
of the Leased Premises is delivered to the Tenant;
(e) if possession of the Leased Premises is not delivered to the
Tenant by on or before the Outside Date, then after such date
either party may terminate this Lease on written notice to the
other and the Landlord shall return any deposits paid to the
Tenant.
<PAGE> 3
-3-
3.3 The Landlord agrees to provide the Leased Premises to the Tenant basic
rent-free during the first three (3) months of the Term (the "Abatement
Months"). The Tenant shall still be responsible for all Direct Costs, its
Proportionate Share of Operating Expenses and all other additional rent over and
above the basic rent set out in clause 3.1 during the Abatement Months. The
entire basic rent otherwise due and payable for the Abatement Months shall
become immediately due and payable upon the occurrence of an event of default by
the Tenant that is not cured within the time period set out in Clause 22 of this
Lease.
4. DEFINITIONS
4.1 In this Lease:
(a) "Building" means the building in which the Leased Premises are
situate;
(b) "Common Areas" means all parts of the Lands and the Building
that are not comprised in premises leased or set aside or
intended by the Landlord to be leased to tenants;
(c) "Direct Costs" means:
(i) all costs and expenses incurred by or levied on the
Landlord in connection with the Landlord performing on
behalf of the Tenant or enforcing any covenant or
agreement of the Tenant hereunder, including without
limitation, solicitors' costs and fees calculated on a
solicitor-client basis, and
(ii) all amounts stated by any clause of this Lease to be
included in or collectible by the Landlord as Direct
Costs;
(d) "levied" means levied, imposed, charged or assessed;
(e) "Operating Expenses" means all expenses chargeable against
income in connection with the operation, maintenance and repair
of the Building and the Lands, including without limitation, the
following:
(i) all costs and expenses from time to time incurred by or
levied on the Landlord in respect of repairing,
maintaining, cleaning, heating, lighting,
air-conditioning and ventilating the Building and the
Lands and any fixtures and appurtenances thereof and any
improvements thereto, and;
(ii) all premiums from time to time paid by the Landlord for
fire, casualty, liability, loss of rental revenue, and
other insurance in respect of the Building, the Lands
and all fixtures and appurtenances thereof and
improvements thereto; and
<PAGE> 4
-4-
(iii) all costs and expenses from time to time incurred by or
levied on the Landlord in respect of janitorial services
and garbage disposal for the Building and the Lands; and
(iv) all taxes from time to time levied by any taxing
authority on the Building and the Lands or either of
them or on the Landlord in respect of the Building and
the Lands or either of them; and
(v) all Utility Charges from time to time levied on the
Building and the Lands or either of them or on the
Landlord in respect of the Building and the Lands or
either of them; and
(vi) an administration fee equal to 5% of the basic rent
paid pursuant to Clause 3.1;
but not interest on debt, income, capital gains or corporate
taxes of the Landlord, costs for which the Landlord is
reimbursed by proceeds of insurance, or amounts charged to the
Tenant under this Lease or to other tenants of the Building
under their respective leases as Tenant's Taxes, Tenant's
Utility Charges or Direct Costs;
(f) "Proportionate Share" means a fraction which has as the
numerator the Tenant's Rentable Area and as the denominator the
Total Rentable Area of the Building;
(g) "Taxes" means taxes, rates, duties, licenses, levies, fees and
the costs of all works undertaken as local improvements by an
Taxing Authority and levied on the owners or occupiers of lands
benefiting or deemed to benefit from such works;
(h) "Taxing Authority" means any school, municipal, regional,
provincial, federal, parliamentary, or other governmental or
statutory body, corporation or authority;
(i) "Tenant's Taxes" means all taxes levied by an taxing authority
on the Landlord or the Tenant in respect of the Leased Premises,
in respect of the business or profession of the Tenant or in
respect of improvements, fixtures, machinery, chattels or
equipment brought onto or installed in the Leased Premises by
the Tenant or at the request of the Tenant, and whether or not
such taxes are included by the Taxing Authority in the Taxes
included in Operating Expenses;
(j) "Tenant's Utility Charges" means all Utility Charges levied
separately against the Leased Premises or on the Tenant or the
Landlord in respect of the Leased Premises;
(k) "Total Rentable Area" of the Building means the total of the
rentable area of all premises in the Building (including the
Leased Premises) leased or set aside or intended by the Landlord
to be leased to tenants;
<PAGE> 5
-5-
(1) "Utility Charges" means all charges for electricity, heat,
light, power, gas, oil, water, sewer or telephone provided to or
made available upon the Building and the Lands or either of
them.
5. NET LEASE
5.1 The Tenant acknowledges and agrees that it is intended that this Lease shall
be completely Net Lease for the Landlord, except as expressly hereinafter set
out, that the Landlord shall not be responsible during the Term for any costs,
taxes, charges, expenses or outlays of any nature whatsoever arising from or
relating to the Leased Premises or the contents thereof or the Common Areas, and
the Tenant shall pay all charges, impositions, costs and expenses of every
nature and kind relating to the Building and the Lands (or either or them) and
not directly levied on any tenant of the Building and the Tenant covenants with
the Landlord accordingly.
6. TENANT'S COVENANTS
6.1 The Tenant covenants with the Landlord as follows:
(a) to pay basic rent as set out in Clause 3.1;
(b) to pay immediately that they become due the Tenant's Taxes and
the Tenant's Utility Charges, and if at any time for any reason
during the Term of this Lease the Landlord pays any of the
foregoing then a sum equal to the amount so paid shall be
included in Direct Costs and paid to the Landlord immediately
upon demand;
(c) to pay immediately on demand by the Landlord as additional rent
all Direct Costs;
(d) to pay as additional rent the Tenant's Proportionate Share of
Operating Expenses. The Tenant's Proportionate Share of
Operating Expenses shall be paid monthly in accordance with the
reasonable forward estimates thereof made by the Landlord and
shall be adjusted at least once (or more often at the discretion
of the Landlord) in each year during the Term, on the basis of
actual Operating Expenses experienced during the period to which
the adjustments relate. The certificate of a chartered
accountant appointed by the Landlord shall, in the event of
dispute, be conclusive and binding on the Landlord and the
Tenant as to any amounts payable under this paragraph and the
cost of obtaining such certificate shall be included in Direct
Costs and be borne by the Tenant;
(e) to pay as additional rent an amount equal to any and all Goods
and Services Taxes, it being the intention of the parties that
the Landlord shall be fully reimbursed by the Tenant with
respect to any and all Goods and Services Taxes at the full rate
applicable from time to time in respect thereof. The amount of
the Goods and Services Taxes so payable by the Tenant shall be
calculated by the
<PAGE> 6
-6-
Landlord in accordance with the applicable legislation and shall
be paid by the Tenant to the Landlord at the same time as
amounts to which such Goods and Services Taxes apply are payable
to the Landlord under the terms of this Lease. For the purposes
of this section, "Goods and Services Taxes", means and includes
any and all goods and services taxes, sales taxes, value added
taxes, business transfer taxes, or any other taxes imposed on
the Landlord under this Lease or the rental of the Leased
Premises or the provision of any goods services or utilities,
whatsoever by the Landlord to the Tenant under this Lease,
whether characterized as a goods and services tax, sales tax,
value added tax, business transfer tax, or otherwise;
(f) to repair, and at the Tenant's sole cost during the whole of the
Term, to keep and maintain the Leased Premises and all fixtures,
fittings and improvements thereto in good working order and
first class condition including periodic painting and decoration
as determined by the Landlord and to make all needed
maintenance, repairs and replacements thereto with due diligence
and dispatch reasonable wear and tear only excepted; and the
Landlord may enter and view the state of repair, and that the
Tenant will repair according to notice but failure of the
Landlord to give notice shall not relieve the Tenant from its
obligation to repair;
(g) if any part of the Building (including the Leased Premises), the
Common Areas or any fixtures, fittings or improvements thereon
or thereto get out of repair or become stopped up, unusable
damaged or destroyed through the negligence, carelessness or
misuse of the Tenant, its servants, agents, employees, invitees
or any one permitted by the Tenant to be in the Building or on
the Common Areas the expense of the necessary repairs,
replacements or alterations shall be borne by the Tenant and
included in Direct Costs;
(h) not to assign or sublet in whole or in part without first
notifying the Landlord in writing of the intention to assign or
sublet and the date such assignment or subletting is to take
effect and obtaining the Landlord's prior written consent, such
consent not to be unreasonably withheld to a financially
responsible and reasonable person and provided always that such
consent may be arbitrarily withheld where the subletting is to
be for only a portion of the Leased Premises, or where the use
of the Leased Premises by the assignee or sub-lessee will differ
from the use authorized pursuant to this Lease. The Tenant shall
pay the sum of FIVE HUNDRED DOLLARS ($500.00) plus G.S.T. to the
Landlord with each request for consent which sum covers the
Landlord's costs for considering, preparing and consenting to
the Assignment of Lease;
(i) to comply at its own expense with all provisions of law
including, without limiting the generality of the foregoing,
federal and provincial legislative enactments, building by-laws
and any other governmental or municipal regulations which relate
to the partitioning, equipment, operation and use of the Leased
Premises, and to
<PAGE> 7
-7-
the making of any repairs, replacements, alterations, additions,
or improvements of or to the Leased Premises;
(j) not to do or suffer any waste or damage, disfiguration or injury
to the Leased Premises, the Building or the Common Areas or the
fixtures, fittings and improvements thereto and not to permit or
suffer any overloading of the floors of the Leased Premises or
the Building; and to keep the Leased Premises and Common Areas
in a neat and tidy condition;
(k) to indemnify and save harmless the Landlord from and against any
and all actions, claims, costs, expenses, damages, losses or
fines incurred or suffered by the Landlord by reason of:
(i) any breach, violation, non-observance or non-
performance by the Tenant of any covenant, agreement or
provision of this Lease;
(ii) damage or injury to persons or property arising from any
act or omission of the Tenant or any assignee,
sub-tenant, agent, contractor, employee, invitee or
licensee of the Tenant;
(iii) the Landlord observing, performing, exercising or
enforcing any covenant, agreement, right or remedy of
the Landlord hereunder, all costs and expenses incurred
by or levied on the Landlord in connection with the
Landlord performing on behalf of the Tenant any covenant
of the Tenant hereunder or in connection with the
Landlord enforcing any term, condition agreement or
provision of this Lease, and without in any way limiting
the generality of the foregoing including solicitors'
costs and fees calculated on a solicitor and own client
basis;
(1) not to make to, or erect in the Leased Premises any alterations,
additions, decorations or improvements without submitting
drawings and specifications to the Landlord and obtaining the
Landlord's prior written consent in each instance not to be
unreasonably withheld. Any work performed in the Leased Premises
by contractors engaged by the Tenant shall be subject to all
conditions which the Landlord may impose; and the Tenant
covenants to prosecute such work to completion with reasonable
diligence; provided nevertheless that the Landlord may at its
option require that the Landlord's contractors be engaged for
any mechanical or electrical work;
(m) not to suffer or permit during the Term any builders' liens or
other liens for work, labour, services or material ordered by
the Tenant or for the cost of which the Tenant may be in any way
obligated, or any conditional sales agreements or chattel
mortgages to attach to the Leased Premises or to the Building,
the Common Areas or the Lands and that whenever and so often as
any such liens or
<PAGE> 8
-8-
claims therefor or conditional sales agreements or chattel
mortgages shall be registered, the Tenant shall immediately
discharge the same; to allow the Landlord to post and keep
posted on the Leased Premises any notice which the Landlord may
wish to post under the provisions of the Builders' Lien Act;
(n) to restore immediately, and with glass of the same colour and
quality, any glass within, forming part of or bounding the
Leased Premises that is damaged or broken during the Term;
(o) not to paint, display, inscribe, place or affix any sign,
fixture, advertisement, notice, lettering or direction on any
part of the Common Areas or the outside of the Building or
Leased Premises or on windows of the Building or that are
visible from the outside of the Building without the prior
written consent of the Landlord, which consent will not be
unreasonably withheld and to comply with the signage
specifications attached as Schedule "B" hereto;
(p) if required to do so by the Landlord to register this Lease
forthwith at the Tenant's expense in the Land Title Office for
the area in which the Leased Premises are situate. Such
registration to be in the form specified by the Landlord. Should
the Tenant wish to register this Lease, it may only do so in the
form of a Short Form of Lease registration which shall not
contain any reference to rent payable under the Lease. The costs
of such registration shall all be borne by the Tenant, which
costs shall include the sum of TWO HUNDRED FIFTY DOLLARS
($250.00) plus G.S.T. payable to the Landlord for reviewing,
approving and executing the necessary Land Title Office
documents. Upon the expiry or earlier termination of this Lease,
the Tenant will discharge such registration at its expense and
provide discharge particulars to the Landlord;
(q) at any time and from time to time upon not less than ten (10)
days prior notice, to execute and deliver to the Landlord or
such other person or corporation that the Landlord directs, a
written statement certifying that this Lease is in full force
and effect and unmodified (or if modified, specifying the
modifications), the amount of the annual rental being paid
hereunder, whether or not any prepayments have been made
hereunder, and if so details thereof, the dates to which other
levies or charges hereunder have been paid, and whether or not
there is any existing default on the part of the Landlord of
which the Tenant has notice;
(r) to occupy and permit to be occupied only those parking spaces
from time to time designated for the Tenant's use by the
Landlord;
(s) not to employ more employees in the Leased Premises than are
from time to time authorized or permitted by the relevant
governmental acts, statutes, regulations and other authorities
having regard to washroom, lunchroom and other facilities
presently available in or to the Leased Premises and having
regard also to any
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other relevant working conditions, provided that if the Tenant
wishes to employ more employees in the Leased Premises than are
from time to time so authorized or permitted then subject to the
provisions of this Lease, the Tenant may, at his sole expense,
install additional washroom, lunchroom or other facilities in
the Leased Premises or otherwise alter the working conditions in
the Leased Premises to permit such increased number of
employees;
(t) not to install or use any equipment which will exceed or
overload the capacity of any utility facilities on the Leased
Premises or the Building or Common Areas;
(u) to notify the Landlord immediately that the Tenant becomes aware
of any fire or accident in the Leased Premises or any damage to
or malfunctioning of any heating, electrical, plumbing,
mechanical or ventilating system in the Building or any damage
to the foundations, structure, roof, exterior walls or
supporting walls of the Building;
(v) to promptly and strictly comply, and cause any person for whom
it is in law responsible to comply, with all environmental laws
regarding the use and occupancy of the Leased Premises under or
pursuant to this Lease, including without limitation obtaining
all required permits or other authorizations;
(w) to promptly comply with all Tenant rules and regulations
relating to the Building imposed by the Landlord for the smooth
and efficient operation of the Building (a copy of the current
rules is attached hereto as Schedule "C");
(x) if the Landlord so requests, to pay all rent obligations
hereunder by way of a series of post-dated cheques delivered to
the Landlord or by way of a pre-authorized debit system;
(y) to register with the Registrar of Companies in British Columbia
as an extra-provincial company by on or before the commencement
date of the Lease.
6.2 The Tenant shall be responsible for obtaining its business licence and all
permits and approvals required in connection with its leasehold improvements or
other work not included in the Landlord's responsibility. The Tenant shall also
be responsible for the installation of power and distribution to the operation
and maintenance of any special equipment or lighting required by its occupancy,
including but not limited to telephone and communication facilities.
7. LANDLORD'S COVENANTS
7.1 Subject to the terms and provisions of this Lease, the Landlord covenants
with the Tenant as follows:
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(a) that provided the Tenant pays the rent hereby reserved, and
observes and performs the covenants and agreements herein
contained and on the part of the Tenant to be observed and
performed, the Tenant shall and may peaceably possess and enjoy
the Leased Premises for the Term hereby granted without
interruption or disturbance from the Landlord, or any persons
lawfully claiming by, through or under the Landlord;
(b) to repair and maintain the foundations, structure, roof and
exterior walls of the Building, the costs of which shall be
borne by the Tenant and paid as part of Operating Expenses;
(c) to permit the Tenant and its employees and all persons lawfully
requiring communication with them to have the use in common with
others having a like right of the Common Areas;
(d) to provide to the Tenant the exclusive use of thirteen (13)
reserved parking stalls and two (2) loading bays, which stalls
and loading bays shall be provided free of charge during the
Term.
7.2 The Landlord agrees to provide the following tenant improvements to the
Leased Premises by, on or before the commencement date:
(a) partition wall separating the showroom area of the Leased
Premises from the high ceiling warehouse area of the Leased
Premises, partition wall to be installed along entire width of
Units 1123 and 1128; two double personnel doors to be installed
in the partition wall;
(b) T-Bar ceiling to entire showroom area, ceiling tiles to be
non-shedding surface finish;
(c) air-conditioning for showroom portion of all three units;
(d) vinyl tile to be installed to the showroom portion of all three
units;
(e) 220 volt power to the warehouse area of the Leased Premises; and
(f) demising wall separating Unit 1133 from the other two units and
a double door to be installed near the front of the unit for
access.
8. LIMITATION OF LANDLORD'S COVENANTS
8.1 Unless negligent, the Landlord shall not be liable for any direct, indirect
or consequential loss, damage, injury or expense caused by the Tenant, its
agents, employees, invitees and licensees or its or their property by or arising
from:
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(a) fire, explosion, falling plaster, gas, electricity or seeping or
leaking water; or
(b) the interruption for any reason whatever, of any service
facility or utility provided by the Landlord;
(c) the Landlord observing, performing, exercising or enforcing any
covenant, agreement, right or remedy of the Landlord;
(d) any other cause beyond the reasonable control of the Landlord.
8.2 The Landlord does not warrant that any service or facility provided by the
Landlord hereunder will be free from interruptions caused or required by
maintenance, repairs, renewals, modifications, strikes, riots, insurrections,
labour controversies, force majeure, Acts of God or other cause or causes beyond
the Landlord's reasonable control. No such interruption shall render the
Landlord liable in damages to the Tenant, nor relieve the Tenant from its
obligations under this Lease, provided that the Landlord shall without delay
take all reasonable and practical steps within its power to remove the cause of
such interruption.
9. INSURANCE
9.1 The Landlord covenants to effect and maintain insurance of the Building and
the Lands, excluding all tenants' fixtures, fittings, machinery, chattels,
equipment and improvements for insurable risks against which and in amounts for
which a prudent Landlord would protect itself.
9.2 The Tenant covenants to effect and maintain in force during the Term in the
names of the Tenant, the Landlord and the Landlord's Mortgagees as their
respective interests may appear insurances in such forms and amounts and with
carriers and insuring such risks as the Landlord may from time to time
reasonably require, including, without limitation, the following:
(a) fire and extended coverage insurance on the Tenant's fixtures,
fittings, machinery, chattels, equipment and improvements in an
amount of not less than the full replacement costs thereof;
(b) property damage and public liability insurance including
personal liability, contractual liability, tenant's legal
liability, non-owned automobile liability, lease agreement
contractual coverage and owners' and contractors' protective
insurance coverage with respect to the Leased Premises, and the
Tenant's use of the Common Areas and facilities, coverage to
include the business operations conducted by the Tenant and any
other person on the Leased Premises, and such policies to be
written on a comprehensive basis with limits of not less than
TWO MILLION DOLLARS ($2,000,000.00) per occurrence.
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9.3 With respect to all policies of insurance effected by the Tenant hereunder,
the Tenant shall obtain from the insurers undertakings to notify the Landlord in
writing at least thirty (30) days prior to any material change or cancellation
thereof. The Tenant shall furnish the Landlord certified copies of all such
policies and shall provide written evidence of the continuation of such policies
not less than ten (10) days prior to their expected expiry dates. The cost or
premium for each and every such policy shall be paid by the Tenant. The Tenant
agrees that if the Tenant fails to take out or keep in force such insurance the
Landlord shall have the right to do so, without however imposing any obligation
on the Landlord to do so, and to pay the premiums therefor, and in such event
the amount paid as premiums shall be included as Direct Costs and paid to the
Landlord immediately on demand.
9.4 The Tenant covenants not to do or omit or permit to be done or omitted upon
the Leased Premises or the Common Areas anything whereby any policy of insurance
effected by the Landlord or the Tenant pursuant to this Lease may be
invalidated, or the coverage thereunder reduced, and will immediately upon
notice from the Landlord remedy the condition giving rise to the invalidation or
threatened invalidation or reduction in coverage and in default the Landlord may
at its option either cancel this Lease or enter the Leased Premises and remedy
the condition, and the costs occasioned thereby shall be included in Direct
Costs and paid to the Landlord immediately on demand.
9.5 If the Tenant does or omits or permits to be done or omitted upon the Leased
Premises or the Common Areas anything whereby the premiums for any insurance
carried by the Landlord with respect to the Building or the Lands are increased,
the amount of such increase shall be included in Direct Costs and paid to the
Landlord immediately on demand from time to time during the Term.
10. USE OF LEASED PREMISES
10.1 The Tenant covenants to use the Leased Premises solely for the purpose of
conducting business of the manufacture, assembly and distribution of medical
equipment and related business activities and not to use or permit the use of
the Leased Premises for any other business or purpose or by any persons other
than the Tenant, its employees and invitees.
11. OFFENSIVE TRADE ETC.
11.1 Notwithstanding the generality of Clause 10, the Tenant covenants not to
carry on or permit to be carried on in the Leased Premises any noisome or
offensive trade or business or any acts or practices which may injure the Leased
Premises, or the Building or the Common Areas or which may be a nuisance,
disturbance or menace to the Landlord or other tenants or occupants of the
Building and not to allow odours to escape from the Leased Premises which, in
the opinion of the Landlord, are offensive.
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12. ACCESS TO LEASED PREMISES TO REPAIR ETC.
12.1 The Landlord, its agents, employees and contractors, with material and
equipment, shall have the right at all times to enter on the Leased Premises to
effect repairs, alterations, improvements or additions to the Leased Premises,
the Building and the Lands or any of them or to preserve any of them from injury
or damage, and no such entry or work shall constitute an eviction of the Tenant
in whole or in part and the rent reserved shall not abate while such work is
being carried out.
13. LANDLORD MAY SHOW LEASED PREMISES
13.1 The Landlord or its agents shall have the right at all reasonable times to
enter the Leased Premises to examine them and to show them to prospective
purchasers, lessees, or mortgagees and during the six months prior to the
expiration of the Term may place on the Leased Premises the usual notices to let
or for sale which notices the Tenant shall permit to remain thereon without
molestation.
14. LANDLORD MAY ENTER FORCIBLY
14.1 If the Tenant shall not be personally present to open and permit entry to
the Leased Premises at any time, when for any reason an entry therein shall be
necessary or permissible pursuant to Clauses 12 or 13, or any other clause of
this Lease, the Landlord, its agents, employees or contractors may enter the
Leased Premises by a master key or forcibly without rendering the Landlord or
such agents, employees or contractors liable therefor and without in any manner
affecting the obligations or covenants of the Tenant herein, and the Tenant
shall not be entitled to compensation for any inconvenience, nuisance or
discomfort or for any damage or injury to property or persons in the Leased
Premises occasioned by any such entry or by any work done in connection with
such entry.
15. SURRENDER OF LEASED PREMISES
15.1 At the end or sooner determination of the Term, the Tenant shall surrender
and yield up to the Landlord the Leased Premises in the same state of repair as
they were at the commencement of the Term, reasonable wear and tear only
excepted.
16. REMOVAL OF FIXTURES
16.1 All alterations, additions, decorations and improvements made by the Tenant
to the Leased Premises, other than the Tenant's trade fixtures, shall
immediately become the property of the Landlord without compensation therefor to
the Tenant and shall not be removed from the Leased Premises either during or at
the end or sooner determination of the Term except that:
(a) the Tenant may, if not in default, remove its trade fixtures;
and
<PAGE> 14
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(b) the Tenant shall, at the end or sooner determination of the
Term, remove such of the trade fixtures, alterations, additions,
decorations and improvements as the Landlord may require; and
(c) in the case of every such removal, the Tenant shall repair any
damage to the Leased Premises and the Common Areas caused by the
installation and removal of any such trade fixtures,
alterations, additions, decorations and improvements, and the
cost of all such removals and repairs shall be borne by the
Tenant.
16.2 If the Tenant does not remove as requested by the Landlord under
Clause 16.1(b), then the Landlord may, but shall not be obliged to, remove such
items and the Tenant shall pay on demand the Landlord's costs of removal plus an
administration charge of twenty per cent (20%) of the cost of removal.
16.3 The Tenant shall not, without the prior written consent of the Landlord,
mortgage, charge or transfer any of its trade fixtures, alterations, additions,
decorations and improvements, and any purported mortgage, charge or transfer of
the said items without the prior written consent of the Landlord shall be of no
effect against the Landlord.
17. CONDITION OF LEASED PREMISES
17.1 The Tenant agrees that it has leased the Leased Premises after examining
them and that they are at the date of this Lease in a good state of repair and
suitable for the intended use and business of the Tenant.
18. NO REPRESENTATIONS
18.1 The Tenant agrees that no representations, warranties or conditions have
been made other than those expressed herein, and that no agreement collateral
hereto shall be binding upon the Landlord unless in writing and signed on behalf
of the Landlord.
19. SUBORDINATION
19.1 This Lease and all of the rights of the Tenant hereunder are, and shall at
all times be, subject and subordinate to any and all mortgages, trust deeds and
debentures, now or hereafter in force or registered against the Lands and
improvements thereto, and all renewals, extensions and modifications thereof and
all advances of money made thereunder. The Tenant covenants to execute in
registrable form immediately on request from time to time, any assurances that
the Landlord may require to confirm this subordination and will if requested by
the Landlord attorn to the holder of any such mortgages, trust deeds and
debentures.
20. DAMAGE OR DESTRUCTION
20.1 If the Leased Premises are damaged by fire or other casualty then:
<PAGE> 15
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(a) the basic rent under Clause 3 (but not sums payable hereunder as
additional rent) shall be abated in whole or in part in the
proportion that the area of the untenantable or non-useable
portion of the Leased Premises is to the Tenant's Rentable Area
until such damage is repaired provided that there shall be no
abatement for time required to repair or replace the Tenant's
trade fixtures or the alterations, additions, decorations and
improvements made to the Leased Premises by the Tenant which is
in excess of the time required to make other necessary repairs
or replacements;
(b) subject to the provisions of Clause 21, the damage to the Leased
Premises shall be repaired by the Landlord with reasonable
diligence but the cost of the repairs and replacements of the
Tenant's trade fixtures and of the alterations, additions,
decorations and improvements made to the Leased Premises by the
Tenant shall be borne by the Tenant.
21. DESTRUCTION OF LEASED PREMISES OR BUILDING
21.1 If more than thirty per cent (30%) of the Leased Premises and the Building,
or either of them, are so damaged by fire or other casualty that the Landlord
decides not to restore them or is unable to restore them within one hundred
eighty (180) days from the date of damage, the Landlord shall within forty-five
(45) days after the fire or other casualty give to the Tenant a notice in
writing of such decision, and thereupon the Term of this Lease shall end, and
the Tenant shall vacate the Leased Premises and surrender them to the Landlord,
but if the Leased Premises are untenantable during such period the Tenant's
liability for rent shall cease as of the day following the fire or other
casualty.
22. DEFAULT OF TENANT
22.1 If and whenever the rent hereby reserved or any part thereof shall not be
paid on the day appointed for payment thereof, whether lawfully demanded or not,
or in case of breach of non-observance or non-performance of any of the
covenants, agreements, provisos and conditions on the part of the Tenant to be
kept, observed or performed, or in case the Leased Premises shall be vacated or
remain unoccupied for fifteen (15) days or in case the Term shall be taken in
execution or attachment for any cause whatever, then and in every such case, it
shall be lawful for the Landlord thereafter to enter into and upon the Leased
Premises or any part thereof in the name of the whole and the same to have
again, repossess and enjoy as of its former estate, anything in this Lease
contained to the contrary notwithstanding other than the proviso to this Clause
22. Provided that the Landlord shall not at any time have the right to re-enter
and forfeit this Lease by reason of the Tenant's default in payment of the rent
reserved by this Lease or by reason of the failure of the Tenant to comply with
any of its obligations under this Lease, unless and until the Landlord shall
have given to the Tenant at least five (5) days written notice of its intention
so to do and setting forth the default complained of and the Tenant shall have
the right during such five (5) days to cure any such default in payment of rent
or cure any default of the Tenant's obligations, as the case may be.
<PAGE> 16
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23. BANKRUPTCY
23.1 In case, without the written consent of the Landlord, the Leased Premises
or any part thereof shall be used by any other person than the Tenant or for any
other purpose than that for which the same were let or in case the Term or any
of the goods and chattels of the Tenant shall be at any time seized in execution
or attachment by a creditor of the Tenant or if the Tenant or the indemnitor of
the Tenant's obligations under this Lease makes any assignment for the benefit
of creditors or any bulk sale or becomes bankrupt or insolvent or takes the
benefit of any Act now or hereafter in force for bankrupt or insolvent debtors,
or, if the Tenant is a corporation and any order shall be made for the
winding-up of the Tenant, or other termination of the corporate existence of the
Tenant then in any such case this Lease shall at the option of the Landlord
cease and terminate and the Term shall immediately become forfeited and void and
the then current month's rent and the next ensuing three months rent shall
immediately become due and be paid and the Landlord may re-enter and take
possession of the Leased Premises as though the Tenant or other occupant or
occupants of the Leased Premises was or were holding over after the expiration
of the Term without any right whatever, and in such event Clause 25 shall not
apply.
24. DISTRESS
24.1 The Landlord shall have the right to distrain for rent in arrears against
the goods and chattels of the Tenant and may use such force as may be necessary
for that purpose and for gaining admittance to the Leased Premises without being
liable to any action in respect thereof, or for any loss or damage occasioned
thereby and the Tenant hereby expressly releases the Landlord, its employees and
agents for all actions, proceedings, claims or demands whatsoever for or on
account of or in respect of any forcible entry or any loss or damage sustained
by the Tenant in connection therewith. The Tenant hereby waives and renounces
the benefit of any present or future statute taking away or limiting the
Landlord's right of distress, and covenants and agrees that notwithstanding any
such statute none of the goods and chattels of the Tenant on the Leased Premises
at any time during the Term shall be exempt from levy by distress for rent in
arrears.
25. RIGHT OF RE-ENTRY
25.1 The Tenant covenants and agrees that on the Landlord's becoming entitled to
re-enter upon the Leased Premises under any of the provisions of this Lease,
the Landlord in addition to all other rights shall have the right to enter the
Leased Premises as the agent of the Tenant either by force or otherwise, without
being liable for any prosecution therefor and to relet the Leased Premises as
the agent of the Tenant, and to receive the rent therefor, and as the agent of
the Tenant to take possession of any furniture or other property on the Leased
Premises and to sell the same at public or private sale without notice and to
apply the proceeds of such sale and any rent derived from reletting the Leased
Premises upon account of the rent under this Lease, and the Tenant shall be
liable to the Landlord for the deficiency, if any.
<PAGE> 17
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26. RIGHT OF TERMINATION
26.1 The Tenant covenants and agrees that on the Landlord's becoming entitled to
re-enter upon the Leased Premises under any of the provisions of this Lease,
the Landlord in addition to all other rights, shall have the right to terminate
this Lease and the Term by leaving upon the Leased Premises notice in writing of
its intention so to do, and thereupon the rent shall be computed, apportioned
and paid in full to the date of such termination and any other payments for
which the Tenant is liable under this Lease shall be paid and the Tenant shall
immediately deliver up possession of the Leased Premises to the Landlord, and
the Landlord may re-enter and take possession of the same.
27. NON-WAIVER
27.1 No condoning, excusing or overlooking by the Landlord of any default,
breach or non-observance by the Tenant at any time or times in respect of any
covenant, proviso or condition herein contained shall operate as a waiver of the
Landlord's rights hereunder in respect of any continuing or subsequent default,
breach or non-observance, and no waiver shall be inferred from or implied by
anything done or omitted by the Landlord save only express waiver in writing.
All rights and remedies of the Landlord in this Lease contained shall be
cumulative and alternative.
28. OVERHOLDING
28.1 If the Tenant shall continue to occupy the Leased Premises after the
expiration of this Lease with or without the consent of the Landlord, and
without any further written agreement, the Tenant shall be a monthly tenant on
the terms and conditions herein set out except as to length of tenancy and
further except that the rent shall be an amount per month equal to one hundred
fifty per cent (150%) of the monthly instalments payable on account of rent
pursuant to Clause 3.
29, RECOVERY OF ADJUSTMENT
29.1 The Landlord in addition to all other rights or remedies, shall have the
same rights and remedies in the event of default by the Tenant in payment of any
amount payable by the Tenant pursuant to any clause of this Lease, as the
Landlord would have in the case of default in payment of rent.
30. INTEREST ON RENT IN ARREARS
30.1 Any instalment of rent not paid on the due date shall, without prejudice to
any other rights and remedies of the Landlord arising from such breach, bear
interest from such due date at the rate of twenty per cent (20%) per annum
until paid.
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31. ADDITIONAL RENT
31.1 Without prejudice to any other rights and remedies of the Landlord, any
money payable by the Tenant to the Landlord hereunder in addition to the basic
rent referred to in Clause 3 of this Lease shall be deemed to be rent and, with
interest at the rate of twenty per cent (20%) per annum thereon from the date
the Landlord shall have demanded payment of the same from the Tenant, shall be
paid as additional rent and shall be collectible as rent and unless otherwise
provided in this Lease shall be payable with the next ensuing monthly instalment
of rent.
32. LANDLORD MAY CURE TENANT'S DEFAULT
32.1 If the Tenant shall fail to perform or cause to be performed each and every
of the covenants, agreements and obligations of the Tenant hereunder, the
Landlord shall have the right (but shall not be obligated) to perform or cause
to be performed the same and all payments, expenses, costs and levies incurred
or paid by the Landlord in respect thereof shall be included in Direct Costs
together with an administration fee of twenty per cent (20%) of the total of
such costs and paid to the Landlord immediately on demand.
33. REMEDIES CUMULATIVE
33.1 No remedy conferred upon or reserved to the Landlord herein, by statute or
otherwise, shall be considered exclusive of any other remedy, but the same shall
be cumulative and shall be in addition to every other remedy available to the
Landlord and all such remedies and powers of the Landlord may be exercised
concurrently and from time to time and as often as occasion may be deemed
expedient by the Landlord.
33.2 No right or remedy provided for the Landlord herein shall preclude or be
deemed or construed to preclude the Landlord from exercising any other right or
remedy provided or implied by law, each such right and remedy being hereby
reserved to the Landlord.
34. SUBDIVISION, STRATIFICATION
34.1 The Landlord may subdivide or stratify the Lands some time during the Term
or the renewal. The Tenant agrees to consent to any such subdivision and/or
stratification. The parties agree to sign all such further documents as may be
necessary to allow any such subdivision and/or stratification to be completed,
including any necessary modifications to the within Lease to reflect the revised
legal status of the Lands (which modification shall include the Tenant's
agreement to comply with all of the bylaws, rules and regulations of the Strata
Corporation as set from time to time).
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35. RENEWAL
35.1 If the Tenant duly and regularly pays the rent hereby reserved and observes
and performs all the covenants and agreements herein contained on the part of
the Tenant to be paid, observed and performed, the Landlord upon written request
by the Tenant delivered not less than six months before the expiration of the
Term, shall grant to the Tenant a renewal of this Lease for a further period of
five (5) years upon the same terms, covenants and conditions as are herein
contained except as to rent and except that there shall be no further right of
renewal. The rent for such renewal term shall be determined by agreement, and
failing agreement by on or before the 30th day prior to the start of the renewal
term, by arbitration before a single arbitrator in accordance with the
provisions of the Commercial Arbitration Act of British Columbia then in force
such single arbitrator to be appointed by agreement, and failing agreement, in
accordance with the provisions of the Commercial Arbitration Act of British
Columbia then in force provided that the monthly rent for the renewal term shall
not be less than the rent for the last month of the immediately preceding term.
This provision shall be binding on the arbitrator.
36. NOTICE AND PAYMENTS
36.1 Any and all payments to be made by the Tenant to the Landlord as provided
in this Lease shall be payable at the address of the Landlord hereinbefore set
out or at such other address as the Landlord may from time to time notify the
Tenant. Any notice required or contemplated by any clause of this Lease shall be
given in writing enclosed in a sealed envelope addressed, in the case of notice
to the Landlord at it at its address hereinbefore set out, and in the case of
notice to the Tenant to it at the Leased Premises, and mailed in British
Columbia registered and postage prepaid. The time of giving and receipt of such
notice shall be conclusively deemed to be the second business day after the day
of such mailing. Such notice shall also be sufficiently given if and when the
same shall be delivered, in the case of notice to the Landlord, to an executive
officer of the Landlord, and in the case of notice to the Tenant, delivered to
the Leased Premises. Such notice, if delivered, shall be conclusively deemed to
have been given and received at the time of such delivery. If in this Lease two
or more persons are named as Tenant, such notice shall also be sufficiently
given if and when the same shall be delivered personally or mailed as aforesaid
to any one of such persons. Provided that either party may, by notice to the
other, from time to time designate another address in Canada to which notices
shall be addressed.
37. HEADINGS
37.1 The headings to the clauses of this Lease are for convenience only and
shall not constitute a part of this Lease.
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38. DEFINITIONS APPLY
38.1 The definitions of any words used in this Lease shall apply to such words
when used elsewhere in the clause in which they are defined and when used in any
other clause or place in this Lease whenever the context is consistent.
39. TIME OF THE ESSENCE
39.1 Time shall be of the essence of the Lease and every part hereof.
40. GOVERNING LAW
40.1 This Lease shall be construed and governed by the laws of the Province of
British Columbia.
41. SUCCESSORS
41.1 All rights and liabilities herein given to, or imposed upon, the respective
parties hereto shall extend to and bind the several respective permitted heirs,
executors, administrators, successors and assigns of the said parties. No
rights, however, shall enure to the benefit of any assignee of the Tenant
unless the assignment to such assignee has been approved by the Landlord in
writing as provided herein.
42. EXTENDED MEANINGS
42.1 Words importing the singular, masculine or neuter shall be construed as
meaning the plural, feminine or body corporate or politic and vice versa
wherever the context in this Lease or the Landlord so requires.
43. SEVERABILITY
43.1 It is agreed that should any clause, condition or term, or any part
thereof, contained in this Lease be unenforceable or prohibited by law or by any
present or future provincial or federal legislation, then such clause,
condition, term or part thereof, shall be amended, and is hereby amended, so as
to be in compliance with the said legislation or law but if such clause,
condition or term or part thereof cannot be amended so as to be in compliance
with any such legislation, then such clause, condition, term or part thereof is
severable from this Lease and all the rest of the clauses, terms and conditions
or parts thereof contained in this Lease shall remain binding on the parties.
<PAGE> 21
-21-
44. ENVIRONMENTAL MATTERS
44.1 DEFINITIONS. - For the purpose of this Clause:
(a) "Contaminants" means any pollutants, contaminants, deleterious
substances, underground or aboveground tanks, asbestos
materials, urea formaldehyde, dangerous substances or goods,
hazardous, corrosive or toxic substances, special waste or waste
of any kind or any other substance which is now or hereafter
prohibited, controlled or regulated under Environmental Laws;
and
(b) "Environmental Laws" means any statutes, laws, regulations,
orders, bylaws, standards, guidelines, permits and other lawful
requirements of any governmental authority having jurisdiction
over the Leased Premises now or hereafter in force relating in
any way to the environment, health, occupational health and
safety, product liability or transportation of dangerous goods,
including the principles of common law and equity.
44.2 TENANT'S COVENANTS AND INDEMNITY. - The Tenant covenants and agrees as
follows:
(a) not to use or permit to be used all or any part of the Leased
Premises for the sale, storage, manufacture, disposal, handling,
treatment, use or any other dealing with any Contaminants,
without the prior written consent of the Landlord, which may be
unreasonably withheld. Without limiting the generality of the
foregoing, the Tenant shall in no event use, and does not plan
or intend to use, the Leased Premises to dispose of, handle or
treat any Contaminants in a manner that, in whole or in part,
would cause the Leased Premises or any adjacent property to
become a contaminated site under Environmental Laws;
(b) to strictly comply, and cause any person for whom it is in law
responsible to comply, with all Environmental Laws regarding the
use and occupancy of the Leased Premises;
(c) to promptly provide to the Landlord a copy of any environmental
site investigation, assessment, audit or report relating to the
Leased Premises conducted by or for the Tenant at any time
before, during or after the Term (or any renewal thereof). The
Tenant shall, at its own cost at the Landlord's request from
time to time, obtain from an independent environmental
consultant approved by the Landlord an environmental site
investigation of the Leased Premises or an environmental audit
of the operations at the Leased Premises, the scope of which
shall be satisfactory to the Landlord and shall include any
additional investigations that the environmental consultant may
recommend;
<PAGE> 22
-22-
(d) to maintain all environmental site investigations, assessments,
audits and reports relating to the Leased Premises in strict
confidence and not to disclose their terms or existence to any
third party (including without limitation, any governmental
authority) except as required by law, to the Tenant's
professional advisers and lenders on a need to know basis or
with the prior written consent of the Landlord, which consent
may be unreasonably withheld;
(e) to promptly provide to the Landlord on request such written
authorizations as the Landlord may require from time to time to
make inquiries of any governmental authorities regarding the
Tenant's compliance with Environmental Laws;
(f) to promptly notify the Landlord in writing of any release of a
Contaminant or any other occurrence or condition at the Leased
Premises, or any adjacent property which could contaminate the
Leased Premises, or subject the Landlord or the Tenant to any
fines, penalties, orders, investigations or proceedings under
Environment Laws;
(g) on the expiry or earlier termination of this Lease or at any
time if requested by the Landlord or required by any
governmental authority pursuant to Environmental Laws, to remove
from the Leased Premises all Contaminants, and to remediate any
contamination of the Leased Premises or any adjacent property
resulting from Contaminants, in either case brought onto, used
at or released from the Leased Premises by the Tenant or any
person for whom it is in law responsible. The Tenant shall
perform these obligations promptly at its own cost and in
accordance with Environmental Laws. All such Contaminants shall
remain the property of the Tenant, notwithstanding any rule of
law or other provision of this Lease to the contrary and
notwithstanding the degree of their affixation to the Leased
Premises; and
(h) to indemnify the Landlord and its directors, officers,
shareholders, employees, agents, successors and assigns, from
any and all liabilities, actions, damages, claims, remediation
cost recovery claims, losses, costs, orders, fines, penalties
and expenses whatsoever (including all consulting and legal fees
and expenses on a solicitor-client basis and the cost of
remediation of the Leased Premises and any adjacent property
arising from or in connection with:
(i) any breach of or non-compliance with the provisions of
this Clause by the Tenant; or
(ii) any release or alleged release of any Contaminants at or
from the Leased Premises related to or as a result of
the use and occupation of the Leased Premises or any act
or omission of the Tenant or any person for whom it is
in law responsible.
<PAGE> 23
-23-
The obligations of the Tenant under this Clause shall survive the expiry or
earlier termination of this Lease. The obligations of the Tenant under this
Clause are in addition to, and shall not limit, the obligations of the Tenant
contained in other provisions of this Lease.
IN WITNESS WHEREOF the parties hereto have hereunto executed this Lease
as a valid and binding act as of the day and year first before written.
The Corporate Seal of INTRACEL )
CORPORATION was hereunto affixed in the )
presence of: )
)
- ------------------------------- ) (C/S)
Authorized Signatory )
)
- ------------------------------- )
Authorized Signatory )
The Corporate Seal of P.K PROJECTS )
LTD. was hereunto affixed in the )
presence of: )
[SIG] )
- ------------------------------- ) (C/S)
Authorized Signatory )
<PAGE> 24
THIS INDEMNITY AGREEMENT dated for reference the 1st day of February, 1998.
BETWEEN:
P.K PROJECTS LTD., a British Columbia Company with an
office at 1203 - 20800 Westminster Highway, Richmond,
B.C., V6V 2W3
(hereinafter referred to as the "Landlord")
OF THE FIRST PART
AND:
BARTELS, INC., a company incorporated under the laws of
the State of Washington, U.S.A., with an office at 1871
NW Gilman Boulevard, Issaqua, Washington, 98027
(hereinafter referred to as the "Indemnitor")
OF THE SECOND PART
In order to induce the Landlord to enter into the lease (the "Lease")
dated the 1st day of February, 1998, and made between the Landlord and INTRACEL
CORPORATION as Tenant, and for other good and valuable consideration, the
receipt and sufficiency whereof is hereby acknowledged, the Indemnitor hereby
makes the following indemnity and agreement (the "Indemnity") with and in favour
of the Landlord:
1. The Indemnitor hereby agrees with the Landlord that at all times during the
Term and any extension or renewal of the Lease, the Indemnitor shall:
(a) make due and punctual payment of all rent, moneys, charges and
other amounts of any kind whatsoever payable under the Lease by
the Tenant whether to the Landlord or otherwise and whether the
Lease has been disaffirmed or disclaimed;
<PAGE> 25
-2-
(b) effect prompt and complete performance of all of the terms,
covenants and conditions contained in the Lease on the part of
the Tenant therein to be kept, observed and performed; and
(c) promptly indemnify and save harmless the Landlord from and
against any claims arising out of any failure by the Tenant to
pay the rent, moneys, charges or other amounts due under the
Lease or resulting from any failure by the Tenant to observe and
perform any of the terms, covenants and conditions in the Lease.
2. The Indemnitor hereby expressly acknowledges and agrees that this Indemnity
is absolute and unconditional and the obligations of the Indemnitor shall not be
released, discharged, mitigated, impaired or affected by:
(a) any extension of time, indulgences or modifications which the
Landlord extends to or makes with the Tenant in respect of the
performance of any of the obligations of the Tenant under the
Lease;
(b) any waiver by or failure of the Landlord to enforce any of the
terms, covenants and conditions contained in the Lease;
(c) any transfer of the Lease by the Tenant or by any transferee or
by any trustee, receiver or liquidator;
(d) any consent which the Landlord gives to any such transfer;
(e) any relocation of the Leased Premises or any changes to the
Lease resulting therefrom;
(f) any amendment or modification to the Lease;
<PAGE> 26
-3-
(g) any waiver by the Tenant or any transferee of any of its rights
under the Lease;
(h) the expiration or termination of the Lease; or
(i) any overholding by the Tenant of the Leased Premises or any part
thereof.
3. The Indemnitor hereby expressly waives notice of the acceptance of this
Indemnity and all notice of non-performance, non-payment or non-observance on
the part of the Tenant of the terms, covenants and conditions in the Lease.
Without limiting the generality of the foregoing, any notice which the Landlord
desires to give to the Indemnitor shall be sufficiently given if delivered in
person to the Indemnitor or if mailed by prepaid registered or certified post
addressed to the Indemnitor at the Leased Premises, and every such notice shall
be deemed to have been given on the day it was delivered in person or, if
mailed, seventy-two (72) hours after it was mailed. The Indemnitor may designate
by notice in writing a substitute address for that set forth above and
thereafter notices shall be directed to such substitute address. If two or more
persons are named as Indemnitor any notice given hereunder or under the Lease
shall be sufficiently given if delivered or mailed in the foregoing manner to
any one of such persons.
4. In the event of a default under the Lease or under this Indemnity, the
Indemnitor waives any right to require the Landlord to:
(a) proceed against the Tenant or pursue any rights or remedies
against the Tenant with respect to the Lease;
(b) proceed against or exhaust any security of the Tenant held by
the Landlord; or
(c) pursue any other remedy whatsoever in the Landlord's power.
<PAGE> 27
-4-
The Landlord shall have the right to enforce this Indemnity regardless of the
acceptance of additional security from the Tenant and regardless of any release
or discharge of the Tenant by the Landlord or by others or by operation of any
law.
5. Without limiting the generality of the foregoing, the liability of the
Indemnitor under this Indemnity shall not be and shall not be deemed to have
been waived, released, discharged, impaired or affected by reason of the release
or discharge of the Tenant in any receivership, bankruptcy, winding-up or other
creditor's proceedings or the rejection, disaffirmance or disclaimer of the
Lease in any proceeding and shall continue with respect to the periods prior
thereto and thereafter, for and with respect to the Term as if the Lease had not
been disaffirmed or disclaimed, and, in furtherance hereof, the Indemnitor
agrees, upon any such disaffirmance or disclaimer, that the Indemnitor shall, at
the option of the Landlord, become the Tenant of the Landlord upon the same
terms and conditions as are contained in the Lease, applied with the necessary
changes having been made, and the Indemnitor shall immediately execute any
documentation (prepared by the Landlord at the Indemnitor's expense) that the
Landlord requires in confirmation thereof. The liability of the Indemnitor shall
not be affected by any repossession of the Leased Premises by the Landlord,
provided, however, that the net payments received by the Landlord after
deducting all costs and expenses of repossession and reletting the Leased
Premises shall be credited from time to time by the Landlord against the
indebtedness of the Indemnitor hereunder and the Indemnitor shall pay any
balance owing to the Landlord from time to time immediately on demand.
6. No action or proceeding brought or instituted under this Indemnity and no
recovery in pursuance thereof shall be a bar or defense to any further action or
proceeding which may be brought under this Indemnity by reason of any further
default hereunder or in the performance and observance of the terms, covenants
and conditions in the Lease.
7. No modification of this Indemnity shall be effective unless it is in writing
and is executed by both the Indemnitor and the Landlord.
<PAGE> 28
-5-
8. The Indemnitor shall, without limiting the generality of the foregoing, be
bound by this Indemnity in the same manner as though the Indemnitor were the
Tenant named in the Lease. The Indemnitor acknowledges that it has received the
Lease and is familiar with the terms, covenants and conditions contained herein.
9. If the Indemnitor is a corporation, it shall not change the effective voting
control thereof from that existing as of the date of commencement of the Term of
the Lease and, if the Indemnitor is a partnership, joint venture or co-tenancy,
it shall not change the persons comprising the partnership, joint venture or
co-tenancy as of the date of commencement of the Term of the Lease without in
either case obtaining the Landlord's prior written consent in each and every
instance, which consent may be unreasonably withheld.
10. If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) execute this Indemnity
as Indemnitor, the liability of each such individual, corporation, partnership
or other business association hereunder is joint and several. In like manner, if
the Indemnitor named in this Indemnity is a partnership or other business
association, the members of which are, by virtue to statutory or general law,
subject to personal liability, the liability of each such member is joint and
several.
11. All of the terms, covenants and conditions of this Indemnity extend to and
are binding on the Indemnitor, its heirs, executors, administrators, successors
and assigns, as the case may be, and enure to the benefit of and may be enforced
by the Landlord, its successors and assigns, as the case may be, and any
mortgagee of the Leased Premises.
12. The expressions "Landlord", "Tenant", "Term", "Leased Premises" and other
terms or expressions where used in this Indemnity, respectively, have the same
meaning as in the Lease.
13. This Indemnity shall be construed in accordance with the laws of the
Province of British Columbia.
<PAGE> 29
-6-
14. Wherever in this Indemnity reference is made to either the Landlord or the
Tenant, the reference is deemed to apply also to the respective heirs,
executors, administrators, successors and permitted assigns of the Tenant and to
the successors and assigns of the Landlord. Any assignment by the Landlord of
any of its interest in the Lease operates automatically as an assignment to such
assignee of the benefit of this Indemnity.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals the day
and year first above written.
The Corporate Seal of P.K. PROJECTS )
LTD. was hereunto affixed in the presence of: )
) (C/S)
)
[SIG] )
- ------------------------------- )
Authorized Signatory )
The Corporate Seal of BARTELS INC. was )
hereunto affixed in the presence of: )
)
Signed by : Simon McKenzie )
- ------------------------------- )
Authorized Signatory ) (C/S)
)
)
- ------------------------------- )
Authorized Signatory )
<PAGE> 30
[FLOOR PLAN]
<PAGE> 31
SCHEDULE "A"
[PLAN]
<PAGE> 32
SCHEDULE "B"
[COMMERCE COURSE LOGO]
SIGNAGE SPECIFICATIONS
All signage applied to the exterior of the buildings shall be located within
designated spots as shown on the elevation plans attached hereto and referred
to as drawings SP1001, SP1002, SP2001, and SP2002.
Advertisers shall pay to the Landlord a deposit of $500.00 which shall be
refundable upon having removed the sign and repaired the building face to its
original state upon vacating.
GROUND FLOOR ADVERTISING
1. All signage that is applied in spaces that are designated for ground floor
signage, shall be constructed from 1.5 in. thick high density Styrofoam
letters painted with semi-gloss exterior enamel. No backboards or
fluorescent light box signs will be allowed.
2. The color of signs shall be General Paint #424-7A.
3. The height of the sign shall be a maximum 24 inches plus or minus 1 inch.
Some variations may be allowed to accommodate corporate logos.
4. The Styrofoam letters shall be fastened to the concrete surface with latex
silicone.
5. All signage must be approved at the design stage by the Landlord before
going into production.
6. No signage will be allowed in the windows.
7. The corporate name may be applied to the exterior of the glass storefront
door and the rear door of the premises in 3 in. high white vinyl lettering,
however, all lettering must be professionally prepared and applied.
SIGNAGE ABOVE THE GROUND FLOOR
Signage above the ground floor shall be illuminated plexi face neon channel
lettering. The sign shall be a single color and may match the corporation's
color. Corporations may only advertise on these locations if it rents or owns
more than 20,000 SF.
1
<PAGE> 33
Only three (3) signs will be allowed above the ground floor on each building
and the locations are described as follows:
1. One sign above the third floor level on the west side of the buildings.
2. One sign above the second floor level at the center of building ONE on south
side and one sign above the second floor level at the center of building TWO
on the north side.
3. One sign above the second floor level on the east side of both buildings.
DIRECTORIES
A free standing directory will be installed at the street entrance of each
building. A space will be provided on the directory for one company name with a
corresponding unit number for every premises.
A lobby directory will be installed. A space will be provided on the directory
for one company name with a corresponding unit number for every premises.
INTERIOR SUITE DOORS
1. All Interior suite doors will have the suite numbers posted in 3 inch high
polished aluminum (Font: swiss black) numbers.
2. Corporate names may be posted on the doors in matching polished aluminum
(Font: swiss black) lettering.
2
<PAGE> 34
[GRAPHIC -- BLUEPRINT]
<PAGE> 35
[GRAPHIC -- BLUEPRINT]
<PAGE> 36
[Commerce Logo]
SCHEDULE "C"
13351 & 13551 Commerce Parkway
Richmond, BC
RULES AND REGULATIONS
In addition to the obligations and covenant of a tenant as set out in the
lease agreement, the Landlord may make rules and regulations it considers
necessary or desirable for the enjoyment, safety, and cleanliness of the Common
Area. Accordingly the owners of Commerce Court International have made the
following Rules and Regulations:
1. SIGNAGE
a) The Tenant shall not erect, install or affix any signs to the exterior of
the building without the prior written consent of the Landlord, which
consent shall only be granted if the proposed signage is substantially in
accordance with the specifications as set out in Schedule "B".
b) The Tenant shall forthwith upon vacating the leased premises pay for the
removal of any signs which have been erected, installed or affixed to the
exterior of the building and pay for the repair and restoration the
exterior surface to its original state including (if required) the
repainting of the same.
2. GARBAGE DISPOSAL
a) The Tenant shall not place, deposit or leave rubbish, scrap, refuse,
garbage, pallets, ashes or any other loose or objectionable material in
or upon the Common Area.
b) All garbage shall be disposed of in the garbage containers provided by
the Landlord. If a garbage container is full then the Tenant shall retain
any garbage he may wish to dispose of within his unit until there is
sufficient room in the garbage container to receive the garbage.
c) The Landlord will supply a separation garbage container for cardboard.
The cardboard will be recycled and accordingly must not be contaminated
with any other garbage. All cardboard must be flattened before it is
deposited in the cardboard garbage container.
d) Pallets, barrels, lumber and drywall shall not be placed in the common
garbage containers for disposal. Such items shall be removed from the
development by the tenant or their subcontractors or workmen and be
disposed of by some means other than the garbage containers provided by
the Landlord.
1
<PAGE> 37
[COMMERCE LOGO]
3. WINDOW COVERINGS
All window coverings shall be vertical venetian blinds and shall be
Hunter Douglas model "Harvest" #V11165-010 and the color "Smoke" in
order to match the exterior color scheme of the development.
4. PARKING
a) Each Tenant will be assigned parking stalls by the Landlord in
agreement with the terms of the lease. In addition to the aforesaid
parking stalls each unit with high bay warehousing will have one
loading bay.
b) There will be parking stalls marked as visitor stalls and stalls marked
as handicap stalls. A Tenant shall not permit its servants or agents to
park their motor vehicles on the Common Area except in such parking
stalls as have been designated for the exclusive use of their
respective unit.
5. AUTOMOTIVE REPAIR
a) Automotive repair shops will not be permitted in the complex. Some light
industrial services such as electronic installations in automobiles may
be allowed.
b) The mechanical repair of vehicles and/or the storage of vehicles to be
repaired, will not be allowed in any Common Areas.
6. OUTSIDE APPEARANCES AND ALTERATIONS
a) No structural alterations shall be made to either the interior or the
exterior of the buildings without the prior written consent of the
Landlord and/or without having obtained a valid building permit from
the City of Richmond.
b) No changes whatsoever shall be made to the exterior of the buildings
without the prior written consent of the Landlord.
We hereby acknowledge receipt of a copy of the aforesaid Rules and Regulations.
Dated at______________, British Columbia this ___ day of _____________, 19___
Acknowledged by: ____________________________ Position: _______________________
Tenant
2
<PAGE> 38
THIS INDEMNITY AGREEMENT dated for reference the 1st day of February, 1998.
BETWEEN:
P.K. PROJECTS LTD., a British Columbia Company with an office at
1203 - 20800 Westminster Highway, Richmond, B.C., V6V 2W3
(hereinafter referred to as the "Landlord")
OF THE FIRST PART
AND:
BARTELS, INC., a company incorporated under the laws of the State of
Washington, U.S.A., with an office at 1871 NW Gilman Boulevard,
Issaqua, Washington, 98027
(hereinafter referred to as the "Indemnitor")
OF THE SECOND PART
In order to induce the Landlord to enter into the lease (the "Lease")
dated the 1st day of February, 1998, and made between the Landlord and INTRACEL
CORPORATION as Tenant, and for other good and valuable consideration, the
receipt and sufficiency whereof is hereby acknowledged, the Indemnitor hereby
makes the following indemnity and agreement (the "Indemnity") with and in favour
of the Landlord:
1. The Indemnitor hereby agrees with the Landlord that at all times
during the Term and any extension or renewal of the Lease, the Indemnitor shall:
(a) make due and punctual payment of all rent, moneys, charges and other
amounts of any kind whatsoever payable under the Lease by the Tenant
whether to the Landlord or otherwise and whether the Lease has been
disaffirmed or disclaimed;
<PAGE> 39
-2-
(b) effect prompt and complete performance of all of the terms,
covenants and conditions contained in the Lease on the part of the Tenant
therein to be kept, observed and performed; and
(c) promptly indemnify and save harmless the Landlord from and against
any claim arising out of any failure by the Tenant to pay the rent, moneys,
charges or other amounts due under the Lease or resulting from any failure by
the Tenant to observe and perform any of the terms, covenants and conditions in
the Lease.
2. The Indemnitor hereby expressly acknowledges and agrees that this
Indemnity is absolute and unconditional and the obligations of the Indemnitor
shall not be released, discharged, mitigated, impaired or affected by:
(a) any extension of time, indulgences or modifications which the
Landlord extends to or makes with the Tenant in respect of the performance of
any of the obligations of the Tenant under the Lease;
(b) any waiver by or failure of the Landlord to enforce any of the
terms, covenants and conditions contained in the Lease;
(c) any transfer of the Lease by the Tenant or by any transferee or by
any trustee, receiver or liquidator;
(d) any consent which the Landlord gives to any such transfer;
(e) any relocation of the Leased Premises or any changes to the Lease
resulting therefrom;
(f) any amendment or modification to the Lease;
<PAGE> 40
-3-
(g) any waiver by the Tenant or any transferee of any of its rights under
the Lease;
(h) the expiration or termination of the Lease; or
(i) any overholding by the Tenant of the Leased Premises or any part
thereof.
3. The Indemnitor hereby expressly waives notice of the acceptance of
this Indemnity and all notice of non-performance, non-payment or non-observance
on the part of the Tenant of the terms, covenants and conditions in the Lease.
Without limiting the generality of the foregoing, any notice which the Landlord
desires to give to the Indemnitor shall be sufficiently given if delivered in
person to the Indemnitor or if mailed by prepaid registered or certified post
addressed to the Indemnitor at the Leased Premises, and every such notice shall
be deemed to have been given on the day it was delivered in person or, if
mailed, seventy-two (72) hours after it was mailed. The Indemnitor may designate
by notice in writing a substitute address for that set forth above and
thereafter notices shall be directed to such substitute address. If two or more
persons are named as Indemnitor any notice given hereunder or under the Lease
shall be sufficiently given if delivered or mailed in the foregoing manner to
any one of such persons.
4. In the event of a default under the Lease or under this Indemnity, the
Indemnitor waives any right to require the Landlord to:
(a) proceed against the Tenant or pursue any rights or remedies against
the Tenant with respect to the Lease;
(b) proceed against or exhaust any security of the Tenant held by the
Landlord; or
(c) pursue any other remedy whatsoever in the Landlord's power.
<PAGE> 41
-4-
The Landlord shall have the right to enforce this Indemnity regardless of the
acceptance of additional security from the Tenant and regardless of any release
or discharge of the Tenant by the Landlord or by others or by operation of any
law.
5. Without limiting the generality of the foregoing, the liability of the
Indemnitor under this Indemnity shall not be and shall not be deemed to have
been waived, released, discharged, impaired or affected by reason of the
release or discharge of the Tenant in any receivership, bankruptcy, winding-up
or other creditor' proceedings or the rejection, disaffirmance or disclaimer of
the Lease in any proceeding and shall continue with respect to the periods
prior thereto and thereafter, for and with respect to the Term as if the Lease
had not been disaffirmed or disclaimed, and, in furtherance hereof, the
Indemnitor agrees, upon any such disaffirmance or disclaimer, that the
Indemnitor shall, at the option of the Landlord, become the Tenant of the
Landlord upon the same terms and conditions as are contained in the Lease,
applied with the necessary changes having been made, and the Indemnitor shall
immediately execute any documentation (prepared by the Landlord at the
Indemnitor's expense) that the Landlord requires in confirmation thereof. The
liability of the Indemnitor shall not be affected by any repossession of the
Leased Premises by the Landlord, provided, however, that the net payments
received by the Landlord after deducting all costs and expenses of repossession
and reletting the Leased Premises shall be credited from time to time by the
Landlord against the indebtedness of the Indemnitor hereunder and the
Indemnitor shall pay any balance owing to the Landlord from time to time
immediately on demand.
6. No action or proceeding brought or instituted under this Indemnity and no
recovery in pursuance thereof shall be a bar or defence to any further action
or proceeding which may be brought under this Indemnity by reason of any
further default hereunder or in the performance and observance of the terms,
covenants and conditions in the Lease.
7. No modification of this Indemnity shall be effective unless it is in
writing and is executed by both the Indemnitor and the Landlord.
<PAGE> 42
-5-
8. The Indemnitor shall, without limiting the generality of the foregoing,
be bound by this Indemnity in the same manner as though the Indemnitor were the
Tenant named in the Lease. The Indemnitor acknowledges that it has received the
Lease and is familiar with the terms, covenants and conditions contained herein.
9. If the Indemnitor is a corporation, is shall not change the effective
voting control thereof from that existing as of the date of commencement of the
Term of the Lease and, if the Indemnitor is a partnership, joint venture or
co-tenancy, it shall not change the persons comprising the partnership, joint
venture or co-tenancy as of the date of commencement of the Term of the Lease
without in either case obtaining the Landlord's prior written consent in each
and every instance, which consent may be unreasonably withheld.
10. If two or more individuals, corporations, partnerships or other
business associations (or any combination of two or more thereof) execute this
Indemnity as Indemnitor, the liability of each such individual, corporation,
partnership or other business association hereunder is joint and several. In
like manner, if the Indemnitor named in this Indemnity is a partnership or
other business association, the members of which are, by virtue to statutory or
general law, subject to personal liability, the liability of each such member
is joint and several.
11. All of the terms, covenants and conditions of this Indemnity extend to
and are binding on the Indemnitor, its heirs, executors, administrators,
successors and assigns, as the case may be, and enure to the benefit of and may
be enforced by the Landlord, its successors and assigns, as the case may be,
and any mortgagee of the Leased Premises.
12. The expressions "Landlord", "Tenant", "Term", "Leased Premises" and
other terms or expressions where used in this Indemnity, respectively, have the
same meaning as in the Lease.
13. This Indemnity shall be construed in accordance with the laws of the
Province of British Columbia.
<PAGE> 43
-6-
14. Wherever in this Indemnity reference is made to either the Landlord
or the Tenant, the reference is deemed to apply also the respective heirs,
executors, administrators, successors and permitted assigns of the Tenant and
to the successors and assigns of the Landlord. Any assignment by the Landlord
of any of its interest in the Lease operates automatically as an assignment to
such assignee of the benefit of this Indemnity.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals the day
and year first above written.
The Corporate Seal of P.K. PROJECTS )
LTD. was hereunto affixed in the presence of: )
)
) (C/S)
/s/ [SIG] )
- --------------------------------------------- )
Authorized Signatory )
The Corporate Seal of BARTELS INC. was )
hereunto affixed in the presence of: )
)
Signed by: Simon McKenzie )
- --------------------------------------------- )
Authorized Signatory ) (C/S)
)
- --------------------------------------------- )
Authorized Signatory )
<PAGE> 1
EXHIBIT 10.6
AGREEMENT AND PLAN OF REORGANIZATION
among
PERIMMUNE HOLDINGS, INC.
INTRACEL CORPORATION
and
INTRACEL ACQUISITION SUB, INC.
DATED AS OF NOVEMBER 26, 1997
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01 Definitions and Usage ......................................................8
ARTICLE II
THE MERGER
Section 2.01 The Merger ................................................................12
Section 2.02 Effects of the Merger .....................................................12
Section 2.03 Certificate of Incorporation and Bylaws ...................................12
Section 2.04 Directors and Officers ....................................................12
Section 2.05 Conversion ................................................................12
Section 2.06 Tax Consequences ..........................................................14
ARTICLE III
EXCHANGE OF SHARES
Section 3.01 Exchange of Certificates ..................................................14
Section 3.02 Stock Options .............................................................16
Section 3.03 Dissenting Shares .........................................................16
Section 3.04 Adjustments ...............................................................17
Section 3.05 Lost Certificates .........................................................17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01 Organization ..............................................................17
Section 4.02 Capitalization ............................................................17
Section 4.03 Authority Relative to This Agreement ......................................18
Section 4.04 Consents and Approvals; No Violations .....................................19
Section 4.05 Absence of Certain Changes ................................................19
Section 4.06 Financial Statements ......................................................20
Section 4.07 No Undisclosed Liabilities ................................................20
Section 4.08 No Default ................................................................20
Section 4.09 Litigation ................................................................20
Section 4.10 Compliance with Applicable Law ............................................20
Section 4.11 Taxes .....................................................................21
Section 4.12 ERISA .....................................................................21
Section 4.13 Title to Property .........................................................22
Section 4.14 Intellectual Property .....................................................23
Section 4.15 Interested Party Transactions .............................................24
Section 4.16 Insurance .................................................................24
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.17 Products ..................................................................25
Section 4.18 Change in Control .........................................................25
Section 4.19 Environmental, Health, and Safety .........................................25
Section 4.20 Employment and Labor Matters ..............................................26
Section 4.21 Contracts .................................................................27
Section 4.22 Predominant Customers .....................................................27
Section 4.23 Change in Customers or Vendors ............................................27
Section 4.24 Notes and Accounts Receivable .............................................27
Section 4.25 Questionable Payments .....................................................27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF INTRACEL
PARENT AND INTRACEL ACQUISITION SUB
Section 5.01 Organization ..............................................................28
Section 5.02 Capitalization ............................................................28
Section 5.03 Authority Relative to this Agreement ......................................29
Section 5.04 Consents and Approvals; No Violations .....................................30
Section 5.05 Financial Statements ......................................................30
Section 5.06 Absence of Certain Changes ................................................30
Section 5.07 No Undisclosed Liabilities ................................................31
Section 5.08 No Default ................................................................31
Section 5.09 Litigation ................................................................31
Section 5.10 Compliance with Applicable Law ............................................31
Section 5.11 Taxes .....................................................................32
Section 5.12 ERISA .....................................................................32
Section 5.13 Title to Property .........................................................33
Section 5.14 Intellectual Property .....................................................33
Section 5.15 Interested Party Transactions .............................................35
Section 5.16 Insurance .................................................................35
Section 5.17 Products ..................................................................35
Section 5.18 Interim Operations of Intracel Acquisition Sub ............................36
Section 5.19 Change in Control .........................................................36
Section 5.20 Environmental, Health, and Safety .........................................36
Section 5.21 Employment and Labor Matters ..............................................37
Section 5.22 Contracts .................................................................38
Section 5.23 Predominant Customers .....................................................38
Section 5.24 Change in Customers or Vendors ............................................38
Section 5.25 Notes and Accounts Receivable .............................................38
Section 5.26 Questionable Payments .....................................................38
ARTICLE VI
COVENANTS
Section 6.01 Covenants of the Company and Intracel Parent ..............................39
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
Section 6.02 Additional Covenants of the Company and Intracel Parent ...................41
Section 6.03 No Solicitation ...........................................................42
Section 6.04 Access to Information .....................................................43
Section 6.05 Stockholders Meetings .....................................................43
Section 6.06 Brokers or Finders ........................................................43
Section 6.07 Consents, Approvals and Filings ...........................................43
ARTICLE VII
CONDITIONS
Section 7.01 Conditions to Each Party's Obligation to Effect the Merger ................44
Section 7.02 Conditions of Obligations of Intracel Parent and Intracel Acquisition Sub..45
Section 7.03 Conditions of Obligations of the Company ..................................47
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 Termination ...............................................................50
Section 8.02 Effect of Termination .....................................................50
Section 8.03 Amendment .................................................................50
Section 8.04 Extension; Waiver .........................................................51
ARTICLE IX
POST CLOSING COVENANTS
ARTICLE X
MISCELLANEOUS
Section 10.01 Nonsurvival of Representations and Warranties .............................51
Section 10.02 Notices ...................................................................51
Section 10.03 Descriptive Headings ......................................................52
Section 10.04 Counterparts ..............................................................52
Section 10.05 Entire Agreement; Assignment ..............................................52
Section 10.06 Governing Law .............................................................52
Section 10.07 Specific Performance ......................................................52
Section 10.08 Expenses ..................................................................53
Section 10.09 Publicity .................................................................53
Section 10.10 Parties in Interest .......................................................53
</TABLE>
iii
<PAGE> 5
<TABLE>
EXHIBITS
<S> <C>
Exhibit 2.03(a) Amended and Restated Certificate of Incorporation of Surviving Corporation
Exhibit 2.03(b) Amended and Restated Certificate of Incorporation of Intracel Parent
Exhibit 2.03(c) Amended and Restated Bylaws of Surviving Corporation
Exhibit 2.03(d) Amended and Restated Bylaws of Intracel Parent
Exhibit B Hanna Letter
Exhibit C Shareholders Agreement
Exhibit D Registration Rights Agreements
</TABLE>
iv
<PAGE> 6
<TABLE>
COMPANY DISCLOSURE SCHEDULES
<S> <C>
Section 4.02 Capitalization of Company and Subsidiaries
Section 4.04 Consents and Approvals; No Violations
Section 4.05 Absence of Certain Changes
Section 4.07 No Undisclosed Liabilities
Section 4.08 No Default
Section 4.09 Litigation
Section 4.11 Taxes
Section 4.12 ERISA
Section 4.13 Title to Property
Section 4.14 Intellectual Property
Section 4.15 Interested Party Transactions
Section 4.17 Products
Section 4.18 Change in Control
Section 4.20 Employment and Labor Matters
Section 4.21 Contracts
Section 4.22 Predominant Customers
Section 4.23 Change in Customers or Vendors
Section 6.01 Covenants of the Company and Intracel Parent
</TABLE>
v
<PAGE> 7
<TABLE>
INTRACEL PARENT DISCLOSURE SCHEDULE
<S> <C>
Section 2.04 List of Directors and Officers of Intracel Acquisition Sub, the Surviving
Corporation and Intracel
Section 5.02(a) Capitalization
Section 5.02(b) Subsidiaries of Intracel Parent
Section 5.04 Consents and Approvals; No Violations
Section 5.05 Financial Statements
Section 5.06 Absence of Certain Changes
Section 5.07 No Undisclosed Liabilities
Section 5.08 No Default
Section 5.09 Litigation
Section 5.11 Taxes
Section 5.12(a) ERISA
Section 5.12(c) Unfunded ERISA Benefit Obligations
Section 5.12(d) Obligations for Retiree and Life Benefits
Section 5.13 Title to Property
Section 5.14(b) Intracel Parent Intellectual Property and Jurisdictions
Section 5.14(c) Non-Ordinary Intellectual Property Information
Section 5.14(d) Breach of Intellectual Property Agreements
Section 5.14(e) Intellectual Property Litigation
Section 5.14(f) Intracel Parent Persons Who Have Executed Intellectual Property Protection
and Assignment Agreements
Section 5.14(g) Undisclosed Uses of Confidential Information
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C>
Section 5.15 Interested Party Transactions
Section 5.17 Products
Section 5.19 Change in Control
Section 5.21 Employment and Labor Matters
Section 5.22 Contracts
Section 5.23 Predominant Customers
Section 5.24 Change in Customers or Vendors
Section 6.01 Covenants of the Company and Intracel Parent
</TABLE>
vii
<PAGE> 9
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of November 26, 1997, by and
among PerImmune Holdings, Inc., a Delaware corporation (the "COMPANY"), Intracel
Corporation, a Delaware corporation ("INTRACEL PARENT"), and Intracel
Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of
Intracel Parent ("INTRACEL ACQUISITION SUB").
RECITALS
A. The Boards of Directors of Intracel Parent, the Company and Intracel
Acquisition Sub believe it is in the best interests of their respective
companies and the shareholders of their respective companies that the Company
and Intracel Acquisition Sub combine into a single company through the statutory
merger of Intracel Acquisition Sub with and into the Company (the "MERGER") and,
in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
the Company capital stock, shall be converted into shares of Intracel Parent
capital stock, at the rate set forth herein.
C. Intracel Parent and Intracel Acquisition Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions and Usage. (a) For purposes of this Agreement:
"AFFILIATE" means, with respect to any person, any other person directly or
indirectly controlling, controlled by, or under common control with such person.
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
8
<PAGE> 10
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or waste.
"FDA" means the United States Food and Drug Administration and any
successor agency thereto.
"KNOWLEDGE" of any person which is not an individual means the knowledge of
such person's officers after reasonable inquiry.
"MATERIAL ADVERSE EFFECT" means, when used in connection with Intracel
Parent or the Company, any change, effect, event, occurrence or state of facts
that has had, or would reasonably be expected to have, a material adverse effect
on the business, operations, assets, liabilities, condition (financial or
otherwise) or results of operations of Intracel Parent and its subsidiaries,
taken as a whole, or the Company and its subsidiaries, taken as a whole as the
case may be.
"OFFICER" means, in the case of Intracel Parent or the Company, any
executive officer of Intracel Parent or the Company, as applicable, within the
meaning of Rule 3b-9 of the 1934 Act.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute thereto.
"SUBSIDIARY" means, with respect to any person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such persons.
A reference in this Agreement to any statute shall be to such statute as
amended from time to time, and to the rules and regulations promulgated
thereunder.
9
<PAGE> 11
(b) Each of the following terms is defined in the Sections set forth opposite
such term:
<TABLE>
<S> <C>
B-1 Conversion Ratio............................. 2.05(a)
B-2 Conversion Ratio............................. 2.05(a)
Certificates..................................... 3.01(b)
Certificate of Merger............................ 2.01
Closing Date..................................... 2.01
Common Conversion Ratio.......................... 2.05(a)
Company Balance Sheet............................ 4.06
Company Balance Sheet Date....................... 4.06
Company Benefit Plans............................ 4.12(a)
Company Common Stock............................. 2.05(a)
Company Disclosure Schedule...................... 4.02(a)
Company Dollar Threshold......................... 4.22
Company Financial Reports........................ 4.06
Company Intellectual Property.................... 4.14(a)
Company Permits.................................. 4.10
Company Primary Opinion.......................... 7.02(e)
Company Product.................................. 4.17(a)
Company Series A Preferred....................... 2.05(a)
Company Series B Preferred....................... 2.05(a)
Company Shares................................... 2.05(a)
Company Stock Option............................. 6.02(b)
Company Stock Option Plan........................ 3.02
Effective Time .................................. 2.01
ERISA ........................................... 4.12(a)
ERISA Affiliate.................................. 4.12(a)
Exchange Agent................................... 3.01(a)
GCL.............................................. 2.01
Governmental Entity.............................. 4.04
Incentive Stock Options.......................... 6.02(a)
Intracel Parent B-1 Preferred.................... 2.05(a)
Intracel Parent B-2 Preferred.................... 2.05(a)
Intracel Parent Balance Sheet.................... 5.05
Intracel Parent Balance Sheet Date 5.05
Intracel Parent Benefit Plans.................... 5.12
Intracel Parent Common Stock..................... 2.05(a)
Intracel Parent Disclosure Schedule 5.02(a)
Intracel Parent Financial Reports................ 5.05
Intracel Parent Permits.......................... 5.10
Intracel Parent Product.......................... 5.17(a)
Intracel Parent Shares........................... 2.05(a)
Intracel Parent Stock Plans...................... 5.02(a)
Intracel Primary Opinion......................... 7.03(e)
</TABLE>
10
<PAGE> 12
<TABLE>
<S> <C>
IRS.............................................. 4.12(a)
Merger Consideration ............................ 2.05(d)
Surviving Corporation ........................... 2.01
Taxes............................................ 4.11
Third Party Intellectual Property................ 4.14(b)
</TABLE>
11
<PAGE> 13
ARTICLE II
THE MERGER
Section 2.01 The Merger. Upon the terms and subject to the conditions hereof, as
promptly as practicable following the satisfaction or waiver of the conditions
set forth in Article VII hereof, but in no event later than two business days
thereafter, unless the parties shall otherwise agree, a certificate of merger
(the "CERTIFICATE OF MERGER") providing for the Merger shall be duly prepared,
executed and filed by the Company, as the surviving corporation (sometimes the
"SURVIVING CORPORATION"), in accordance with the relevant provisions of the
Delaware General Corporation Law (the "GCL") and the parties hereto shall take
any other actions required by law to make the Merger effective.
Following the Merger, the Company, with all its purposes, objects,
rights, privileges, powers and franchises, shall continue, and Intracel
Acquisition Sub shall cease to exist. The time the Merger becomes effective is
referred to herein as the "EFFECTIVE TIME" and the date on which the Effective
Time occurs is referred to as the "CLOSING DATE." Prior to the filing of the
Certificate of Merger, a closing shall take place at the offices of Morrison &
Foerster LLP, 1290 Avenue of the Americas, New York City, New York 10104.
Section 2.02 Effects of the Merger. The Merger shall have the effects set forth
in the GCL, this Agreement and the Certificate of Merger. As of the Effective
Time, the Surviving Corporation shall be a wholly owned subsidiary of Intracel
Parent.
Section 2.03 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of the Surviving Corporation and Intracel Parent shall be amended
and restated as set forth in Exhibit 2.03(a) and Exhibit 2.03(b), respectively.
The Bylaws of the Surviving Corporation and Intracel Parent shall be amended and
restated as set forth in Exhibit 2.03(c) and Exhibit 2.03(d), respectively.
Section 2.04 Directors and Officers. The directors and officers of Intracel
Acquisition Sub immediately prior to the Effective Time shall be the initial
directors and officers of the Surviving Corporation until their successors shall
have been duly elected or appointed and shall have been qualified or until their
earlier death, resignation or removal in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. Such directors and
officers, together with the officers of Intracel Parent immediately subsequent
to the Effective Time, are set forth in Section 2.04 hereto.
Section 2.05 Conversion. At the Effective Time, by virtue of the Merger and
without any action on the part of Intracel Parent, Intracel Acquisition Sub, the
Company or the holder of any of the following securities:
(a) Subject to Section 3.01(e), each issued and outstanding share of (i)
common stock, par value $.01 per share, of the Company ("COMPANY COMMON
STOCK") (other than shares to be cancelled in accordance with Section
2.05(b) hereof) shall be converted into the
12
<PAGE> 14
right to receive a number of fully paid and nonassessable shares of
Intracel Parent common stock, par value $.0001 per share ("INTRACEL
PARENT COMMON STOCK") equal to the Common Conversion Ratio (as
hereinafter defined), (ii) Series preferred stock, par value $.01 per
share, of the Company ("COMPANY SERIES A PREFERRED") (other than shares
to be cancelled in accordance with Section 2.05(b) hereof) shall be
converted into the right to receive a number of fully paid and
nonassessable shares of Intracel Parent preferred stock, Class B-1, par
value $.0001 per share ("INTRACEL PARENT B-1 PREFERRED") equal to the
B-1 Conversion Ratio (as hereinafter defined); and (iii) Series B
preferred stock, par value $.01 per share, of the Company ("COMPANY
SERIES B PREFERRED" and, together with the Company Common Stock and
Company Series A Preferred, the "COMPANY SHARES") (other than shares to
be cancelled in accordance with Section 2.05(b) hereof) shall be
converted into the right to receive a number of fully paid and
nonassessable shares of Intracel Parent preferred stock, Class B-2, par
value $.0001 per share ("INTRACEL PARENT B-2 PREFERRED" and, together
with the Intracel Parent Common Stock and Intracel Parent B-1 Preferred,
"INTRACEL PARENT SHARES") equal to the B-2 Conversion Ratio (as
hereinafter defined). For purposes of the foregoing, the (i) "COMMON
CONVERSION RATIO" shall mean an amount equal to the quotient of: (A) the
total number of outstanding shares of Intracel Parent Common Stock on a
fully diluted basis immediately prior to the Effective Time, divided by
(B) the total number of outstanding shares of Company Common Stock on a
fully diluted basis immediately prior to the Effective Time, (ii) "B-1
CONVERSION RATIO" shall mean 1 and (iii) "B-2 CONVERSION RATIO" shall
mean 1. For the purposes of determining "fully diluted basis" pursuant
to the immediately preceding sentence and Section 3.01(e), all shares of
Intracel Parent Common Stock or Company Common Stock, as the case may
be, issuable upon exercise of options or warrants, or upon conversion,
exchange or exercise of other securities or other rights outstanding,
and all payment in kind dividends for any series of capital stock which
have not been paid but have accrued through the date, immediately prior
to the Effective Time (regardless of whether then exercisable,
convertible or exchangeable and including shares issuable upon exercise
of outstanding options, notwithstanding that such options are being
assumed or converted pursuant to Section 6.02(b) hereof) shall be deemed
outstanding.
(b) All Company Shares held in the treasury of the Company and all Company
Shares held by Intracel Parent or any subsidiary of Intracel Parent
shall be cancelled and retired and cease to exist.
(c) Each issued and outstanding share of the capital stock of Intracel
Acquisition Sub shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(d) The consideration to be delivered in exchange for each security, as set
forth in this Section 2.05, is hereafter referred to as the "MERGER
CONSIDERATION."
13
<PAGE> 15
Section 2.06 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
ARTICLE III
EXCHANGE OF SHARES
Section 3.01 Exchange of Certificates.
(a) At the Effective Time, Intracel Parent shall make available to Perkins,
Coie, as the exchange agent (the "EXCHANGE AGENT"), certificates
representing the aggregate number of Intracel Parent Shares issuable
pursuant to Section 2.05 in exchange for Company Shares, and the
Exchange Agent shall hold such certificates in trust for the benefit of
the holders of Company Shares for exchange in accordance with this
Article III.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which immediately
prior to the Effective Time represented Company Shares (the
"CERTIFICATES") a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions
as Intracel Parent and the Company may reasonably specify) and
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing Intracel Parent Shares and any
dividends payable on such Intracel Parent Shares as provided in Section
3.01(c) and cash in lieu of fractional shares as provided in clause (e)
of this Section 3.01, if applicable. Upon surrender of a Certificate to
the Exchange Agent, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the certificates representing whole Intracel Parent
Shares and cash in lieu of fractional shares as provided in clause (e)
of this Section 3.01, if applicable, which such holder has the right to
receive pursuant to the provisions of this Agreement, and the
Certificate so surrendered shall forthwith be cancelled. If a
certificate representing Intracel Parent Shares is to be issued in a
name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition to the issuance that
such Certificate be properly endorsed (or accompanied by an appropriate
instrument of transfer) and accompanied by evidence that any applicable
stock transfer taxes have been paid or provided for. Until surrendered
as contemplated by this Section 3.01, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to
receive the consideration specified herein; provided that in the event
any holder exercises his appraisal rights, if any, under Section 262 of
the GCL and becomes entitled to receive the appraised value of his
Company Shares instead of the Intracel Parent Shares into which such
Company Shares shall have been converted, Intracel Parent shall pay such
holder the appraised value of such Company Shares, together with any
other sums which it may owe him as a result of the appraisal proceeding,
upon his surrender to the Exchange Agent of the certificate or
certificates which immediately prior to the Effective Time represented
14
<PAGE> 16
the shares so appraised, and the Exchange Agent shall not thereafter be
required to deliver to such holder any Intracel Parent Shares.
Any certificates representing Intracel Parent Shares which remain unclaimed
by the holders of Certificates for twelve months after the Effective Time shall
remain outstanding and shall be held by Intracel Parent, and any holders of
Certificates who have not surrendered their Certificates in compliance with
Section 3.01 shall thereafter receive delivery (subject to abandoned property,
escheat or other similar laws) of the Intracel Parent Shares issuable upon the
conversion of their Certificates and any dividends payable on such Intracel
Parent Shares, without any interest thereon only after delivering their
Certificates and letters of transmittal to Intracel Parent, and otherwise
complying with Section 3.01(b).
(c) No dividends or other distributions declared or made after the Effective
Time with respect to Intracel Parent Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the Intracel Parent Shares represented
thereby and no cash payment in lieu of fractional shares shall be paid
to any such holder pursuant to Section 3.01(e) until the holder of
record of such Certificate shall surrender such Certificate. Following
surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole Intracel Parent Shares
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional
Intracel Parent Share to which such holder is entitled pursuant to
Section 3.01(e) and the amount of dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to
such whole Intracel Parent Shares and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole Intracel
Parent Shares.
(d) Following the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of
the Company Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in this Article III.
(e) No certificate or scrip representing fractional Intracel Parent Shares
shall be issued upon the surrender for exchange of Certificates, and
such fractional share interests will not entitle the owner thereof to
vote or to any rights of a stockholder of Intracel Parent. In lieu of
any such fractional share, Intracel Parent shall pay to each former
stockholder of the Company who otherwise would be entitled to receive a
fractional Intracel Parent Share an amount in cash determined by
multiplying (i) the quotient of $75,000,000 divided by the number of
outstanding shares of Intracel Parent Common Stock on a fully diluted
basis immediately prior to the Effective Time by (ii) the fraction of an
Intracel Parent Share to which such holder would otherwise be entitled.
As promptly as practicable after any determination of the amount of cash
to be paid to holders of Company Shares in lieu of any fractional share
interests, Exchange Agent shall pay such
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amounts to such holders of Company Shares in accordance with the terms
of this Article III.
(f) The Intracel Parent Shares to be issued pursuant to this Section 3.01
shall not have been registered and shall be characterized as "restricted
securities" under the federal securities laws, and under such laws such
shares may be resold without registration under the Securities Act, only
in certain limited circumstances. Each certificate evidencing Intracel
Parent Shares to be issued pursuant to this Section 3.01 shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND WERE ISSUED IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SAID ACT. SUCH SHARES MAY NOT
BE RESOLD, REOFFERED, TRANSFERRED, PLEDGED HYPOTHECATED,
CONVEYED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH SAID
ACT.
(g) Notwithstanding anything to the contrary in this Section 3.01, none of
the Exchange Agent, the Company or any party hereto shall be liable to
any person for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(h) If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession
to all assets, property, rights, privileges, powers and franchises of
the Company and Intracel Acquisition Sub, the officers and directors of
the Company and Intracel Acquisition Sub are fully authorized in the
name of their respective corporations or otherwise to take, and will
take, all such lawful and necessary action, so long as such action is
not inconsistent with this Agreement.
Section 3.02 Stock Options. At the Effective Time, the PerImmune Amended and
Restated 1996 Stock Option Plan (the "COMPANY STOCK OPTION PLAN") and each
option to purchase shares of Company Common Stock outstanding under the Company
Stock Option Plan, whether or not exercisable, and whether or not vested, shall
be assumed by Intracel Parent in accordance with Section 6.02 (b), and, prior to
the Effective Time, Intracel Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Intracel Parent Common
Stock for delivery upon exercise of such options so assumed by it.
Section 3.03 Dissenting Shares. If any holder of Company Shares shall be
entitled to be paid the "fair value" of his Company Shares, as provided in
Section 262 of the GCL, the Company shall give Intracel Parent notice thereof
and Intracel Parent shall have the right to participate in all negotiations and
proceedings with respect to any such demands. The Company shall not,
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except with the prior written consent of Intracel Parent, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment.
Section 3.04 Adjustments. If, between the date of this Agreement and the
Effective Time, the Intracel Parent Shares or Company Shares shall have been
exchanged into a different number of shares or a different class by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with a
record date within such period, the amount of Intracel Parent Shares into which
the Company Shares will be converted in the Merger shall be correspondingly
adjusted.
Section 3.05 Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting of such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to be paid in respect of the shares of
Company Shares represented by such Certificates as contemplated by this Article.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Intracel Parent and Intracel
Acquisition Sub as follows:
Section 4.01 Organization. Each of the Company and PerImmune, Inc. (the
"Subsidiary") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Subsidiary is the only
subsidiary of the Company. The Company and the Subsidiary are duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect on the Company and the
Subsidiary, taken as a whole. The Company has heretofore delivered to Intracel
Parent accurate and complete copies of the Certificate of Incorporation and
Bylaws, as currently in effect, of the Company and the Subsidiary.
Section 4.02 Capitalization. (a) The authorized capital stock of the Company
consists of 3,000 shares of Company Common Stock, 100 shares of Company Series A
Preferred, 20 shares of Company Series B Preferred and 880 Company Shares which
are preferred stock without designation, of which, as of the date hereof, 594.5
shares of Company Common Stock, 100 shares of Company Series A Preferred and 20
shares of Company Series B Preferred were issued and outstanding. All the issued
and outstanding Company Shares are validly issued, fully paid
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and nonassessable and free of preemptive rights. As of the date hereof, 257
shares of Company Common Stock were issuable upon exercise of options pursuant
to the Company Stock Option Plan. Section 4.02 of the disclosure schedule
attached hereto relating to the Company (the "COMPANY DISCLOSURE SCHEDULE") sets
forth each other subscription, option, warrant, call, right, convertible
security or other agreement or commitment of any character obligating the
Company to issue, transfer or sell any security and, as to each such security,
agreement or commitment, the average conversion or exercise price thereof, a
range of the conversion or exercise prices and the effects of the Merger and the
other transactions contemplated hereby on such security, agreement or
commitment, including pursuant to the antidilution provisions thereof. The
Company owns 100% of the issued and outstanding capital stock of PerImmune, Inc.
Except as set forth above or in Section 4.02 of the Company Disclosure
Schedule, or as contemplated hereby, there are not now, and at the Effective
Time there will not be, any shares of capital stock (or securities substantially
equivalent to capital stock) of the Company issued or outstanding or any
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character obligating the Company to issue,
transfer or sell any of its securities.
(b) Section 4.02 of the Company Disclosure Schedule sets forth
the name, jurisdiction of incorporation and capitalization of each subsidiary of
the Company. Except as disclosed in Section 4.02 of the Company Disclosure
Schedule, the Company does not own, directly or indirectly, any capital stock or
other equity securities of any corporation or have any direct or indirect equity
or ownership interest in any business. All of the outstanding shares of capital
stock of the Subsidiary have been validly issued and are fully paid and
nonassessable and, except as set forth in Section 4.02 of the Company Disclosure
Schedule, are owned by either the Company or the Subsidiary free and clear of
all liens, charges, claims or encumbrances. Except as set forth in Section 4.02
of the Company Disclosure Schedule, there are not now, and at the Effective Time
there will not be, any outstanding subscriptions, options, warrants, calls,
rights, convertible securities or other agreements or commitments of any
character relating to the issued or unissued capital stock or other securities
of the Subsidiary, or otherwise obligating the Company or any such subsidiary to
issue, transfer or sell any such securities. Except as set forth in Section 4.02
of the Company Disclosure Schedule, there are not now, and at the Effective Time
there will not be, any voting trusts or other agreements or understandings to
which the Company or the Subsidiary is a party or is bound with respect to the
voting of the capital stock of the Company or the Subsidiary. Except as set
forth above or in Section 4.02 of the Company Disclosure Schedule, there are no
persons or entities (other than the Subsidiary) in which the Company or the
Subsidiary has any voting rights or equity interests.
Section 4.03 Authority Relative to This Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated
(other than, with respect to the Merger, the approval of the Merger and adoption
of this Agreement by
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the holders of a majority of the outstanding shares of Company Common Stock, a
majority of the outstanding shares of Series A Preferred and a majority of the
outstanding shares of Series B Preferred). This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject as to enforcement to bankruptcy, reorganization,
moratorium, insolvency or other laws of general applicability relating to or
affecting creditors rights and to general equity principles.
Section 4.04 Consents and Approvals; No Violations. Except for applicable
requirements of the Securities Act, applicable state securities laws and the
filing and recordation of a Certificate of Merger, as required by the GCL and
such other filings, permits, authorizations, consents or approvals which if not
obtained or made would not individually or in the aggregate have a Material
Adverse Effect on the Company, no filing with, and no permit, authorization,
consent or approval of, any public body or authority, including courts of
competent jurisdiction, domestic or foreign ("GOVERNMENTAL ENTITY"), is
necessary for the consummation by the Company of the transactions contemplated
by this Agreement. Except as set forth in Section 4.04 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws of the Company or the Subsidiary, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which the Company or the Subsidiary is a party or by
which any of them or any of their properties or assets may be bound or (iii)
violate any material order, writ, injunction, decree, statute, treaty, rule or
regulation applicable to the Company, the Subsidiary or any of their properties
or assets, except in the case of (ii) or (iii) for violations, breaches or
defaults which are not in the aggregate material to the business, operations or
financial condition of the Company and the Subsidiary taken as a whole and which
will not prevent or delay the consummation of the transactions contemplated
hereby.
Section 4.05 Absence of Certain Changes. Except as set forth in Section 4.05 of
the Company Disclosure Schedule, in the Company Financial Reports (as defined
below) or the Company Balance Sheet, and except as contemplated by this
Agreement, since September 30, 1997, neither the Company nor the Subsidiary has
taken any of the actions set forth in Sections 6.01(b) to (h), suffered any
adverse changes in its business, operations or financial condition which are
material to the Company and the Subsidiary taken as a whole (other than changes
generally affecting the industries in which the Company operates, including
changes due to actual or proposed changes in law or regulation, or changes
relating to the transactions contemplated by this Agreement, including the
change in control contemplated hereby) or entered into any transaction, or
conducted its business or operations, other than in the ordinary and usual
course of business and consistent with past practice and other than in
connection with the Company's exploration of alternatives leading to the
execution of this Agreement.
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Section 4.06 Financial Statements. The Company's audited consolidated financial
statements dated December 31, 1996 ("COMPANY FINANCIAL REPORTS") and unaudited
consolidated interim financial statements dated September 30, 1997 fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and the Subsidiary as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments in the case of
any unaudited interim financial statements). For purposes of this Agreement,
"COMPANY BALANCE SHEET" means the consolidated balance sheet of the Company as
of September 30, 1997 and "COMPANY BALANCE SHEET DATE" means September 30, 1997.
Section 4.07 No Undisclosed Liabilities. Except as and to the extent set forth
in the audited Company Financial Reports, the Company Balance Sheet or Section
4.07 of the Company Disclosure Schedule, neither the Company nor the Subsidiary
had on the date of such Company Financial Report or on the Company Balance Sheet
Date any material liabilities required by generally accepted accounting
principles to be reflected on a consolidated balance sheet of the Company and
the Subsidiary. Except as set forth on Section 4.07 of the Company Disclosure
Schedule, since the Company Balance Sheet Date, neither the Company nor the
Subsidiary has incurred any liabilities material to the business, operations or
financial condition of the Company and the Subsidiary taken as a whole, except
liabilities incurred in the ordinary and usual course of business and consistent
with past practice and liabilities incurred in connection with this Agreement.
Section 4.08 No Default. Except as set forth in Section 4.08 of the Company
Disclosure Schedule, neither the Company nor the Subsidiary is in default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Certificate of Incorporation or its Bylaws, (ii) any
material note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which the Company or the Subsidiary is a party or by
which they or any of their properties or assets may be bound or (iii) to the
knowledge of the Company, any material order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or the Subsidiary, which defaults
or violations would, in the aggregate, have a Material Adverse Effect on the
business, operations or financial condition of the Company and the Subsidiary
taken as a whole or which would prevent or delay the consummation of the
transactions contemplated hereby.
Section 4.09 Litigation. Except as disclosed in Section 4.09 of the Company
Disclosure Schedule, there is no action, suit, proceeding or, to the best
knowledge of the Company, review or investigation pending or, to the best
knowledge of the Company, threatened involving the Company or the Subsidiary, at
law or in equity, or before any Governmental Entity which are reasonably likely
to have a Material Adverse Effect on the Company or the Subsidiary.
Section 4.10 Compliance with Applicable Law. The Company and the Subsidiary
hold all material permits, licenses, variances, exemptions, orders and approvals
of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "COMPANY PERMITS"), except for failures to hold such
Company Permits which would not have a Material
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Adverse Effect on the Company. The Company and the Subsidiary are in compliance
with the terms of the Company Permits, except where the failure to so comply
would not have a Material Adverse Effect on the Company. The businesses of the
Company and the Subsidiary are not being conducted in violation of any
applicable law, ordinance, rule, regulation, decree or order of any Governmental
Entity, except for violations which do not and would not have a Material Adverse
Effect on the Company.
Section 4.11 Taxes. Except as set forth in Section 4.11 of the Company
Disclosure Schedule, the Company and the Subsidiary have duly filed all federal,
state, local and foreign tax returns required to be filed by it, and the Company
and the Subsidiary have duly paid, caused to be paid or made adequate provision
for the payment of all Taxes (as hereinafter defined) shown to be due in respect
of the periods covered by such tax returns and has made adequate provision for
payment of all Taxes anticipated to be payable in respect of all calendar
periods since the periods covered by such returns. All deficiencies and
assessments asserted as a result of any examinations or other audits known to
the Company by federal, state, local or foreign taxing authorities have been
paid, fully settled or adequately provided for in the Company Financial Reports,
and no issue or claim has been asserted for Taxes by any taxing authority for
any prior period, the adverse determination of which would result in a
deficiency which would have a Material Adverse Effect on the Company, other than
those heretofore paid or provided for. Except as set forth in Section 4.11 of
the Company Disclosure Schedule, there are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any federal or
foreign income tax return of the Company or the Subsidiary. For purposes of this
Section 4.11 and Section 5.11 below, "TAXES" shall mean all taxes, assessments
and governmental charges imposed by any federal, state, county, local or foreign
government, taxing authority, subdivision or agency thereof, including interest,
penalties or additions thereto.
Section 4.12 ERISA. (a) With respect to each employee benefit plan (including,
without limitations, any "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
any material bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan, arrangement or understanding and any employment or
change in control agreements (all the foregoing being herein called the "COMPANY
BENEFIT PLANS"), maintained or contributed to by the Company or the Subsidiary
as of the date hereof, the Company has made available to Intracel Parent a true
and correct copy of, where applicable, (i) the most recent annual report (Form
5500) filed with the Internal Revenue Service (the "IRS"), (ii) such Company
Benefit Plans, (iii) each trust agreement and group annuity contract, if any,
relating to such Company Benefit Plan and (iv) the most recent actuarial report
or valuation relating to a Company Benefit Plan subject to Title IV of ERISA.
All Company Benefit Plans are set forth on Section 4.12 of the Company
Disclosure Schedule. None of the Company Benefit Plans are multiemployer plans
within the meaning of Section 3(37) of ERISA or have been at any time since
September 26, 1980. Each of the Plans covered by ERISA (a) has been operated in
all material respects in accordance with ERISA, (b) has met the minimum funding
standards of Section 412 of the Code and (c) which is intended to be qualified
under Section 401(a) of the Code, has received or applied for, a favorable
determination letter from the IRS, and the
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Company is not aware of any circumstances likely to result in revocation of such
determination letter. No notice of "reportable event" (within the meaning of
Section 4043 of ERISA) for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Plan or by the "single-employer
plan," within the meaning of Section 4001(a)(15) of ERISA, of any entity which
is considered one employer with the Company under Section 4001 of ERISA or
Section 414 of the Code (an "ERISA AFFILIATE") as of the date hereof within the
12-month period ending on the date hereof or will be required to be filed in
connection with the transaction contemplated by this Agreement. Neither the
Company nor any subsidiary has engaged in a transaction with respect to any
Company Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject the Company or the Subsidiary to a
material tax or penalty imposed by either Section 4975 of the Code or Section
502(i) of ERISA.
(b) With respect to the Company Benefit Plans, no event has
occurred, and to the knowledge of the Company or the Subsidiary there exists no
condition or set of circumstances which in the aggregate are reasonably likely
to occur in connection with which the Company or the Subsidiary would be subject
to any liability that would have a Material Adverse Effect on the Company
(except liability for benefits claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other applicable law.
(c) Except as set forth in Section 4.12 of the Company Disclosure
Schedule, with respect to the Company Benefit Plans, there are no funded benefit
obligations for which contributions have not been made or properly accrued and
there are no unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with generally accepted
accounting principles, on the financial statements of the Company or the
Subsidiary, which obligations are reasonably likely to have a Material Adverse
Effect on the Company.
(d) Neither the Company or the Subsidiary has any obligation for
retiree health and life benefits under any Company Benefit Plan, except as set
forth on Section 4.12 of the Company Disclosure Schedule.
Section 4.13 Title to Property. Except as set forth in Section 4.13 of the
Company Disclosure Schedule, the Company and the Subsidiary have good and
marketable title to all of their respective properties, interests in properties
and assets, real and personal, reflected in the Company Balance Sheet or
acquired after the Company Balance Sheet Date (except properties, interests in
properties and assets sold or otherwise disposed of since the Company Balance
Sheet Date in the ordinary course of business), or with respect to leased
properties and assets, valid leasehold interests in, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affect thereby, or otherwise materially impair business operations involving
such properties and (iii) liens securing debt which is reflected on the Company
Balance Sheet. The plants, property and equipment of the Company and the
Subsidiary that are used in the operations of their businesses are in all
material respects in good operating condition and repair, subject to normal wear
and tear. All properties used in
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the operations of the Company and the Subsidiary are reflected in the Company
Balance Sheet to the extent generally accepted accounting principles require the
same to be reflected. Section 4.13 of the Company Disclosure Schedule identifies
each material parcel of real property owned or leased by the Company or the
Subsidiary.
Section 4.14 Intellectual Property.
(a) To the Company's knowledge, the Company and the Subsidiary own, or are
licensed or otherwise possess legally enforceable rights to use all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, net lists, schematics, technology,
know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material ("COMPANY INTELLECTUAL PROPERTY") that are used in the business
of the Company and the Subsidiary as currently conducted, except to the
extent that the failure to have such rights have not had and would not
reasonably be expected to have a Material Adverse Effect on the Company.
(b) Section 4.14 of the Company Disclosure Schedule lists (i) all patents
and patent applications and all registered and unregistered trademarks,
trade names and service marks, registered and unregistered copyrights,
and maskworks, included in the Company Intellectual Property, including
the jurisdictions in which each such Company Intellectual Property right
has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all licenses, sublicenses
and other agreements as to which the Company is a party and pursuant to
which any person is authorized to use any Company Intellectual Property,
and (iii) all licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which the Company is authorized to
use any third party patents, trademarks or copyrights, including
software ("THIRD PARTY INTELLECTUAL PROPERTY") which are incorporated
in, are, or form a part of any Company product.
(c) To the Company's knowledge, there is no unauthorized use, disclosure,
infringement or misappropriation of any Company Intellectual Property
rights, any trade secret material to the Company or of the Subsidiary,
by any third party, including any employee or former employee of the
Company or any of its subsidiaries. To the Company's knowledge, there is
no unauthorized use, disclosure, infringement or misappropriation by the
Company or the Subsidiary of any Third Party Intellectual Property right
to the extent licensed by or through the Company or the Subsidiary.
Except as set forth in Section 4.14(c) of the Company Disclosure
Schedule, neither the Company nor the Subsidiary has entered into any
agreement to indemnify any other person against any charge of
infringement of any Third Party Intellectual Property, other than
indemnification provisions contained in sales agreements arising in the
ordinary course of business. Except as set forth in Section 4.14 of the
Company Disclosure Schedule, there are no royalties, fees or other
payments payable by the Company to any Person by reason of the
ownership, use, sale or disposition of Third Party Intellectual
Property.
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(d) Except as set forth in Section 4.14 of the Company Disclosure Schedule,
neither the Company nor the Subsidiary is nor will any of such party be
as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any
license, sublicense or other agreement relating to the Third Party
Intellectual Property or Third Party Intellectual Property rights, the
breach of which would have a Material Adverse Effect on the Company.
(e) To the Company's knowledge, all patents, registered trademarks, service
marks and copyrights held by the Company or the Subsidiary are valid and
subsisting. Except as set forth in Section 4.14 of the Company
Disclosure Schedule, neither the Company nor the Subsidiary (i) has been
sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other propriety right of any third
party; (ii) has knowledge that the manufacturing, marketing, licensing
or sale of its products infringes any patent, trademark, service mark,
copyright, trade secret or other proprietary right of any third party;
and (iii) has brought any action, suit or proceeding for infringement of
Company or Third Party Intellectual Property or breach of any license or
agreement involving Company or Third Party Intellectual Property against
any third party.
(f) Section 4.14 of the Company Disclosure Schedule sets forth a list of all
officers, employees and consultants of the Company or the Subsidiary who
have executed and delivered to the Company an agreement regarding the
protection of proprietary information and the assignment to the Company
of all Company Intellectual Property arising from services performed for
the Company by such persons.
(g) Except as set forth in Section 4.14 of the Company Disclosure Schedule,
all use, disclosure or appropriation by the Company or the Subsidiary of
the Company or Third Party Intellectual Property not otherwise protected
by patents, patent applications or copyright (such information as it
relates to either the Company or Intracel Parent, "Confidential
Information"), has been pursuant to the terms of a written agreement
between the Company and such third party or is otherwise lawful. Except
as set forth in Section 4.14 of the Company Disclosure Schedule, all
use, disclosure or appropriation by the Company or the Subsidiary of
Confidential Information not owned by the Company has been pursuant to
the terms of a written agreement between the Company and the owner of
such Confidential Information, or is otherwise lawful.
Section 4.15 Interested Party Transactions. Except as set forth in
Section 4.15 of the Company Disclosure Schedule, neither the Company nor the
Subsidiary is indebted to any director, officer, employee or agent of the
Company or any of its subsidiaries (except for amounts due as normal salaries
and bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to the Company or the Subsidiary.
Section 4.16 Insurance. The Company and the Subsidiary have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of the Company and the
Subsidiary. There is no material claim pending
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under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and the Company
and the Subsidiary are otherwise in compliance with the terms of such policies
and bonds. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
Section 4.17 Products.
(a) Except as set forth in Section 4.17 of the Company Disclosure Schedule,
there are no statements, citations, warning letters, FDA Forms 483, or
decisions by any governmental or regulatory body that any product
produced, manufactured, marketed or distributed at any time by the
Company or the Subsidiary ("COMPANY PRODUCT") is defective or fails to
meet any applicable standards promulgated by any such governmental or
regulatory body. There have been no recalls ordered by any such
governmental or regulatory body with respect to any Company Product. To
the knowledge of the Company, there is (i) no fact relating to any
Company Product that may give rise to a recall of any Company Product or
a duty to warn of a defect in any Company Product and (ii) no latent or
overt design, manufacturing or other defect in any Company Product.
(b) All Company Products used, marketed or distributed by the Company or
the Subsidiary in clinical investigations are subject to all applicable
licenses, registrations, approvals, clearances, and authorizations
required by local, state and federal agencies, foreign or domestic,
regulating the safety, effectiveness, and market clearance of medical
devices, which licenses, registrations, approval, clearances and
authorizations are held by the Company or the Subsidiary and were
obtained by the Company or the Subsidiary on or before the date when
same were required. Those licenses, registrations, approvals,
clearances, and authorizations will not be affected or impaired by the
Merger.
(c) The Company or the Subsidiary is in full possession of all supportive
materials and data substantiating representations made to the FDA in its
material filings therewith, including any and all testing data in the
possession or under the control of the Company or the Subsidiary,
whether or not submitted to the FDA. The Company Products perform in
compliance with the representations and performance specifications as
contained in said filings.
(d) There is no proceedings by the FDA or any other governmental agency,
including but not limited to a grand jury investigation, a 405 hearing,
a civil penalty proceeding brought at any time in the past relating to
the safety or efficacy of Company Products and, to the Company's
knowledge, there is no basis for such a proceeding.
Section 4.18 Change in Control. Except as set forth in Section 4.18 of the
Company Disclosure Schedule, neither the Company nor the Subsidiary is a party
to any contract, agreement or understanding which contains a "change in control"
provision or "potential change in control" provision.
Section 4.19 Environmental, Health, and Safety.
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(a) The Company and the Subsidiary (A) have complied with all applicable
Environmental, Health, and Safety Laws governing the Company or the
Subsidiary in all material respects (and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any such failure to
comply), (B) have obtained and been in substantial compliance with all
of the terms and conditions of all material permits, licenses, and other
authorizations which are required under all applicable Environmental,
Health, and Safety Laws governing the Company or the Subsidiary, and (C)
have complied in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in the
Environmental, Health, and Safety Laws governing the Company or the
Subsidiary.
(b) To the knowledge of the Company, the Company and the Subsidiary have no
material liability (whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), there is no fact or
circumstance that with the passage of time, or occurrence of other
reasonably foreseeable events would give rise to any material liability,
and the Company and the Subsidiary have not handled or disposed of any
substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could give rise to
any material liability, for damage to any site, location, or body of
water (surface or subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law governing the Company or the
Subsidiary.
Section 4.20 Employment and Labor Matters. Section 4.20 of the Company
Disclosure Schedule contains a true, complete and accurate list of the names,
titles, annual compensation (including all bonuses and similar payments made
with respect to each such individual for the current and preceding fiscal years)
of all directors, officers and employees of the Company and the Subsidiary who
have an annual aggregate remuneration of $80,000 or more. The Company and the
Subsidiary have and currently are conducting their respective business in full
compliance with all laws relating to employment and employment practices, terms
and conditions of employment, wages and hours, affirmative action, and
nondiscrimination in employment. Except as disclosed in Section 4.20 of the
Company Disclosure Schedule, to the Company's knowledge, the relationships of
the Company and the Subsidiary with their respective employees are good; to the
Company's knowledge, there is, and during the past five years there has been, no
labor strike, dispute, slow-down, work stoppage or other labor difficulty
actually pending or threatened against or involving the Company or the
Subsidiary and to the Company's knowledge no attempt is currently being made or
during the past three years has been made to organize any employees of the
Company or the Subsidiary to form or enter a labor union or similar
organization. Section 4.20 of the Company Disclosure Schedule contains a list of
all grievances by employees during the past three years which have resulted in a
significant change in work practices or contract interpretation or terms or
resulted in arbitration.
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Section 4.21 Contracts. Section 4.21 of the Company Disclosure Schedule lists
all the material contracts and arrangements to which the Company or the
Subsidiary is a party or by which it is bound, or to which any of its assets or
properties is subject. The Company has delivered to Intracel Parent true and
complete copies of each document listed in Section 4.21 of the Company
Disclosure Schedule, and a written description of each oral arrangement so
listed. Except as disclosed in Section 4.21 of the Company Disclosure Schedule,
all such contracts and arrangements are in full force and effect, and neither
the Company nor the Subsidiary is in default under any of them, nor, to the
knowledge of the Company, is any other party to any such contract or arrangement
in default thereunder.
Section 4.22 Predominant Customers. Except as set forth on Section 4.22 of the
Company Disclosure Schedule, no single customer of the Company or the Subsidiary
accounts or accounted for over five percent (5%) of the total consolidated
revenues of the Company and the Subsidiary (the "COMPANY DOLLAR THRESHOLD")
during the twelve month period immediately preceding the date of this Agreement.
Section 4.23 Change in Customers or Vendors. Except as set forth on
Section 4.23 of the Company Disclosure Schedule, no customer or vendor whose
annual volume of purchases or sales during the Company fiscal year ended
December 31, 1996 exceeded the Company Dollar Threshold, has indicated to the
Company or the Subsidiary or to any of the Company or the Subsidiary's officers
or directors that it intends to cease doing business with the Company or the
Subsidiary or materially alter the amount or pricing of the business done with
the Company or the Subsidiary. To the knowledge of the Company, the relationship
of such customers and vendors will not be materially adversely affected by the
consummation of the transactions contemplated by this Agreement.
Section 4.24 Notes and Accounts Receivable. All notes and accounts receivable
of the Company and the Subsidiary are reflected properly on the Company
Financial Reports and Company Balance Sheet, are valid receivables which arose
in the ordinary course of business from bona fide transactions, subject to no
set-offs or counterclaims, subject only to the reserve for bad debts set forth
on the face of the Company Financial Reports and Company Balance Sheet.
Section 4.25 Questionable Payments. None of the Company or the Subsidiary nor
any of their respective directors, officers or other employees has: (i) made any
payments or provided services or other favors in the United States of America or
in any foreign country in order to obtain preferential treatment or
consideration by any Governmental Entity with respect to any aspect of the
business of the Company or the Subsidiary; or (ii) made any political
contributions which would not be lawful under the laws of the United States
(including the Foreign Corrupt Practices Act) or the foreign country in which
such payments were made. None of the Company or the Subsidiary or any of their
respective directors, officers or other employees nor, to the Company's
knowledge, any customer or supplier of the Company or the Subsidiary, has been
subject to any inquiry or investigation by any Governmental Entity in connection
with payments or benefits or other favors to or for the benefit of any
governmental or armed services official,
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agent, representative or employee with respect to any aspect of the business of
the Company or the Subsidiary or with respect to any political contribution.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
INTRACEL PARENT AND INTRACEL ACQUISITION SUB
Intracel Parent and Intracel Acquisition Sub represent and warrant to the
Company as follows:
Section 5.01 Organization. Intracel Parent and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Intracel Parent and each of its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Material Adverse Effect on Intracel Parent and
its subsidiaries, taken as a whole. Intracel Parent has heretofore delivered to
the Company accurate and complete copies of the charter and bylaws, as currently
in effect, of Intracel Parent and each of its subsidiaries.
Section 5.02 Capitalization. (a) The authorized capital stock of Intracel Parent
consists of (i) 3,000,000 shares of Preferred Stock, $.01 par value per share,
of which 730,000 shares have been designated Series A Preferred, 850,000 shares
have been designated Series A-1 Preferred, 155,000 shares have been designated
Series A-2 Preferred and 200,000 shares have been designated Series A-3
Preferred and (ii) 5,000,000 shares of Intracel Parent Common Stock. As of the
date hereof, 2,475,668 shares of Intracel Parent Common Stock were issued and
outstanding, 591,786 shares of Series A Preferred were issued and outstanding,
638,392 shares of Series A-1 Preferred were issued and outstanding, 42,624
shares of Series A-2 Preferred were issued and outstanding and 145,023 shares of
Series A-3 Preferred were issued and outstanding. All of the foregoing shares of
capital stock of Intracel Parent are validly issued, fully paid and
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. 400,000 shares of Intracel Parent Common
Stock have been reserved for issuance in the event options granted pursuant to
the 1989 and 1990-91 Stock Option Plans of Intracel Parent ("INTRACEL PARENT
STOCK PLANS") are exercised. As of the date hereof, 355,517 shares of Intracel
Parent Common Stock were issuable upon exercise of options pursuant to the
Intracel Parent Stock Plans. Section 5.02(a) of the disclosure schedule attached
hereto relating to Intracel Parent (the "INTRACEL PARENT DISCLOSURE SCHEDULE")
sets forth each other subscription, option, warrant, call, right, convertible
security or other agreement or commitment of any character obligating Intracel
Parent to issue, transfer or sell any security, and, as to each such security,
agreement or commitment, the average conversion or exercise price thereof, a
range of the conversion or exercise prices and the effects of the Merger and the
other transactions contemplated hereby on such security, agreement or
commitment, including pursuant to antidilution provisions thereof.
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All shares of Intracel Parent Shares which are to be issued pursuant to the
Merger or the other transactions contemplated hereby, will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and nonassessable and free of any preemptive rights in respect
thereto. Except as set forth above or in Section 5.02(a) of the Intracel Parent
Disclosure Schedule or as contemplated hereby, there are not now, and at the
Effective Time there will not be, any shares of capital stock (or securities
substantially equivalent to capital stock) of Intracel Parent issued or
outstanding or any subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character obligating
Intracel Parent to issue, transfer or sell any of its securities.
(b) Section 5.02(b) of the Intracel Parent Disclosure Schedule
sets forth the name, jurisdiction of incorporation and capitalization of each
subsidiary of Intracel Parent. Except as disclosed in Section 5.02(b) of the
Intracel Parent Disclosure Schedule, Intracel Parent does not own, directly or
indirectly, any capital stock or other equity securities of any corporation or
have any direct or indirect equity or ownership interest in any business. All of
the outstanding shares of capital stock of each of Intracel Parent's
subsidiaries have been validly issued and are fully paid and nonassessable and,
except as set forth in Section 5.02(b) of the Intracel Parent Disclosure
Schedule, are owned either by Intracel Parent or another of its subsidiaries
free and clear of all liens, charges, claims or encumbrances. Except as set
forth in Section 5.02(b) of the Intracel Parent Disclosure Schedule, there are
not now, and at the Effective Time there will not be, any outstanding
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of any of Intracel Parent's subsidiaries, or
otherwise obligating Intracel Parent or any such subsidiary to issue, transfer
or sell any such securities. Except as set forth in Section 5.02(b) of the
Intracel Parent Disclosure Schedule, there are not now, and at the Effective
Time there will not be, any voting trusts or other agreements or understandings
to which Intracel Parent or any of its subsidiaries is a party or is bound with
respect to the voting of the capital stock of Intracel Parent or any of Intracel
Parent's subsidiaries. Except as set forth above or in Section 5.02(b) of the
Intracel Parent Disclosure Schedule, there are no persons or entities (other
than subsidiaries of Intracel Parent) in which Intracel Parent or any of its
subsidiaries has any voting rights or equity interests.
Section 5.03 Authority Relative to this Agreement. Each of Intracel Parent and
Intracel Acquisition Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Intracel Parent and Intracel Acquisition Sub and by
Intracel Parent as the sole stockholder of Intracel Acquisition Sub and no other
corporate proceedings on the part of Intracel Parent or Intracel Acquisition Sub
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the affirmative vote of a majority of each of the
Intracel Parent Common Stock, Series A Stock, Series A-1 Stock, Series A-2 Stock
and Series A-3 Stock entitled to vote on the amendment to the Certificate of
Incorporation of Intracel Parent contemplated by this Agreement). This Agreement
has been duly and validly executed and delivered by each of Intracel Parent and
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Intracel Acquisition Sub and constitutes a valid and binding agreement of each
of Intracel Parent and Intracel Acquisition Sub, enforceable against each of
Intracel Parent and Intracel Acquisition Sub in accordance with its terms,
subject as to enforcement to bankruptcy, reorganization, moratorium, insolvency
or other laws of general applicability relating to or affecting creditors rights
and to general equity principles.
Section 5.04 Consents and Approvals; No Violations. Except for applicable
requirements of the Securities Act, state securities laws and the filing and
recordation of a Certificate of Merger, as required by the GCL, and such other
filings, permits, authorizations, consents or approvals which if not obtained or
made would not individually or in the aggregate have a Material Adverse Effect
on Intracel Parent, no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity, is necessary for the consummation by
Intracel Parent or Intracel Acquisition Sub of the transactions contemplated by
this Agreement. Except as set forth in Section 5.04 of the Intracel Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Intracel Parent or Intracel Acquisition Sub nor the consummation by Intracel
Parent or Intracel Acquisition Sub of the transactions contemplated hereby nor
compliance by Intracel Parent or Intracel Acquisition Sub with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the charter or bylaws of Intracel Parent or any of its
subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which Intracel
Parent or any of its subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iii) violate any material order,
writ, injunction, decree, statute, treaty, rule or regulation applicable to
Intracel Parent, any of its subsidiaries or any of their properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults which
are not in the aggregate material to the business, operations or financial
condition of Intracel Parent and its subsidiaries taken as a whole and which
will not prevent or delay the consummation of the transactions contemplated
hereby.
Section 5.05 Financial Statements. Intracel Parent's unaudited consolidated
financial statements dated December 31, 1996 ("INTRACEL PARENT FINANCIAL
REPORTS") attached to Section 5.05 of the Intracel Parent Disclosure Schedule
and unaudited consolidated interim financial statements dated June 30, 1997
fairly present, in conformity with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of Intracel Parent and its subsidiaries as
of the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject to normal year-end adjustments in the case
of any unaudited interim financial statements). For purposes of this Agreement,
"INTRACEL PARENT BALANCE SHEET" means the consolidated balance sheet of the
Company as of June 30, 1997 and "INTRACEL PARENT BALANCE SHEET DATE" means June
30, 1997.
Section 5.06 Absence of Certain Changes. Except as set forth in the Intracel
Parent Financial Reports, including the Intracel Parent Balance Sheet, or
Section 5.06 of the Intracel Parent Disclosure Schedule, and except as
contemplated by this Agreement, since June 30, 1997 neither Intracel Parent nor
any of its subsidiaries has taken any of the actions set forth in Sections
6.01(a)
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to (h), suffered any adverse changes in its business, operations or financial
condition which are material to Intracel Parent and its subsidiaries taken as a
whole (other than changes generally affecting the industries in which Intracel
Parent operates, including changes due to actual or proposed changes in law or
regulation) or entered into any transaction, or conducted its business or
operations, other than in the ordinary and usual course of business and
consistent with past practice.
Section 5.07 No Undisclosed Liabilities. Except as and to the extent set forth
in the Intracel Parent Financial Reports, the Intracel Parent Balance Sheet or
Section 5.07 of the Intracel Parent Disclosure Schedule, neither Intracel Parent
nor any of its subsidiaries had on the date of such Intracel Parent Financial
Report or on the Intracel Parent Balance Sheet Date any material liabilities
required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of Intracel Parent and its subsidiaries. Except as
and to the extent set forth in Section 5.07 of the Intracel Parent Disclosure
Schedule, since June 30, 1997 neither Intracel Parent nor any of its
subsidiaries has incurred any liabilities material to the business, operations
or financial condition of Intracel Parent and its subsidiaries taken as a whole,
except liabilities incurred in the ordinary and usual course of business and
consistent with past practice and liabilities incurred in connection with this
Agreement.
Section 5.08 No Default. Except as set forth in Section 5.08 of the Intracel
Parent Disclosure Schedule, neither Intracel Parent nor any of its subsidiaries
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its charter or its bylaws, (ii) any material note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation to which Intracel Parent or any of its subsidiaries is a party or by
which they or any of their properties or assets may be bound or (iii) to the
knowledge of Intracel Parent, any material order, writ, injunction, decree,
statute, rule or regulation applicable to Intracel Parent or any of its
subsidiaries, which defaults or violations would have a Material Adverse Effect
on Intracel Parent or which would prevent or delay the consummation of the
transactions contemplated hereby.
Section 5.09 Litigation. Except as disclosed in Section 5.09 of the Intracel
Parent Disclosure Schedule, there is no action, suit, proceeding or, to the best
knowledge of Intracel Parent, review or investigation pending or, to the best
knowledge of Intracel Parent, threatened involving Intracel Parent or any of its
subsidiaries, at law or in equity, or before any Governmental Entity which are
reasonably likely to have a Material Adverse Effect on Intracel Parent.
Section 5.10 Compliance with Applicable Law. Intracel Parent and its
subsidiaries hold all material permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective business (the "INTRACEL PARENT PERMITS"), except for failures
to hold such Intracel Parent Permits which would not have a Material Adverse
Effect on the Intracel Parent. Intracel Parent and its subsidiaries are in
compliance with the terms of the Intracel Parent Permits, except where the
failure so to comply would not have a Material Adverse Effect on the Intracel
Parent. The businesses of Intracel Parent and its subsidiaries are not being
conducted in violation of any applicable law, ordinance,
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rule, regulation, decree or order of any Governmental Entity, except for
violations which or in the aggregate do not and would not have a Material
Adverse Effect on Intracel Parent.
Section 5.11 Taxes. Except as set forth in Section 5.11 of the Intracel Parent
Disclosure Schedule, Intracel Parent and each of its subsidiaries has duly filed
all federal, state, local and foreign tax returns required to be filed by it,
and Intracel Parent and each of its subsidiaries has duly paid, caused to be
paid or made adequate provision for the payment of all Taxes shown to be due in
respect of the periods covered by such tax returns and has made adequate
provision for payment of all Taxes anticipated to be payable in respect of all
calendar periods since the periods covered by such returns. All deficiencies and
assessments asserted as a result of any examinations or other audits, known to
Intracel Parent, by federal, state, local or foreign taxing authorities have
been paid, fully settled or adequately provided for in the Intracel Parent
Financial Reports, and no issue or claim has been asserted for Taxes by any
taxing authority for any prior period, the adverse determination of which would
result in a deficiency which would have a Material Adverse Effect on Intracel
Parent, other than those heretofore paid or provided for. Except as set forth in
Section 5.11 of the Intracel Parent Disclosure Schedule, there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal or foreign income tax return of Intracel Parent or its
subsidiaries.
Section 5.12 ERISA. (a) With respect to each employee benefit plan (including,
without limitations, any "employee benefit plan," as defined in Section 3(3) of
ERISA), and any material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, insurance or other plan, arrangement or understanding and any
employment or change in control agreements (all the foregoing being herein
called the "INTRACEL PARENT BENEFIT PLANS"), maintained or contributed to by
Intracel Parent or any of its subsidiaries as of the date hereof, Intracel
Parent has made available to the Company a true and correct copy of, where
applicable, (i) the most recent annual report (Form 5500) filed with the IRS,
(ii) such Intracel Parent Benefit Plan, (iii) each trust agreement and group
annuity contract, if any, relating to such Intracel Parent Benefit Plan and (iv)
the most recent actuarial report or valuation relating to a Intracel Parent
Benefit Plan subject to Title IV of ERISA. All Intracel Parent Benefit Plans are
set forth on Section 5.12(a) of the Intracel Parent Disclosure Schedule. None of
the Intracel Parent Benefit Plans are multiemployer plans within the meaning of
Section 3(37) of ERISA or have been at any time since September 26, 1980. Each
of the Plans covered by ERISA (a) has been operated in all material respects in
accordance with ERISA, (b) has met the minimum funding standards of Section 412
of the Code and (c) which is intended to be qualified under Section 401(a) of
the Code, has received or applied for a favorable determination letter from the
IRS, and Intracel Parent is not aware of any circumstances likely to result in a
revocation of such determination letter. No notice of "reportable event" (within
the meaning of Section 4043 of ERISA) for which the 30-day reporting requirement
has not been waived, has been required to be filed for any Plan or by the
single-employer of an ERISA Affiliate as of the date hereof, within the 12-month
period ending on the date hereof or will be required to be filed in connection
with the transaction contemplated by this Agreement. Neither Intracel Parent nor
any subsidiary has engaged in a transaction with respect to any Intracel Parent
Benefit Plan that, assuming the taxable period of such transaction expired as of
the date hereof, would subject the Intracel Parent
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or any of its subsidiaries to a material tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA.
(b) With respect to the Intracel Parent Benefit Plans, no event
has occurred, and to the knowledge of Intracel Parent or any of its
subsidiaries, there exists no condition or set of circumstances which in the
aggregate are reasonably likely to occur in connection with which Intracel
Parent or any of its subsidiaries would be subject to any liability that would
have a Material Adverse Effect on Intracel Parent, (except liability for
benefits claims and funding obligations payable in the ordinary course), under
ERISA, the Code or any other applicable law.
(c) Except as set forth in Section 5.12(c) of the Intracel Parent
Disclosure Schedule, with respect to the Intracel Parent Benefit Plans, there
are no funded benefit obligations for which contributions have not been made or
properly accrued and there are no unfunded benefit obligations which have not
been accounted for by reserves, or otherwise properly footnoted in accordance
with generally accepted accounting principles, on the financial statements of
Intracel Parent or any of its subsidiaries, which obligations are reasonably
likely to have a Material Adverse Effect on Intracel Parent.
(d) Neither Intracel Parent nor any of its subsidiaries has any
obligations for retiree health and life benefits under any Intracel Parent
Benefit Plan, except as set forth in Section 5.12(d) of the Intracel Parent
Disclosure Schedule.
Section 5.13 Title to Property. Except as set forth in Section 5.13 of the
Intracel Parent Disclosure Schedule, Intracel Parent and its subsidiaries have
good and marketable title to all of their respective properties, interests in
properties and assets, real and personal, reflected in the Intracel Parent
Balance Sheet or acquired after the Intracel Parent Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of
since the Intracel Parent Balance Sheet Date in the ordinary course of
business), or with respect to leased properties and assets, valid leasehold
interests in, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) the lien of current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt
which is reflected on the Intracel Parent Balance Sheet. The plants, property
and equipment of Intracel Parent and its subsidiaries that are used in the
operations of their businesses are in all material respects in good operating
condition and repair, subject to normal wear and tear. All properties used in
the operations of Intracel Parent and its subsidiaries are reflected in the
Intracel Parent Balance Sheet to the extent generally accepted accounting
principles require the same to be reflected. Section 5.13 of the Intracel Parent
Disclosure Schedule identifies each material parcel of real property owned or
leased by Intracel Parent or any of its subsidiaries.
Section 5.14 Intellectual Property.
(a) To Intracel Parent's knowledge, Intracel Parent and its subsidiaries
own, or are licensed or otherwise possess legally enforceable rights to
use all patents, trademarks, trade names, service marks, copyrights, and
any applications therefor, maskworks, net lists,
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schematics, technology, know-how, trade secrets, inventory, ideas,
algorithms, processes, computer software programs or applications (in
both source code and object code form), and tangible or intangible
proprietary information or material ("Intracel Parent Intellectual
Property") that are used in the business of Intracel Parent and its
subsidiaries as currently conducted, except to the extent that the
failure to have such rights have not had and would not reasonably be
expected to have a Material Adverse Effect on Intracel Parent.
(b) Section 5.14(b) of the Intracel Parent Disclosure Schedule lists (i) all
patents and patent applications and all registered and unregistered
trademarks, trade names and service marks, registered and unregistered
copyrights, and maskworks, included in the Intracel Parent Intellectual
Property, including the jurisdictions in which each such Intracel Parent
Intellectual Property right has been issued or registered or in which
any application for such issuance and registration has been filed, (ii)
all licenses, sublicenses and other agreements as to which Intracel
Parent is a party and pursuant to which any person is authorized to use
any Intracel Parent Intellectual Property, and (iii) all licenses,
sublicenses and other agreements as to which Intracel Parent is a party
and pursuant to which Intracel Parent is authorized to use any Third
Party Intellectual Property rights which are incorporated in, are, or
form a part of any Intracel Parent product.
(c) To the knowledge of Intracel Parent, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intracel Parent
Intellectual Property rights, any trade secret material to Intracel
Parent or any of its subsidiaries, by any third party, including any
employee or former employee of Intracel Parent or any of its
subsidiaries. To the knowledge of Intracel Parent, there is no
unauthorized use, disclosure, infringement or misappropriation by
Intracel Parent or any of its subsidiaries of any Third Party
Intellectual Property right to the extent licensed by or through
Intracel Parent or any of its subsidiaries. Except as set forth in
Section 5.14(c) of the Intracel Parent Disclosure Schedule, neither
Intracel Parent nor any of its subsidiaries has entered into any
agreement to indemnify any other person against any charge of
infringement of any Third Party Intellectual Property, other than
indemnification provisions contained in sales agreements arising in the
ordinary course of business. Except as set forth in Section 5.14(c) of
the Intracel Parent Disclosure Schedule, there are no royalties, fees or
other payments payable by Intracel Parent or any of its subsidiaries to
any Person by reason of the ownership, use, sale or disposition of Third
Party Intellectual Property.
(d) Except as set forth in Section 5.14(d) of the Intracel Parent Disclosure
Schedule, neither Intracel Parent nor any of its subsidiaries is nor
will any of such parties be as a result of the execution and delivery of
this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement
relating to the Intracel Parent Intellectual Property or Third Party
Intellectual Property Rights, the breach of which would have a Material
Adverse Effect on Intracel Parent.
(e) To Intracel Parent's knowledge, all patents, registered trademarks,
service marks and copyrights held by Intracel Parent and any of its
subsidiaries are valid and subsisting.
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Except as set forth in Section 5.14(e) of the Intracel Parent Disclosure
Schedule, neither Intracel Parent nor any of its subsidiaries (i) has
been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third
party; (ii) has knowledge that the manufacturing, marketing, licensing
or sale of its products infringes any patent, trademark, service mark,
copyright, trade secret or other proprietary right of any third party;
and (iii) has brought any action, suit or proceeding for infringement of
Intracel Parent or Third Party Intellectual Property or breach of any
license or agreement involving Intracel Parent Intellectual Property
against any third party.
(f) Section 5.14(f) of the Intracel Parent Disclosure Schedule sets forth a
list of all officers, employees and consultants of Intracel Parent or
any of its subsidiaries who have executed and delivered to Intracel
Parent an agreement regarding the protection of proprietary information
and the assignment to Intracel Parent of all Intracel Parent
Intellectual Property arising from services performed for Intracel
Parent by such persons.
(g) Except as set forth in Section 5.14(g) of the Intracel Parent Disclosure
Schedule, all use, disclosure or appropriation by Intracel Parent or any
of its subsidiaries of Confidential Information has been pursuant to the
terms of a written agreement between Intracel Parent or such subsidiary,
and such third party or is otherwise lawful. Except as set forth in
Section 5.14(g) of the Intracel Parent Disclosure Schedule, all use,
disclosure or appropriation by Intracel Parent or any of its
subsidiaries of Confidential Information not owned by Intracel Parent or
any of its subsidiaries has been pursuant to the terms of a written
agreement between Intracel Parent or such subsidiary, and the owner of
such Confidential Information, or is otherwise lawful.
Section 5.15 Interested Party Transactions. Except as set forth in
Section 5.15 of the Intracel Parent Disclosure Schedule, neither Intracel Parent
nor any of its subsidiaries is indebted to any director, officer, employee or
agent of Intracel Parent or any of its subsidiaries (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to Intracel Parent or any of its subsidiaries.
Section 5.16 Insurance. Intracel Parent and each of its subsidiaries have
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of Intracel
Parent and its subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and Intracel Parent and
its subsidiaries are otherwise in compliance with the terms of such policies and
bonds. Intracel Parent has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
Section 5.17 Products.
(a) Except as set forth in Section 5.17 of the Intracel Parent Disclosure
Schedule, there are no statements, citations, warning letters, FDA Forms
483, or decisions by any governmental
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or regulatory body that any product produced, manufactured, marketed or
distributed at any time by Intracel Parent or any of its subsidiaries
("INTRACEL PARENT PRODUCT") is defective or fails to meet any applicable
standards promulgated by any such governmental or regulatory body. There
have been no recalls ordered by any such governmental or regulatory body
with respect to any Intracel Parent Product. To the knowledge of
Intracel Parent, there is (i) no fact relating to any Intracel Parent
Product that may give rise to a recall of any Intracel Parent Product or
a duty to warn of a defect in any Intracel Parent Product and (ii) no
latent or overt design, manufacturing or other defect in any Intracel
Parent Product.
(b) All Intracel Parent Products used, marketed or distributed by Intracel
Parent or any of its subsidiaries in clinical investigations are subject
to all applicable licenses, registrations, approvals, clearances, and
authorizations required by local, state and federal agencies, foreign or
domestic, regulating the safety, effectiveness, and market clearance of
medical devices, which licenses, registrations, approval, clearances and
authorizations are held by Intracel Parent or one of its subsidiaries
and were obtained by Intracel Parent or such subsidiary on or before the
date when same were required. Those licenses, registrations, approvals,
clearances, and authorizations will not be affected or impaired by the
Merger.
(c) Intracel Parent and one of its subsidiaries is in full possession of
all supportive materials and data substantiating representations made to
the FDA in its material filings therewith, including any and all testing
data in the possession or under the control of Intracel Parent, whether
or not submitted to the FDA. The Intracel Parent Products perform in
compliance with the representations and performance specifications as
contained in said filings.
(d) There is no proceeding by the FDA or any other governmental agency,
including but not limited to a grand jury investigation, a 405 hearing,
a civil penalty proceeding brought at any time in the past relating to
the safety or efficacy of Intracel Parent Products and, to Intracel
Parent's knowledge, there is no basis for such a proceeding.
Section 5.18 Interim Operations of Intracel Acquisition Sub. Intracel
Acquisition Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
Section 5.19 Change in Control. Except as set forth in Section 5.19 of the
Intracel Parent Disclosure Schedule, neither Intracel Parent nor any of its
subsidiaries is a party to any contract, agreement or understanding which
contains a "change in control" or "potential change in control" provision.
Except as set forth in the Intracel Parent Financial Reports or Section 5.19 of
the Intracel Parent Disclosure Schedule, there are no agreements or
understandings between Intracel Parent and its subsidiaries, on the one hand,
and any affiliates of Intracel Parent (other than subsidiaries of Intracel
Parent), on the other hand.
Section 5.20 Environmental, Health, and Safety.
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(a) Intracel Parent and its subsidiaries (A) have complied with all
applicable Environmental, Health, and Safety Laws governing Intracel
Parent and its subsidiaries in all material respects (and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them
alleging any such failure to comply), (B) have obtained and been in
substantial compliance with all of the terms and conditions of all
material permits, licenses, and other authorizations which are required
under all applicable Environmental, Health, and Safety Laws governing
Intracel Parent and its subsidiaries, and (C) have complied in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in the Environmental, Health, and Safety
Laws governing Intracel Parent and its subsidiaries.
(b) To the knowledge of Intracel Parent, Intracel Parent and its
subsidiaries have no material liability (whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due), there is
no fact or circumstance that with the passage of time, or occurrence of
other reasonably foreseeable events would give rise to any material
liability, and Intracel Parent and its subsidiaries have not handled or
disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition,
or owned or operated any property or facility in any manner that could
give rise to any material liability, for damage to any site, location,
or body of water (surface or subsurface), for any illness of or personal
injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law governing Intracel Parent and its
subsidiaries.
Section 5.21 Employment and Labor Matters. Section 5.21 of the Intracel Parent
Disclosure Schedule contains a true, complete and accurate list of the names,
titles, annual compensation (including all bonuses and similar payments made
with respect to each such individual for the current and preceding fiscal years)
of all directors, officers and employees of Intracel Parent and its subsidiaries
who have an annual aggregate remuneration of $80,000 or more. Intracel Parent
and its subsidiaries have and currently are conducting their respective
businesses in full compliance with all laws relating to employment and
employment practices, terms and conditions of employment, wages and hours,
affirmative action, and nondiscrimination in employment. Except as disclosed in
Section 5.21 of the Intracel Parent Disclosure Schedule, to Intracel Parent's
knowledge, the relationships of Intracel Parent and its subsidiaries with their
respective employees are good; to Intracel Parent's knowledge, there is, and
during the past five years there has been, no labor strike, dispute, slow-down,
work stoppage or other labor difficulty actually pending or threatened against
or involving Intracel Parent and its subsidiaries and, to Intracel Parent's
knowledge, no attempt is currently being made or during the past three years has
been made to organize any employees of Intracel Parent and its subsidiaries to
form or enter a labor union or similar organization. Section 5.21 of the
Intracel Parent Disclosure Schedule contains a list of all grievances by
employees during the past three years which have resulted in a significant
change in work practices or contract interpretation or terms or resulted in
arbitration.
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Section 5.22 Contracts. Section 5.22 of the Intracel Parent Disclosure Schedule
lists all the material contracts and arrangements to which Intracel Parent or
any of its subsidiaries is a party or by which it is bound, or to which any of
its assets or properties is subject. Intracel Parent has delivered to the
Company true and complete copies of each document listed in Section 5.22 of the
Intracel Parent Disclosure Schedule, and a written description of each oral
arrangement so listed. Except as disclosed in Section 5.22 of the Intracel
Parent Disclosure Schedule, all such contracts and arrangements are in full
force and effect, and neither Intracel Parent nor any of its subsidiaries is in
default under any of them, nor, to the knowledge of Intracel Parent, is any
other party to any such contract or arrangement in default thereunder.
Section 5.23 Predominant Customers. Except as set forth on Section 5.23 of
the Intracel Parent Disclosure Schedule, no single customer of Intracel Parent
or any of its subsidiaries accounts or accounted for over five percent (5%) of
the total consolidated revenues of Intracel Parent and its subsidiaries (the
"Intracel Dollar Threshold") during the twelve (12) month period immediately
preceding the date of this Agreement.
Section 5.24 Change in Customers or Vendors. Except as set forth on Section
5.24 of the Intracel Parent Disclosure Schedule, no customer or vendor whose
annual volume of purchases or sales during Intracel Parent's fiscal year ended
December 31, 1996 exceeded the Intracel Dollar Threshold, has indicated to
Intracel Parent or any of its subsidiaries, or to any of their respective
officers or directors that it intends to cease doing business with Intracel
Parent or such subsidiary, or materially alter the amount or pricing of the
business done with Intracel Parent or such subsidiary, respectively. To the
knowledge of Intracel Parent, the relationship of such customers and vendors
will not be materially adversely affected by the consummation of the
transactions contemplated by this Agreement.
Section 5.25 Notes and Accounts Receivable. All notes and accounts receivable
of Intracel Parent and its subsidiaries are reflected properly on the Intracel
Parent Financial Reports and Intracel Parent Balance Sheet, are valid
receivables which arose in the ordinary course of business from bona fide
transactions, subject to no set-offs or counterclaims, subject only to the
reserve for bad debts set forth on the face of the Intracel Parent Financial
Reports and Intracel Parent Balance Sheet.
Section 5.26 Questionable Payments. None of Intracel Parent, its subsidiaries,
or any of their respective directors, officers or other employees has: (i) made
any payments or provided services or other favors in the United States of
America or in any foreign country in order to obtain preferential treatment or
consideration by any Governmental Entity with respect to any aspect of the
business of Intracel Parent and its subsidiaries, or (ii) made any political
contributions which would not be lawful under the laws of the United States
(including the Foreign Corrupt Practices Act) or the foreign country in which
such payments were made. None of Intracel Parent, its subsidiaries, or any of
their respective directors, officers or other employees nor, to Intracel
Parent's knowledge, any customer or supplier of Intracel Parent or any of its
subsidiaries, has been subject to any inquiry or investigation by any
Governmental Entity in connection with payments or benefits or other favors to
or for the benefit of any governmental or
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armed services official, agent, representative or employee with respect to any
aspect of the business of Intracel Parent or its subsidiaries or with respect to
any political contribution.
ARTICLE VI
COVENANTS
Section 6.01 Covenants of the Company and Intracel Parent. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, the Company and Intracel
Parent each agree as to itself and its subsidiaries that (except as expressly
contemplated or permitted by this Agreement, Section 6.01 of the Company
Disclosure Schedule or the Intracel Parent Disclosure Schedule, as the case may
be, or to the extent that the other party shall otherwise consent in writing):
(a) Each party and its subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course, consistent with
past practice and (i) use its best efforts to preserve its business
intact, keep available the services of all of its present officers,
employees, agents and representatives, and preserve the goodwill of all
suppliers, customers, clients and others having business relations with
it or any of its subsidiaries; (ii) maintain its corporate existence and
good standing in its state of incorporation; (iii) keep and maintain in
good condition, repair and working order all buildings, offices, stores
and other structures and all machinery, tools, equipment, fixtures and
other property of it and its subsidiaries and observe and conform to all
material terms and conditions upon or under which any of their
properties is held; and (iv) continue and maintain in full force and
effect all insurance now maintained and promptly proceed with the
repair, restoration or replacement of any asset or property damaged or
destroyed by fire or other casualty after the date hereof, whether
insured or uninsured, subject to the rights, if any, of the lessors or
mortgagees thereof.
(b) Except for such transaction disclosed in the appropriate party's
Disclosure Schedule, no party shall, nor shall any party permit any of
its subsidiaries to, nor shall any party or subsidiary propose to, (i)
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of any of
its capital stock, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (iii) repurchase, redeem or otherwise acquire, or
permit any subsidiary to repurchase, redeem or otherwise acquire, any of
its securities or any securities of its subsidiaries.
(c) No party shall, nor shall any party permit any of its subsidiaries to,
authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (including
indebtedness having the right to vote) or equity equivalents (including,
without limitation, stock appreciation rights), except as required
pursuant to the agreements and instruments
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outstanding on the date hereof or disclosed in Sections 4.02 and 5.02,
or amend in any material respect any of the terms of any such securities
or agreements outstanding on the date hereof, other than the issuance of
Company Shares or shares of Intracel Parent Shares, as the case may be,
upon the exercise of stock options pursuant to Company Stock Plan or
Intracel Parent Stock Plans and upon the exercise or conversion of other
Intracel Parent and Company options, warrants or rights, in each case
outstanding on the date of this Agreement and in accordance with their
present terms.
(d) No party shall amend or propose to amend its charter or bylaws.
(e) No party shall, nor shall any party permit any of its subsidiaries to,
acquire, sell, lease, encumber, transfer or dispose of any assets
outside the ordinary course of business, consistent with past practice,
or any assets which are material to such party and its subsidiaries
taken as a whole, except pursuant to obligations in effect on the date
hereof, or enter into any commitment or transaction outside the ordinary
course of business, consistent with past practice.
(f) No party shall, nor shall any party permit any of its subsidiaries to,
incur any indebtedness for borrowed money (which shall not be deemed to
include entering into credit agreements, lines of credit or similar
arrangements until borrowings are made under such arrangements) or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of such party or any
of its subsidiaries or guarantee (or become liable for) any debt of
others or make any loans, advances or capital contributions or mortgage,
pledge or otherwise encumber any material assets or create or suffer any
material lien thereupon other than in each case in the ordinary course
of business consistent with prior practice.
(g) No party shall, nor shall any party permit any of its subsidiaries to
pay, discharge or satisfy any claims, liabilities or obligations in
excess of $350,000 (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of any party and its consolidated
subsidiaries or incurred in the ordinary course of business consistent
with past practice.
(h) No party shall change any of the accounting principles or practices used
by it (except as required by generally accepted accounting principles).
(i) No party shall, nor shall any party permit any of its subsidiaries to,
agree to take any of the foregoing actions or take or agree to take any
action that would or is reasonably likely to result in any of its
representations and warranties set forth in this Agreement being untrue
or in any of the conditions to the Merger set forth in Article VII not
being satisfied.
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(j) Each of the parties shall give prompt notice to the other party of: (i)
any notice of, or other communication relating to, a default or event
which, with notice or the lapse of time or both, would become a default,
received by it or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any agreement,
indenture or instrument material to the financial condition, properties,
businesses or results of operations of it and its subsidiaries, taken as
a whole, to which it or any of its subsidiaries is a party or is
subject; (ii) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, which
consent, if required, would breach the representations contained in
Articles IV and V; and (iii) any material adverse change in the
financial condition, properties, businesses, results of operations or
prospects of it and its subsidiaries, taken as a whole.
(k) The parties shall consult with each other before issuing any press
releases or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any
federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto.
Section 6.02 Additional Covenants of the Company and Intracel Parent.
(a) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time,
each of the Company and Intracel Parent agrees as to itself and its
subsidiaries that it will not, without the prior written consent of the
other party, except as contemplated by this Agreement or required by
law, (i) enter into, adopt, amend or terminate any Company Benefit Plan
or Intracel Parent Benefit Plan, as the case may be, or other employee
benefit plan or any agreement, arrangement, plan or policy between the
Company or Intracel, as the case may be, and one or more of its
directors or executive officers or (ii) except for normal increases in
the ordinary course of business consistent with past practice that, in
the aggregate, do not result in a material increase in benefits or
compensation expense to the Company or Intracel, as the case may be,
increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any
plan and arrangement as in effect as of the date hereof or enter into
any contract, agreement, commitment or arrangement to do any of the
foregoing.
(b) (i) At the Effective Time, each outstanding option to purchase Company
Shares (a "COMPANY STOCK OPTION") under the Company Stock Option Plan,
whether vested or unvested, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such
Company Stock Option, the same number of shares of Intracel Parent
Common Stock as the holder of such Company Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time (not taking
into account whether or not such option was in fact exercisable), at a
price per share equal to (1) the exercise price for the Company Stock
Option divided by (2) the Common Conversion Ratio. In the case of any
Company Stock Option to which Section 421 of the Code
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applies by reason of its qualification under any of Sections 422 and 424
of the Code ("INCENTIVE STOCK OPTIONS"), the option price, the number of
shares purchasable pursuant to such option and the terms and conditions
of exercise of such option shall comply with Section 424(a) of the Code;
(ii) as soon as practicable after the Effective Time, Intracel Parent
shall deliver to the holders of the Company Stock Options set forth in
Section 6.02(b) (i) appropriate notices setting forth such holders'
rights pursuant thereto and such Company Stock Options, including that
the grants or awards pursuant to the Company Stock Option Plan, shall
continue in effect on the same terms and conditions (including further
antidilution provisions, and subject to the adjustments required by this
Section 6.02(b) after giving effect to the Merger). Intracel Parent
shall comply with the terms of such Company Stock Options and ensure, to
the extent required by, and subject to the provisions of, any such
Company Stock Option Plan, that the Company Stock Options which
qualified as incentive stock options prior to the Effective Time
continue to qualify as incentive stock options after the Effective Time.
(c) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time,
subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective without limitation, (i) such actions as
may be required to be taken under the Securities Act and applicable
state securities laws in connection with the issuances contemplated
hereby, and (ii) the preparation and filing of all other forms,
registrations and notices required to be filed to consummate the
transactions contemplated hereby and the taking of such actions as are
necessary to obtain any requisite approvals, consents, orders,
exemptions, waivers by any public or private third party. Each party
shall promptly consult with the other with respect to, provide any
necessary information with respect to and provide the other (or its
counsel) copies of, all filings made by such party with any Governmental
Entity in connection with this Agreement and the transactions
contemplated hereby.
Section 6.03 No Solicitation. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, none of the Company, Intracel Parent or any of their respective
subsidiaries, affiliates, officers, directors, representatives or agents shall,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing information) any person, entity or group concerning any merger, sale
of substantial assets outside the ordinary course of business, sale of shares of
capital stock or similar transaction involving the Company, Intracel Parent or
any of their respective subsidiaries or divisions (other than the transactions
contemplated by this Agreement). During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, the Company shall promptly advise Intracel Parent, and
Intracel Parent shall promptly advise the Company, of any such inquiries or
proposals which are proposed by any third parties on an unsolicited basis.
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Section 6.04 Access to Information. Upon reasonable notice and subject to
restrictions contained in confidentiality agreements to which such party is
subject (from which such party shall use reasonable efforts to be released), the
Company and Intracel Parent shall each (and shall cause each of their respective
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other, reasonable access, during normal business
hours during the period prior to the earlier of the termination of this
Agreement and the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each of the Company and
Intracel Parent shall (and shall cause each of their respective subsidiaries to)
furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request. Unless
otherwise required by law or court order, the parties will hold any such
information which is nonpublic in confidence until such time as such information
otherwise becomes publicly available through no wrongful act of either party,
and in the event of termination of this Agreement for any reason each party
shall promptly return all nonpublic documents obtained from any other party, and
any copies or summaries made of such documents, to such other party.
Section 6.05 Stockholders Meetings. Each of the Company and Intracel Parent
shall either duly call, give notice of, convene and hold a meeting of its
stockholders or solicit the consents of its stockholders as promptly as
practicable for the purpose of voting, in the case of the Company, upon this
Agreement and related matters and, in the case of Intracel Parent, upon the
amendment to the Certificate of Incorporation of Intracel Parent and the
issuance of Intracel Parent Shares pursuant hereto. Intracel Parent and the
Company will, through their respective Board of Directors, recommend to their
respective stockholders approval of such matters and will coordinate and
cooperate with respect to the timing of such meetings or consent solicitations
and shall use their best efforts, if applicable, to hold such meetings on the
same day and as soon as practicable after the date hereof, and shall use their
best efforts to secure the approval of their stockholders for the transactions
contemplated herein.
Section 6.06 Brokers or Finders. Each of Intracel Parent and the Company
represents, as to itself, its subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement
except Vector Securities International, Inc., whose fees and expenses will be
paid (a) by the Company in accordance with the Company's agreement with such
firm (of which a copy has been delivered by the Company to Intracel Parent prior
to the date of this Agreement), and (b) by Intracel Parent in accordance with
Intracel Parent's agreement with such firm (of which a copy has been delivered
by Intracel Parent to the Company prior to the date of this Agreement), and each
of Intracel Parent and the Company agree to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
affiliate.
Section 6.07 Consents, Approvals and Filings. The Company and Intracel Parent
will make and cause their respective subsidiaries to make all necessary filings,
as soon as practicable, including, without limitation, those required under the
Securities Act and applicable state
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securities laws, in order to facilitate prompt consummation of the transactions
contemplated by this Agreement. In addition, the Company and Intracel Parent
will each use their best efforts, and will cooperate fully with each other (i)
to comply as promptly as practicable with all governmental requirements
applicable to the transactions contemplated by this Agreement and (ii) to obtain
as promptly as practicable all necessary permits, orders or other consents of
Governmental Entities and consents, waivers and approvals of all third parties
necessary for the consummation of the transactions contemplated by this
Agreement and to enable each of the Company and Intracel Parent to conduct and
operate its business substantially as presently conducted. Each of the Company
and Intracel Parent shall use reasonable efforts to provide such information and
communications to Governmental Entities as such Governmental Entity may
reasonably request.
ARTICLE VII
CONDITIONS
Section 7.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Closing Date of the following conditions:
(a) This Agreement shall have been approved and adopted by the affirmative
vote of the holders of a majority of the outstanding Company Common
Stock, a majority of the outstanding Company Series A Preferred and a
majority of the outstanding Company Series B Preferred, and the issuance
of Intracel Parent Shares pursuant to the Merger, the amendment of the
Certificate of Incorporation of Intracel Parent and the other terms of
this Agreement shall have been approved by the affirmative vote of the
Intracel Parent shareholders in accordance with the provisions of
Delaware Law and the respective certificate of incorporation and bylaws
of each of the Company and Intracel Parent.
(b) Other than the filing provided for by Section 2.01, all authorizations,
consents, orders or approvals of, or declarations or filings with, or
expirations or terminations of waiting periods imposed by, any
Governmental Entity (other than the filing of a Form D under the
applicable regulations promulgated under the Securities Act), and all
required third party consents, the failure to obtain which would have a
Material Adverse Effect on Intracel Parent and its subsidiaries,
including the Surviving Corporation and its subsidiaries, taken as a
whole, shall have been filed, occurred or been obtained. Intracel Parent
shall have received all state securities or Blue Sky permits and other
authorizations necessary to issue the Intracel Parent Shares pursuant to
the Merger and the other terms of this Agreement.
(c) No statute, rule, regulation, executive order, decree or injunction
which prohibits the consummation of the Merger, or limits or restricts
the operation of Intracel Parent following the Merger, shall have been
enacted, entered, promulgated or enforced by any court or governmental
authority and be in effect.
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(d) The Amended and Restated Certificate of Incorporation of Intracel
Parent shall have been filed with the Secretary of State of the State of
Delaware.
(e) Mr. Hanna shall have delivered the letter in substantially the form of
Exhibit B hereto.
(f) The Shareholders Agreement in substantially the form of Exhibit C hereto
shall have been duly executed and delivered by each of the parties
thereto.
(g) The Registration Rights Agreement in substantially the form of
Exhibit D hereto shall have been duly executed and delivered by each of
the parties thereto.
(h) The Employment Agreements between Intracel Parent and each of Simon
McKenzie and Michael Hanna, respectively, in a form mutually agreeable
to each such respective party,in substantially the form of Exhibit E
hereto, shall have been duly executed and delivered by each of the
parties thereto.
(i) Intracel Parent and the Company shall have received opinions from
Sullivan & Cromwell and Morrison & Foerster, LLP, each dated at the
Effective Time and addressed to Intracel Parent and the Company, stating
that the Merger will qualify as a reorganization under section 368(a) of
the Code. In rendering such opinions, each counsel shall be entitled to
require and to rely upon representations and agreements contained in
certificates from Intracel Parent, the Company and such other parties as
they shall deem reasonably necessary.
Section 7.02 Conditions of Obligations of Intracel Parent and Intracel
Acquisition Sub. The obligations of Intracel Parent and Intracel Acquisition Sub
to effect the Merger are further subject to the satisfaction at or prior to the
Closing Date of the following conditions, unless waived by Intracel Parent and
Intracel Acquisition Sub:
(a) The representations and warranties of the Company set forth in this
Agreement shall be true and correct as of the date of this Agreement,
and shall also be true in all material respects (except for such changes
as are contemplated by the terms of this Agreement and such changes as
would be required to be made in the exhibits to this Agreement if such
schedules were to speak as of the Closing Date) on and as of the Closing
Date with the same force and effect as though made on and as of the
Closing Date, except if and to the extent any failures to be true and
correct would not, in the aggregate, have a Material Adverse Effect on
the Company and its subsidiaries taken as a whole.
(b) From the date of this Agreement through the Closing Date, except as set
forth in Section 4.05 of the Company Disclosure Schedule, the Company
shall not have suffered any adverse changes in its business, operations
or financial condition which are material to the Company and its
subsidiaries taken as a whole (other than changes generally affecting
the industries in which the Company operates, including changes due to
actual or proposed changes in law or regulation, or changes relating to
the transactions contemplated by this Agreement, including the change in
control contemplated hereby).
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<PAGE> 47
(c) The Company shall have performed all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, in
all material respects, other than the filing of the Certificate of
Merger.
(d) At the Closing, the Company shall have furnished Intracel Parent with
copies of (i) resolutions duly adopted by the Board of Directors of the
Company approving the execution and delivery of this Agreement and all
other necessary or proper corporate action to enable the Company to
comply with the terms of this Agreement, (ii) the resolutions duly
adopted by the holders of Company Common Stock, Company Series A
Preferred and Company Series B Preferred approving and adopting this
Agreement and the Merger, such resolutions to be certified by the
Secretary or Assistant Secretary of the Company and (iii) a Certificate
of the Secretary of the Company setting forth the capitalization of the
Company on the Closing Date, immediately prior to the Effective Time, as
specified in Section 4.02.
(e) At the Closing, the Company shall have furnished Intracel Parent with
an opinion, dated the Closing Date, of counsel to the Company, in form
and substance satisfactory to Intracel Parent and its counsel, to the
effect that:
(i) the Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of
Delaware;
(ii) the Subsidiary has been duly incorporated and is an existing
corporation in good standing under the laws of the State of
Delaware;
(iii) all of the outstanding Company Shares have been duly authorized
and validly issued and are fully paid and nonassessable and none
of such issued Company Shares were issued in violation of any
preemptive rights of shareholders of the Company;
(iv) this Agreement has been duly authorized, executed and delivered
by the Company and this Agreement constitutes a valid and
legally binding obligation of the Company enforceable in
accordance with its terms, subject to bankruptcy, fraudulent
transfer, reorganization, moratorium, insolvency and similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and
(v) all regulatory consents, authorizations, approvals and filings
required to be obtained or made by the Company prior to the
Effective Time under the Federal laws of the United States or
the General Corporation Law of the State of Delaware for the
consummation of the transactions contemplated by this Agreement
by the Company, have been made or obtained.
In rendering the foregoing opinion (the "COMPANY PRIMARY OPINION"), such
counsel may rely on certificates of officers and other agents of the Company and
public officials as to matters of fact and, as to matters relating to the law of
jurisdictions other than New York and the General Corporation Law of the State
of Delaware, upon opinions of counsel of such other jurisdictions reasonably
satisfactory to Intracel Parent and its counsel, provided such reliance is
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<PAGE> 48
expressly noted in the Company Primary Opinion and the opinions of such other
counsel and the certificates of such officers, agents and public officials
relied on are attached to the Company Primary Opinion. Notwithstanding the
foregoing, such counsel shall not be required to express an opinion with respect
to any matters relating to FDA consents, authorizations, approvals or filings;
(f) The Company shall have issued shares of Company Series B
Preferred to Mentor Corporation substantially in accordance with the terms set
forth in the Strategic Alliance Terms Sheet previously delivered to Intracel
Parent.
(g) All actions, proceedings, instruments and documents required
to carry out this Agreement, or incidental hereto, and all other legal matters
shall have been approved by counsel to Intracel Parent, and such counsel shall
have received all documents, certificates and other papers reasonably requested
by it in connection therewith.
Section 7.03 Conditions of Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to the satisfaction at or prior
to the Closing Date of the following conditions, unless waived by the Company:
(a) The representations and warranties of Intracel Parent and Intracel
Acquisition Sub set forth in this Agreement shall be true and correct as
of the date of this Agreement, and shall also be true in all material
respects (except for such changes as are contemplated by the terms of
this Agreement and such changes as would be required to be made in the
exhibits to this Agreement if such schedules were to speak as of the
Closing Date) on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date, except if and to
the extent any failures to be true and correct would not, in the
aggregate, have a Material Adverse Effect on Intracel Parent.
(b) From the date of this Agreement through the Closing Date, except as set
forth in Section 5.06 of the Intracel Parent Disclosure Schedule,
Intracel Parent shall not have suffered any adverse changes in its
business, operations or financial condition which are material to
Intracel Parent and its subsidiaries taken as a whole (other than
changes generally affecting the industries in which Intracel Parent
operates, including changes due to actual or proposed changes in law or
regulation)
(c) Intracel Parent and Intracel Acquisition Sub shall have performed all
obligations required to be performed by it under this Agreement at or
prior to the Closing Date in all material respects, other than the
filing of the Certificate of Merger.
(d) At the Closing, Intracel Parent and Intracel Acquisition Sub shall have
furnished the Company with copies of (i) resolutions duly adopted by
their respective Boards of Directors approving the execution and
delivery of this Agreement and all other necessary or proper corporate
action to enable them to comply with the terms of this Agreement, (ii)
the resolutions duly adopted by the shareholders of Intracel Parent
approving the issuance of Intracel Parent Shares and the amendment to
the Certificate of Incorporation of Intracel Parent, such resolutions to
be certified by the Secretary or Assistant Secretary of Intracel
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<PAGE> 49
Parent, (iii) the resolutions duly adopted by the sole shareholder of
Intracel Acquisition Sub approving and adopting this Agreement and the
Merger, (iv) a certificate of the Secretary of Intracel Parent setting
forth the capitalization of Intracel Parent on the Closing Date,
immediately prior to the Effective Time, as specified in Section 5.02
and (v) audited Intracel Parent Financial Reports.
(e) At the Closing, Intracel Parent shall have furnished the Company with
an opinion, dated the Closing Date, of counsel to the Intracel Parent
and Intracel Acquisition Sub, in form and substance satisfactory to the
Company and its counsel, to the effect that:
(i) Each of Intracel Parent, Intracel Acquisition Sub and Bartels
Inc. is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of their
respective incorporation;
(ii) the Intracel Parent Shares to be issued under the Agreement (the
"Subject Shares") have been duly authorized and, upon
consummation of the transactions contemplated by the Agreement,
will be validly issued, fully paid and nonassessable, and such
issuance is not subject to any preemptive rights of shareholders
of Intracel Parent;
(iii) this Agreement has been duly authorized, executed and delivered
by Intracel Parent and Intracel Acquisition Sub and constitutes
the legal, valid and binding obligation of each, enforceable
against Intracel Parent and Intracel Acquisition Sub in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws
relating to or affecting the rights of creditors generally,
including, without limitation, laws relating to fraudulent
transfers or conveyances, preferences, and equitable
subordination;
(iv) no registration with, consent or approval of, notice to, or other
action by, any governmental entity of the United States and the
General Corporation Law of the State of Delaware is required on
the part of Intracel Parent or Intracel Acquisition Sub for the
execution, delivery or performance of this Agreement by Intracel
Parent or Intracel Acquisition Sub, or if required, such
registration has been made, such consent or approval has been
obtained, such notice has been given or such appropriate action
has been taken; and
(v) none of the transactions contemplated by this Agreement will
require registration under Section 5 of the Securities Act of
1933, as amended.
In rendering the foregoing opinion (the "INTRACEL PRIMARY OPINION"), such
counsel may rely on certificates of officers and other agents of the Company,
Intracel Parent or Intracel Acquisition Sub, the stockholders of such entities,
and public officials as to matters of fact and, as to matters relating to the
law of jurisdictions other than New York and the General Corporation Law of the
State of Delaware, upon opinions of counsel of such other jurisdictions
reasonably satisfactory to Intracel Parent and its counsel, provided such
reliance is expressly noted in the Intracel Primary Opinion and the opinions of
such other counsel and the certificates of such officers, agents and public
officials relied on are attached to the Intracel Primary
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<PAGE> 50
Opinion. Notwithstanding the foregoing, such counsel shall (i) be permitted, in
connection with rendering the opinion set forth in clause (v), to assume that
the information statement delivered to the Company's shareholders complies with
Rule 502 promulgated under the Securities Act and (ii) not be required to
express an opinion with respect to any matters relating to FDA consents,
authorizations, approvals or filings.
(f) Intracel Parent shall have furnished to the Company evidence
that Intracel Parent and each of its subsidiaries has filed all federal, state,
local and foreign tax returns required to be filed by it, that the aggregate
amounts of all taxes owed pursuant to such returns shall in no event exceed
$10,000 and that any penalties imposed or to be imposed for filing such returns
late shall not be material to Intracel Parent.
(g) Intracel Parent shall have furnished to the Company a copy of
Intracel Parent's audited consolidated financial statements for the year ended
December 31, 1996 as audited by Ernst & Young LLP (the "Audited Financials").
Such Audited Financials shall not be substantially different than the Intracel
Parent Financial Reports attached to the Intracel Parent Disclosure Schedule,
and shall contain an unqualified opinion by Ernst & Young LLP.
(h) Intracel Parent shall have furnished to the Company an amendment
(the "Amendment") to each of the following agreements, in a form reasonably
satisfactory to the Company: (i) the Loan Documents (as such term is defined in
the Credit Agreement, dated as of November 16, 1995, as amended, among Intracel
Parent, Credit Anstalt Bankverien, as agent, and the lenders party thereto) (the
"CreditAnstalt Agreements"); (ii) the Secured Promissory Note, dated December
27, 1995, as amended, by Intracel Parent in favor of Northstar Advantage High
Total Return Fund (the "Northstar Agreement"); and (iii) the Secured Promissory
Note, dated June 11, 1996, by Intracel Parent in favor of CoreStates Enterprise
Fund (the "CoreStates Agreement" and, together with the CreditAnstalt Agreements
and the Northstar Agreement, the "Credit Agreements"). Such Amendment shall
expressly waive compliance by Intracel Parent with all of the covenants
(including all affirmative and negative covenants) included in each of the
Credit Agreements until December 31, 1998, except that the Amendment may contain
such covenants as are reasonably acceptable to the Company.
(i) Intracel Parent shall have furnished to the Company, in a form
reasonably satisfactory to the Company, the renewal of the License Agreement,
dated as of June 1, 1994, between Thomas Jefferson University and Intracel
Parent.
(j) Intracel Parent shall have issued shares of Intracel Parent
Common Stock to CoreStates Enterprise Fund in the manner described in the
Intracel Parent Disclosure Schedule.
(k) All actions, proceedings, instruments and documents required to
carry out this Agreement, or incidental hereto, and all other legal matters
shall have been approved by counsel to the Company, and such counsel shall have
received all documents, certificates and other papers reasonably requested by it
in connection therewith.
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ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the stockholders of the Company or Intracel
Parent:
(a) by mutual consent of Intracel Parent and the Company;
(b) by either Intracel Parent or the Company if the Merger shall not have
been consummated before January 31, 1998 (unless the failure to
consummate the Merger by such date shall be due to the action or failure
to act of the party seeking to terminate this Agreement);
(c) by either Intracel Parent or the Company if any permanent injunction or
other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and non-appealable;
(d) by either party if any required approval of the stockholders of Intracel
Parent or the Company shall not have been obtained by reason of the
failure to obtain the required vote pursuant to a written consent of
shareholders, or at a duly held meeting of stockholders or at any
adjournment thereof;
(e) by Intracel Parent if there has been a material breach of any
representation, warranty, covenant or agreement contained in this
Agreement on the part of the Company and such breach has not been cured
five business days prior to the Closing Date, after notice to the
Company by Intracel Parent; or
(f) by the Company if there has been a material breach of any
representation, warranty, covenant or agreement contained in this
Agreement on the part of Intracel Parent or Intracel Acquisition Sub and
such breach has not been cured five business days prior to the Closing
Date, after notice to Intracel Parent by the Company.
Section 8.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.01 hereof, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party hereto
or its affiliates, directors, officers or stockholders; provided, however, that
not withstanding the foregoing, nothing contained in this Section 8.02 shall
relieve any party from liability for any breach of this Agreement by such party.
Section 8.03 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company or of Intracel Parent, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
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Section 8.04 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
POST CLOSING COVENANTS
In filing federal tax returns at any time, each of Intracel Parent, the
Company and Intracel Acquisition Sub will take consistent filing positions to
the effect that, for federal income tax purposes, the Merger qualifies as a
"reorganization" within the meaning of Section 368(a) of the Code, and no
shareholder is required to recognize income gain or loss with respect thereto.
ARTICLE X
MISCELLANEOUS
Section 10.01 Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 10.02 Notices. All notices and other communications hereunder shall
be in writing (and shall be deemed given upon receipt) if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Intracel Parent or Intracel Acquisition Sub, to
Intracel Corporation
1871 N.W. Gilman Blvd.
Issaquah, WA 98027
Fax: (425) 391-0416
with a copy to
Joseph Bartlett, Esq.
Morrison & Foerster, LLP
1290 Avenue of the Americas
New York, NY 10104
Fax: (212) 468-7900
and
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<PAGE> 53
(b) if to the Company, to
PerImmune Inc.
1330 Piccard Drive
Rockville, Maryland 20850
Fax: (301) 840-2161
with a copy to
Edwin Williamson, Esq.
Sullivan & Cromwell
1701 Pennsylvania Ave., NW
Washington, D.C. 20006
Fax: (202) 293-6330
Section 10.03 Descriptive Headings. The descriptive headings herein are
inserted for convenience only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
Section 10.04 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 10.05 Entire Agreement; Assignment. This Agreement and the documents and
instruments and other agreements to be executed on the Closing Date (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof (other than any confidentiality agreement between the
parties; any provisions of such agreements which are inconsistent with the
transactions contemplated by this Agreement being waived hereby) and (b) shall
not be assigned by operation of law or otherwise, provided that Intracel Parent
may cause Intracel Acquisition Sub to assign its rights and obligations to
Intracel Parent or any other wholly owned subsidiary of Intracel Parent, but no
such assignment shall relieve Intracel Acquisition Sub of its obligations
hereunder if such assignee does not perform such obligations.
Section 10.06 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable principles of conflicts of law.
Section 10.07 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
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Section 10.08 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
Section 10.09 Publicity. Except as otherwise required by law or the rules of
any national securities exchange, for so long as this Agreement is in effect,
neither the Company nor Intracel Parent shall, or shall permit any of its
subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without prior consultation with the other party.
Section 10.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person or
persons any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
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<PAGE> 55
IN WITNESS WHEREOF, the Company, Intracel Parent and Intracel Acquisition
Sub have caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the date first written above.
PERIMMUNE HOLDINGS, INC.
By
----------------------------------
Name:
Title:
INTRACEL CORPORATION
By
----------------------------------
Name:
Title:
INTRACEL ACQUISITION SUB, INC.
By
----------------------------------
Name:
Title:
54
<PAGE> 56
EXHIBIT 2.03(A)
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PERIMMUNE HOLDINGS, INC.
Adopted in Accordance with Section 242 and 245
of the Delaware General Corporate Law
* * * * *
FIRST. The name of the corporation is PerImmune Holdings, Inc. The
date of filing of the original Certificate of Incorporation with the Secretary
of State was June 28, 1996, and the name under which it was originally
incorporated was PerImmune Holdings, Inc.
SECOND. This Amended and Restated Certificate of Incorporation
amends, restates and integrates the provisions of the Certificate of
Incorporation of said corporation and has been duly adopted in accordance with
the provisions of Section 242 and 245 of the General Corporation Law of the
State of Delaware (the "DGCL") by the written consent of the holders of the
outstanding stock entitled to vote thereon in accordance with the provisions of
Section 228 of the DGCL.
THIRD. The text of the Certificate of Incorporation is hereby
amended and restated to read in full as follows:
1. The name of the corporation (hereinafter sometimes referred
to as the "Corporation") is PERIMMUNE HOLDINGS, INC.
2. The address of its registered office is in the State or
Delaware is Corporation Trust Center, 1209 Orange Street, in the city of
Wilmington County, County of New Castle. The name of its registered
agent at such address is The Corporation Trust Company.
3. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
4. The total number of shares of stock which the corporation
shall have the authority to issue is One Thousand Five Hundred (1,500)
shares of Common Stock; all of such shares shall be without par value.
<PAGE> 57
5. The board of directors is authorized to adopt, amend or
repeal the by-laws of the corporation. Election of directors need not be
by written ballot, except and to the extent provided in the By-laws of
the Corporation.
6. The corporation is to have perpetual existence.
7. Any action required or permitted to be taken by the holders
of any class or series of stock of the Corporation, including but not
limited to the election of directors, may be taken by written consent or
consents.
8. A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that such exemption
from liability or limitation thereof is not permitted under the Delaware
General Corporation Law as currently in effect or as the same may
hereafter be amended. No amendment, modification or repeal of this
Article Eight shall adversely affect any right or protection of a
director that exists at the time of such amendment, modification or
repeal.
IN WITNESS WHEREOF, PerImmune Holdings, Inc. has caused this Certificate
to be signed by Simon R. McKenzie, its Chief Executive Officer, on the 2nd day
of January, 1998.
/s/ SIMON R. MCKENZIE
----------------------------------------
<PAGE> 58
EXHIBIT 2.03(b)
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INTRACEL CORPORATION
ADOPTED IN ACCORDANCE WITH SECTION 242 AND 245
OF THE DELAWARE GENERAL CORPORATION LAW
FIRST. The name of the corporation is Intracel Corporation. The date
of filing of the original Certificate of Incorporation with the Secretary of
State was April 30, 1997, and the name under which it was originally
incorporated was Intracel Corporation.
SECOND. This Amended and Restated Certificate of Incorporation
amends, restates and integrates the provisions of the Certificate of
Incorporation of said corporation and has been duly adopted in accordance with
the provisions of Section 242 and 245 of the General Corporation Law of the
State of Delaware (the "DGCL") by the written consent of the holders of the
outstanding stock entitled to vote thereon in accordance with the provisions of
Section 228 of the DGCL.
THIRD. The text of the Certificate of Incorporation is hereby
amended and restated to read in full as follows:
ARTICLE 1 NAME
The name of this corporation is Intracel Corporation.
ARTICLE 2 REGISTERED OFFICE AND AGENT
The address of the initial registered office of this corporation is 1013
Centre Road, Wilmington, County of New Castle, State of Delaware 19805, and the
name of its initial registered agent at such address is Corporation Service
Company.
ARTICLE 3 PURPOSES
The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware
ARTICLE 4 SHARES
The total authorized stock of this corporation shall consist of
25,000,000 shares of common stock having a par value of $.0001 per share
("Common Stock") and 5,000,000 shares of preferred stock having a par value of
$.0001 per share ("Preferred Stock"). Authority is hereby expressly granted to
the Board of Directors to fix by resolution or resolutions any of the
designations and the powers, preferences and rights, and the qualifications,
limitations or
<PAGE> 59
restrictions which are permitted by Delaware General Corporation Law in respect
of any class or classes of stock or any series of any class of stock of this
corporation.
4.1 SERIES A PREFERRED STOCK
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations, or restrictions
thereof in respect of the Series A Preferred Stock of this corporation, $.0001
par value per share ("Series A Preferred Stock"), which shall consist of and be
limited to a number of shares not to exceed 730,000 shares.
4.1.1 VOTING
(a) General. Each holder of outstanding shares of Series A Preferred Stock
shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series A Preferred Stock
held by such holder are convertible (as adjusted from time to time
pursuant to Section 4.1.4 hereof), multiplied by the number of votes per
share which the holders of shares of Common Stock then have with respect
to such matter, at each meeting of stockholders of this corporation (and
written actions of stockholders in lieu of meetings) with respect to any
and all matters presented to the stockholders of this corporation for
their action or consideration. Except as provided by law or as otherwise
set forth herein, holders of Series A Preferred Stock shall vote
together with the holders of Common Stock (and any other class or series
of stock entitled to vote together as one class with the Common Stock)
as a single class.
(b) Board Seat. The holders of records of the shares of Series A Preferred
Stock, exclusively as a separate class, shall collectively be entitled
to elect one (1) director to this corporation's Board of Directors.
Regarding the election of other directors to this corporation's Board of
Directors, the holders of record of the shares of Common Stock and any
other class or series of stock entitled to vote together as one class
with the Common Stock, as a single class, shall be entitled to elect the
balance of the number of directors of this corporation to be elected in
a given year.
(c) Quorum. At any meeting held for the purpose of electing the director to
be elected exclusively by the holders of Series A Preferred, the
presence in person or by proxy of the holders of a majority of the
shares of Series A Preferred Stock then outstanding shall constitute a
quorum of the Series A Preferred Stock for the purpose of electing such
director by the holders of the Series A Preferred Stock; the holders of
Series A Preferred Stock shall be entitled to cast one vote per share of
Series A Preferred Stock for such purpose; and the director to be
elected exclusively by the holders of Series A Preferred Stock shall be
elected
(d) Removal and Vacancy. The director who shall have been elected
exclusively by the holders of the Series A Preferred Stock may be
removed at any time by, and removed only by, the affirmative vote of the
holders of a majority of the outstanding shares of such class at a
special meeting of such holders called for that purpose. A vacancy in
the directorship filled exclusively by the holders of Series A Preferred
Stock shall be filled
2
<PAGE> 60
only by vote or written consent in lieu of a meeting of the holders of
the Series A Preferred Stock.
(e) Covenants. So long as at least 25% of the shares of Series A
Preferred Stock originally authorized remain outstanding, in
addition to any other rights provided by law, without first
obtaining the affirmative vote or written consent of the holders of
not less than 51% of the then outstanding shares of the Series A
Preferred Stock, this corporation shall not:
(i) amend or repeal any provision of, or add any provision to, this
corporation's Certificate of Incorporation or Bylaws if such action
would materially alter or change the preferences, rights, privileges
or powers of, or the restrictions provided for the benefit of, any
Series A Preferred Stock, or increase or decrease the number of
shares of Series A Preferred Stock authorized hereby;
(ii) authorize or issue shares of any class or series of stock not
expressly authorized herein having any preference or priority as to
dividends, assets or other rights superior to any such preference or
priority as to dividends, assets or other rights superior to any
such preference or priority of the Series A Preferred Stock, or
authorize or issue shares of stock of any class or any bonds,
debentures, notes or other obligations convertible into or
exchangeable for, or having option rights to purchase, any shares of
stock of this corporation having any preference or priority as to
dividends, assets or other rights superior to any such preference or
priority of the Series A Preferred Stock;
(iii) pay or declare any dividend on any capital stock of this corporation
which is junior to the Series A Preferred Stock ("Junior Stock")
(other than dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of
Common Stock with respect to Junior Stock other than Common Stock,
together with cash in lieu of fractional shares and aggregate
dividends since the last payment of a cash dividend on the Series A
Preferred Stock not in excess of the aggregate cash dividend payment
last made in respect of the Series A Preferred Stock) while the
Series A Preferred Stock remains outstanding, or apply any of its
assets to the redemption, retirement, purchase or acquisition,
directly or indirectly, through subsidiaries or otherwise, of any
Junior Stock, except from employees of this corporation, upon
termination of employment or otherwise, pursuant to the terms of
employee stock purchase or employee stock options plans of general
application which provide for the repurchase of, or right of first
refusal with respect to, such Junior Stock entered into with
participating employees;
(iv) recapitalize or reclassify any shares of capital stock;
(v) merge or consolidate into or with any other corporation (except for
a merger which yields to the holders of the Series A Preferred Stock
an all cash consideration paid at closing equal to the
then-applicable Series A Optional Redemption Price (as defined
below));
(vi) voluntarily liquidate, dissolve or wind up this corporation; or
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(vii) materially change the principal business of this corporation.
4.1.2 DIVIDENDS
(a) The holders of record of outstanding shares of the Series A Preferred
Stock shall be entitled to receive an eight percent (8%) annual dividend
which shall accrue daily, and which shall be calculated on the basis of
the Series A Initial Conversion Price (as defined below) for the Series
A Preferred Stock. All dividend payment, regardless of form, shall be
paid in quarterly installments on each of September 30, December 31,
March 31 and June 30 of each year. At the election of this corporation,
each dividend may be paid either in additional shares of Series A
Preferred Stock or in cash until January 1, 1999 and payable only in
cash from thereafter until July 1, 2001. Dividends paid in additional
shares of Series A Preferred Stock shall be paid in full shares only
with a cash payment (based on an assumed value of $8.00 per share) equal
to the value of any fractional shares. Each dividend paid in cash shall
be mailed to the holders of record of the Series A Preferred Stock as
their names and addresses appear on the share register of this
corporation or at the office of the transfer agent if a dividend is
paid-in-kind, which notification will specify the number of shares of
Series A Preferred Stock paid as a dividend and the recipient's
aggregate holdings of Series A Preferred Stock as of that dividend
payment date and after giving effect to the dividend.
(b) Dividends shall accrue until paid whether or not they have been declared
and whether or not there are profits, surplus, or other funds legally
available for the payment of dividends. At the earlier of: (i) the
redemption of the Series A Preferred Stock; (ii) the filing of a
registration statement in respect of an underwritten public offering of
the type described in Section 4.1.4(b); or (iii) the liquidation, sale
or merger of this corporation, any accrued but undeclared dividends
shall be paid to the holders of record of outstanding shares of Series A
Preferred Stock.
4.1.3 LIQUIDATION
(a) Preferred Stock. Upon any liquidation, dissolution or winding up of this
corporation, whether voluntary or involuntary, the holders of the shares
of the Series A Preferred Stock together with the holders of the shares
of the Series A-1 Preferred Stock, the Series A-3 Preferred Stock, the
Series B-1 Preferred Stock and the Series B-2 Preferred Stock (all as
hereinafter defined), shall first be entitled, before any distribution
or payment is made with respect to the Common Stock or Junior Stock, to
be paid an amount equal to the higher of:
(i) $8.00 per share of the Series A Preferred Stock, Series A-1
Preferred Stock and Series A-3 Preferred Stock, and $45,000 per
share of the Series B-1 Preferred Stock and $50,000 per share of the
Series B-2 Preferred Stock, plus an amount equal to all accrued but
unpaid dividends thereon, computed to the date payment thereof is
made available; or
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(ii) such amount per share of the Series A Preferred Stock, the Series
A-1 Preferred Stock and Series A-3 Preferred Stock, as would have
been payable had each share been converted to Common Stock
immediately prior to such liquidation, dissolution or winding up of
this corporation.
If upon such liquidation, dissolution or winding up of this corporation,
whether voluntary or involuntary, the assets to be distributed among the holders
of the Series A Preferred Stock, the Series A-1 Preferred Stock, Series A-3
Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred Stock shall
be insufficient to permit distribution in full to the holders of the Series A
Preferred Stock, the Series A-1 Preferred Stock, Series A-3 Preferred Stock,
Series B-1 Preferred Stock and Series B-2 Preferred Stock of the amounts set
forth in (i) and (ii) of this Section 4.1.3(a), then the entire remaining assets
of this corporation shall be distributed ratably (based on the amount of
distribution to be made pursuant to this Section 4.1.3(a)) among the holders of
the Series A Preferred Stock, the Series A-1 Preferred Stock, Series A-3
Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred Stock.
(b) Junior and Common Stock. Upon any such liquidation, dissolution or
winding up of this corporation, only after the holders of the Series A
Preferred Stock, the Series A-1 Preferred Stock, Series A-3 Preferred
Stock, Series B-1 Preferred Stock and Series B-2 Preferred Stock shall
have been paid in full the amounts to which they shall be entitled
pursuant to Section 4.1.2(a), may the remaining net assets of this
corporation be distributed to the holders of Common Stock and Junior
Stock.
(c) Notice. Upon any such liquidation, dissolution or winding up, stating a
payment date and the place where said payments shall be made, shall be
given by mail, postage prepaid, or by telex to non-U.S. residents, not
less than twenty (20) days prior to the payment date stated therein, to
the holders of record of the Series A Preferred Stock, such notice to be
addressed to each such holder at its address as shown on the records of
this corporation.
4.1.4 CONVERSION
The holders of the Series A Preferred Stock shall have conversion rights
as follows (the "Series A Conversion Rights"):
(a) Optional Conversion. Subject to and upon compliance with the provisions
of this Section 4.1.4, the holder of any shares of Series A Preferred
Stock shall have the right at such holder's option, at any time or from
time to time, to convert any of such shares of Series A Preferred Stock
into fully paid and nonassessable shares of Common Stock at the Series A
Conversion Price (as hereinafter defined) in effect on the Series A
Conversion Date (as hereinafter defined) upon the terms hereinafter set
forth. In case any shares of Series A Preferred Stock is called for
redemption, such right of conversion shall terminate at the close of
business on the Series A Mandatory Redemption Date (as hereinafter
defined) or, if this corporation shall default in the payment of the
Series A Mandatory Redemption Price (as hereinafter defined), at the
close of business when such payment is made.
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(b) Automatic Conversion. Each outstanding share of Series A Preferred Stock
shall automatically be converted, without any further act of this
corporation or its stockholders, into fully paid and nonassessable
shares of Common Stock at the Series A Conversion Price then in effect
upon notice by this corporation to the holders of shares of Series A
Preferred Stock of the closing of an underwritten public offering
pursuant to an effective registration statement in Form S-1 or successor
form under the Securities Act of 1933, as amended, covering the offering
and sale of Common Stock for the account of this corporation at a per
share price of at least $8.00 in which the aggregate gross proceeds
received by this corporation has equaled or exceeded $10,000,000,
provided, however, that such closing of an underwritten public offering
occurs no later than September 19, 1998.
(c) Conversion Price. Each share of Series A Preferred Stock shall be
converted into a number of shares of Common Stock determined by dividing
(i) the sum of (A) $8.00 plus (B) the dollar amount of any dividends on
such shares of the Series A Preferred Stock which such holder is
entitled to receive, but has not yet received, by (ii) the Series A
Conversion Price in effect on the Series A Conversion Date. The Series A
Conversion Price at which shares of Common Stock shall initially be
issuable upon conversion of the shares of Series A Preferred Stock shall
be $8.00. The Series A Conversion Price shall be subject to adjustment
as set forth in Section 4.1.4(f). No payment or adjustment shall be made
for any dividends on the Common Stock issuable upon such conversion.
(d) Mechanics of Conversion.
(i) The holder of any shares of Series A Preferred Stock may exercise
the conversion right specified in Section 4.1.4(a) by surrendering
to this corporation or the transfer agent of this corporation the
certificate or certificates for the shares to be converted,
accompanied by written notice specifying the number of shares to be
converted. Upon the occurrence of the event specified in Section
4.1.4(b), the outstanding shares of the Series A Preferred Stock
shall be converted automatically without any further action by the
holders of such shares and whether or not the certificates
representing such shares are surrendered to this corporation or to
its transfer agent, provided that this corporation shall not be
obligated to issue to any such holder certificates evidencing the
shares of Common Stock issuable upon such conversion unless
certificates evidencing the shares of the Series A Preferred Stock
are delivered whether to this corporation or the transfer agent of
their corporation. Conversion shall be deemed to have been effected
on the date when delivery of the notice of an election to convert
and certificates for shares is made or on the date of the occurrence
of the event specified in Section 4.1.4(b), as the case may be, and
such date is referred to herein as the "Series A Conversion Date."
As promptly as practicable thereafter this corporation shall issue
and deliver to or upon the written order of such holder a
certificate or certificates for the number of full shares of Common
Stock to which such holder is entitled and a check or cash with
respect to any fractional interest in a share of Common Stock as
provided in Section 4.1.4(e). The person in whose name the
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certificate or certificates for Common Stock are to be issued shall
be deemed to have become the holder of record of such Common Stock
on the applicable Series A Conversion Date. Upon conversion of only
a portion of the number of shares covered by a certificate
representing shares of the Series A Preferred Stock surrendered for
conversion this corporation shall issue and deliver to or upon the
written order of the holder of the certificate so surrendered for
conversion, at the expense of this corporation, a new certificate
covering the number of shares of the Series A Preferred Stock
representing the unconverted portion of the certificate so
surrendered.
(ii) This corporation shall, at all time when the Series A Preferred
Stock shall be outstanding, reserve and keep available out of its
authorized but unissued capital stock, for the purpose of effecting
the conversion of the Series A Preferred Stock, such number of its
duly authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series A
Preferred Stock. Before taking any action which would cause an
adjustment reducing the Series A Conversion Price below the then par
value of the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, this corporation will take any corporate
action which may be necessary in order that this corporation may
validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Series A Conversion Price.
(iii) All shares of the Series A Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares
shall immediately cease and terminate on the Series A Conversion
Date, except only the right of the holders thereof to receive shares
of Common Stock in exchange therefor. Such conversion shall be
deemed to have been made at the close of business on the Series A
Conversion Date, and the person entitled to receive the shares of
Common Stock shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. This
corporation shall not re-issue any share of Series A Preferred Stock
surrendered by the holder thereof for conversion.
(e) Fractional Shares. No fractional shares of Common Stock or scrip shall
be issued upon conversion of shares of the Series A Preferred Stock. If
more than one share of the Series A Preferred Stock shall be surrendered
for conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of the Series A
Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any
shares of the Series A Preferred Stock, this corporation shall pay a
cash adjustment in respect of such fractional interest in an amount
equal to that fractional interest of the higher of the current marketing
price or fair market value as determined by the Board of Directors of
this corporation.
(f) Adjustments to Conversion Price for Diluting Issues.
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(i) Special Definitions. For purposes of this Section 4.1.4(f), the
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding (1) options granted to employees and
Directors of this corporation prior to June 30, 1994 pursuant to
employee benefit plans or employee stock option plans available
for grants to this corporation's executives in general, adopted
by the Board of Directors of this corporation and options
granted to employees, officers, directors and consultants of
PerImmune Holdings, Inc. prior to January 1, 1998 pursuant to
the PerImmune Holdings, Inc. 1996 Stock Option Plan (the
"PerImmune Plan"), (2) 200,000 additional options to purchase
shares of Common Stock granted to employees and directors of
this corporation pursuant to employee benefit plans or employee
stock option plans available for grants to the corporation's
executives in general, subsequent to June 30, 1994 and prior to
July 1, 2001; provided, that each such option shall have an
exercise price equal to or greater than $6.50 per share, (3)
warrants (the "Series A Warrants") issued in connection with the
Convertible Preferred Stock Purchase Agreement dated July 22,
1994 (the "Series A Purchase Agreement") which evidence rights
to purchase an aggregate of 52,000 shares of Common Stock (the
"Series A Warrant Shares") and (4) the Series A-1 Warrants (the
"Series A-1 Warrants") issued in connection with the Warrant
Agreement between this corporation and Dublind Investments,
L.L.C. (the "Series A-1 Warrant Agreement") which evidence
rights to purchase an aggregate of 86,462 shares of Common Stock
(the "Series A-1 Warrant Shares").
(B) "Original Issue Date" shall mean the date on which shares of
Series A Preferred Stock were first issued.
(C) "Convertible Securities" shall mean the evidence of
indebtedness, shares of other securities directly or indirectly
convertible into or exchange for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Section 4.1.4(f)(vi),
deemed to be issued) by this corporation after the Original
Issue Date, other than shares of Common Stock issued or
issuable:
(I) upon conversion of shares of Series A Preferred Stock issued
pursuant to the Series A Purchase Agreement or the exercise of
Series A Warrants for Series A Warrant Shares;
(II) upon conversion of shares of Series A-1 Preferred Stock issued
pursuant to the Series A-1 Purchase Agreement, or conversion
of the Series A-3 Preferred Stock, Series B-1 Preferred Stock
or Series B-2 Preferred Stock, or the exercise of the Series
A-1 Warrant for Series A-1 Warrant Shares;
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(III) as a dividend or distribution on the Series A Preferred Stock,
the Series A-1 Preferred Stock, the Series A-2 Preferred
Stock, the Series A-3 Preferred Stock, the Series B-1
Preferred Stock or the Series B-2 Preferred Stock;
(IV) by reason of a dividend, stock split, split-up or other
distribution on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by the
foregoing clauses (I), (II), and (III) or this clause (IV);
(V) options granted to employees and directors of this corporation
pursuant to employee benefit plans or employee stock option
plans available for grants to this corporation's executives in
general;
(VI) upon conversion of the following promissory notes of PerImmune
Holdings, Inc.: (a) note dated August 2, 1996 in favor of
Organon Teknika Corporation (the "Organon Note") or (b) notes
dated January 14, 1996 in favor of Ed Scott, Chris Kline and
Meribeth Visco (the "January Notes"); or
(VII) to the holders of shares of common stock, par value $.01 per
share, of PerImmune Holdings, Inc., in connection with the
merger.
(ii) Adjustment for Certain Dividends and Distributions. In the event
this corporation at any time, or from time to time, after the
Original Issue Date shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of
Common Stock, then and in each such event the Series A Conversion
Price then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record date, by multiplying the
Series A Conversion Price then in effect by a fraction:
(A) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record
date, and
(B) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record
date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution.
(iii) Adjustment for Other Dividends and Distributions. In the event this
corporation at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in securities of this
corporation other than shares of Common Stock, then and in each such
event provisions shall be made so that the holders of Series A
Preferred Stock shall receive upon conversion thereof, in addition
to the number of shares of Common Stock receivable thereupon, the
amount of securities of this corporation that they would have
received if (A) their Series A
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Preferred Stock had been converted into Common Stock on the date of
such event and (B) they had thereafter retained such securities and
all rights and distributions relating to them.
(iv) Adjustment for Stock Splits, Reclassification, Exchange or
Substitution. If the Common Stock issuable upon the conversion of
the Series A Preferred Stock shall, in accordance herewith, be
changed into the same or a different number of shares of any class
or classes of stock, whether by capital reorganization,
reclassification, or otherwise then and in each such event the
holder of each such shares of Series A Preferred Stock shall have
the right thereafter to convert such share into the kind and amount
of shares of stock and other securities and property receivable upon
such reorganization, reclassification, or other change, by holders
of the number of shares of Common Stock into which such shares of
Series A Preferred Stock were convertible immediately prior to such
reorganization, reclassification or change, all subject to further
adjustment as provided herein. If this corporation shall at any time
or form time to time after the Original Issue Date effect a
subdivision or combination of the outstanding Common Stock, the
Series A Conversion Price then in effect immediately before the
subdivision shall be proportionately decreased or increased
effective at the close of business on the date the subdivision or
combination becomes effective.
(v) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of this corporation with or into another
corporation or the sale of all or substantially all of the assets of
this corporation to another corporation in accordance herewith, each
share of Series A Preferred Stock shall thereafter be convertible
for the kind and amount of shares of stock or other securities or
property which a holder of the number of shares of Common Stock of
this corporation deliverable upon conversion of such Series A
Preferred Stock would have been entitled upon such consolidation,
merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in
the application of the provisions in this Section 4.1.4 set forth
with respect to the rights and interest thereafter of the holders of
the Series A Preferred Stock, to the end that the provisions set
forth in this Section 4.1.4 (including provisions with respect to
changes in and other adjustments of the Series A Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock.
(vi) Adjustment For Issuance or Deemed Issuance of Additional Shares of
Common Stock. If the corporation at any time or from time to time
after the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares
of Common Stock issued or issuable upon the exercise of such Options
or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock. In any such case in
which Additional Shares of Common Stock are deemed to be issued:
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(A) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to this corporation, or
increase or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the
Series A Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(B) Upon the expiration, termination or other retirement of any
unexercised Option or Convertible Security, the Series A
Conversion Price shall be readjusted to reflect such event; and
(C) No readjustment pursuant to clause (A) or (B) above shall have
the effect of increasing the Series A Conversion Price to an
amount which exceeds the Series A Conversion Price on the date
of original issuance of Options or Convertible Securities;
Upon the issuance or deemed issuance of any Additional Shares of
Common Stock without consideration or for a consideration per share less than
the applicable Series A Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series A
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series A
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received by this corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Series A Conversion Price; and (B) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such Additional Shares of
Common Stock so issued; provided, that, immediately after any Additional Shares
of Common Stock are issued or deemed issued and the Series A Conversion Price
has been appropriately reduced, then such Additional Shares of Common Stock
shall be deemed to be outstanding for all subsequent applications of this
Section 4.1.4(f).
(vii) Determination of Consideration. For purposes of this Section
4.1.4(f), the consideration received by this corporation for the
issue of any Additional Shares of Common Stock issued or deemed to
have been issued shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash, be computed at the aggregate
of cash received by this corporation for the Additional Shares
of Common Stock,
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(II) insofar as it consists of property other than cash, be the
fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of
this corporation for consideration which covers both, be the
portion of such consideration which covers both, be the
portion of such consideration so received which is, in the
judgment of the Board of Directors allocated to the Common
Stock, computed as provided in clauses (I) and (II) above, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
received by this corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to Section
4.1.4(f)(vi), relating to Options and Convertible Securities,
shall be determined by dividing
(x) the total amount, if any, received or
receivable by this corporation as consideration for the
issue of such Options or Convertible Securities, plus
the minimum aggregate amount of additional consideration
(as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to
this corporation upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such
Convertible Securities, by
(y) the maximum number of shares of Common Stock
(as set forth in the instrument relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of
Options for Convertible Securities and the conversion or
exchange of such Convertible Securities.
(viii) No De Minimis Adjustments. The applicable Series A Conversion Price
shall not be so reduced at such time if the amount of such reduction
would be an amount less than $.01, but any such amount shall be
carried forward and reduction with respect thereto made at the time
of and together with any subsequent reduction which, together with
such amount and any of the amount or amounts so carried forward,
shall aggregate $.01 or more.
(g) [Intentionally Omitted]
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(h) No Impairment. This corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary actin, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
this corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4.1.4 and in the
taking of all such action as may be necessary or appropriate in order to
protect the Series A Conversion Rights against impairment.
(i) Certificate as to Adjustment. Upon the occurrence of each adjustment or
readjustment of the Series A Conversion Price pursuant to this Section
4.1.4, this corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms thereof and
furnish to each holder of Series A Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This corporation
shall, upon the written request at any time of any holder of Series A
Preferred Stock, furnish or cause to be furnished to such holder a
similar certificate setting forth (i) such adjustment and readjustments,
(ii) the Series A Conversion Price then in effect, and (iii) the number
of shares of Common Stock and the amount, fi any, of other property
which then would be received upon the conversion of the Series A
Preferred Stock.
(j) Notice of Record Date. In the event:
(i) that this corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other
securities of this corporation;
(ii) that this corporation subdivides or combines its outstanding shares
of Common Stock;
(iii) of any reclassification of the Common Stock of this corporation
(other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon),
or of any consolidation or merger of this corporation into or with
another corporation, or of the sale of all or substantially all of
the assets of this corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or winding
up of this corporation;
Then this corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, and shall cause to
be mailed to the holders of the Series A Preferred Stock at their last addressed
as shown on the records of this corporation or such transfer agent, at least
fifteen (15) days prior to the record date specified in (A) below and at least
thirty (30) days before the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of
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record to be entitled to such dividend, distribution,
subdivision or combination are to be determined, or
(B) the date of which any reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock or record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution or winding up.
4.1.5 REDEMPTION BY THIS CORPORATION
(a) Mandatory Redemption.
(i) In the event that on July 1, 2001 (the "Series A Mandatory
Redemption Date") there are any shares of Series A Preferred Stock
still outstanding, this corporation shall redeem any and all such
shares of Series A Preferred Stock for an amount, payable in cash,
equal to $8.00 plus an amount equal to all dividends accrued
thereon, computed to the date payment thereof is made available. The
total sum payable per share of Series A Preferred Stock on the
Series A Mandatory Redemption Date is referred to as the "Series A
Mandatory Redemption Price."
(ii) Payment. Holders of record of shares of Series A Preferred Stock to
be redeemed on the Series A Mandatory Redemption Date shall be
entitled to receive the applicable Series A Mandatory Redemption
Price upon actual delivery to this corporation or the transfer agent
of the certificates representing the shares entitled to be redeemed.
If upon the Series A Mandatory Redemption Date the assets of this
corporation available for redemption are insufficient to pay the
holders of outstanding shares of Series A Preferred Stock and Series
A-1 Preferred Stock the full amounts to which they are entitled,
such holders of shares of Series A Preferred Stock and Series A-1
Preferred Stock shall share ratably according to the respective
amounts which would be payable in respect of such shares to be
redeemed by the holders thereof, if all amounts payable on or with
respect to such shares were paid in full.
(b) Optional Redemption.
(i) Upon the occurrence of any Series A Optional Redemption Event this
corporation will, by notice given to each holder of Series A
Preferred Stock, offer to redeem all (but not fewer than all) shares
of Series A Preferred Stock then owned by such holder at a price
equal to:
105.334% of the Series A Mandatory Redemption Price if such
offer to redeem is made prior to July 1, 1998;
104.001% of the Series A Mandatory Redemption Price if such
offer to redeem is made prior to July 1, 1999;
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102.668% of the Series A Mandatory Redemption Price if such
offer to redeem is made subsequent to June 30, 1999 and prior to July 1, 2000;
101.335% of the Series A Mandatory Redemption Price if such
offer to redeem is made subsequent to June 30, 2000 and prior to July 1, 2001;
(ii) Upon receipt of a notice given pursuant to Section 4.1.5(b), each
holder of Series A Preferred Stock shall have the right to accept
such offer by tender in such holder's shares to this corporation for
redemption, at an address to be set froth in such notice, at any
time prior to 5:00 p.m. Seattle, Washington time on the 15th day
following the making of the offer to redeem by notice given as
prescribed herein.
(A) The occurrence of a Change of Control shall be a Series A
Optional Redemption Event, which shall be deemed to have
occurred if:
1. any person or group of related or affiliated
persons shall have become the beneficial owner or owners
of 40% or more of the outstanding voting stock of this
corporation; provided, however, that beneficial
ownership of Series A Preferred Stock shall not be given
effect toward counting a person's or group of related or
affiliated persons' beneficial ownership;
2. there shall have occurred a merger or
consolidation in which this corporation is not the
survivor or in which holders of Common Stock of this
corporation shall have become entitled to receive cash,
securities of this corporation other than voting Common
Stock or securities of any other person, except that a
merger or consolidation which occurs for the sole
purpose of moving the jurisdiction of incorporation
(i.e., a reincorporation) shall not be deemed a Series A
Optional Redemption Event;
3. at any time a majority of the members of the
Board of Directors of this corporation shall be persons
who were elected at one or more meetings held, or by one
or more consents given, by the stockholders of this
corporation during the preceding twelve (12) months and
who were not members of the Board of Directors twelve
(12) months prior to that time; or
4. if this corporation shall take any action
referred to in Section 4.1.1(e)(i) through Section
4.1.1(e)(vi) without having obtained the required
consent of the holders of Series A Preferred Stock.
(c) Cancellation of Redeemed Stock. Any shares of Series A Preferred Stock
redeemed pursuant to this Section 4.1.5 or otherwise acquired by this
corporation in any manner whatsoever shall be canceled and shall not
under any circumstances be reissued; and
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this corporation may from time to time take such appropriate corporate
action as may be necessary to reduce accordingly the number of
authorized shares of this corporation's capital stock.
4.2 SERIES A-1 PREFERRED STOCK
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations, or restrictions
thereof in respect of the Series A-1 Preferred Stock of this corporation, $.0001
par value per share("Series A-1 Preferred Stock"), which shall consist of and be
limited to a number of shares not to exceed 850,000 shares.
4.2.1 VOTING
(a) General. Each holder of outstanding shares of Series A-1 Preferred Stock
shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series A-1 Preferred
Stock held by such holder are convertible (as adjusted from time to time
pursuant to Section 4.2.4 hereof), multiplied by the number of votes per
share which the holders of shares of Common Stock then have with respect
to such matter, at each meeting of stockholders of this corporation (and
written actions of stockholders in lieu of meetings) with respect to any
and all matters presented to the stockholders of this corporation for
their action or consideration. Except as provided by law or as otherwise
set forth herein, holders of Series A-1 Preferred Stock shall vote
together with the holders of Common Stock (and any other class or series
of stock entitled to vote together as one class with the Common Stock)
as a single class.
(b) Covenants. So long as at least 25% of the shares of Series A-1 Preferred
Stock originally authorized remain outstanding, in addition to any other
rights provided by law, without first obtaining the affirmative votes or
written consent of the holders of not less than 51% of the then
outstanding shares of the Series A-1 Preferred Stock, this corporation
shall not:
(i) amend or repeal any provision of, or add any provision to, this
corporation's Certificate of Incorporation or Bylaws if such action
would materially alter or change the preferences, rights, privileges
or power of, or the restrictions provided for the benefit of, any
Series A-1 Preferred Stock, or increase or decrease the number of
shares of Series A-1 Preferred Stock authorized hereby;
(ii) authorize or issue shares of any class or series of stock not
expressly authorized herein having any preference or priority as to
dividends, assets or other rights superior to any such preference or
priority of the Series A-1 Preferred Stock, or authorize or issue
shares of stock of any class or any bonds, debentures, notes or
other obligations convertible into or exchange for, or having option
rights to purchase, any shares of stock of this corporation having
any preference or priority as to dividends, assets or other rights
superior to any such preference or priority of the Series A-1
Preferred Stock;
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(iii) pay or declare any dividend on Junior Stock (other than dividends
payable in shares of the class or series upon which such dividends
are declared or paid, or payable in shares of Common Stock with
respect to Junior Stock other than Common Stock, together with cash
in lieu of fractional shares and aggregate dividends since the last
payment of a cash dividend on the Series A-1 Preferred Stock not in
excess of the aggregate cash dividend payment last made in respect
of the Series A-1 Preferred Stock) while the Series A-1 Preferred
Stock remains outstanding, or apply any of its assets to the
redemption, retirement, purchase or acquisition, directly or
indirectly, through subsidiaries or otherwise, of any Junior Stock,
except from employees of this corporation, upon termination of
employment or otherwise, pursuant to the terms of employee stock
purchase or employee stock option plans of general application which
provide for the repurchase of, or right of first refusal with
respect to, such Junior Stock entered into with participating
employees;
(iv) recapitalize or reclassify any shares of capital stock;
(v) merge or consolidate into or with any other corporation (except for
a merger which yields to the holders of the Series A-1 Preferred
Stock an all cash consideration paid at closing equal to the
then-applicable Series A-1 Optional Redemption Price (as defined
below));
(vi) voluntarily liquidate, dissolve or wind up this corporation; or
(vii) materially change the principal business of this corporation.
4.2.2 DIVIDENDS
(a) The holders of record of outstanding shares of the Series A-1 Preferred
Stock shall be entitled to receive an eight percent (8%) annual dividend
which shall accrue daily, and which shall be calculated on the basis of
the initial Series A-1 Conversion Price (as defined below) for the
Series A-1 Preferred Stock. All dividend payments, regardless of form,
shall be paid in quarterly installments on each of September 30,
December 31, March 31 and June 30 of each year. At the election of the
corporation, each dividend may be paid either in additional shares of
Series A-1 Preferred Stock or in cash until January 1, 1999 and payable
only in cash from thereafter until July 1, 2002. Dividends paid in
additional shares of Series A-1 Preferred Stock shall be paid in full
shares only with a cash payment (based on an assumed value of $8.00 per
share) equal to the value of any fractional shares. Each dividend paid
in cash shall be mailed to the holders of record of the Series A-1
Preferred Stock as their names and addresses appear on the share
register of this corporation or at the office of the transfer agent on
the corresponding dividend payment date. Holders of Series A-1 Preferred
Stock will receive written notification from this corporation or the
transfer agent if a dividend is paid-in-kind, which notification will
specify the number of shares of Series A-1 Preferred Stock paid as a
dividend and the recipient's aggregate holdings of Series A-1 Preferred
Stock as of that dividend payment date and after giving effect to the
dividend.
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(b) Dividends shall accrue until paid whether or not they have been declared
and whether or not there are profits, surplus, or other funds legally
available for the payment of dividends. At the earlier of: (i) the
redemption of the Series A-1 Preferred Stock; (ii) the filling of a
registration statement in respect of an underwritten public offering of
the type described in Section 4.2.4(b); or (iii) the liquidation, sale
or merger of this corporation, any accrued but undeclared dividends
shall be paid to the holders of record of outstanding shares of Series
A-1 Preferred Stock.
4.2.3 LIQUIDATION
(a) Preferred Stock. The provisions of Section 4.1.3(a) shall be
incorporated by reference with respect to the Series A-1 Preferred
Stock.
(b) Junior and Common Stock. The provisions of Section 4.1.3(b) shall be
incorporated by reference with respect to the Series A-1 Preferred
Stock.
(c) Notice. Written notice of such liquidation, dissolution or winding up,
stating a payment date and the place where said payments shall be made,
shall be given by mail, postage prepaid, or by telex to non-U.S.
residents, not less than twenty (20) days prior to the payment date
stated therein, to the holders of record of the Series A-1 Preferred
Stock, such notice to be addressed to each such holder at its address as
shown on the records of this corporation.
4.2.4 CONVERSION
The holders of the Series A-1 Preferred Stock shall have conversion
rights as follows (the "Series A-1 Conversion Rights"):
(a) Optional Conversion. Subject to and upon compliance with the provisions
of this Section 4.2.4, the holders of any shares of Series A-1 Preferred
Stock shall have the right at such holder's option, at any time or from
time to time, to convert any of such shares of Series A-1 Preferred
Stock into fully paid and nonassessable shares of Common Stock at the
Series A-1 Conversion Price (as hereinafter defined) in effect on the
Series A-1 Conversion Date (as hereinafter defined) upon the terms
hereinafter set forth. In case any share of Series A-1 Preferred Stock
is called for redemption, such right of conversion shall terminate at
the close of business on the Series A-1 Mandatory Redemption Date (as
hereinafter defined) or, if this corporation shall default in the
payment of the Series A-1 Mandatory Redemption Price (as hereinafter
defined), at the close of business when such payment is made.
(b) Automatic Conversion. Each outstanding share of Series A-1 Preferred
Stock shall automatically be converted, without any further act of this
corporation or its stockholders, into fully paid and nonassessable
shares of Common Stock at the Series A-1 Conversion Price then in effect
upon notice by this corporation to the holders of shares of Series A-1
Preferred Stock of the closing of an underwritten public offering
pursuant to an effective registration statement on Form S-1 or successor
form under the
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Securities Act of 1933, as amended, covering the offering and sale of
Common Stock for the account of this corporation at a per share price of
at least $8.00 in which due aggregate gross proceeds received by this
corporation has equaled or exceeded $10,000,000; provided, however, that
such closing of an underwritten public offering occurs no later than
September 19, 1998.
(c) Conversion Price. Each share of Series A-1 Preferred Stock shall be
converted into a number of shares of Common Stock determined by dividing
(i) the sum of (A) $8.00 plus (B) the dollar amount of any dividends on
such share of the Series A-1 Preferred Stock which such holder is
entitled to received, but has not yet received, by (ii) the Series A-1
Conversion Price in effect on the Series A-1 Conversion Date. The Series
A-1 Conversion Price at which shares of Common Stock shall initially be
issuable upon conversion of the shares of Series A-1 Preferred Stock
shall be $8.00. The Series A-1 Conversion Price shall be subject to
adjustment as set forth in Section 4.2.4(f). No payment or adjustment
shall be made for any dividends on the Common Stock issuable upon such
conversion.
(d) Mechanics of Conversion.
(i) The holder of any shares of Series A-1 Preferred Stock may exercise
the conversion right specified in Section 4.2.4(a) by surrendering
to this corporation or the transfer agent of this corporation the
certificate or certificates for the shares to be converted. Upon the
occurrence of the event specified in Section 4.2.4(b), the
outstanding shares of the Series A-1 Preferred Stock shall be
converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such
shares are surrendered to this corporation or its transfer agent;
provided that this corporation shall not be obligated to issue to
any such holder certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing the
shares of the Series A-1 Preferred Stock are delivered either to
this corporation or the transfer agent of this corporation.
Conversion shall be deemed to have been effected on the date when
delivery of the notice of an election to convert and certificates
for shares is made or on the date of the occurrence of the event
specified in Section 4.2.4(b), as the case may be, and such date is
referred to herein as the "Series A-1 Conversion Date." As promptly
as practicable thereafter this corporation shall issue and deliver
to or upon the written order of such holder a certificate or
certificates for the number of full shares of Common Stock to which
such holder is entitled and a check or cash with respect to any
fractional interest in a shares of Common Stock as provided in
Section 4.2.4(e). The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to
have become the holder of record of such Common Stock on the
applicable Series A-1 Conversion Date. Upon conversion of only a
portion of the number of shares covered by a certificate
representing shares of the Series A-1 Preferred Stock surrendered
for conversion this corporation shall issue and deliver to or upon
the written order of the holder of the certificate covering the
number of shares of the Series A-1 Preferred Stock representing the
unconverted portion of the certificate so surrendered.
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(ii) This corporation shall, at all times when the Series A-1 Preferred
Stock shall be outstanding, reserve and keep available out of its
authorized but unissued capital stock, for the purpose of effecting
the conversion of the Series A-1 Preferred Stock, such number of its
duly authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series A-1
Preferred Stock. Before taking any action which would cause an
adjustment reducing the Series A-1 Conversion Price below the then
par value of the shares of Common Stock issuable upon conversion of
the Series A-1 Preferred Stock, this corporation will take any
corporation action which may be necessary in order that this
corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Series A-1
Conversion Price.
(iii) All shares of the Series A-1 Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares
shall immediately cease and terminate on the Series A-1 Conversion
Date, except only the right of the holders thereof to receive shares
of Common Stock in exchange therefor. Such conversion shall be
deemed to have been made at the close of business on the Series A-1
Conversion Date, and the person entitled to receive the shares of
Common Stock shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. This
corporation shall not re-issue any share of Series A-1 Preferred
Stock surrendered by the holder thereof for conversion.
(e) Fractional Shares. No fractional shares of Common Stock or scrip shall
be issued upon conversion of shares as of the Series A-1 Preferred
Stock. If more than one share of the Series A-1 Preferred Stock shall be
surrendered for conversion at any one time by the same holder, the
number of full shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of the
Series A-1 Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion
of any shares of the Series A-1 Preferred Stock, this corporation shall
pay a cash adjustment in respect of such fractional interest in an
amount equal to that fractional interest of the higher of the current
market price or fair market value as determined by the Board of
Directors of this corporation.
(f) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this Section 4.24(f), the
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding (1) options granted to employees and
Directors of this corporation prior to June 30, 1995 pursuant to
employee benefit plans or employee stock option plans available
for grants to this corporation's executives in general, adopted
by the Board of
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Directors of this corporation and options granted prior to
January 1, 1998 under the PerImmune Plan, (2) 200,000 additional
options to purchase shares of Common Stock granted to employees
and directors of this corporation pursuant to employee benefit
plans or employee stock option plans available for grants to
this corporation's executives in general, subsequent to June 30,
1995 and prior to July 1, 2002; provided, that each such option
shall have an exercise price equal to or greater than $6.50 per
shares, (3) the Series A Warrants which evidence rights to
purchase an aggregate of 52,000 Series A Warrant Shares, and (4)
the Series A-1 Warrants which evidence the right to purchase
86,462 Series A-1 Warrant Shares.
(B) "Original Issue Date" shall mean the date on which shares of
Series A-1 Preferred Stock were first issued.
(C) "Convertible Securities" shall mean any evidence of
indebtedness, shares of other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Section 4.2.3(f)(vi),
deemed to be issued) by this corporation after the Original
Issue Date, other than shares of Common Stock issued or
issuable:
(I) upon conversion of shares of Series A Preferred Stock issued
pursuant to the Series A Purchase Agreement or the exercise of
Series A Warrant for Series A Warrant Shares;
(II) upon conversion of shares of Series A-1 Preferred Stock issued
pursuant to the Series A-1 Purchase Agreement, or conversion
of the Series A-3 Preferred Stock, Series B-1 Preferred Stock
or Series B-2 Preferred Stock, or the exercise of the Series
A-1 Warrant for Series A-1 Warrant Shares:
(III) as a dividend or distribution on the Series A Preferred Stock,
the Series A-1 Preferred Stock, the Series A-2 Preferred
Stock, the Series A-3 Preferred Stock, the Series B-1
Preferred Stock and the Series B-2 Preferred Stock;
(IV) by reason of a dividend, stock split, split-up or other
distribution on shares of Common Stock excluded from the
definition of Additional Shares of Common stock by the
foregoing clauses (I), (II), and (III) or this clause (IV);
(V) options granted to employees and directors of this corporation
pursuant to employee benefit plans or employee stock option
plans available for grants to this corporation's executives in
general;
(VI) upon conversion of the Organon Note or the January Notes; or
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(VII) to the holders of shares of common stock, par value $.01 per
share, of PerImmune Holdings, Inc., in connection with the
merger.
(ii) Adjustment for Certain Dividends and Distributions. In the event
this corporation at any time, or from time to time, after the
Original Issue Date shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of
Common Stock, then and in each such event the Series A-1 Conversion
Price then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record date, by multiplying the
Series A-1 Conversion Price then in effect by a fraction:
(A) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record
date, and
(B) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record
date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution.
(iii) Adjustments for Other Dividends and Distributions. In the event this
corporation at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in securities of this
corporation other than shares of Common Stock, then and in each such
event provision shall be made so that the holders of Series A-1
Preferred Stock shall receive upon conversion thereof in addition
the number of shares of Common Stock receivable thereupon, the
amount of securities of this corporation that they would have
received in (A) their Series A-1 Preferred Stock had been converted
into Common Stock on the date of such event and (B) they had
thereafter retained such securities and all rights and distributions
relating to them.
(iv) Adjustment for Stock Splits, Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of
the Series A-1 Preferred Stock shall, in accordance herewith, be
changed into the same or a different number of shares of any class
or classes of stock, whether by capital reorganization,
reclassification, or otherwise then and in each such event the
holder of each such share of Series A-1 Preferred Stock shall have
the right thereafter to convert such share into the kind and amount
of shares of stock and other securities and property receivable upon
such reorganization, reclassification, or other change, by holders
of the number of shares of Common Stock into which such shares of
Series A-1 Preferred Stock were convertible immediately prior to
such reorganization, reclassification or change, all subject to
further adjustment as provided herein. If this corporation shall at
any time or from to time after the Original Issue Date effect a
subdivision or combination of the
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outstanding Common Stock, the Series A-1 Conversion Price then in
effect immediately before the subdivision shall be proportionately
decreased or increased effective at the close of business on the ate
the subdivision or combination becomes effective.
(v) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of this corporation with or into another
corporation or the sale of all or substantially all of the assets of
this corporation to another corporation in accordance herewith, each
share of Series A-1 Preferred Stock shall thereafter be convertible
for the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock
of this corporation deliverable upon conversion of such Series A-1
Preferred Stock would have been entitled upon such consolidation,
merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in
the application of the provisions in this Section 4.2.3 (including
provisions with respect to changes in and other adjustments of the
Series A-1 Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or
other property thereafter deliverable upon the conversion of the
Series A-1 Preferred Stock.
(vi) Adjustment for Issuance or Deemed Issuance of Additional Shares of
Common Stock. If this corporation at any time or from time to time
after the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares
of Common Stock issued or issuable upon the exercise of such Options
or, in the case of Convertible Securities, shall be deemed to be
Additional Shares of Common Stock. In any such case in which
Additional Shares of Common Stock are deemed to be issued:
(A) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to this corporation, or
increase or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the
Series A-1 Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(B) Upon the expiration, termination or other retirement of any
unexercised Option or Convertible Securities, the Series A-1
Conversion Price shall be readjusted to reflect such event; and
(C) No readjustment pursuant to clause (A) or (B) above shall have
the effect of increasing the Series A-1 Conversion Price to an
amount which exceeds the
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Series A-1 Conversion Price on the date of original issuance of
such Options or Convertible Securities:
Upon the issuance or deemed issuance of any Additional Shares of
Common Stock without consideration or for a consideration per share less than
the applicable Series A-1 Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series A-1
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series A-1
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received by this corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Series A-1 Conversion Price; and (B) the
denominator of which shall be the number of such Additional Shares of Common
Stock so issued; provided, that, immediately after any Additional Shares of
Common Stock are issued or deemed issued and the Series A-1 Conversion Price has
been appropriately reduced, then such Additional Shares of Common Stock shall be
deemed to be outstanding for all subsequent applications of this Section
4.2.4(f).
(vii) Determination of Consideration. For purposes of this Section
4.2.4(f), the consideration received by this corporation for the
issue of any Additional Shares of Common Stock issued or deemed to
have been issued shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash, be computed at the aggregate
of cash received by this corporation for the Additional Shares
of Common Stock,
(II) insofar as it consists of property other than cash, be the
fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of
this corporation for consideration which covers both, be the
portion of such consideration which covers both, be the
portion of such consideration so received which is, in the
judgment of the Board of Directors allocated to the Common
Stock, computed as provided in clauses (I) and (II) above, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
received by this corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to Section
4.2.4(f)(vi), relating to Options and Convertible Securities,
shall be determined by dividing
(x) the total amount, if any, received or
receivable by this corporation as consideration for the
issue of such Options or Convertible Securities, plus
the
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minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to
this corporation upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such
Convertible Securities, by
(y) the maximum number of shares of Common Stock
(as set forth in the instrument relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of
Options for Convertible Securities and the conversion or
exchange of such Convertible Securities.
(viii) No De Minimis Adjustments. The applicable Series A-1 Conversion
Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $.01, but any such amount
shall be carried forward and reduction with respect thereto made at
the time of and together with any subsequent reduction which,
together with such amount and any of the amount or amounts so
carried forward, shall aggregate $.01 or more.
(g) [Intentionally Omitted]
(h) No Impairment. This corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary actin, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
this corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4.2.4 and in the
taking of all such action as may be necessary or appropriate in order to
protect the Series A-1 Conversion Rights against impairment.
(i) Certificate as to Adjustment. Upon the occurrence of each adjustment or
readjustment of the Series A-1 Conversion Price pursuant to this Section
4.2.4, this corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms thereof and
furnish to each holder of Series A-1 Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. This
corporation shall, upon the written request at any time of any holder of
Series A-1 Preferred Stock, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustment and
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readjustments, (ii) the Series A-1 Conversion Price then in effect, and
(iii) the number of shares of Common Stock and the amount, fi any, of
other property which then would be received upon the conversion of the
Series A-1 Preferred Stock.
(j) Notice of Record Date. In the event:
(i) that this corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other
securities of this corporation;
(ii) that this corporation subdivides or combines its outstanding shares
of Common Stock;
(iii) of any reclassification of the Common Stock of this corporation
(other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon),
or of any consolidation or merger of this corporation into or with
another corporation, or of the sale of all or substantially all of
the assets of this corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or winding
up of this corporation;
then this corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series -1 Preferred Stock, and shall cause
to be mailed to the holders of the Series A-1 Preferred Stock at their last
addressed as shown on the records of this corporation or such transfer agent, at
least fifteen (15) days prior to the record date specified in (A) below and at
least thirty (30) days before the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or combination are to
be determined, or
(B) the date of which any reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock or record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution or winding up.
4.2.5 REDEMPTION BY THIS CORPORATION
(a) Mandatory Redemption.
(i) In the event that on July 1, 2002 (the "Series A-1 Mandatory
Redemption Date") there are any shares of Series A-1 Preferred Stock
still outstanding, this corporation shall redeem any and all such
shares of Series A-1 Preferred Stock for an amount, payable in cash,
equal to $8.00 plus an amount equal to all dividends accrued
thereon,
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computed to the date payment thereof is made available. The total
sum payable per share of Series -1 Preferred Stock on the Series A-1
Mandatory Redemption Date is referred to as the "Series A-1
Mandatory Redemption Price."
(ii) Payment. Holders of record of shares of Series A-1 Preferred Stock
to be redeemed on the Series A-1 Mandatory Redemption Date shall be
entitled to receive the applicable Series A-1 Mandatory Redemption
Price upon actual delivery to this corporation or the transfer agent
of the certificates representing the shares entitled to be redeemed.
If upon the Series A-1 Mandatory Redemption Date the assets of this
corporation available for redemption are insufficient to pay the
holders of outstanding shares of the Series A Preferred Stock and
the Series A-1 Preferred Stock the full amounts to which they are
entitled, such holders of shares of the Series A Preferred Stock and
the Series A-1 Preferred Stock shall share ratably according to the
respective amounts which would be payable in respect of such shares
to be redeemed by the holders thereof, if all amounts payable on or
with respect to such shares were paid in full.
(b) Optional Redemption.
(i) Upon the occurrence of any Series A-1 Optional Redemption Event this
corporation will, by notice given to each holder of Series A-1
Preferred Stock, offer to redeem all (but not fewer than all) shares
of Series A-1 Preferred Stock then owned by such holder at a price
equal to:
106.667% of the Series A-1 Mandatory Redemption Price if
such offer to redeem is made prior to July 1, 1998;
105.334% of the Series A-1 Mandatory Redemption Price if
such offer to redeem is made subsequent to June 30, 1998 and prior to July 1,
1999;
104.001% of the Series A-1 Mandatory Redemption Price if
such offer to redeem is made subsequent to June 30, 1999 and prior to July 1,
2000;
102.668% of the Series A-1 Mandatory Redemption Price if
such offer to redeem is made subsequent to June 30, 2000 and prior to July 1,
2001;
101.335% of the Series A-1 Mandatory Redemption Price if
such offer to redeem is made subsequent to June 30, 2001 and prior to July 1,
2002;
(ii) Upon receipt of a notice given pursuant to Section 4.2.5(b), each
holder of Series A-1 Preferred Stock shall have the right to accept
such offer by tender in such holder's shares to this corporation for
redemption, at an address to be set forth in such notice, at any
time prior to 5:00 p.m. Seattle, Washington time on the 15th day
following the making of the offer to redeem by notice given as
prescribed herein.
(iii) The occurrence of a Change of Control shall be a Series A-1 Optional
Redemption Event, which shall be deemed to have occurred if:
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1. any person or group of related or affiliated
persons shall have become the beneficial owner or owners
of 40% or more of the outstanding voting stock of this
corporation; provided, however, that beneficial
ownership of Series A-1 Preferred Stock shall not be
given effect toward counting a person's or group of
related or affiliated persons' beneficial ownership;
2. there shall have occurred a merger or
consolidation in which this corporation is not the
survivor or in which holders of Common Stock of this
corporation shall have become entitled to receive cash,
securities of this corporation other than voting Common
Stock or securities of any other person, except that a
merger or consolidation which occurs for the sole
purpose of moving the jurisdiction of incorporation
(i.e., a reincorporation) shall not be deemed a Series
A-1 Optional Redemption Event;
3. at any time a majority of the members of the
Board of Directors of this corporation shall be persons
who were elected at one or more meetings held, or by one
or more consents given, by the stockholders of this
corporation during the preceding twelve (12) months and
who were not members of the Board of Directors twelve
(12) months prior to that time; or
4. if this corporation shall take any action
referred to in Section 4.2.1(e)(i) through Section
4.2.1(e)(vi) without having obtained the required
consent of the holders of Series A-1 Preferred Stock.
(c) Cancellation of Redeemed Stock. Any shares of Series A-1 Preferred Stock
redeemed pursuant to this Section 4.2.5 or otherwise acquired by this
corporation in any manner whatsoever shall be canceled and shall not
under any circumstances be reissued; and this corporation may from time
to time take such appropriate corporate action as may be necessary to
reduce accordingly the number of authorized shares of this corporation's
capital stock.
4.3 SERIES A-2 PREFERRED STOCK
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations, or restrictions
thereof in respect of the Series A-2 Preferred Stock of this corporation, $.0001
par value per share ("Series A-2 Preferred Stock"), which shall consist of and
be limited to a number of shares not to exceed 155,000 shares.
4.3.1 VOTING
(a) General. Except as may otherwise be required hereby or by law, the
shares of Series A-2 Preferred Stock shall not entitle the holder
thereof to have any rights to vote or to
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receive any notice of any meeting of the holders of this corporation's
stock; provided, however, that in the event this corporation proposes to
sell all or substantially all of its assets, the holders of shares of
Series A-2 Preferred Stock shall be entitled to a number of votes for
each share of Series A-2 Preferred Stock voting with the holders of this
corporation's Common Stock, equal to 100 divided by the then-applicable
Series A-1 Conversion Price at each meeting of stockholders of this
corporation (and written actions of stockholders in lieu of meetings) at
which such sale of all or substantially all of the assets of this
corporation is considered.
(b) Covenants. So long as any shares of Series A-2 Preferred Stock
originally authorized remain outstanding, in addition to any other
rights provided by law, without first obtaining the affirmative votes or
written consent of the holders of not less than 51% of the then
outstanding shares of the Series A-2 Preferred Stock, this corporation
shall not:
(i) except for authorization or issuances provided in this corporation's
Certificate of Incorporation, with respect to this corporation's
Series A Preferred Stock and Series A-1 Preferred Stock, amend or
repeal any provision of, or add any provision to, this corporation's
Certificate of Incorporation or Bylaws if such action would
materially alter or change the preferences, rights, privileges or
power of, or the restrictions provided for the benefit of, any
Series A-2 Preferred Stock, or increase or decrease the number of
shares of Series A-2 Preferred Stock authorized hereby;
(ii) authorize or issue shares of any class or series of stock not
expressly authorized herein having any preference or priority as to
dividends, assets or other rights superior to any such preference or
priority of the Series A-2 Preferred Stock, or authorize or issue
shares of stock of any class or any bonds, debentures, notes or
other obligations convertible into or exchange for, or having option
rights to purchase, any shares of stock of this corporation having
any preference or priority as to dividends, assets or other rights
superior to any such preference or priority of the Series A-2
Preferred Stock;
(iii) pay or declare any dividend on any capital stock of this corporation
which is junior to the Series A-2 Preferred Stock ("A-2 Junior
Stock") (other than dividends payable in shares of the class or
series upon which such dividends are declared or paid, or payable in
shares of Common Stock with respect to A-2 Junior Stock other than
Common Stock, together with cash in lieu of fractional shares and
aggregate dividends since the last payment of a cash dividend on the
Series A-2 Preferred Stock not in excess of the aggregate cash
dividend payment last made in respect of the Series A-2 Preferred
Stock) while the Series A-2 Preferred Stock remains outstanding, or
apply any of its assets to the redemption, retirement, purchase or
acquisition, directly or indirectly, through subsidiaries or
otherwise, of any A-2 Junior Stock, except from employees of this
corporation, upon termination of employment or otherwise, pursuant
to the terms of employee stock purchase or employee stock option
plans of general application which provide for the repurchase of, or
right of first refusal with respect to, such A-2 Junior Stock
entered into with participating employees;
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(iv) recapitalize or reclassify any shares of capital stock;
(v) merge into or consolidate with any other corporation
(except for a merger or consolidation which provides the holders
of the Series A-2 Preferred Stock with all cash consideration
paid at closing equal to the consideration which would have been
received by such holders had the Series A-2 Preferred Stock been
redeemed on the date of such closing under Section 4.3.4(a));
(vi) voluntarily liquidate dissolve, or wind up this
corporation;
(vii) materially change the principal business of this
corporation; or
(viii) enter into any agreement that would prohibit,
other than during any period in which this corporation is in
default under the terms of such agreement, the payment of the
Dividends (as hereinafter defined).
(c) Consent. This corporation shall obtain the consent of the
holders of not less than 51% of the then outstanding shares of the Series A-2
Preferred Stock (which consent shall not be unreasonably withheld) prior to
entering into any transaction or series of related transactions pursuant to
which this corporation incurs any "Obligation" (as hereinafter defined) of
$3,500,000 or more. For purposes of the foregoing sentence, "Obligation" shall
mean any monetary obligation of this corporation other than (i) trade payables
and other unsecured obligations incurred by this corporation in its ordinary
course of business, (ii) that which exists as of the Original Issue Date (as
hereinafter defined), (iii) that is acquired or assumed in connection with an
acquisition, provided that such obligation is secured only by the assets so
acquired and (iv) any refinancing or replacement of any obligation of the type
described in (ii) and (iii) above, provided that such refinancings do not result
in an increase in the original principal amount of such obligation (and, in the
event any such refinancing does result in such an increase, only the amount of
such increase shall be deemed to be an "Obligation" for purposes of this Section
4.3.1(c)).
4.3.2 DIVIDENDS.
(a) The holders of record of outstanding shares of the Series A-2
Preferred Stock shall be entitled to receive dividends (the "Dividends") payable
in cash at a rate equal to thirteen and one-half percent (13.5%) (the "Dividend
Rate") of the Series A-2 Liquidation Preference (as defined in Section 4.3.4(a)
hereof), which shall accrue daily; provided, however, that, notwithstanding the
foregoing, the Dividends with respect to any period may be paid by this
corporation through the issuance of additional shares of Series A-2 Preferred
Stock ("in kind") when (i) there has occurred, and is continuing on the date
such Dividends are declared, an event which causes a default (or with the
passage of time or notice would result in a default) under any agreement for
borrowed money to which this corporation is a party or under the terms of any
Preferred Stock; this corporation agrees to use its best efforts to cure the
event causing such default, or (ii) this corporation determines that such
Dividends shall be paid in kind (which determination may be made by this
corporation with respect to Dividends payable at any
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time but may not be utilized by this corporation with respect to more than ten
(10) payments of Dividends (in addition to the in-kind payments permitted by
clause (i) above); provided, further, however, that the ability of this
corporation to pay Dividends in kind pursuant to clause (i) and (ii) shall
terminate upon the date of repayment (the "Payoff Date") by this corporation of
all obligations due by this corporation under that certain Credit Agreement
dated as of November 16, 1995 between this corporation, the lenders party
thereto and Creditanstalt Bankverein ("Creditanstalt"), as agent; provided,
further, however, that, notwithstanding the foregoing, from and after February
28, 2007, the Dividend Rate on all shares of Series A-2 Preferred Stock then
outstanding will increase to nineteen percent (19%) per annum and the Dividend
will be payable only in cash. In the event a holder of Series A-2 Preferred
Stock has not received any Dividend (whether in cash or in kind) within five (5)
days after a Dividend Payment Date (as hereinafter defined) (provided, that such
holder shall provide notice to this corporation that such Dividend has not been
paid), the then-applicable Dividend Rate shall increase by two percent (2%) for
the period commencing on the respective Dividend Payment Date and ending on the
date on which such Dividend is paid by this corporation; provided, however, that
notwithstanding the foregoing, the Dividend Rate shall not increase by two
percent (2%) for such period if this corporation has in its possession evidence
that such Dividend was paid by it and sent for delivery to the location directed
by such holder in a manner which was intended to provide for the delivery of
such Dividend prior to the expiration of such five (5) day period. All dividend
payments, regardless of form, shall be quarterly, without notice from any holder
of Series A-2 Preferred Stock, at the rate of 3.375% of the Series A-2
Liquidation Preference, on each of February 28, May 31, August 31, and November
30 (each, a "Series A-2 Dividend Payment Date") of each year. Each Dividend paid
in cash or in kind shall be mailed to the holders of record of the Series A-2
Preferred Stock as their names and addresses appear on the share register of
this corporation, or to such other name and address as any holder of record
shall have notified this corporation. Holders of Series A-2 Preferred Stock will
receive written notification from this corporation if a Dividend is
paid-in-kind, which notification will specify the number of shares of Series A-2
Preferred Stock paid as a Dividend and the recipient's aggregate holdings of
Series A-2 Preferred Stock as of that Series A-2 Dividend Payment Date and after
giving effect to the Dividend.
(b) Dividends shall accrue until paid whether or not they have been
declared and whether or not there are profits, surplus, or other funds legally
available for payment of dividends. At the earlier of (i) the redemption of the
Series A-2 Preferred Stock (ii) the filing of a registration statement in
respect of an underwritten public offering; or (iii) the liquidation, sale or
merger of this corporation, any accrued but undeclared dividends shall be paid
in cash to the holders of record of outstanding shares of Series A-2 Preferred
Stock.
4.3.3 LIQUIDATION
(i) Upon any liquidation, dissolution or winding up of this
corporation, whether voluntary or involuntary, the holders of the shares
of the Series A-2 Preferred Stock, only after (x) the holders of the
Series A Preferred Stock, Series A-1 Preferred Stock, Series A-3
Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred
Stock shall have been paid in full the amounts to which they shall be
entitled
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pursuant to Sections 4.1.3, 4.2.3, 4.4.3, 4.5.3 and 4.6.3, respectively,
shall be entitled, before any distribution or payment is made with
respect to the Common Stock or A-2 Junior Stock, to be paid in cash an
amount equal to $100.00 per share of the Series A-2 Preferred Stock plus
an amount equal to all accrued but unpaid Dividends, computed to the
date payment thereof is made in immediately available funds.
(ii) If upon such liquidation, dissolution or winding up of this
corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of the Series A-2 Preferred Stock shall be
insufficient to permit distribution in full to the holders of the Series
A-2 Preferred Stock of the amounts set forth in this Section 4.3.3(a),
then the entire remaining assets of this corporation shall be
distributed ratably among the holders of the Series A-2 Preferred Stock
(based on their respective holdings of Series A-2 Preferred Stock).
(b) Junior and Common Stock. Upon any such liquidation, dissolution
or winding up of this corporation, only after the holders of the Series A
Preferred Stock, the Series A-1 Preferred Stock, Series A-2 Preferred Stock,
Series A-3 Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred
Stock shall have been paid in full the amounts to which they shall be entitled
pursuant to Sections 4.1.3, 4.2.3, 4.3.3, 4.4.3, 4.5.3 and 4.6.3, respectively,
may the remaining net assets of this corporation be distributed to the holders
of Common Stock and A-2 Junior Stock.
(c) Notice. Written notice of such liquidation, dissolution or
winding up, stating a payment date and the place where said payments shall be
made, shall be given by mail, postage prepaid, or by telex to non-U.S.
residents, not less than 20 days prior to the payment date stated therein, to
the holders of record of the Series A-2 Preferred Stock, such notice to be
addressed to each such holder at its address as shown on the records of this
corporation.
4.3.4 REDEMPTION BY THIS CORPORATION.
(a) Optional Redemption.
(i) The Series A-2 Preferred Stock shall be redeemable by this
corporation, in whole or in part (x) at any time prior to February 28,
2000, at a per share redemption price equal to $100.00 per share (the
"Series A-2 Liquidation Preference") (with all Series A-2 Preferred
Stock which has been issued for payment of dividends in kind valued at
such Series A-2 Liquidation Preference) plus an amount equal to the
additional dividends that would have been paid by this corporation with
respect to the originally issued Series A-2 Preferred Stock (but not the
Series A-2 Preferred Stock issued as payment in kind pursuant to Section
4.3.2 hereof ("Original Preferred Stock") had the Series A-2 Preferred
Stock provided for dividends at a rate equal to 17.6% per annum rather
than 13.5% per annum; provided, however, that if not all Series A-2
Preferred Stock is so redeemed, the amount of such additional dividends
to be paid shall be the product of (A) the amount of additional
dividends calculated as stated above as if all shares being redeemed
were shares of Original Preferred Stock and (B) a fraction, the
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numerator of which is the number of shares of Original Preferred Stock
and the denominator of which is the number of shares of Series A-2
Preferred Stock then outstanding, and (y) at any time after February 28,
2000, at a per share redemption price equal to the Series A-2
Liquidation Preference (with all Series A-2 Preferred Stock which has
been issued for payment of dividends in kind value at the Series A-2
Liquidation Preference); provided, however, that notwithstanding the
foregoing, in the event that the Payoff Date has not occurred at the
time of any proposed redemption pursuant to this clause (i), this
corporation shall be required to obtain the prior written consent of
Creditanstalt prior to the consummation of any such redemption.
(ii) Written notice of such redemption by this corporation,
stating a payment date and the place where said payments shall be made,
shall be given by mail, postage prepaid, or by telex to non-U.S.
residents, not less than 20 days prior to the payment date stated
therein, to the holders of record of the Series A-2 Preferred Stock,
such notice to be addressed to each such holder at its address shown on
the records of this corporation.
(iii) Upon receipt of such a notice, each holder of Series A-2
Preferred Stock shall tender such holder's shares to this corporation
for redemption, at an address to be set forth in such notice, at any
time prior to 5:00 p.m. New York City time on the 15th day following the
notice given as prescribed herein. After the notice of redemption is
sent, the Series A-2 Preferred Stock to which it relates shall be deemed
canceled and thereafter the certificates evidencing such shares of
Series A-2 Preferred Stock shall represent only the right to receive
redemption proceeds as set forth in this Section.
(b) Cancellation of Redeemed Stock. Any shares of Series A-2
Preferred Stock redeemed pursuant to this Section 4.3.4 or otherwise acquired by
this corporation in any manner whatsoever shall be cancelled and shall not under
any circumstances be reissued; and this corporation may from time to time take
such appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of this corporation's capital stock.
4.3.5 [Intentionally Omitted]
4.3.6 EXCHANGE
(a) From and after the Series A-2 Original Issue Date (as
hereinafter defined), if this corporation shall be in arrears in the payment of
any four consecutive quarterly Dividends, whether in cash or in kind, on the
outstanding shares of Series A-2 Preferred Stock, the holders of Series A-2
Preferred Stock shall have the option at any time thereafter until such time as
all Dividends accumulated in the Series A-2 Preferred Stock shall have been paid
in full to exchange all or any portion of the shares of Series A-2 Preferred
Stock outstanding into notes (the "Notes") having substantially the same terms
and conditions as the notes, as amended, issued under the Note and Series A-IV
Warrant Purchase Agreement dated as of June 21, 1996 between this corporation
and Northstar High Total Return Fund (except that the maturity date for
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any Notes issued in an exchange pursuant hereto on or prior to February 28, 2007
shall be February 28, 2007, and Notes issued on and after February 28, 2007, and
Notes issued on and after February 28, 2007 shall be payable on demand), in the
amount of $100 principal amount of Notes for each share of Series A-2 Preferred
Stock (assuming, for purposes of the foregoing calculations, that all accrued
Dividends have been paid in kind pursuant to the provisions of Section 4.3.2 in
full through the date notice is provided pursuant to Section 4.3.6(b) below).
(b) Any exchange pursuant to this Section 4.3.6 shall be made upon
prior written notice pursuant to the notice provisions set forth in the
Preferred Stock Purchase Agreement dated as of March 12, 1997 (the "Series A-2
Original Issue Date") between this corporation and the Purchasers named therein.
Upon receipt of such notice by this corporation, all rights of the holders with
respect to such shares exchanged shall cease, except the right to receive the
Notes in the amount set forth in Section 4.3.6(a) above. This corporation shall
not be required to declare or pay, and the holders of Series A-2 Preferred Stock
shall not be entitled to receive, any dividends on such Series A-2 Preferred
Stock from and after the date on which notice pursuant to this Section 4.3.6(b)
is provided.
4.4 SERIES A-3 PREFERRED STOCK
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations, or restrictions
thereof in respect of the Series A-3 Preferred Stock of this corporation, $.0001
par value per share ("Series A-3 Preferred Stock"), which shall consist of and
be limited to a number of shares not to exceed 200,000 shares.
4.4.1 VOTING
(a) General. Except as may otherwise be required hereby or by law, the
shares of Series-3 Preferred Stock shall not entitle the holder thereof
to have any rights to vote or to receive any notice of any meeting of
the holders of the Corporation's stock.
(b) Covenants. So long as at least 25% of the shares of Series A-3 Preferred
Stock originally authorized remain outstanding, in addition to any other
rights provided by law, without first obtaining the affirmative votes or
written consent of the holders of not less than 51% of the then
outstanding shares of the Series A-3 Preferred Stock, this corporation
shall not:
(i) amend or repeal any provision of, or add any provision to, this
corporation's Certificate of Incorporation or Bylaws if such action
would materially alter or change the preferences, rights, privileges
or power of, or the restrictions provided for the benefit of, any
Series A-3 Preferred Stock, or increase or decrease the number of
shares of Series A-3 Preferred Stock authorized hereby;
(ii) authorize or issue shares of any class or series of stock not
expressly authorized herein having any preference or priority as to
dividends, assets or other rights superior to any such preference or
priority of the Series A-3 Preferred Stock, or authorize or issue
shares of stock of any class or any bonds, debentures, notes or
other obligations
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convertible into or exchange for, or having option rights to
purchase, any shares of stock of this corporation having any
preference or priority as to dividends, assets or other rights
superior to any such preference or priority of the Series A-3
Preferred Stock;
(iii) pay or declare any dividend on any Junior Stock (other than
dividends payable in shares of the class or series upon which such
dividends are declared or paid, or payable in shares of Common Stock
with respect to Junior Stock other than Common Stock, together with
cash in lieu of fractional shares and aggregate dividends since the
last payment of a cash dividend on the Series A-3 Preferred Stock
not in excess of the aggregate cash dividend payment last made in
respect of the Series A-3 Preferred Stock) while the Series A-3
Preferred Stock remains outstanding, or apply any of its assets to
the redemption, retirement, purchase or acquisition, directly or
indirectly, through subsidiaries or otherwise, of any Junior Stock,
except from employees of this corporation, upon termination of
employment or otherwise, pursuant to the terms of employee stock
purchase or employee stock option plans of general application which
provide for the repurchase of, or right of first refusal with
respect to, such Junior Stock entered into with participating
employees;
(iv) recapitalize or reclassify any shares of capital stock;
(v) merge or consolidate into or with any other corporation (except for
a merger which yields to the holders of the Series A-3 Preferred
Stock an all cash consideration paid at closing equal to the
then-applicable Series A-3 Optional Redemption Price (as defined
below)); or
(vi) voluntarily liquidate, dissolve or wind up this corporation.
4.4.2 DIVIDENDS
(a) The holders of record of outstanding shares of the Series A-3 Preferred
Stock shall be entitled to receive an eight percent (8%) annual dividend
which shall accrue daily, and which shall be calculated on the basis of
the initial Series A-3 Conversion Price (as defined below) for the
Series A-3 Preferred Stock. All dividend payments, regardless of form,
shall be paid in quarterly installments on each of September 30,
December 31, March 31 and June 30 of each year. At the election of the
corporation, each dividend may be paid either in additional shares of
Series A-3 Preferred Stock or in cash until January 1, 1999 and payable
only in cash from thereafter until July 1, 2002. Dividends paid in
additional shares of Series A-3 Preferred Stock shall be paid in full
shares only with a cash payment (based on an assumed value of $8.00 per
share) equal to the value of any fractional shares. Each dividend paid
in cash shall be mailed to the holders of record of the Series A-3
Preferred Stock as their names and addresses appear on the share
register of this corporation or at the office of the transfer agent on
the corresponding dividend payment date. Holders of Series A-3 Preferred
Stock will receive written notification from this corporation or the
transfer agent if a dividend is paid-in-kind, which notification will
specify the number of shares of Series A-3
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Preferred Stock paid as a dividend and the recipient's aggregate
holdings of Series A-3 Preferred Stock as of that dividend payment date
and after giving effect to the dividend.
(b) Dividends shall accrue until paid whether or not they have been declared
and whether or not there are profits, surplus, or other funds legally
available for the payment of dividends. At the earlier of: (i) the
redemption of the Series A-3 Preferred Stock; (ii) the filling of a
registration statement in respect of an underwritten public offering of
the type described in Section 4.4.3(b); or (iii) the liquidation, sale
or merger of this corporation, any accrued but undeclared dividends
shall be paid to the holders of record of outstanding shares of Series
A-3 Preferred Stock.
4.4.3 LIQUIDATION
(a) Preferred Stock. The provisions of Section 4.1.3(a) are incorporated by
reference with respect to the Series A-3 Preferred Stock
(b) Common Stock. The provisions of Section 4.1.3(b) are incorporated by
reference with respect to the Series A-3 Preferred Stock.
(c) Notice. Written notice of such liquidation, dissolution or winding up,
stating a payment date and the place where said payments shall be made,
shall be given by mail, postage prepaid, or by telex to non-U.S.
residents, not less than twenty (20) days prior to the payment date
stated therein, to the holders of record of the Series A-3 Preferred
Stock, such notice to be addressed to each such holder at its address as
shown on the records of this corporation.
4.4.4 CONVERSION
The holders of the Series A-3 Preferred Stock shall have conversion
rights as follows (the "Series A-3 Conversion Rights"):
(a) Optional Conversion. Subject to and upon compliance with the provisions
of this Section 4.4.4, the holders of any shares of Series A-3 Preferred
Stock shall have the right at such holder's option, at any time or from
time to time, to convert any of such shares of Series A-3 Preferred
Stock into fully paid and nonassessable shares of Common Stock at the
Series A-3 Conversion Price (as hereinafter defined) in effect on the
Series A-3 Conversion Date (as hereinafter defined) upon the terms
hereinafter set forth. In case any share of Series A-3 Preferred Stock
is called for redemption, such right of conversion shall terminate at
the close of business on the Series A-3 Mandatory Redemption Date (as
hereinafter defined) or, if this corporation shall default in the
payment of the Series A-3 Mandatory Redemption Price (as hereinafter
defined), at the close of business when such payment is made.
(b) Automatic Conversion. Each outstanding share of Series A-3 Preferred
Stock shall automatically be converted, without any further act of this
corporation or its stockholders, into fully paid and nonassessable
shares of Common Stock at the
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Series A-3 Conversion Price then in effect upon notice by this
corporation to the holders of shares of Series A-3 Preferred Stock of
the closing of an underwritten public offering pursuant to an effective
registration statement on Form S-1 or successor form under the
Securities Act of 1933, as amended, covering the offering and sale of
Common Stock for the account of this corporation at a per share price of
at least $8.00 in which due aggregate gross proceeds received by this
corporation has equaled or exceeded $10,000,000; provided, however, that
such closing of an underwritten public offering occurs no later than
September 19, 1998.
(c) Conversion Price. Each share of Series A-3 Preferred Stock shall be
converted into a number of shares of Common Stock determined by dividing
(i) the sum of (A) $8.00 plus (B) the dollar amount of any dividends on
such share of the Series A-3 Preferred Stock which such holder is
entitled to received, but has not yet received, by (ii) the Series A-3
Conversion Price in effect on the Series A-3 Conversion Date. The Series
A-3 Conversion Price at which shares of Common Stock shall initially be
issuable upon conversion of the shares of Series A-3 Preferred Stock
shall be $8.00. The Series A-3 Conversion Price shall be subject to
adjustment as set forth in Section 4.4.4(f). No payment or adjustment
shall be made for any dividends on the Common Stock issuable upon such
conversion.
(d) Mechanics of Conversion.
(i) The holder of any shares of Series A-3 Preferred Stock may exercise
the conversion right specified in Section 4.4.4(a) by surrendering
to this corporation or the transfer agent of this corporation the
certificate or certificates for the shares to be converted. Upon the
occurrence of the event specified in Section 4.4.4(b), the
outstanding shares of the Series A-3 Preferred Stock shall be
converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such
shares are surrendered to this corporation or its transfer agent;
provided that this corporation shall not be obligated to issue to
any such holder certificates evidencing the shares of Common Stock
issuable upon such conversion unless certificates evidencing the
shares of the Series A-3 Preferred Stock are delivered either to
this corporation or the transfer agent of this corporation.
Conversion shall be deemed to have been effected on the date when
delivery of the notice of an election to convert and certificates
for shares is made or on the date of the occurrence of the event
specified in Section 4.4.4(b), as the case may be, and such date is
referred to herein as the "Series A-3 Conversion Date." As promptly
as practicable thereafter this corporation shall issue and deliver
to or upon the written order of such holder a certificate or
certificates for the number of full shares of Common Stock to which
such holder is entitled and a check or cash with respect to any
fractional interest in a shares of Common Stock as provided in
Section 4.4.4(e). The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to
have become the holder of record of such Common Stock on the
applicable Series A-3 Conversion Date. Upon conversion of only a
portion of the number of shares covered by a certificate
representing shares of the Series A-3 Preferred Stock surrendered
for
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conversion this corporation shall issue and deliver to or upon
the written order of the holder of the certificate covering the
number of shares of the Series A-3 Preferred Stock representing the
unconverted portion of the certificate so surrendered.
(ii) This corporation shall, at all times when the Series A-3 Preferred
Stock shall be outstanding, reserve and keep available out of its
authorized but unissued capital stock, for the purpose of effecting
the conversion of the Series A-3 Preferred Stock, such number of its
duly authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series A-3
Preferred Stock. Before taking any action which would cause an
adjustment reducing the Series A-3 Conversion Price below the then
par value of the shares of Common Stock issuable upon conversion of
the Series A-3 Preferred Stock, this corporation will take any
corporation action which may be necessary in order that this
corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Series A-3
Conversion Price.
(iii) All shares of the Series A-3 Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares
shall immediately cease and terminate on the Series A-3 Conversion
Date, except only the right of the holders thereof to receive shares
of Common Stock in exchange therefor. Such conversion shall be
deemed to have been made at the close of business on the Series A-3
Conversion Date, and the person entitled to receive the shares of
Common Stock shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. This
corporation shall not re-issue any share of Series A-3 Preferred
Stock surrendered by the holder thereof for conversion.
(e) Fractional Shares. No fractional shares of Common Stock or scrip shall
be issued upon conversion of shares as of the Series A-3 Preferred
Stock. If more than one share of the Series A-3 Preferred Stock shall be
surrendered for conversion at any one time by the same holder, the
number of full shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of the
Series A-3 Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion
of any shares of the Series A-3 Preferred Stock, this corporation shall
pay a cash adjustment in respect of such fractional interest in an
amount equal to that fractional interest of the higher of the current
market price or fair market value as determined by the Board of
Directors of this corporation.
(f) Adjustments to Series A-3 Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this Section 4.4.4(f), the
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding (1) options
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granted to employees and Directors of this corporation prior to
June 30, 1995 pursuant to employee benefit plans or employee
stock option plans available for grants to this corporation's
executives in general, adopted by the Board of Directors of this
corporation and options granted prior to January 1, 1998 under
the PerImmune Plan, (2) 200,000 additional options to purchase
shares of Common Stock granted to employees and directors of
this corporation pursuant to employee benefit plans or employee
stock option plans available for grants to this corporation's
executives in general, subsequent to June 30, 1995 and prior to
July 1, 2002; provided, that each such option shall have an
exercise price equal to or greater than $6.50 per shares, (3)
the Series A Warrants which evidence rights to purchase an
aggregate of 52,000 Series A Warrant Shares, and (4) the Series
A-1 Warrants which evidence rights to purchase an aggregate of
86,462 Series A-1 Warrant Shares.
(B) "Original Issue Date" shall mean the date on which shares of
Series A-3 Preferred Stock were first issued.
(C) "Convertible Securities" shall mean any evidence of
indebtedness, shares of other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Section 4.4.4(f)(vi),
deemed to be issued) by this corporation after the Original
Issue Date, other than shares of Common Stock issued or
issuable:
(I) upon conversion of shares of Series A Preferred Stock issued
or the exercise of the Series A Warrant for Series A Warrant
Shares;
(II) upon conversion of shares of Series A-1 Preferred Stock,
Series A-3 Preferred Stock, Series B-1 Preferred Stock or
Series B-2 Preferred Stock or the exercise of the Series A-1
Warrant for Series A-1 Warrant Shares:
(III) as a dividend or distribution on the Series A Preferred Stock,
the Series A-1 Preferred Stock, the Series A-2 Preferred
Stock, the Series A-3 Preferred Stock, the Series B-1
Preferred Stock or the Series B-2 Preferred Stock;
(IV) by reason of a dividend, stock split, split-up or other
distribution on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by the
foregoing clauses (I), (II), and (III) or this clause (IV);
(V) options granted to employees and directors of the Corporation
pursuant to employee benefit plans or employee stock option
plans available for grants to this Corporation's executives in
general;
(VI) upon conversion of the Organon Note or the January Notes; or
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(VII) to the holders of shares of common stock, par value $.01 per
share, of PerImmune Holdings, Inc., in connection with the
merger.
(ii) Adjustment for Certain Dividends and Distributions. In the event
this corporation at any time, or from time to time, after the
Original Issue Date shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of
Common Stock, then and in each such event the Series A-3 Conversion
Price then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record ate, by multiplying the
Series A-3 Conversion Price then in effect by a fraction:
(A) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record
date, and
(B) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record
date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution.
(iii) Adjustments for Other Dividends and Distributions. In the event this
corporation at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in securities of this
corporation other than shares of Common Stock, then and in each such
event provision shall be made so that the holders of Series A-3
Preferred Stock shall receive upon conversion thereof in addition
the number of shares of Common Stock receivable thereupon, the
amount of securities of this corporation that they would have
received in (A) their Series A-3 Preferred Stock had been converted
into Common Stock on the date of such event and (B) they had
thereafter retained such securities and all rights and distributions
relating to them.
(iv) Adjustment for Stock Splits, Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of
the Series A-3 Preferred Stock shall, in accordance herewith, be
changed into the same or a different number of shares of any class
or classes of stock, whether by capital reorganization,
reclassification, or otherwise then and in each such event the
holder of each such share of Series A-3 Preferred Stock shall have
the right thereafter to convert such share into the kind and amount
of shares of stock and other securities and property receivable upon
such reorganization, reclassification, or other change, by holders
of the number of shares of Common Stock into which such shares of
Series A-3 Preferred Stock were convertible immediately prior to
such reorganization, reclassification or change, all subject to
further adjustment as provided herein. If this corporation shall at
any time or from to time after the Original Issue Date effect a
subdivision or combination of the
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outstanding Common Stock, the Series A-3 Conversion Price then in
effect immediately before the subdivision shall be proportionately
decreased or increased effective at the close of business on the ate
the subdivision or combination becomes effective.
(v) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of this corporation with or into another
corporation or the sale of all or substantially all of the assets of
this corporation to another corporation in accordance herewith, each
share of Series A-3 Preferred Stock shall thereafter be convertible
for the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock
of this corporation deliverable upon conversion of such Series A-3
Preferred Stock would have been entitled upon such consolidation,
merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in
the application of the provisions in this Section 4.4.4 (including
provisions with respect to changes in and other adjustments of the
Series A-3 Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or
other property thereafter deliverable upon the conversion of the
Series A-3 Preferred Stock.
(vi) Adjustment for Issuance or Deemed Issuance of Additional Shares of
Common Stock. If this corporation at any time or from time to time
after the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares
of Common Stock issued or issuable upon the exercise of such Options
or, in the case of Convertible Securities, shall be deemed to be
Additional Shares of Common Stock. In any such case in which
Additional Shares of Common Stock are deemed to be issued:
(A) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to this corporation, or
increase or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the
Series A-3 Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(B) Upon the expiration, termination or other retirement of any
unexercised Option or Convertible Securities, the Series A-3
Conversion Price shall be readjusted to reflect such event; and
(C) No readjustment pursuant to clause (A) or (B) above shall have
the effect of increasing the Series A-3 Conversion Price to an
amount which exceeds the
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Series A-3 Conversion Price on the date of original issuance of
such Options or Convertible Securities:
Upon the issuance or deemed issuance of any Additional Shares of
Common Stock without consideration or for a consideration per share less than
the applicable Series A-3 Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Series A-3
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Series A-3
Conversion Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received by this corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Series A-3 Conversion Price; and (B) the
denominator of which shall be the number of such Additional Shares of Common
Stock so issued; provided, that, immediately after any Additional Shares of
Common Stock are issued or deemed issued and the Series A-3 Conversion Price has
been appropriately reduced, then such Additional Shares of Common Stock shall be
deemed to be outstanding for all subsequent applications of this Section
4.4.4(f).
(vii) Determination of Consideration. For purposes of this Section
4.4.4(f), the consideration received by this corporation for the
issue of any Additional Shares of Common Stock issued or deemed to
have been issued shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash, be computed at the aggregate
of cash received by this corporation for the Additional Shares
of Common Stock,
(II) insofar as it consists of property other than cash, be the
fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of
this corporation for consideration which covers both, be the
portion of such consideration which covers both, be the
portion of such consideration so received which is, in the
judgment of the Board of Directors allocated to the Common
Stock, computed as provided in clauses (I) and (II) above, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
received by this corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to Section
4.4.4(f)(vi), relating to Options and Convertible Securities,
shall be determined by dividing
(x) the total amount, if any, received or
receivable by this corporation as consideration for the
issue of such Options or Convertible Securities, plus
the
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minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to
this corporation upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such
Convertible Securities, by
(y) the maximum number of shares of Common Stock
(as set forth in the instrument relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of
Options for Convertible Securities and the conversion or
exchange of such Convertible Securities.
(viii) No De Minimis Adjustments. The applicable Series A-3 Conversion
Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $.01, but any such amount
shall be carried forward and reduction with respect thereto made at
the time of and together with any subsequent reduction which,
together with such amount and any of the amount or amounts so
carried forward, shall aggregate $.01 or more.
(g) No Impairment. This corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary actin, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
this corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4.4.4 and in the
taking of all such action as may be necessary or appropriate in order to
protect the Series A-3 Conversion Rights against impairment.
(h) Certificate as to Adjustment. Upon the occurrence of each adjustment or
readjustment of the Series A-3 Conversion Price pursuant to this Section
4.4.4, this corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms thereof and
furnish to each holder of Series A-3 Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. This
corporation shall, upon the written request at any time of any holder of
Series A-3 Preferred Stock, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustment and
readjustments, (ii) the Series A-3 Conversion Price then in effect, and
(iii) the number
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of shares of Common Stock and the amount, fi any, of other property
which then would be received upon the conversion of the Series A-3
Preferred Stock.
(i) Notice of Record Date. In the event:
(i) that this corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other
securities of this corporation;
(ii) that this corporation subdivides or combines its outstanding shares
of Common Stock;
(iii) of any reclassification of the Common Stock of this corporation
(other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon),
or of any consolidation or merger of this corporation into or with
another corporation, or of the sale of all or substantially all of
the assets of this corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or winding
up of this corporation;
then this corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A-3 Preferred Stock, and shall cause
to be mailed to the holders of the Series A-3 Preferred Stock at their last
addressed as shown on the records of this corporation or such transfer agent, at
least fifteen (15) days prior to the record date specified in (A) below and at
least thirty (30) days before the date specified in (B) below, a notice stating:
(A) the record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or combination are to
be determined, or
(B) the date of which any reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock or record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution or winding up.
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4.4.5 REDEMPTION BY THIS CORPORATION
(a) Mandatory Redemption. In the event that on July 1, 2002 (the "Series A-3
Mandatory Redemption Date") there are any shares of Series A-3 Preferred
Stock still outstanding, this corporation shall redeem any and all such
shares of Series A-3 Preferred Stock for an amount, payable in cash,
equal to $8.00 plus an amount equal to all dividends accrued thereon,
computed to the date payment thereof is made available. The total sum
payable per share of Series A-3 Preferred Stock on the Series A-3
Mandatory Redemption Date is referred to as the "Series A-3 Mandatory
Redemption Price." Holders of record of shares of Series A-3 Preferred
Stock to be redeemed on the Series A-3 Mandatory Redemption Date shall
be entitled to receive the applicable Series A-3 Mandatory Redemption
Price upon actual delivery to the Corporation or the transfer agent of
the certificates representing the shares entitled to be redeemed. If
upon the Series A-3 Mandatory Redemption Date the assets of the
Corporation available for redemption are insufficient to pay the holders
of outstanding shares of Series A-3 Preferred Stock, the holders of
Series A-3 Preferred Stock shall share ratably according to the
respective amounts which would be payable in respect of such shares to
be redeemed by the holders thereof, if all amounts payable on or with
respect to such shares were paid in full.
(b) Optional Redemption.
(i) Upon the occurrence of any Series A-3 Optional Redemption Event (as
hereinafter defined) this corporation will, by notice given to each
holder of Series A-3 Preferred Stock, offer to redeem all (but not
fewer than all) shares of Series A-3 Preferred Stock then owned by
such holder at a price equal to:
106.667% of the Series A-3 Mandatory Redemption Price if
such offer to redeem is prior to July 1, 1998;
105.334% of the Series A-3 Mandatory Redemption Price if
such offer to redeem is made subsequent to June 30, 1998 and prior to July 1,
1999;
104.001% of the Series A-3 Mandatory Redemption Price if
such offer to redeem is made subsequent to June 30, 1999 and prior to July 1,
2000;
102.668% of the Series A-3 Mandatory Redemption Price if
such offer to redeem is made subsequent to June 30, 2000 and prior to July 1,
2001;
101.335% of the Series A-3 Mandatory Redemption Price if
such offer to redeem is made subsequent to June 30, 2001 and prior to July 1,
2002;
(ii) Upon receipt of a notice given pursuant to Section 4.4.5(b), each
holder of Series A-3 Preferred Stock shall have the right to accept
such offer by tender in such holder's shares to this corporation for
redemption, at an address to be set froth in such notice, at
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any time prior to 5:00 p.m. New York City time on the 15th day
following the making of the offer to redeem by notice given as
prescribed herein.
(iii) The following shall be Series A-3 Optional Redemption Events:
1. any person or group of related or affiliated
persons shall have become the beneficial owner or owners
of 40% or more of the outstanding voting stock of this
corporation; provided, however, that beneficial
ownership of Series A-3 Preferred Stock shall not be
given effect toward counting a person's or group of
related or affiliated persons' beneficial ownership;
2. there shall have occurred a merger or
consolidation in which this corporation is not the
survivor or in which holders of Common Stock of this
corporation shall have become entitled to receive cash,
securities of this corporation other than voting Common
Stock or securities of any other person, except that a
merger or consolidation which occurs for the sole
purpose of moving the jurisdiction of incorporation
(i.e., a reincorporation) shall not be deemed a Series
A-3 Optional Redemption Event under this Section;
3. at any time a majority of the members of the
Board of Directors of this corporation shall be persons
who were elected at one or more meetings held, or by one
or more consents given, by the stockholders of this
corporation during the preceding twelve (12) months and
who were not members of the Board of Directors twelve
(12) months prior to that time; or
4. if this corporation shall take any action
referred to in Section 4.4.1(e)(i) through (vi) without
having obtained the required consent of the holders of
Series A-3 Preferred Stock.
(c) Cancellation of Redeemed Stock. Any shares of Series A-3 Preferred Stock
redeemed pursuant to this Section 4.4.5 or otherwise acquired by this
corporation in any manner whatsoever shall be canceled and shall not
under any circumstances be reissued; and this corporation may from time
to time take such appropriate corporate action as may be necessary to
reduce accordingly the number of authorized shares of this corporation's
capital stock.
4.4.6 SERIES A-2 PREFERRED STOCK
Each holder of the Series A-3 Preferred Stock hereby consents, and each
holder subsequent to the initial holder of the Series A-3 Preferred Stock shall
by its acceptance of the certificate representing such shares be deemed to
consent, to the terms and provisions of the Series A-2 Preferred Stock of the
Corporation.
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4.5 SERIES B-1 PREFERRED STOCK. The following is a statement of the
designations and the powers, privileges and rights, and the qualifications,
limitations, or restrictions thereof in respect of the Series B-1 Preferred
Stock of this corporation, $.0001 par value per share ("Series B-1 Preferred
Stock"), which shall consist of and be limited to a number of shares not to
exceed 100 shares.
4.5.1 CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
Section 4.5.1 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).
Business Day. The term "Business Day" shall mean a day other
than a Saturday or Sunday or any federal holiday.
Common Equity. The term "Common Equity" shall mean all shares
now or hereafter authorized of any class of common stock of this corporation,
including the Common Stock, and any other stock of the corporation, howsoever
designated, authorized after the Series B-1 Initial Issue Date, which has the
right (subject always to prior rights of any class or series of preferred stock)
to participate in the distribution of the assets and earnings of this
corporation without limit as to per share amount.
Parity Stock. The term "Parity Stock" shall mean the Series A
Preferred Stock, the Series A-1 Preferred Stock, the Series A-3 Preferred Stock,
Series B-1 Preferred Stock, Series B-2 Preferred Stock, any class or series of
stock of this corporation authorized after the Series B-1 Initial Issue Date
which, by its terms, is entitled to receive payment of dividends on a parity
with the Series B-1 Preferred Stock, and shall mean any class or series of stock
of this corporation authorized after the Series B-1 Initial Issue Date which, by
its terms, is entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of the corporation on a parity with the Series B-1
Preferred Stock.
Qualifying Convertible Securities Offering. The term "Qualifying
Convertible Securities Offering" shall mean a private offering of securities
that are convertible into shares of Common Stock effected by the corporation
within twelve-months of the Series B-1 Initial Issue Date which yields gross
offering proceeds to this corporation in excess of $5 million; provided,
however, that, if more than one such offering is effected within the
twelve-month period following the Series B-1 Initial Issue Date, only the first
such offering shall constitute a "Qualifying Convertible Securities Offering."
Qualifying IPO. The term "Qualifying IPO" means the first
registered, underwritten public offering of shares of Common Stock by this
corporation.
Record Date. The term "Record Date" shall mean the date
designated by the Board of Directors of this corporation at the time a dividend
is declared; provided, however, that such Record Date shall not be more than
thirty (30) days nor less than ten (10) days prior to the
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respective Series B-1 Dividend Payment Date or such other date designated by the
Board of Directors for the payment of dividends.
Senior Stock. The term "Senior Stock" shall mean any class or
series of stock of the corporation authorized after the Series B-1 Initial Issue
Date which, by its terms, ranks senior to the Series B-1 Preferred Stock in
respect of the right to receive dividends, and for purposes of Section 4.5.3,
shall mean any class or series of stock of this corporation authorized after the
Series B-1 Initial Issue Date which, by its terms, ranks senior to the Series
B-1 Preferred Stock in respect of the right to participate in any distribution
upon liquidation, dissolution or winding up of the affairs of this corporation.
Series B-1 Conversion Date. The term "Series B-1 Conversion Date"
shall have the meaning set forth in Section 4.5.4(b) below.
Series B-1 Conversion Price. The term "Series B-1 Conversion
Price" shall initially mean $4.94 and thereafter shall be subject to adjustment
from time to time pursuant to the terms of Section 4.5.4 below.
Series B-1 Dividend Payment Date. The term "Series B-1 Dividend
Payment Date" shall have the meaning set forth in Section 4.5.2(b) below.
Series B-1 Dividend Period. The term "Series B-1 Dividend Period"
shall mean the period from, and including, the Series B-1 Initial Issue Date to,
but not including, the first Series B-1 Dividend Payment Date and thereafter,
each annual period from, and including, the Series B-1 Dividend Payment Date to,
but not including, the next Series B-1 Dividend Payment Date.
Series B-1 Initial Issue Date. The term "Series B-1 Initial Issue
Date" shall mean April 24, 1997.
Series B-1 Liquidation Preference. The term "Series B-1
Liquidation Preference" shall mean $45,000 per share.
Series B-1 Redemption Date. The term "Series B-1 Redemption Date"
shall have the meaning set forth in Section 4.5.5(a) below.
Series B-1 Redemption Price. The term "Series B-1 Redemption
Price" shall mean a price per share equal to the Series B-1 Liquidation
Preference together with accrued and unpaid dividends thereon to the Series B-1
Redemption Date.
4.5.2 DIVIDENDS.
(a) Subject to the prior preferences and other rights of
any Senior Stock as to dividends, the recordholders of Series B-1 Preferred
Stock shall be entitled to receive dividends if, when and as declared by the
Board of Directors of this corporation, out of funds
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legally available for payment of dividends. Such dividends shall by the
corporation be payable in cash at the rate of seven percent (7%) per annum of
the Series B-1 Liquidation Preference.
(b) Dividends on shares of Series B-1 Preferred Stock
shall be payable annually in arrears when and as declared by the Board of
Directors of this corporation on each anniversary of the Series B-1 Initial
Issue Date (a "Series B-1 Dividend Payment Date"), commencing on April 24, 1998.
If any Series B-1 Dividend Payment Date occurs on a day that is not a Business
Day, any accrued dividends otherwise payable on such Series B-1 Dividend Payment
Date shall be paid on the next succeeding Business Day. Dividends shall be paid
to the holders of record of the Series B-1 Preferred Stock as their names shall
appear on the share register of the corporation on the Record Date for such
dividend. Dividends payable in any Series B-1 Dividend Period which is less than
a full Series B-1 Dividend Period in length will be computed on the basis of a
365 day Series B-1 Dividend Period and actual days elapsed in such Series B-1
Dividend Period. Dividends on account of arrears for any past Series B-1
Dividend Periods may be declared and paid at any time to holders of record on
the Record Date therefor.
(c) So long as any shares of Series B-1 Preferred Stock
shall be outstanding, the corporation shall not (except as provided in Section
4.3) declare, pay or set apart for payment on any Junior Stock any dividends
whatsoever, whether in cash, property or otherwise (other than dividends payable
in shares of the class or series upon which such dividends are declared or paid,
or payable in shares of Common Stock with respect to Junior Stock other than
Common Stock, together with cash in lieu of fractional shares), nor shall this
corporation make any distribution on any Junior Stock, nor shall any Junior
Stock be purchased, redeemed or otherwise acquired by this corporation or any of
its subsidiaries of which it owns not less than a majority of the outstanding
voting power, nor shall any monies be paid or made available for a sinking fund
for the purchase or redemption of any Junior Stock, unless all dividends to
which the holders of Series B-1 Preferred Stock shall have been entitled for all
previous Series B-1 Dividend Periods shall have been paid or declared and a sum
of money sufficient for the payment thereof has been set apart.
(d) In the event that full dividends are not paid or made
available to the holders of all outstanding shares of Series B-1 Preferred Stock
and of any Parity Stock and funds available for payment of dividends shall be
insufficient to permit payment in full to holders of all such stock of the full
preferential amounts to which they are then entitled, then the entire amount
available for payment of dividends shall be distributed ratably among all such
holders of Series B-1 Preferred Stock and of any Parity Stock in proportion to
the full amount to which they would otherwise be respectively entitled.
(e) Notwithstanding anything contained herein to the
contrary, no dividends on shares of Series B-1 Preferred Stock shall be declared
by the Board of Directors of this corporation or paid or set apart for payment
by this corporation at such time as the terms and provisions of any agreement of
this corporation, including any agreement relating to its indebtedness,
prohibits such declaration, payment or setting apart for payment or provides
that such declaration, payment or setting apart for payment would constitute a
breach thereof or a default thereunder, or if such declaration or payment shall
be restricted or prohibited by law.
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4.5.3 DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or other winding up of the affairs of this corporation,
subject to the prior preferences and other rights of any Senior Stock as to
liquidation preferences, but before any payment or distribution shall be made to
the holders of Junior Stock, the holders of Series B-1 Preferred Stock shall be
entitled to be paid out of the assets of this corporation in cash or property at
its fair market value as determined by the Board of Directors of this
corporation the Series B-1 Liquidation Preference per share plus an amount equal
to all dividends accrued and unpaid thereon to the date of such liquidation or
dissolution or such other winding up. Except as provided in this paragraph,
holders of Series B-1 Preferred Stock shall not be entitled to any distribution
in the event of liquidation, dissolution or winding up of the affairs of this
corporation.
(b) If, upon any such liquidation, dissolution or other
winding up of the affairs of this corporation the assets of this corporation
shall be insufficient to permit the payment in full of the Series B-1
Liquidation Preference per share plus an amount equal to all dividends accrued
and unpaid on the Series B-1 Preferred Stock and the full liquidating payments
on all Parity Stock, then the assets of this corporation remaining after the
distributions to holders of any Senior Stock of the full amounts to which they
may be entitled shall be ratably distributed among the holders of Series B-1
Preferred Stock and of any Parity Stock in proportion to the full amounts to
which they would otherwise be respectively entitled if all amounts thereon were
paid in full. Neither the consolidation or merger of this corporation into or
with another corporation or corporations, nor the sale, lease, transfer or
conveyance of all or substantially all of the assets of this corporation to
another corporation or any other entity shall be deemed a liquidation,
dissolution or winding up of the affairs of this corporation within the meaning
of this Section 4.5.3.
4.5.4 CONVERSION RIGHTS.
(a) Each share of Series B-1 Preferred Stock (i) may be
converted into Common Stock at any time before the close of business on the
Series B-1 Redemption Date (unless this corporation shall default in payment of
the Series B-1 Redemption Price) at the option of the holder thereof and (ii) if
not previously converted or redeemed in accordance with the terms hereof, shall
be automatically converted into Common Stock upon consummation of a Qualifying
IPO (i.e., upon the closing of the offering comprising the Qualifying IPO),
effective immediately prior to the consummation of such Qualifying IPO. For the
purposes of conversion, each share of Series B-1 Preferred Stock shall be deemed
to have a value equal to the sum of (i) the Series B-1 Liquidation Preference
and (ii) all accrued and unpaid dividends on such share of Series B-1 Preferred
Stock (such sum being referred to as the "Series B-1 Per Share Value"), and the
number of shares of Common Stock issuable upon conversion of one share of Series
B-1 Preferred Stock (which number may be a fraction of one share) shall equal
(x) the Series B-1 Per Share Value, divided by (y) the Series B-1 Conversion
Price in effect on the Series B-1 Conversion Date (rounded to the nearest
share). Immediately following such conversion, the rights of the holders of
converted Series B-1 Preferred Stock shall cease and the persons entitled
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to receive the Common Stock upon the conversion of Series B-1 Preferred Stock
shall be treated for all purposes as having become the owners of such Common
Stock.
(b) To convert Series B-1 Preferred Stock, a holder must
(i) surrender the certificate or certificates evidencing the shares of Series
B-1 Preferred Stock to be converted, duly endorsed in a form satisfactory to
this corporation, at the office of this corporation or transfer agent for the
Series B-1 Preferred Stock, (ii) notify this corporation at such office that he
elects to convert Series B-1 Preferred Stock, and the number of shares he wishes
to convert, (iii) state in writing the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued, and (iv)
pay any transfer or similar tax if required. In the event that a holder fails to
notify this corporation of the number of shares of Series B-1 Preferred Stock
which he wishes to convert, he shall be deemed to have elected to convert all
shares represented by the certificate or certificates surrendered for
conversion. The date on which the holder satisfies all those requirements is the
"Series B-1 Conversion Date." As soon as practical, this corporation shall
deliver a certificate for the number of full shares of Common Stock issuable
upon the conversion and a new certificate representing the unconverted portion,
if any, of the shares of Series B-1 Preferred Stock represented by the
certificate or certificates surrendered for conversion. The person in whose name
the Common Stock certificate is registered shall be treated as the stockholder
of record on and after the Series B-1 Conversion Date. If a holder of Series B-1
Preferred Stock converts more than one share at a time, the number of full
shares of Common Stock issuable upon conversion shall be based on the total
value of all shares of Series B-1 Preferred Stock converted. If the last day on
which Series B-1 Preferred Stock may be converted is not a Business Day, the
shares of Series B-1 Preferred Stock may be surrendered for conversion on the
next succeeding Business Day.
(c) If a holder converts shares of Series B-1 Preferred
Stock, this corporation shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of shares of Common Stock upon the conversion.
However, the holder shall pay any such tax which is due because the shares are
issued in a name other than the holder's name.
(d) This corporation has reserved and shall continue to
reserve out of its authorized but unissued Common Stock or its Common Stock held
in treasury enough shares of Common Stock to permit the conversion of the Series
B-1 Preferred Stock in full. All shares of Common Stock which may be issued upon
conversion of Series B-1 Preferred Stock shall be fully paid and nonassessable.
This corporation will comply in all material respects with all securities laws
regulating the offer and delivery of shares of Common Stock upon conversion of
Series B-1 Preferred Stock.
(e) If the corporation:
(i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common
Stock into a greater number of shares;
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(iii) combines its outstanding shares of Common
Stock into a small number of shares; or
(iv) issued by reclassification of its Common Stock
any shares of its capital stock;
then the Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of Series B-1 Preferred Stock thereafter converted
may receive the number of shares of capital stock of this corporation which he
would have owned immediately following such action if he had converted Series
B-1 Preferred Stock immediately prior to such action. The adjustment shall
become effective immediately after the record date in the case of dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If, after an adjustment referred to
in clauses (i) through (iv) above, a holder of Series B-1 Preferred Stock upon
conversion of it may receive shares of two or more classes of capital stock of
this corporation, this corporation shall determine the allocation of the
adjusted Series B-1 Conversion Price between the classes of capital stock. After
such allocation, the Series B-1 Conversion Price of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this subparagraph (e).
(f) If this corporation consummates a Qualifying
Convertible Securities Offering and the Series B-1 Conversion Price then in
effect exceeds (x) the gross proceeds received by the Company from such
Qualifying Security Offering, divided by (y) the number of shares of Common
Stock issuable upon conversion of the convertible securities issued in
connection with such Qualifying Convertible Securities Offering (the "Qualifying
Securities Conversion Price"), the Series B-1 Conversion Price shall be adjusted
so that the Series B-1 Conversion Price, as so adjusted, shall be equal to the
Qualifying Securities Conversion Price. In the event that, subsequent to the
consummation of such Qualifying Convertible Securities Offering, the Qualifying
Securities Conversion Price shall be adjusted pursuant to the terms of the
instrument(s) governing such convertible securities, the Series B-1 Conversion
Price shall similarly be adjusted such that, absent any adjustment pursuant to
Section 4.5.4(g), the Series B-1 Conversion Price shall equal the Qualifying
Securities Conversion Price.
(g) If this corporation consummates a Qualifying IPO in
which the price to the public (as set forth in the final prospectus utilized in
connection with such Qualifying IPO) of one share of Common Stock (the "Offering
Price") is less than 200% of the Series B-1 Conversion Price then in effect, the
Series B-1 Conversion Price shall be adjusted (effective immediately prior to
the consummation of such Qualifying IPO and the related automatic conversion of
the Series B-1 Preferred Stock into Common Stock pursuant to Section 4.5.4(a))
such that the Series B-1 Conversion Price shall, after giving effect to such
adjustment, equal to 50% of the Offering Price.
(h) No adjustment in the Series B-1 Conversion Price need
be made unless the adjustment would require an increase or decrease of at least
1% in the Series B-1 Conversion Price. Any adjustments that are not made shall
be carried forward and taken into
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account in any subsequent adjustment. All calculations under this paragraph 4
shall be made to the nearest cent or to the nearest share, as the case may be.
(i) Whenever the Series B-1 Conversion Price is adjusted,
this corporation shall promptly mail to holders of Series B-1 Preferred Stock,
first class, postage prepaid, a notice of the adjustment. This corporation shall
file with the transfer agent, if any, for Series B-1 Preferred Stock a
certificate from this corporation's independent public accountants briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is correct.
(j) This corporation from time to time may reduce the
Series B-1 Conversion Price by any amount for any period of time if the period
is at least twenty (20) Business Days and if the reduction is irrevocable during
the period, but in no event may the Series B-1 Conversion Price be less than the
par value of a share of Common Stock. Whenever the Series B-1 Conversion Price
is reduced, this corporation shall mail to holders of Series B-1 Preferred Stock
a notice of the reduction. This corporation shall mail, first class, postage
prepaid, the notice at least 15 days before the date the reduced conversion
price takes effect. The notice shall state the reduced conversion price and the
period it will be in effect.
(k) If this corporation is party to a merger which
reclassifies or changes its Common Stock, upon consummation of such transaction
Series B-1 Preferred Stock shall automatically become convertible into the kind
and amount of securities, cash or other assets which the holder of Series B-1
Preferred Stock would have owned immediately after the consolidation, merger,
transfer or lease if such holder had converted Series B-1 Preferred Stock
immediately before the effective date of the transaction, appropriate adjustment
(as determined by the Board of Directors of this corporation) shall be made in
the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of Series B-1 Preferred Stock, to the
end that the provisions set forth herein (including provisions with respect to
changes in, and other adjustment of the Series B-1 Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other securities or property thereafter deliverable upon the
conversion of Series B-1 Preferred Stock. If this Section 4.5.4(k) applies,
Section 4.5.4(e) does not apply.
(l) In any case in which this Section 4.5.4 shall require
that an adjustment as a result of any event become effective from and after a
record date, this corporation may elect to defer until after the occurrence of
such event the issuance to the holder of any shares of Series B-1 Preferred
Stock converted after such record date and before the occurrence of such event
of the additional shares of Common Stock issuable upon such conversion over and
above the shares issuable on the basis of the Series B-1 Conversion Price in
effect immediately prior to adjustment.
(m) All shares of Series B-1 Preferred Stock converted
pursuant to this Section 4.5.4 shall be retired and shall be restored to the
status of authorized and unissued shares of preferred stock, without designation
as to Series B-1 and may thereafter be reissued as shares of any series of
preferred stock other than Series B-1 Preferred Stock.
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4.5.5 REDEMPTION BY THE CORPORATION.
(a) This corporation shall redeem on the fifth anniversary
of the Series B-1 Initial Issue Date (the "Series B-1 Redemption Date") at the
Series B-1 Redemption Price all of the then issued and outstanding shares of
Series B-1 Preferred Stock. If the Series B-1 Redemption Date is on or after a
dividend record date and on or before the related Series B-1 Dividend Payment
Date, the dividend payable shall be paid to the holder in whose name the Series
B-1 Preferred Stock is registered at the close of business on such record date.
(b) No Series B-1 Preferred Stock may be redeemed except
with funds legally available for the payment of the Series B-1 Redemption Price.
(c) In case that, on the Series B-1 Redemption Date, this
corporation does not have sufficient funds available to redeem all of the then
issued and outstanding shares of Series B-1 Preferred Stock and, accordingly,
less than all shares of Series B-1 Preferred Stock at the time outstanding, the
shares to be redeemed shall be selected pro rata or by lot as determined by this
corporation in its sole discretion. Any shares not so redeemed shall remain
outstanding.
(d) Notwithstanding the foregoing provisions of this
Section 4.5.5, unless the full cumulative dividends on all outstanding shares of
Series B-1 Preferred Stock shall have been paid or contemporaneously are
declared and paid for all past dividend periods, none of the shares of Series
B-1 Preferred Stock shall be redeemed unless all outstanding shares of Series
B-1 Preferred Stock are simultaneously redeemed.
(e) All shares of Series B-1 Preferred Stock redeemed
pursuant to this Section 4.5.5 shall be retired and shall be restored to the
status of authorized and unissued shares of preferred stock, without designation
as to Series B-1 and may thereafter be reissued as shares of any series of
preferred stock other than shares of Series B-1 Preferred Stock.
4.5.6 VOTING RIGHTS.
(a) General. Each holder of outstanding shares of Series
B-1 Preferred Stock shall be entitled to the number of votes equal to the number
of whole shares of Common Stock into which the shares of Series B-1 Preferred
Stock held by such holder are convertible (as adjusted from time to time),
multiplied by the number of votes per share which the holders of shares of
Common Stock then have with respect to such matter, at each meeting of
stockholders of this corporation (and written actions of stockholders in lieu of
meetings) with respect to any and all matters presented to the stockholders of
this corporation for their action or consideration. Except as provided by law or
as otherwise set forth herein, holders of Series B-1 Preferred Stock shall vote
together with the holders of Common Stock (and any other class or series of
stock entitled to vote together as one class with the Common Stock) as a single
class.
(b) Prior to the consummation of a Qualifying IPO, so long
as all of the shares of Series B-1 Preferred Stock are beneficially owned by
Syncor International Corporation ("Syncor"), Syncor, as the holder of all of the
shares of Series B-1 Preferred Stock, voting separately as a class, shall have
the exclusive right to elect one (1) member of the board of
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directors of this corporation (the "Preferred Stock Director") at any special
meeting of stockholders called for such purpose, at each annual meeting of
stockholders and in any written consent of stockholders pursuant to Section 228
of the DGCL. From and after the date on which Syncor ceases to beneficially own
all of the shares of Series B-1 Preferred Stock or on which the Series B-1
Preferred Stock is converted to Common Stock upon a Qualifying IPO, the right of
Syncor to elect the Preferred Stock Director shall terminate.
(c) The Preferred Stock Director elected as provided
herein shall serve until the next annual meeting or until his successor shall be
elected and shall qualify. The Preferred Stock Director may be removed with or
without cause by, and shall not be removed other than by the vote of Syncor, as
the holder of all of the shares of Series B-1 Preferred Stock, voting separately
as a class, at a meeting called for such purpose or by written consent in
accordance with Section 228 of the Delaware General Corporate Law. If the office
of the Preferred Stock Director becomes vacant by reason of death, resignation,
retirement, disqualification or removal from office or otherwise, Syncor, as the
holder of all of the shares of Series B-1 Preferred Stock, voting separately as
a class, at a meeting called for such purpose or by written consent in
accordance with Section 228 of the DGCL, may elect a successor. Any such
successor shall hold office for the unexpired term in respect of which such
vacancy occurred. Upon any termination of the right of the holder of Series B-1
Preferred Stock to vote for and elect a Preferred Stock Director as herein
provided, the Preferred Stock Director then serving on the Board of Directors
may continue to hold his office for the remainder of his term.
(d) During such time as any shares of Series B-1 Preferred
Stock are outstanding, this corporation will not, without the vote of the
Holders of a majority of the Series B-1 Preferred Stock voting separately as a
class: (i) file or cause to be filed with the Secretary of State of the State of
Delaware a certificate of dissolution with respect to this corporation as
provided for in Section 275 and Section 103 of the DGCL; (ii) amend, alter or
repeal any of the provisions of the Certificate of Incorporation so as to affect
adversely the powers, preferences or rights of the holders of the Series B-1
Preferred Stock then outstanding or reduce the minimum time for any required
notice to which the holders of the Series B-1 Preferred Stock then outstanding
may be entitled (an amendment of the Certificate of Incorporation to authorize
or create, or to increase the authorized amount of any common stock or any other
series of preferred stock being deemed not to affect adversely the powers,
preferences, or rights of the holders of the Series B-1 Preferred Stock); or
(iii) merge or consolidate with or into any other corporation, unless each
holder of Series B-1 Preferred Stock immediately preceding such merger or
consolidation shall receive or continue to hold in the resulting corporation the
same number of shares, with substantially the same rights and preferences,
including, without limitation, as set forth in Section 4.5.4(k) hereof, as
correspond to the shares of Series B-1 Preferred Stock so held.
4.5.7 EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the shares of Series
B-1 Preferred Stock shall not have any preferences and relative, participating,
optional or other special rights, other than those specifically set forth in
this resolution (as such resolution may be amended from
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time to time) and in the Certificate of Incorporation. The shares of Series B-1
Preferred Stock shall have no preemptive or subscription rights.
4.6 SERIES B-2 PREFERRED STOCK. The following is a statement of the
designations and the powers, privileges and rights, and the qualifications,
limitations, or restrictions thereof in respect of the Series B-2 Preferred
Stock of this corporation, $.0001 par value per share ("Series B-2 Preferred
Stock"), which shall consist of and be limited to a number of shares not to
exceed 120 shares.
4.6.1 CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
Section 4.6.1 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).
Parity Stock. The term "Parity Stock" shall mean the Series A
Preferred Stock, the Series A-1 Preferred Stock, the Series A-3 Preferred Stock,
Series B-1 Preferred Stock, Series B-2 Preferred Stock, any class or series of
stock of this corporation authorized after the Series B-2 Initial Issue Date
which, by its terms, is entitled to receive payment of dividends on a parity
with the Series B-2 Preferred Stock, and shall mean any class or series of stock
of this corporation authorized after the Series B-2 Initial Issue Date which, by
its terms, is entitled to receive assets upon liquidation, dissolution or
winding up of the affairs of the corporation on a parity with the Series B-2
Preferred Stock.
Qualifying Convertible Securities Offering. The term "Qualifying
Convertible Securities Offering" shall mean a private offering of securities
that are convertible into shares of Common Stock effected by the corporation
within twelve-months of the Series B-2 Initial Issue Date which yields gross
offering proceeds to this corporation in excess of $5 million; provided,
however, that, if more than one such offering is effected within the
twelve-month period following the Series B-2 Initial Issue Date, only the first
such offering shall constitute a "Qualifying Convertible Securities Offering."
Record Date. The term "Record Date" shall mean the date
designated by the Board of Directors of this corporation at the time a dividend
is declared; provided, however,- that such Record Date shall not be more than
thirty (30) days nor less than ten (10) days prior to the respective Series B-2
Dividend Payment Date or such other date designated by the Board of Directors
for the payment of dividends.
Senior Stock. The term "Senior Stock" shall mean any class or
series of stock of the corporation authorized after the Series B-2 Initial Issue
Date which, by its terms, ranks senior to the Series B-2 Preferred Stock in
respect of the right to receive dividends, and for purposes of Section 4.6.3,
shall mean any class or series of stock of this corporation authorized after the
Series B-2 Initial Issue Date which, by its terms, ranks senior to the Series
B-2 Preferred Stock in respect of the right to participate in any distribution
upon liquidation, dissolution or winding up of the affairs of this corporation.
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Series B-2 Conversion Date. The term "Series B-2 Conversion Date"
shall have the meaning set forth in Section 4.6.4(b) below.
Series B-2 Conversion Price. The term "Series B-2 Conversion
Price" shall initially mean $5.49 divided by the Common Stock Exchange Ratio]
and thereafter shall be subject to adjustment from time to time pursuant to the
terms of Section 4.6.4.
Series B-2 Dividend Payment Date. The term "Series B-2 Dividend
Payment Date" shall have the meaning set forth in Section 4.6.2(b).
Series B-2 Dividend Period. The term "Series B-2 Dividend Period"
shall mean the period from, and including, the Series B-2 Initial Issue Date to,
but not including, the first Series B-2 Dividend Payment Date and thereafter,
each annual period from, and. including, the Series B-2 Dividend Payment Date
to, but not including, the next Series B-2 Dividend Payment Date.
Series B-2 Initial Issue Date. The term "Series B-2 Initial Issue
Date" shall mean June 16, 1997.
Series B-2 Liquidation Preference. The term "Series B-2
Liquidation Preference" shall mean $50,000 per share.
Series B-2 Redemption Date. The term "Series B-2 Redemption Date"
shall have the meaning set forth in Section 4.6.5(a) below.
Series B-2 Redemption Price. The term "Series B-2 Redemption
Price" shall mean a price per share equal to the Series B-2 Liquidation
Preference together with accrued and unpaid dividends thereon to the Series B-2
Redemption Date.
4.6.2 DIVIDENDS.
(a) Subject to the prior preferences and other rights of
any Senior Stock as to dividends, the recordholders of Series B-2 Preferred
Stock shall be entitled to receive dividends if, when and as declared by the
Board of Directors of this corporation, out of funds legally available for
payment of dividends. Such dividends shall by the corporation be payable in cash
at the rate of seven percent (7%) per annum of the Series B-2 Liquidation
Preference.
(b) Dividends on shares of Series B-2 Preferred Stock
shall be payable annually in arrears when and as declared by the Board of
Directors of this corporation on each anniversary of the Series B-2 Initial
Issue Date (a "Series B-2 Dividend Payment Date"), commencing on June 16, 1998.
If any Series B-2 Dividend Payment Date occurs on a day that is not a Business
Day, any accrued dividends otherwise payable on such Series B-2 Dividend Payment
Date shall be paid on the next succeeding Business Day. Dividends shall be paid
to the holders of record of the Series B-2 Preferred Stock as their names shall
appear on the share register of the corporation on the Record Date for such
dividend. Dividends payable in any Series B-2 Dividend Period which is less than
a full Series B-2 Dividend Period in length will be
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computed on the basis of a 365 day Series B-2 Dividend Period and actual days
elapsed in such Series B-2 Dividend Period. Dividends on account of arrears for
any past Series B-2 Dividend Periods may be declared and paid at any time to
holders of record on the Record Date therefor.
(c) So long as any shares of Series B-2 Preferred Stock
shall be outstanding, the corporation shall not (except as provided in Section
4.3) declare, pay or set apart for payment on any Junior Stock any dividends
whatsoever, whether in cash, property or otherwise (other than dividends payable
in shares of the class or series upon which such dividends are declared or paid,
or payable in shares of Common Stock with respect to Junior Stock other than
Common Stock, together with cash in lieu of fractional shares), nor shall this
corporation make any distribution on any Junior Stock, nor shall any Junior
Stock be purchased, redeemed or otherwise acquired by this corporation or any of
its subsidiaries of which it owns not less than a majority of the outstanding
voting power, nor shall any monies be paid or made available for a sinking fund
for the purchase or redemption of any Junior Stock, unless all dividends to
which the holders of Series B-2 Preferred Stock shall have been entitled for all
previous Series B-2 Dividend Periods shall have been paid or declared and a sum
of money sufficient for the payment thereof has been set apart.
(d) In the event that full dividends are not paid or made
available to the holders of all outstanding shares of Series B-2 Preferred Stock
and of any Parity Stock and funds available for payment of dividends shall be
insufficient to permit payment in full to holders of all such stock of the full
preferential amounts to which they are then entitled, then the entire amount
available for payment of dividends shall be distributed ratably among all such
holders of Series B-2 Preferred Stock and of any Parity Stock in proportion to
the full amount to which they would otherwise be respectively entitled.
(e) Notwithstanding anything contained herein to the
contrary, no dividends on shares of Series B-2 Preferred Stock shall be declared
by the Board of Directors of this corporation or paid or set apart for payment
by this corporation at such time as the terms and provisions of any agreement of
this corporation, including any agreement relating to its indebtedness,
prohibits such declaration, payment or setting apart for payment or provides
that such declaration, payment or setting apart for payment would constitute a
breach thereof or a default thereunder, or if such declaration or payment shall
be restricted or prohibited by law.
4.6.3 DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or other winding up of the affairs of this corporation,
subject to the prior preferences and other rights of any Senior Stock as to
liquidation preferences, but before any payment or distribution shall be made to
the holders of Junior Stock, the holders of Series B-2 Preferred Stock shall be
entitled to be paid out of the assets of this corporation in cash or property at
its fair market value as determined by the Board of Directors of this
corporation the Series B-2 Liquidation Preference per share plus an amount equal
to all dividends accrued and unpaid thereon to the date of such liquidation or
dissolution or such other winding up. Except as provided in this paragraph,
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holders of Series B-2 Preferred Stock shall not be entitled to any distribution
in the event of liquidation, dissolution or winding up of the affairs of this
corporation.
(b) If, upon any such liquidation, dissolution or other
winding up of the affairs of this corporation the assets of this corporation
shall be insufficient to permit the payment in full of the Series B-2
Liquidation Preference per share plus an amount equal to all dividends accrued
and unpaid on the Series B-2 Preferred Stock and the full liquidating payments
on all Parity Stock, then the assets of this corporation remaining after the
distributions to holders of any Senior Stock of the full amounts to which they
may be entitled shall be ratably distributed among the holders of Series B-2
Preferred Stock and of any Parity Stock in proportion to the full amounts to
which they would otherwise be respectively entitled if all amounts thereon were
paid in full. Neither the consolidation or merger of this corporation into or
with another corporation or corporations, nor the sale, lease, transfer or
conveyance of all or substantially all of the assets of this corporation to
another corporation or any other entity shall be deemed a liquidation,
dissolution or winding up of the affairs of this corporation within the meaning
of this Section 4.6.3.
4.6.4 CONVERSION RIGHTS.
(a) Each share of Series B-2 Preferred Stock (i) may be
converted into Common Stock at any time before the close of business on the
Series B-2 Redemption Date (unless this corporation shall default in payment of
the Series B-2 Redemption Price) at the option of the holder thereof and (ii) if
not previously converted or redeemed in accordance with the terms hereof, shall
be automatically converted into Common Stock upon consummation of a Qualifying
IPO (i.e., upon the closing of the offering comprising the Qualifying IPO),
effective immediately prior to the consummation of such Qualifying IPO. For the
purposes of conversion, each share of Series B-2 Preferred Stock shall be deemed
to have a value equal to the sum of (i) the Series B-2 Liquidation Preference
and (ii) all accrued and unpaid dividends on such share of Series B-2 Preferred
Stock (such sum being referred to as the "Series B-2 Per Share Value"), and the
number of shares of Common Stock issuable upon conversion of one share of Series
B-2 Preferred Stock (which number may be a fraction of one share) shall equal
(x) the Series B-2 Per Share Value, divided by (y) the Series B-2 Conversion
Price in effect on the Series B-2 Conversion Date (rounded to the nearest
share). Immediately following such conversion, the rights of the holders of
converted Series B-2 Preferred Stock shall cease and the persons entitled to
receive the Common Stock upon the conversion of Series B-2 Preferred Stock shall
be treated for all purposes as having become the owners of such Common Stock.
(b) To convert Series B-2 Preferred Stock, a holder must
(i) surrender the certificate or certificates evidencing the shares of Series
B-2 Preferred Stock to be converted, duly endorsed in a form satisfactory to
this corporation, at the office of this corporation or transfer agent for the
Series B-2 Preferred Stock, (ii) notify this corporation at such office that he
elects to convert Series B-2 Preferred Stock, and the number of shares he wishes
to convert, (iii) state in writing the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued, and (iv)
pay any transfer or similar tax if required. In the event that a holder fails to
notify this corporation of the number of shares of Series B-2 Preferred Stock
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which he wishes to convert, he shall be deemed to have elected to convert all
shares represented by the certificate or certificates surrendered for
conversion. The date on which the holder satisfies all those requirements is the
"Series B-2 Conversion Date." As soon as practical, this corporation shall
deliver a certificate for the number of full shares of Common Stock issuable
upon the conversion and a new certificate representing the unconverted portion,
if any, of the shares of Series B-2 Preferred Stock represented by the
certificate or certificates surrendered for conversion. The person in whose name
the Common Stock certificate is registered shall be treated as the stockholder
of record on and after the Series B-2 Conversion Date. If a holder of Series B-2
Preferred Stock converts more than one share at a time, the number of full
shares of Common Stock issuable upon conversion shall be based on the total
value of all shares of Series B-2 Preferred Stock converted. If the last day on
which Series B-2 Preferred Stock may be converted is not a Business Day, the
shares of Series B-2 Preferred Stock may be surrendered for conversion on the
next succeeding Business Day.
(c) If a holder converts shares of Series B-2 Preferred
Stock, this corporation shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of shares of Common Stock upon the conversion.
However, the holder shall pay any such tax which is due because the shares are
issued in a name other than the holder's name.
(d) This corporation has reserved and shall continue to
reserve out of its authorized but unissued Common Stock or its Common Stock held
in treasury enough shares of Common Stock to permit the conversion of the Series
B-2 Preferred Stock in full. All shares of Common Stock which may be issued upon
conversion of Series B-2 Preferred Stock shall be fully paid and nonassessable.
This corporation will comply in all material respects with all securities laws
regulating the offer and delivery of shares of Common Stock upon conversion of
Series B-2 Preferred Stock.
(e) If this corporation:
(i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines its outstanding shares of Common
Stock into a smaller number of shares; or
(iv) issued by reclassification of its Common Stock
any shares of its capital stock;
then the Series B-2 Conversion Price in effect immediately prior to such action
shall be adjusted so that the holder of Series B-2 Preferred Stock thereafter
converted may receive the number of shares of capital stock of this corporation
which he would have owned immediately following such action if he had converted
Series B-2 Preferred Stock immediately prior to such action. The adjustment
shall become effective immediately after the record date in the case of dividend
or
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distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If, after an adjustment referred to
in clauses (i) through (iv) above, a holder of Series B-2 Preferred Stock upon
conversion of it may receive shares of two or more classes of capital stock of
this corporation, this corporation shall determine the allocation of the
adjusted Series B-2 Conversion Price between the classes of capital stock. After
such allocation, the Series B-2 Conversion Price of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this subparagraph (e).
(f) No adjustment in the Series B-2 Conversion Price need
be made unless the adjustment would require an increase or decrease of at least
1% in the Series B-2 Conversion Price. Any adjustments that are not made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 4.6.4 shall be made to the nearest cent or to
the nearest share, as the case may be.
(g) Whenever the Series B-2 Conversion Price is adjusted,
this corporation shall promptly mail to holders of Series B-2 Preferred Stock,
first class, postage prepaid, a notice of the adjustment. This corporation shall
file with the transfer agent, if any, for Series B-2 Preferred Stock a
certificate from this corporation's independent public accountants briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is correct.
(h) This corporation from time to time may reduce the
Series B-2 Conversion Price by any amount for any period of time if the period
is at least twenty (20) Business Days and if the reduction is irrevocable during
the period, but in no event may the Series B-2 Conversion Price be less than the
par value of a share of Common Stock. In the event this corporation shall reduce
the Series B-2 Conversion Price of any Parity Stock, then this corporation shall
reduce the Series B-2 Conversion Price by the same proportionate amount and for
the same period of time as for the conversion price of such Parity Stock,
provided that, in no event shall the Series B-2 Conversion Price be less than
the par value of a share of Common Stock. Whenever the Series B-2 Conversion
Price is reduced, this corporation shall mail to holders of Series B-2 Preferred
Stock a notice of the reduction. This corporation shall mail, first class,
postage prepaid, the notice at least 15 days before the date the reduced
conversion price takes effect. The notice shall state the reduced conversion
price and the period it will be in effect.
(i) If this corporation is party to a merger which
reclassifies or changes its Common Stock, upon consummation of such transaction
Series B-2 Preferred Stock shall automatically become convertible into the kind
and amount of securities, cash or other assets which the holder of Series B-2
Preferred Stock would have owned immediately after the consolidation, merger,
transfer or lease if such holder had converted Series B-2 Preferred Stock
immediately before the effective date of the transaction, appropriate adjustment
(as determined by the Board of Directors of this corporation) shall be made in
the application of the provisions herein, set forth with respect to the rights
and interests thereafter of the holders of Series B-2 Preferred Stock, to the
end that the provisions set forth herein (including provisions with respect
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to changes in, and other adjustment of the Series B-2 Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other securities or property thereafter deliverable upon the
conversion of Series B-2 Preferred Stock. If this Section 4.6.4(i) applies,
Section 4.6.4(e) does not apply.
(j) In any case in which this Section 4.6.4 shall require
that an adjustment as a result of any event become effective from and after a
record date, this corporation may elect to defer until after the occurrence of
such event the issuance to the holder of any shares of Series B-2 Preferred
Stock converted after such record date and before the occurrence of such event
of the additional shares of Common Stock issuable upon such conversion over and
above the shares issuable on the basis of the Series B-2 Conversion Price in
effect immediately prior to adjustment.
(k) All shares of Series B-2 Preferred Stock converted
pursuant to this Section 4.6.4 shall be retired and shall be restored to the
status of authorized and unissued shares of preferred stock, without designation
as to Series B-2 Preferred Stock and may thereafter be reissued as shares of any
series of preferred stock other than Series B-2 Preferred Stock.
4.6.5 REDEMPTION BY THE CORPORATION.
(a) This corporation shall redeem on the fifth anniversary
of the Series B-2 Initial Issue Date (the "Series B-2 Redemption Date") at the
Series B-2 Redemption Price all of the then issued and outstanding shares of
Series B-2 Preferred Stock. If the Series B-2 Redemption Date is on or after a
dividend record date and on or before the related Series B-2 Dividend Payment
Date, the dividend payable shall be paid to the holder in whose name the Series
B-2 Preferred Stock is registered at the close of business on such record date.
(b) No Series B-2 Preferred Stock may be redeemed except
with funds legally available for the payment of the Series B-2 Redemption Price.
(c) In case that, on the Series B-2 Redemption Date, this
corporation does not have sufficient funds available to redeem all of the then
issued and outstanding shares of Series B-2 Preferred Stock and, accordingly,
less than all shares of Series B-2 Preferred Stock at the time outstanding, the
shares to be redeemed shall be selected pro rata or by lot as determined by this
corporation in its sole discretion. Any shares not so redeemed shall remain
outstanding.
(d) Notwithstanding the foregoing provisions of this
Section 4.6.5, unless the full cumulative dividends on all outstanding shares of
Series B-2 Preferred Stock shall have been paid or contemporaneously are
declared and paid for all past dividend periods, none of the shares of Series
B-2 Preferred Stock shall be redeemed unless all outstanding shares of Series
B-2 Preferred Stock are simultaneously redeemed.
(e) All shares of Series B-2 Preferred Stock redeemed
pursuant to this Section 4.6.5 shall be retired and shall be restored to the
status of authorized and unissued shares of preferred stock, without designation
as to Series B-2 and may thereafter be reissued as shares of any series of
preferred stock other than shares of Series B-2 Preferred Stock.
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4.6.6 VOTING RIGHTS.
(a) General. Each holder of outstanding shares of Series
B-2 Preferred Stock shall be entitled to the number of votes equal to the number
of whole shares of Common Stock into which the shares of Series B-2 Preferred
Stock held by such holder are convertible (as adjusted from time to time),
multiplied by the number of votes per share which the holders of shares of
Common Stock then have with respect to such matter, at each meeting of
stockholders of this corporation (and written actions of stockholders in lieu of
meetings) with respect to any and all matters presented to the stockholders of
this corporation for their action or consideration. Except as provided by law or
as otherwise set forth herein, holders of Series B-2 Preferred Stock shall vote
together with the holders of Common Stock (and any other class or series of
stock entitled to vote together as one class with the Common Stock) as a single
class.
(b) During such time as any shares of Series B-2 Preferred
Stock are outstanding, this corporation will not, without the vote of the
holders of a majority of the Series B-2 Preferred Stock voting separately as a
class: (i) file or cause to be filed with the Secretary of State of the State of
Delaware a certificate of dissolution with respect to this corporation as
provided for in Section 275 and Section 103 of the DGCL; (ii) amend, alter or
repeal any of the provisions of the Certificate of Incorporation so as to affect
adversely the powers, preferences or rights of the holders of the Series B-2
Preferred Stock then outstanding or reduce the minimum time for any required
notice to which the holders of the Series B-2 Preferred Stock then outstanding
may be entitled (an amendment of the Certificate of Incorporation to authorize
or create, or to increase the authorized amount of any common stock or any other
series of preferred stock being deemed not to affect adversely the powers,
preferences, or rights of the holders of the Series B-2 Preferred Stock); or
(iii) merge or consolidate with or into any other corporation, unless each
holder of Series B-2 Preferred Stock immediately preceding such merger or
consolidation shall receive or continue to hold in the resulting corporation the
same number of shares, with substantially the same rights and preferences,
including, without limitation, as set forth in Section 4.6.4(i) hereof, as
correspond to the shares of Series B-2 Preferred Stock so held.
4.6.7 EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the shares of Series
B-2 Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Certificate of Incorporation. The shares of Series B-2
Preferred Stock shall have no preemptive or subscription rights.
ARTICLE 5 BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws for this corporation, subject to the power of the stockholders to
amend or repeal such Bylaws. The stockholders shall also have the power to
adopt, amend or repeal the Bylaws for this corporation.
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ARTICLE 6 ELECTION OF DIRECTORS
Written ballots are not required in the election of Directors.
ARTICLE 7 CUMULATIVE VOTING
The right to cumulate votes in the election of Directors shall not exist
with respect to shares of stock of this corporation.
ARTICLE 8 AMENDMENTS TO CERTIFICATE OF INCORPORATION
This corporation reserves the right to amend or repeal any of the
provisions contained in this Certificate of Incorporation in any manner now or
hereafter permitted by law, and the rights of the stockholders of this
corporation are granted subject to this reservation.
ARTICLE 9 LIMITATION OF DIRECTOR LIABILITY
To the full extent that the DGCL, as it exists on the date hereof or may
hereafter be amended, permits the limitation or elimination of the liability of
Directors, a director of this corporation shall not be liable to this
corporation or it stockholders for monetary damages for breach of fiduciary duty
as a Director. Any amendment to or repeal of this Article 9 shall not adversely
affect any right or protection of a Director of this corporation for or with
respect to any acts or omissions of such Director occurring prior to such
amendment or repeal.
ARTICLE 10 ACTION BY STOCKHOLDERS WITHOUT A MEETING
Any action which could be taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if a written consent setting forth the action taken is signed by a
majority of the stockholders entitled to vote with respect to the subject matter
thereof.
IN WITNESS WHEREOF, Intracel Corporation has caused this certificate to
be signed by its Chief Executive Officer on this 2nd day of January,
1998.
INTRACEL CORPORATION
By: /s/ SIMON R. MCKENZIE
--------------------------------
Simon R. McKenzie
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EXHIBIT 2.03(c)
AMENDED AND RESTATED
BY-LAWS
OF
PERIMMUNE HOLDINGS, INC
<PAGE> 123
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Article I. OFFICES.......................................................................... 1
Section 1. Registered Office............................................................... 1
Section 2. Other Offices................................................................... 1
Article II. MEETINGS OF STOCKHOLDERS........................................................ 1
Section 1. Place of Meetings............................................................... 1
Section 2. Annual Meeting of Stockholders.................................................. 1
Section 3. Quorum; Adjourned Meetings and Notice Thereof................................... 1
Section 4. Voting.......................................................................... 2
Section 5. Proxies......................................................................... 2
Section 6. Special Meetings................................................................ 3
Section 7. Notice of Stockholder's Meetings................................................ 3
Section 8. Maintenance and Inspection of Stockholder List.................................. 3
Section 9. Stockholder Action by Written Consent Without a Meeting......................... 4
Article III. DIRECTORS...................................................................... 4
Section 1. The Number of Directors......................................................... 4
Section 2. Vacancies....................................................................... 5
Section 3. Powers.......................................................................... 5
Section 4. Place of Directors' Meetings.................................................... 5
Section 5. Regular Meetings................................................................ 5
Section 6. Special Meetings................................................................ 6
Section 7. Quorum.......................................................................... 6
Section 8. Action Without Meeting.......................................................... 6
Section 9. Telephonic Meetings............................................................. 6
Section 10. Committees of Directors......................................................... 7
Section 11. Minutes of Committee Meetings................................................... 7
Section 12. Compensation of Directors....................................................... 8
Section 13. Indemnification................................................................. 8
Article IV. OFFICERS........................................................................ 8
Section 1. Officers........................................................................ 8
Section 2. Election of Officers............................................................ 9
Section 3. Subordinate Officers............................................................ 9
Section 4. Compensation of Officers........................................................ 9
Section 5. Term of Office; Removal and Vacancies........................................... 9
Section 6. Chairman of the Board........................................................... 9
Section 7. Vice Chairman of the Board...................................................... 10
Section 8. President....................................................................... 10
Section 9. Vice Presidents................................................................. 10
Section 10. Secretary....................................................................... 11
Section 11. Assistant Secretary............................................................. 11
Section 12. Treasurer....................................................................... 12
Section 13. Assistant Treasurer............................................................. 12
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Article V. CERTIFICATES OF STOCK............................................................ 12
Section 1. Certificates.................................................................... 12
Section 2. Signatures on Certificates...................................................... 13
Section 3. Statement of Stock Rights, Preferences, Privileges.............................. 13
Section 4. Lost Certificates............................................................... 13
Section 5. Corporate Seal.................................................................. 14
Section 6. Fixing Record Date.............................................................. 14
Section 7. Registered Stockholder.......................................................... 15
Article VI. GENERAL PROVISIONS.............................................................. 15
Section 1. Dividends....................................................................... 15
Section 2. Payment of Dividends' Directors' Duties......................................... 15
Section 3. Checks.......................................................................... 15
Section 4. Fiscal Year..................................................................... 15
Section 5. Corporate Seal.................................................................. 16
Section 6. Manner of Giving Notice......................................................... 16
Section 7. Waiver of Notice................................................................ 16
Section 8. Annual Statement................................................................ 16
Article VII. AMENDMENTS..................................................................... 16
Section 1. Amendment by Directors or Stockholder........................................... 16
</TABLE>
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Article I.
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
Article II.
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders shall be held at any place within or
outside the State of Delaware designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the Corporation.
Section 2. The annual meeting of stockholders shall be held each year on
a date and a time designated by the Board of Directors. At each annual meeting
directors shall be elected and any other proper business may be transacted.
Section 3. A majority of the stock issued and outstanding and entitled
to vote at any meeting of stockholders, the holders of which are present in
person or represented by proxy, shall constitute a quorum for the transaction of
business except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person
<PAGE> 126
or by proxy may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
Section 5. At each meeting of the stockholders, each stockholder having
the right to vote may vote in person or may authorize another person or persons
to act for him by proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than three years prior to said meeting,
unless said instrument provides for a longer period. AH proxies must be filed
with the Secretary of the Corporation at the beginning of each meeting in order
to be counted in any vote at the meeting. Each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the books
of the Corporation on the record date set by the Board of Directors as provided
in Article V, Section 6 hereof. All elections shall be had and all questions
decided by a plurality vote.
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Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or the Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation, issued and outstanding,
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. Whenever stockholders are required or permitted to take any
action at a meeting, a written notice of the meeting shall be given which notice
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. The
written notice of any meeting shag be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation.
Section 8. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list
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shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 9. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Article III.
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall be six (6), but the number of directors may be increased or
decreased (provided such decrease does not shorten the term of any incumbent
director), from time to time by resolution adopted by the majority of the whole
Board of Directors, but shall, in no event, exceed nine (9) directors. The
directors need not be stockholders. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until his successor is elected and
qualified; provided, however, that unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, either with or without cause, from' the Board of
Directors at any meeting of stockholders by a majority of the stock represented
and entitled to vote thereat.
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Section 2. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner replaced by a
vote of the shareholders. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The property and business of the Corporation shall be managed
by or under the direction of its Board of Directors. In addition to the powers
and authorities by these By-Laws expressly conferred upon them, the Board may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
Section 4. The directors may hold their meetings and have one or more
offices, and keep the books of the Corporation outside of the State of Delaware.
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.
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Section 6. Special meetings of the Board of Directors may be -called by
the President on forty-eight hours' notice to each director, either personally
or by mall or by telegram; special meetings shall be called by the President or
the Secretary in like manner and on like notice on the written request of two
directors.
Section 7. At all meetings of the Board of Directors a majority of the
authorized number of directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the vote of a majority of the
directors present at any meeting at which there is a quorum, shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute, by the Certificate of Incorporation or by these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum. At any
meeting, a director shall have the right to be accompanied by counsel provided
that such counsel shall agree to any confidentiality restrictions reasonably
imposed by the Corporation.
Section 8. Unless otherwise restricted by the Certificate of
Incorporation or these, By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of
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conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committee, each such
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws of the Corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
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Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 13. The Corporation shall indemnity every person who is or was a
party or is or was threatened to be made a party to any action, suit, or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director or officer of the Corporation or, while
a director or officer or employee of the Corporation, is or was serving at the
request of the Corporation as a director, officer, employee, agent or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including counsel fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, to the' frill extent permitted
by applicable law.
Article IV.
OFFICERS
Section 1. The officers of this corporation shall be chosen by the Board
of Directors and shall include a President and a Secretary. The Corporation may
also have, at the discretion of the Board of Directors, such other officers as
are desired, including a Chairman of the Board, a Vice Chairman of the Board,
one or more Vice Presidents, a Treasurer, one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as may be appointed in
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accordance with the provisions of Section 3 hereof. In the event there are two
or more Vice Presidents, then one or more may be designated as Executive Vice
President, Senior Vice President, or other similar or dissimilar title. At the
time of the election of officers, the directors may by resolution determine the
order of their rank. Any number of offices may be held by the same person unless
the Certificate of Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors, at its first meeting after each
annual meeting of stockholders, shall choose the officers of the Corporation.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by these
By-Laws. If there is no President, the Chairman of the Board shall
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in addition be the Chief Executive Officer of the Corporation and shall have the
powers and duties prescribed in Section 7 of this Article IV.
Section 7. Vice Chairman of the Board. In the absence or disability of
the Chairman, the vice Chairman shall perform all the duties of the Chairman,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the Chairman. The Vice Chairman shall have such other duties
as from time to time may be prescribed for him by the Board of Directors.
Section 8. President. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the Chief Executive Officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
Corporation. He shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be an ex-officio member of all committees and
shall have the general powers and duties of management usually vested in the
office of President and Chief Executive Officer of corporations, and shall have
such other powers and duties as may be prescribed by the Board of Directors or
these By-Laws.
Section 9. Vice Presidents. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President.
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The Vice Presidents shall have such other duties as from time to time may be
prescribed for them, respectively, by the Board of Directors.
Section 10. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. In the absence
or disability of the President and the Vice Presidents, the Secretary shall
perform all the duties of the President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the President.
He shall keep in safe custody the seal of the Corporation, and when
authorized by the Board, affix the same to any instrument requiring it, and when
so affixed it shall be attested by his signature or by the signature of an
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seat of the Corporation and to attest the affixing by
his signature.
Section 11. Assistant Secretary. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
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Section 12. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the Corporation. If required by the Board of
Directors, he shall give the Corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 13. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Article V.
CERTIFICATES OF STOCK
Section 1. Every holder of stock of the Corporation shall be entitled to
have a certificate signed by, or in the name of the Corporation by, the Chairman
or Vice Chairman of the
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Board of Directors, or the President or a Vice President, and by the Secretary
or an Assistant Secretary, or the Treasurer or an Assistant Treasurer of the
Corporation, certifying the number of shares represented by the certificate
owned by such stockholder in the Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
Section 3. If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class,, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such' class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to
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<PAGE> 138
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost,
Section 5. Upon surrender to the Corporation, or the transfer agent of
the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its book.
Section 6. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of the stockholders, or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
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Section 7. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
Article VI.
GENERAL PROVISIONS
Section 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interests of the
Corporation, and the directors may abolish any such reserve.
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers as the Board of Directors may from
time to time designate.
Section 4. The fiscal year of the Corporation shall be the calendar
year.
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Section 5. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 7. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Section 8. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
Article VII.
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors at any
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the
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Board of Directors if notice of such alteration, amendment, repeat or adoption
of new By-Laws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by
the Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
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<PAGE> 142
SECRETARY'S CERTIFICATION
I hereby certify that the foregoing By-laws were adopted by the Board of
Directors of the Corporation on _________, 1997.
------------------------------------
Name:
Title: Secretary
<PAGE> 143
EXHIBIT 2.03(d)
AMENDED AND RESTATED
BYLAWS
OF
INTRACEL CORPORATION
(A Delaware corporation)
Originally adopted on April 30, 1997
Amendments are listed on page i
<PAGE> 144
INTRACEL CORPORATION
AMENDMENTS
<TABLE>
<CAPTION>
Date of
Section Effect of Amendment Amendment
------- ------------------- ---------
<S> <C> <C>
3.2 Increase maximum number of January 2, 1998
Directors to nine.
</TABLE>
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<PAGE> 145
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 OFFICES.............................................................. 1
SECTION 2 STOCKHOLDERS......................................................... 1
2.1 Annual Meeting......................................................... 1
2.2 Special Meetings....................................................... 1
2.3 Place of Meeting....................................................... 1
2.4 Notice of Meeting...................................................... 1
2.5 Waiver of Notice....................................................... 2
2.5.1 Waiver in Writing............................................. 2
2.5.2 Waiver by Attendance.......................................... 2
2.6 Fixing of Record Date for Determining Stockholders..................... 2
2.6.1 Meetings...................................................... 2
2.6.2 Consent to Corporate Action Without a Meeting................. 3
2.6.3 Dividends, Distributions and Other Rights..................... 3
2.7 Voting List............................................................ 3
2.8 Quorum................................................................. 4
2.9 Manner of Acting....................................................... 4
2.10 Proxies................................................................ 4
2.10.1 Appointment................................................... 4
2.10.2 Delivery to Corporation; Duration............................. 5
2.11 Voting of Shares....................................................... 5
2.12 Voting for Directors................................................... 5
2.13 Action by Stockholders Without a Meeting............................... 5
SECTION 3 BOARD OF DIRECTORS................................................... 6
3.1 General Powers......................................................... 6
3.2 Number and Tenure...................................................... 6
3.3 Annual and Regular Meetings............................................ 6
3.4 Special Meetings....................................................... 6
3.5 Meetings by Telephone.................................................. 7
3.6 Notice of Special Meetings............................................. 7
3.6.1 Personal Delivery............................................. 7
3.6.2 Delivery by Mail.............................................. 7
3.6.3 Delivery by Private Carrier................................... 7
3.6.4 Facsimile Notice.............................................. 7
3.6.5 Delivery by Telegraph......................................... 7
3.6.6 Oral Notice................................................... 8
3.7 Waiver of Notice....................................................... 8
3.7.1 In Writing.................................................... 8
3.7.2 By Attendance................................................. 8
</TABLE>
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<PAGE> 146
<TABLE>
<S> <C>
3.8 Quorum................................................................ 8
3.9 Manner of Acting...................................................... 8
3.10 Presumption of Assent................................................. 8
3.11 Action by Board or Committees Without a Meeting....................... 9
3.12 Resignation........................................................... 9
3.13 Removal............................................................... 9
3.14 Vacancies............................................................. 9
3.15 Committees............................................................ 9
3.15.1 Creation and Authority of Committees......................... 9
3.15.2 Minutes of Meetings.......................................... 10
3.15.3 Quorum and Manner of Acting.................................. 10
3.15.4 Resignation.................................................. 10
3.15.5 Removal...................................................... 10
3.16 Compensation.......................................................... 11
SECTION 4 OFFICERS............................................................ 11
4.1 Number................................................................ 11
4.2 Election and Term of Office........................................... 11
4.3 Resignation........................................................... 11
4.4 Removal............................................................... 11
4.5 Vacancies............................................................. 12
4.6 Chairman of the Board................................................. 12
4.7 President............................................................. 12
4.8 Vice President........................................................ 12
4.9 Secretary............................................................. 12
4.10 Treasurer............................................................. 13
4.11 Salaries.............................................................. 13
SECTION 5 CONTRACTS, LOANS, CHECKS AND DEPOSITS............................... 13
5.1 Contracts............................................................. 13
5.2 Loans to the Corporation.............................................. 13
5.3 Checks, Drafts, Etc................................................... 13
5.4 Deposits.............................................................. 14
SECTION 6 CERTIFICATES FOR SHARES AND THEIR TRANSFER.......................... 14
6.1 Issuance of Shares.................................................... 14
6.2 Certificates for Shares............................................... 14
6.3 Stock Records......................................................... 14
6.4 Restriction on Transfer............................................... 14
6.5 Transfer of Shares.................................................... 15
6.6 Lost or Destroyed Certificates........................................ 15
6.7 Shares of Another Corporation......................................... 15
SECTION 7 BOOKS AND RECORDS................................................... 16
</TABLE>
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<PAGE> 147
<TABLE>
<S> <C>
SECTION 8 ACCOUNTING YEAR..................................................... 16
SECTION 9 SEAL................................................................ 16
SECTION 10 INDEMNIFICATION..................................................... 16
10.1 Right to Indemnification.............................................. 16
10.2 Right of Indemnitee to Bring Suit..................................... 17
10.3 Nonexclusivity of Rights.............................................. 17
10.4 Insurance, Contracts and Funding...................................... 17
10.5 Indemnification of Employees and Agents of the Corporation............ 18
10.6 Persons Serving Other Entities........................................ 18
SECTION 11 AMENDMENTS OR REPEAL................................................ 18
</TABLE>
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AMENDED AND RESTATED
BYLAWS
OF
INTRACEL CORPORATION
SECTION 1 OFFICES
The principal office of the corporation shall be located at its
principal place of business or such other place as the Board of Directors (the
"Board") may designate. The corporation may have such other offices, either
within or without the State of Delaware, as the Board may designate or as the
business of the corporation may require from time to time.
SECTION 2 STOCKHOLDERS
2.1 ANNUAL MEETING
The annual meeting of the stockholders shall be held each year within 90
to 180 days after the fiscal year end of the corporation at a date, time and
location determined by resolution of the Board for the purpose of electing
Directors and transacting such other business as may properly come before the
meeting. If the day fixed for the annual meeting is a legal holiday at the place
of the meeting, the meeting shall be held on the next succeeding business day.
If the annual meeting is not held on the date designated therefor, the Board
shall cause the meeting to be held on such other date as may be convenient.
2.2 SPECIAL MEETINGS
The Chairman of the Board, the President or the Board may call special
meetings of the stockholders for any purpose. Holders of not less than 30% of
all the outstanding shares of the corporation entitled to vote at the meeting
may call special meetings of the stockholders for any purpose by giving notice
to the corporation as specified in subsection 2.4 hereof.
2.3 PLACE OF MEETING
All meetings shall be held at the principal office of the corporation or
at such other place as designated by the Board, by any person entitled to call a
meeting hereunder.
2.4 NOTICE OF MEETING
The Chairman of the Board, the President, the Secretary, the Board, or
stockholders calling an annual or special meeting of stockholders as provided
for herein, shall cause to be delivered to each stockholder entitled to notice
of or to vote at the
<PAGE> 149
meeting either personally or by mail, not less than 10 nor more than 60 days
before the meeting, written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called. Upon written request delivered to the corporation in
accordance with subsection 2.5 hereof by the holders of not less than 40% of the
outstanding shares of the corporation, the stockholders may request that the
corporation call a special meeting of stockholders. Within 60 days of such a
request, it shall be the duty of the Secretary to give notice of a special
meeting of stockholders to be held on such date and at such place and hour as
the Secretary may fix, and if the Secretary shall neglect or refuse to issue
such notice, the person making the request may do so and may fix the date for
such meeting. If such notice is mailed, it shall be deemed delivered when
deposited in the official government mail properly addressed to the stockholder
at such stockholder's address as it appears on the stock transfer books of the
corporation with postage prepaid. If the notice is telegraphed, it shall be
deemed delivered when the content of the telegram is delivered to the telegraph
company. Notice given in any other manner shall be deemed delivered when
dispatched to the stockholder's address, telephone number or other number
appearing on the stock transfer records of the corporation.
2.5 WAIVER OF NOTICE
2.5.1 WAIVER IN WRITING
Whenever any notice is required to be given to any stockholder under the
provisions of these Bylaws, the Certificate of Incorporation or the General
Corporation Law of the State of Delaware, as now or hereafter amended (the
"DGCL"), a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
2.5.2 WAIVER BY ATTENDANCE
The attendance of a stockholder at a meeting shall constitute a waiver
of notice of such meeting, except when a stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
2.6 FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS
2.6.1 MEETINGS
For the purpose of determining stockholders entitled to notice of and to
vote at any meeting of stockholders or any adjournment thereof, the Board may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record date
shall be nor more than 60 (or the maximum number permitted by applicable law) or
less than 10 days before the date of such meeting. If no record date is fixed by
the Board, the record date for determining stockholders entitled to notice of
and to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given or, if notice
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<PAGE> 150
is waived, at the close of business on the day next preceding the day on which
the meeting is held. A determination of stockholders of record entitled to
notice of and to vote at the meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board may fix a new
record date for the adjourned meeting.
2.6.2 CONSENT TO CORPORATE ACTION WITHOUT A MEETING
For the purpose of determining stockholders entitled to consent to
corporate action in writing without a meeting, the Board may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board, and which date shall not be more than
10 (or the maximum number permitted by applicable law) days after the date upon
which the resolution fixing the record date is adopted by the Board. If no
record date has been fixed by the Board, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board is required by Chapter 1 of the DGCL,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by delivery
to its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board and prior action by the Board is required by Chapter 1 of the DGCL,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on the day
on which the Board adopts the resolution taking such prior action.
2.6.3 DIVIDENDS, DISTRIBUTIONS AND OTHER RIGHTS
For the purpose of determining stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than 60 (or the maximum number permitted by applicable
law) days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto.
2.7 VOTING LIST
At least 10 days before each meeting of stockholders, a complete list of
the stockholders entitled to vote at such meeting, or any adjournment thereof,
shall be made, arranged in alphabetical order, with the address of and number of
shares held by each stockholder. This list shall be open to examination by any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of 10 days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where
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the meeting is to be held. This list shall also be produced and kept at such
meeting for inspection by any stockholder who is present.
2.8 QUORUM
A majority of the outstanding shares of the corporation entitled to
vote, present in person or represented by proxy at the meeting, shall constitute
a quorum at a meeting of the stockholders; provided, that where a separate vote
by a class or classes is required, a majority of the outstanding shares of such
class or classes, present in person or represented by proxy at the meeting,
shall constitute a quorum entitled to take action with respect to that vote on
that matter. If less than a majority of the outstanding shares entitled to vote
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. If a quorum is
present or represented at a reconvened meeting following such an adjournment,
any business may be transacted that might have been transacted at the meeting as
originally called. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
2.9 MANNER OF ACTING
In all matters other than the election of Directors, if a quorum is
present, the affirmative vote of the majority of the outstanding shares present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless the vote of a
greater number is required by these Bylaws, the Certificate of Incorporation or
the DGCL. Where a separate vote by a class or classes is required, if a quorum
of such class or classes is present, the affirmative vote of the majority of
outstanding shares of such class or classes present in person or represented by
proxy at the meeting shall be the act of such class or classes. Directors shall
be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
Directors.
2.10 PROXIES
2.10.1 APPOINTMENT
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy. Such
authorization may be accomplished by the stockholder or such stockholder's
authorized office, director, employee or agent executing a writing or causing
his or her signature to be affixed to such writing by any reasonable means,
including facsimile signature, or (b) transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic transmission
to the intended holder of the proxy or to a proxy solicitation firm, proxy
support service or similar agent duly authorized by the intended proxy holder to
receive such transmission; provided, that any such telegram, cablegram or other
electronic transmission must either set forth or be accompanied by information
from which it can be
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determined that the telegram, cablegram or other electronic transmission was
authorized by the stockholder. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission by which a stockholder has
authorized another person to act as proxy for such stockholder may be
substituted or used in lieu of the original writing or transmission for any and
all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.
2.10.2 DELIVERY TO CORPORATION; DURATION
A proxy shall be filed with the Secretary before or at the time of the
meeting or the delivery to the corporation of the consent to corporate action in
writing. A proxy shall become invalid three years after the date of its
execution unless otherwise provided in the proxy. A proxy with respect to a
specified meeting shall entitle the holder thereof to vote at any reconvened
meeting following adjournment of such meeting but shall not be valid after the
final adjournment thereof.
2.11 VOTING OF SHARES
Each outstanding share entitled to vote with respect to the subject
matter of an issue submitted to a meeting of stockholders shall be entitled to
one vote upon each such issue.
2.12 VOTING FOR DIRECTORS
Each stockholder entitled to vote at an election of Directors may vote,
in person or by proxy, the number of shares owned by such stockholder for as
many persons as there are directors to be elected and for whose election such
stockholder has a right to vote.
2.13 ACTION BY STOCKHOLDERS WITHOUT A MEETING
Any action which could be taken at any annual or special meeting of
stockholders may be taken without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall (a) be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted (as determined
in accordance with subsection 2.6.2 hereto) and (b) be delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the corporation having
custody of the records of proceedings of meetings of stockholders. Delivery made
to the corporation's registered office shall be by hand or by certified mail or
registered mail, return receipt requested. Every written consent shall bear the
date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless written consents signed by the requisite number of stockholders entitled
to vote with respect to the subject matter thereof are delivered to the
corporation, in the manner required by this Section 2, within 60 (or the maximum
number permitted
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by applicable law) days of the earliest dated consent delivered to the
corporation in the manner required by this Section 2. The validity of any
consent executed by a proxy for a stockholder pursuant to a telegram, cablegram
or other means of electronic transmission transmitted to such proxy holder by or
upon the authorization of the stockholder shall be determined by or at the
direction of the Secretary. A written record of the information upon which the
person making such determination relied shall be made and kept in the records of
the proceedings of the stockholders. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing. Any such
consent shall be inserted in the minute book as if it were the minutes of a
meeting of the stockholders.
SECTION 3 BOARD OF DIRECTORS
3.1 GENERAL POWERS
The business and affairs of the corporation shall be managed by the
Board.
3.2 NUMBER AND TENURE
The Board shall be composed of not less than six nor more than nine
Directors, the specific number to be set by resolution of the board or the
stockholders, provided that the Board may consist of fewer than three Directors
until vacancies are filled. The number of Directors may be changed from time to
time by amendment to these Bylaws, but no decrease in the number of Directors
shall have the effect of shortening the term of any incumbent Director. Unless a
Director resigns or is removed, he or she shall hold office until the next
annual meeting of stockholders or until his or her successor is elected,
whichever is later. Directors need not be stockholders of the corporation or
residents of the State of Delaware.
3.3 ANNUAL AND REGULAR MEETINGS
An annual Board meeting shall be held without notice immediately after
and at the same place as the annual meeting of stockholders. By resolution, the
Board or any committee designated by the Board may specify the time and place
either within or without the State of Delaware for holding regular meetings
thereof without other notice than such resolution.
3.4 SPECIAL MEETINGS
Special meetings of the Board or any committee appointed by the Board
may be called by or at the request of the Chairman of the of the Board, the
President, Secretary or, in the case of special Board meetings, any two
Directors and, in the case of any special meeting of any committee appointed by
the Board, by the Chairman thereof. The person or persons authorized to call
special meetings may fix any place either within or without the State of
Delaware as the place for holding any special meeting called by them.
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3.5 MEETINGS BY TELEPHONE
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation by such means
shall constitute presence in person at a meeting.
3.6 NOTICE OF SPECIAL MEETINGS
Notice of a special Board or committee meeting stating the place, day
and hour of the meeting shall be given to a Director in writing or orally by
telephone or in person. Neither the business to be transacted at, nor the
purpose of, any special meeting need be specified in the notice of such meeting.
3.6.1 PERSONAL DELIVERY
If notice is given by personal delivery, the notice shall be effective
if delivered to a Director at least two days before the meeting.
3.6.2 DELIVERY BY MAIL
If notice is delivered by mail, the notice shall be deemed effective if
deposited in the official government mail properly addressed to a Director at
his or her address shown on the records of the corporation with postage prepaid
at least five days before the meeting.
3.6.3 DELIVERY BY PRIVATE CARRIER
If notice is given by private carrier, the notice shall be deemed
effective when dispatched to a Director at his or her address shown on the
records of the corporation at least three days before the meeting.
3.6.4 FACSIMILE NOTICE
If notice is delivered by wire or wireless equipment that transmits a
facsimile of the notice, the notice shall be deemed effective when dispatched at
least two days before the meeting to a Director at his or her telephone number
or other number appearing on the records of the corporation.
3.6.5 DELIVERY BY TELEGRAPH
If notice is delivered by telegraph, the notice shall be deemed
effective if the content thereof is delivered to the telegraph company at least
two days before the meeting for delivery to a Director at his or her address
shown on the records of the corporation.
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3.6.6 ORAL NOTICE
If notice is delivered orally, by telephone or in person, the notice
shall be deemed effective if personally given to the director at least two days
before the meeting.
3.7 WAIVER OF NOTICE
3.7.1 IN WRITING
Whenever any notice is required to be given to any Director under the
provisions of these Bylaws, the Certificate of Incorporation or the DGCL, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the board or any
committee appointed by the Board need to be specified in the waiver of notice of
such meeting.
3.7.2 BY ATTENDANCE
The attendance of a Director at a Board or committee meeting shall
constitute a waiver of notice of such meeting, except when a Director attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
3.8 QUORUM
A majority of the total number of Directors fixed in the manner provided
in these Bylaws or, if vacancies exist on the Board, a majority of the total
number of Directors then serving on the Board, provided, however, that such
number may be not less than one-third of the total number of Directors fixed in
the manner provided in these Bylaws, shall constitute a quorum for the
transaction of business at any Board meeting. If less than a majority are
present at a meeting, a majority of the Directors present may adjourn the
meeting from time to time without further notice.
3.9 MANNER OF ACTING
The act of the majority of the Directors present at a Board or committee
meeting at which there is a quorum shall be the act of the Board or committee,
unless the vote of a greater number is required by these Bylaws, the Certificate
of Incorporation or the DGCL.
3.10 PRESUMPTION OF ASSENT
A Director of the corporation present at a Board or committee meeting at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless his or her dissent is entered in the minutes of the
meeting, or unless such Director files a written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof, or
forwards such dissent by registered mail to
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the Secretary of the corporation immediately after the adjournment of the
meeting. A Director who voted in favor of such action may not dissent.
3.11 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING
Any action that could be taken at a meeting of the Board or of any
committee appointed by the Board may be taken without a meeting if a written
consent setting forth the action so taken is signed by each of the Directors or
by each committee member. Any such written consent shall be inserted in the
minute book as if it were the minutes of a Board or a committee meeting.
3.12 RESIGNATION
Any Director may resign at any time by delivering written notice to the
Chairman of the Board, the President, the Secretary or the Board, or to the
registered office of the corporation. Any such resignation shall take effect at
the time specified therein or, if the time is not specified, upon delivery
thereof and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
3.13 REMOVAL
At a meeting of stockholders called expressly for that purpose, one or
more members of the Board (including the entire Board) may be removed, with or
without cause, by a vote of the holders of a majority of the shares then
entitled to vote on the election of Directors.
3.14 VACANCIES
Any vacancy occurring on the Board may be filled by the affirmative vote
of a majority of the remaining Directors though less than a quorum of the Board.
A Director elected to fill a vacancy shall be elected for the unexpired term of
his or her predecessor in office. Any directorship to be filled by reason of an
increase in the number of Directors may be filled by the Board.
3.15 COMMITTEES
3.15.1 CREATION AND AUTHORITY OF COMMITTEES
The Board may, by resolution passed by a majority of the number of
Directors fixed by or in the manner provided in these Bylaws, appoint standing
or temporary committees, each committee to consist of one or more Directors of
the corporation. The Board may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board establishing
such
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committee or as otherwise provided in these Bylaws, shall have and may exercise
all the powers and authority of the Board in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers that require it; but no such committee shall have the
power or authority in reference to (a) amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
as provided in Section 151(a) of the DGCL, fix the designations, preferences or
rights of such shares to the extent permitted under Section 141 of the DGCL),
(b) adopting an agreement of merger or consolidation under Section 251 or 252 of
the DGCL, (c) recommending to the stockholders the sale, lease or exchange or
other disposition of all or substantially all the property and assets of the
corporation, (d) recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (e) amending these Bylaws; and,
unless expressly provided by resolution of the Board, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock or to adopt a certificate of ownership and merger pursuant to Section 253
of the DGCL.
3.15.2 MINUTES OF MEETINGS
All committees so appointed shall keep regular minutes of their meetings
and shall cause them to be recorded in books kept for that purpose.
3.15.3 QUORUM AND MANNER OF ACTING
A majority of the number of Directors composing any committee of the
Board, as established and fixed by resolution of the Board, shall constitute a
quorum for the transaction of business at any meeting of such committee but, if
less than a majority are present at a meeting, a majority of such Directors
present may adjourn the meeting from time to time without further notice. The
act of a majority of the members of a committee present at a meeting at which a
quorum is present shall be the act of such committee.
3.15.4 RESIGNATION
Any member of any committee may resign at any time by delivering written
notice to the Chairman of the Board, the President, the Secretary, the Board or
the Chairman of such committee. Any such resignation shall take effect at the
time specified therein or, if the time is not specified, upon delivery thereof
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
3.15.5 REMOVAL
The Board may remove from office any member of any committee elected or
appointed by it, but only by the affirmative vote of not less than a majority of
the number of Directors fixed by or in the manner provided in these Bylaws.
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3.16 COMPENSATION
By Board resolution, Directors and committee members may be paid their
expenses, if any, of attendance at each Board or committee meeting, a fixed sum
for attendance at each Board or committee meeting or a stated salary as Director
or a committee member, or a combination of the foregoing. No such payment shall
preclude any Director or committee member from serving the corporation in any
other capacity and receiving compensation therefor.
SECTION 4 OFFICERS
4.1 NUMBER
The officers of the corporation shall be a President, a Secretary and a
Treasurer, each of whom shall be elected by the Board. One or more Vice
Presidents and such other officers and assistant officers, including Chairman of
the Board, may be elected or appointed by the Board, such officers and assistant
officers to hold office for such period, have such authority and perform such
duties as are provided in these Bylaws or as may be provided by resolution of
the Board. Any officer may be assigned by the Board any additional title that
the Board deems appropriate. The Board may delegate to any officer or agent the
power to appoint any such subordinate officers or agents and to prescribe their
respective terms of office, authority and duties. Any two or more offices may be
held by the same person.
4.2 ELECTION AND TERM OF OFFICE
The officers of the corporation shall be elected annually by the Board
at the Board meeting held after the annual meeting of the stockholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as a Board meeting conveniently may be held. Unless an officer
dies, resigns or is removed from office, he or she shall hold office until the
next annual meeting of the Board or until his or her successor is elected.
4.3 RESIGNATION
Any officer may resign at any time by delivering written notice to the
Chairman of the Board, the President, a Vice President, the Secretary or the
Board. Any such resignation shall take effect at the time specified therein or,
if the time is not specified, upon delivery thereof and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
4.4 REMOVAL
Any officer or agent elected or appointed by the Board may be removed by
the Board whenever in its judgment the best interests of the corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
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4.5 VACANCIES
A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office or any other cause may be filled by
the Board for the unexpired portion of the term, or for a new term established
by the Board.
4.6 CHAIRMAN OF THE BOARD
If elected, the Chairman of the Board shall perform such duties as shall
be assigned to him or her by the Board from time to time and shall preside over
meetings of the Board and stockholders unless another officer is appointed or
designated by the Board as Chairman of such meeting.
4.7 PRESIDENT
The President shall be the chief executive officer of the corporation
unless some other officer is so designated by the Board, shall preside over
meetings of the Board and stockholders in the absence of a Chairman of the Board
and, subject to the Board's control, shall supervise and control all the assets,
business and affairs of the corporation. The President may sign certificates for
shares of the corporation, deeds, mortgages, bonds, contracts or other
instruments, except when the signing and execution thereof have been expressly
delegated by the Board or by these Bylaws to some other officer or agent of the
corporation or are required by law to be otherwise signed or executed by some
other officer or in some other manner. In general, the President shall perform
all duties incident to the office of President and such other duties as are
prescribed by the Board from time to time.
4.8 VICE PRESIDENT
In the event of the death of the President or his or her inability to
act, the Vice President (or if there is more than one Vice President, the Vice
President who was designated by the Board as the successor to the President, or
if no Vice President is so designated, the Vice President first elected to such
office) shall perform the duties of the President, except as may be limited by
resolution of the Board, with all the powers of and subject to all the
restrictions upon the President. Any Vice President may sign with the Secretary
or any Assistant Secretary certificates for shares of the corporation. Vice
Presidents shall have, to the extent authorized by the President or the Board,
the same powers as the President to sign deeds, mortgages, bonds, contracts or
other instruments. Vice Presidents shall perform such other duties as from time
to time may be assigned to them by the President or the Board.
4.9 SECRETARY
The Secretary shall be responsible for preparation of minutes of
meetings of the Board and stockholders, maintenance of the corporation's records
and stock registers, and authentication of the corporation's records and shall
in general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to
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him or her by the President or the Board. In the absence of the Secretary, an
Assistant Secretary may perform the duties of the Secretary.
4.10 TREASURER
If required by the Board, the Treasurer shall give a bond for the
faithful discharge of his or her duties in such amount and with such surety or
sureties as the Board shall determine. The Treasurer shall have charge and
custody of and be responsible for all funds and securities of the corporation;
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation in
banks, trust companies or other depositories selected in accordance with the
provisions of these Bylaws; sign certificates for shares of the corporation; and
in general perform all duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him or her by the President or
the Board. In the absence of the Treasurer, an Assistant Treasurer may perform
the duties of the Treasurer.
4.11 SALARIES
The salaries of the officers shall be fixed from time to time by the
Board or by any person or persons to whom the Board has delegated such
authority. No officer shall be prevented from receiving such salary by reason of
the fact that he or she is also a Director of the corporation.
SECTION 5 CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 CONTRACTS
The Board may authorize any officer or officers, or agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation. Such authority may be general or confined to
specific instances.
5.2 LOANS TO THE CORPORATION
No loans shall be contracted on behalf of the corporation and no
evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the Board. Such authority may be general or confined to specific
instances.
5.3 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, or agent or agents, of the corporation and
in such manner as is from time to time determined by resolution of the Board.
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5.4 DEPOSITS
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the Board may select.
SECTION 6 CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 ISSUANCE OF SHARES
No shares of the corporation shall be issued unless authorized by the
Board, which authorization shall include the maximum number of shares to be
issued and the consideration to be received for each share.
6.2 CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be signed by
the Chairman of the Board or a Vice Chairman of the Board, if any, or the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, any of whose signatures may be a
facsimile. The Board may in its discretion appoint responsible banks or trust
companies from time to time to act as transfer agents and registrars of the
stock of the corporation; and, when such appointments shall have been made, no
stock certificate shall be valid until countersigned by one of such transfer
agents and registered by one of such registrars. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if such person was such officer, transfer agent or
registrar at the date of issue. All certificates shall include on their face
written notice of any restrictions that may be imposed on the transferability of
such shares and shall be consecutively numbered or otherwise identified.
6.3 STOCK RECORDS
The stock transfer books shall be kept at the registered office or
principal place of business of the corporation or at the office of the
corporation's transfer agent or registrar. The name and address of each person
to whom certificates for shares are issued, together with the class and number
of shares represented by each such certificate and the date of issue thereof,
shall be entered on the stock transfer books of the corporation. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
6.4 RESTRICTION ON TRANSFER
Except to the extent that the corporation has obtained an opinion of
counsel acceptable to the corporation that transfer restrictions are not
required under applicable securities laws, or has otherwise satisfied itself
that such transfer restrictions are not required, all certificates representing
shares of the corporation shall bear a legend on the
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face of the certificate, or on the reverse of the certificate if a reference to
the legend is contained on the face, that reads substantially as follows:
"The securities evidenced by this certificate have not be
registered under the Securities Act of 1933, as amended, or any
applicable state law, and no interest therein may be sold,
distributed, assigned, offered, pledged or otherwise transferred
unless (a) there is an effective registration statement under
such Act and applicable state securities laws covering any such
transaction involving said securities or (b) this corporation
receives an opinion of legal counsel for the holder of these
securities (concurred in by legal counsel for this corporation)
stating that such transaction is exempt from registration or this
corporation otherwise satisfies itself that such transaction is
exempt from registration. Neither the offering of the securities
nor any offering materials have been reviewed by an administrator
under the Securities Act of 1933, as amended, or any applicable
state law."
6.5 TRANSFER OF SHARES
The transfer of shares of the corporation shall be made only on the
stock transfer books of the corporation pursuant to authorization or document of
transfer made by the holder of record thereof or by his or her legal
representative, who shall furnish proper evidence of authority to transfer, or
by his or her attorney-in-fact authorized by power of attorney duly executed and
filed with the Secretary of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificates for a like number of shares shall have been
surrendered and cancelled.
6.6 LOST OR DESTROYED CERTIFICATES
In the case of a lost, destroyed or mutilated certificate, a new
certificate may be issued therefor upon such terms and indemnity to the
corporation as the Board may prescribe.
6.7 SHARES OF ANOTHER CORPORATION
Shares owned by the corporation in another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the Board may determine
or, in the absence of such determination, by the Chairman of the Board, the Vice
Chairman of the Board, the President or any Vice President of the corporation.
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SECTION 7 BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its stockholders
and Board and such other records as may be necessary or advisable.
SECTION 8 ACCOUNTING YEAR
The accounting year of the corporation shall be the calendar year,
provided that if a different accounting year is at any time selected for
purposes of federal income taxes, the accounting year shall be the year so
selected.
SECTION 9 SEAL
The seal of the corporation, if any, shall consist of the name of the
corporation, the state of its incorporation and the year of its incorporation.
SECTION 10 INDEMNIFICATION
10.1 RIGHT TO INDEMNIFICATION
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved (including, without limitation, as a witness)
in any actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a Director or officer of the corporation or that,
being or having been such a Director or officer or an employee of the
corporation, he or she is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as such a Director,
officer, employee or agent or in any other capacity while serving as such a
Director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the full extent permitted by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than permitted prior thereto), or by other applicable law
as then in effect, against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred or suffered by such indemnitee who
has ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that except as provided in subsection 10.2 hereof with respect to
proceedings seeking to enforce rights to indemnification, the corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized or ratified by the Board. The right to indemnification conferred in
this subsection 10.1 shall be a contract right and shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition (hereinafter an "advancement of expenses');
provided,
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however, that if the DGCL requires, an advancement of expenses incurred by an
indemnitee in his or her capacity as a Director or officer (and not in any other
capacity in which service was or is rendered by such indemnitee, including,
without limitation, service to an employee benefit plan) shall be made only upon
delivery to the corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified
for such expenses under this subsection 10.1 or otherwise.
10.2 RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under subsection 10.1 hereof is not paid in full by the
corporation within 60 days after a written claim has been received by the
corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. The indemnitee shall be presumed
to be entitled to indemnification under this Section 10 upon submission of a
written claim (and, in an action brought to enforce a claim for an advancement
of expenses, where the required undertaking, if any is required, has been
tendered to the corporation), and thereafter the corporation shall have the
burden of proof to overcome the presumption that the indemnitee is not so
entitled. Neither the failure of the corporation (including its Board,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances nor an actual determination by the corporation
(including its Board, independent legal counsel or its stockholders) that the
indemnitee is not entitled to indemnification shall be a defense to the suit or
create a presumption that the indemnitee is not so entitled.
10.3 NONEXCLUSIVITY OF RIGHTS
The rights to indemnification and to the advancement of expenses
conferred in this Section 10 shall not be exclusive of any other right that any
person may have or hereafter acquire under any statute, agreement, vote of
stockholders or disinterested Directors, provisions of the Certificate of
Incorporation or these Bylaws or otherwise. Notwithstanding any amendment to or
repeal of this Section 10, any indemnitee shall be entitled to indemnification
in accordance with the provisions hereof with respect to any acts or omissions
of such indemnitee occurring prior to such amendment or repeal.
10.4 INSURANCE, CONTRACTS AND FUNDING
The corporation may maintain insurance, at its expense, to protect
itself and any Director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against
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any expense, liability or loss, whether or not the corporation would have the
power to indemnify such person against such expense, liability or loss under the
DGCL. The corporation, without further stockholder approval, may enter into
contracts with any Director, officer, employee or agent in furtherance of the
provisions of this Section 10 and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Section 10.
10.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
The corporation may, by action of the Board, grant rights to
indemnification and advancement of expenses to employees or agents or groups of
employees or agents of the corporation with the same scope and effect as the
provisions of this Section 10 with respect to the indemnification and
advancement of expenses of Directors and officers of the corporation; provided,
however, that an undertaking shall be made by an employee or agent only if
required by the Board.
10.6 PERSONS SERVING OTHER ENTITIES
Any person who is or was a Director, officer or employee of the
corporation who is or was serving (a) as a Director or officer of another
corporation of which a majority of the shares entitled to vote in the election
of its Directors is held by the corporation or (b) in an executive or management
capacity in a partnership, joint venture, trust or other enterprise of which the
corporation or a wholly owned subsidiary of the corporation is a general partner
or has a majority ownership shall be deemed to be so serving at the request of
the corporation and entitled to indemnification and advancement of expenses
under subsection 10.1 hereof.
SECTION 11 AMENDMENTS OR REPEAL
These Bylaws may be amended or repealed and new Bylaws may be adopted by
the Board. The stockholders may also amend and repeal these Bylaws or adopt new
Bylaws. All Bylaws made by the Board may be amended or repealed by the
stockholders. Notwithstanding any amendment to Section 10 hereof or repeal of
these Bylaws, or of any amendment or repeal of any of the procedures that may be
established by the Board pursuant to Section 10 hereof, any indemnitee shall be
entitled to indemnification in accordance with the provisions hereof and thereof
with respect to any acts or omissions of such indemnitee occurring prior to such
amendment or repeal.
The foregoing Amended and Restated Bylaws were adopted by the Board of
Directors on November 20, 1997.
------------------------------------
Michael Carrisino
Secretary
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EXHIBIT B
January 2, 1998
Intracel Corporation
1871 NW Gilman Blvd.
Issaquah, Washington
Attn: Simon McKenzie
Re: Agreement to Sell
Gentlemen:
The purpose of this letter is to confirm my agreement with you as follows.
In connection with any Qualified IPO (as such term is defined in that certain
Shareholders Agreement ("Shareholders Agreement") of even date herewith between
Intracel Corporation (the "Company") and certain of its shareholders), I hereby
agree to, upon the (i) request of the Intracel Shareholders (as such term is
defined in the Shareholders Agreement) holding at least a majority of all shares
of Company Common Stock (as such term is defined in the Shareholders Agreement)
held by all Intracel Shareholders (the "Shareholder Request") and (ii) approval
of the managing underwriter for the Qualified IPO, to sell and include in the
Qualified IPO up to a number (which number shall be stated in the Shareholder
Request) of shares of Company Common Stock equal to 20% of the shares of Company
Common Stock which were issued to me in connection with the Merger (as such term
is defined in the Shareholders Agreement) (as such number may be adjusted from
time to time to reflect any splits, recapitalizations or any other transactions
which affect the number of shares of Company Common Stock which are issued and
outstanding).
I also agree that any person to whom I transfer more than 910,832 shares of
Company Common Stock in a single transaction or a series of related transactions
shall take subject to my obligations set forth in this letter.
<PAGE> 167
I agree that each of the Intracel Shareholders is intended to be a
third party beneficiary of my agreement set forth in this letter.
Very truly yours,
/s/ MICHAEL HANNA
------------------------------------
Michael Hanna
Accepted as of the date
first set forth above:
INTRACEL CORPORATION
By:
-------------------------------
<PAGE> 168
I agree that each of the Intracel Shareholders is intended to be a
third party beneficiary of my agreement set forth in this letter.
Very truly yours,
/s/ MICHAEL HANNA
------------------------------------
Michael Hanna
Accepted as of the date
first set forth above:
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
-------------------------------
Simon R. McKenzie
<PAGE> 169
EXHIBIT C
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated as of January 2, 1998, by and among Intracel
Corporation, a Delaware corporation ("Intracel" or the "Company"), Michael G.
Hanna, Jr. ("Hanna"), and the holders of shares ("Shares") of the Company's
common stock, $.0001 par value per share ("Company Common Stock") or the
Company's preferred stock, $.0001 par value per share ("Company Preferred Stock"
and, together with Company Common Stock, "Company Stock")) whose names appear on
Schedule A hereto either in the column entitled "Intracel Shareholder" (meaning
certain holders of shares of Company Stock prior to the Merger (as hereinafter
defined), directly or derivatively) or "PerImmune Shareholder" (meaning certain
previous holders of shares of PerImmune Holdings, Inc. ("PerImmune") common
stock, par value $.01 per share ("PerImmune Common Stock") or PerImmune
preferred stock, par value $.01 per share ("PerImmune Preferred Stock" and,
together with PerImmune Common Stock, "PerImmune Stock"), directly or
derivatively); all such holders are referred to herein as the "Intracel
Shareholders" or the "PerImmune Shareholders," respectively, and collectively,
as the "Shareholders".
PREAMBLE
Intracel is the successor by merger (the "Merger") to 100% of the capital
stock of PerImmune Holdings, Inc., a Delaware corporation ("PerImmune") pursuant
to that certain Agreement and Plan of Reorganization dated November 26, 1997
among the Company, PerImmune and Intracel Acquisition Sub, Inc. (the "Merger
Agreement"; and all defined terms used herein which are not otherwise defined
are used as defined in the Merger Agreement).
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<PAGE> 170
Hanna was, prior to the Merger, the holder of 500 shares of PerImmune Common
Stock and, by virtue of the Merger, a holder of 4,554,160 Shares. Hanna and the
Shareholders wish to regulate the governance of Intracel in an orderly and
equitable manner.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Election of Directors. Immediately after the Effective Time,
each of the undersigned agrees to execute a written consent of shareholders,
pursuant to which the Board of Directors of the Company shall be reconstituted
and composed of the six (6) directors identified in clause (b) below. At each
annual meeting of the stockholders of the Company, or at each special meeting
of the stockholders of the Company involving the election of directors of the
Company, and at any other time at which stockholders of the Company will have
the right to or will vote for or render consents in writing regarding the
election of directors of the Company, then and in each event, the Shareholders
(including Hanna) hereby covenant and agree to vote all Shares presently owned
or hereafter acquired by them (whether owned of record or over which any person
exercises voting control) in favor of the following actions:
(a) to fix and maintain the number of directors at six (6);
and
(b) to cause and maintain the election to the Board of
Directors of the Company of: (i) three (3)
representatives designated by Mr. Simon McKenzie, on
behalf of the Intracel Shareholders (and the Intracel
Shareholders hereby grant Mr. McKenzie the right to so
designate, on
2
<PAGE> 171
their behalf, such representatives pursuant to the terms
of this Agreement), who shall initially be Simon
McKenzie, Raymond Schuyler and Alexander Klibanov
(individually, an "Intracel Director" and, collectively,
the "Intracel Directors"), and (ii) three (3)
representatives designated by Mr. Michael Hanna on
behalf of the PerImmune Shareholders (and the PerImmune
Shareholders hereby grant Mr. Hanna the right to so
designate, on their behalf, such representatives
pursuant to the terms of this Agreement), who shall
initially be Michael G. Hanna, Jr., Joseph Caligiuri and
Steven Gerber (individually a "PerImmune Director" and,
collectively, the "PerImmune Directors").
None of the Intracel Shareholders or PerImmune Shareholders shall vote
to remove either or any director designated by the PerImmune Shareholders or
Intracel Shareholders, respectively, except for bad faith or willful
misconduct. Each of the parties hereto shall vote or cause to be voted all
Shares owned by them or over which they have voting control (i) to remove from
the Board of Directors any director designated by any party pursuant hereto at
the request of such party and (ii) to fill any vacancy in the membership of the
Board of Directors with a designee of the party whose designee's resignation or
removal from the Board caused such vacancy. Each of the holders of the
Company's Series A Preferred Stock and Series B-1 Preferred Stock who are
signatories to this Agreement hereby acknowledge and agree that the foregoing
provisions satisfy the Company's obligations with respect to each of such
holders' rights as holders of such Series A Preferred Stock and Series B-1
Preferred Stock.
3
<PAGE> 172
The Company shall provide to each party entitled to designate directors
hereunder prior written notice of any intended mailing of notice to
stockholders for a meeting at which directors are to be elected, and any party
entitled to designate directors pursuant hereto shall notify the Company in
writing, prior to such mailing of notice to stockholders, of the person(s)
designated by it or them as its or their nominee(s) for election as director(s).
If any party entitled to designate directors hereunder fails to give
notice to the Company as provided above, it shall be deemed that the designees
of such party then serving as director shall be its designees for reelection.
Each party entitled to designate directors hereunder hereby agrees that:
(i) the Company shall not have any executive or similar committee of the Board
of Directors unless the Board of Directors unanimously consents to the
formation of such committee and (ii) upon the mutual agreement of Mr. McKenzie
and Mr. Hanna, the number of members of the Board of Directors may be expanded
up to (but no more than) nine (9), with such additional seats created thereby
to be filled by such vote as Mr. McKenzie and Mr. Hanna may mutually determine.
2. [Intentionally Omitted]
3. Transfer of Stock. Except as otherwise expressly provided by this
Agreement, each Shareholder agrees not to transfer any Shares held by such
Shareholders unless (a) the transferee agrees in writing to be bound by the
terms and conditions of this Agreement and executes a counterpart of this
Agreement and (b) such Shareholder has complied with applicable law in
connection with such transfer.
4
<PAGE> 173
4. Duration of Agreement. The rights and obligations of the Company
and each Shareholder under this Agreement shall terminate on the earliest to
occur of the following: (a) immediately prior to the consummation of the first
underwritten public offering by the Company pursuant to an effective
registration statement under the Securities Act of 1933, as amended, of any of
its equity securities for its own account in which the aggregate gross proceeds
to the Company equal or exceed $10,000,000 (a "Qualified IPO"), (b) immediately
prior to the consummation of the sale of all, or substantially all, of the
Company's assets or Company Common Stock, or a merger, consolidation,
reorganization or other business combination of the Company which results in
the transfer of more than 50% of the voting securities of the Company, or (c)
the tenth anniversary hereof.
5. Legend. Each certificate representing Shares shall bear the
following legend, until such time as the Shares represented thereby are no
longer subject to the provisions hereof:
"The sale, transfer or assignment of the securities represented by this
certificate are subject to the terms and conditions of a certain
Shareholders Agreement dated January 1, 1998, among the Company and
certain holders of its outstanding capital stock. Copies of such
Agreement may be obtained at no cost by written request made by the
holder of record of this certificate to the Secretary of the Company."
6. Severability; Governing Law. If any provisions of this Agreement
shall be determined to be illegal or unenforceable by any court of law, the
remaining provisions shall be severable and enforceable in accordance with
their terms. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware other than such laws as would result in
the application of the law of a state other than the State of Delaware.
5
<PAGE> 174
7. Equitable Relief. It is acknowledged that it will be impossible to
measure the damages that would be suffered by the nonbreaching party if any
party fails to comply with the provisions of this Agreement and that, in the
event of any such failure, the nonbreaching parties will not have an adequate
remedy at law. The non-breaching parties shall, therefore, be entitled to
obtain specific performance of the breaching party's obligations hereunder and
to obtain immediate injunctive relief. The breaching party shall not urge, as a
defense to any proceeding for such specific performance or injunctive relief,
that the nonbreaching parties have an adequate remedy at law.
8. Attorneys' Fees, Etc. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
9. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assignees, legal representatives and heirs. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement. The administrator, executor or legal representative
of any deceased, juvenile or incapacitated Shareholder shall have the right to
execute and deliver all documents and perform all acts necessary to exercise
and perform the rights and obligations of such Shareholder under the terms of
this Agreement.
6
<PAGE> 175
10. Modification or Amendment. Neither this Agreement nor any provisions
hereof can be modified, amended, changed, discharged or terminated except by
an instrument in writing, signed by the Shareholders of at least a majority of
the Intracel Shareholders and a majority of the PerImmune Shareholders then
subject to this Agreement, based upon voting power and calculated on the basis
of all such securities of the Company then held by such Shareholders on an "as
if converted" and "as if exercised" basis.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
12. Notices. All notices to be given or otherwise made to any party to
this Agreement shall be deemed to be sufficient if contained in a written
instrument, delivered by hand in person, or by express overnight courier
service, or by electronic facsimile transmission (with a copy sent by
first-class mail, postage prepaid), or by registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth in Schedule A hereto or at such other address as may hereafter be
designated in writing by the addressee to the addressor listing all parties. All
such notices shall, when mailed or telegraphed, be effective when received or
when attempted delivery is refused.
13. No Other Agreements. Other than that certain Voting Trust Agreement
dated August 1, 1996 between PerImmune and certain holders of PerImmune Common
Stock party thereto, each Shareholder represents that he has not granted and is
not a party to any proxy, voting trust or other agreement which is inconsistent
with or conflicts with the provisions of this
7
<PAGE> 176
Agreement, and no holder of Shares shall grant any proxy or become party to any
voting trust or other agreement which is inconsistent with or conflicts with
the provisions of this Agreement.
14. Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of the Company may be amended in any manner permitted
thereunder, except that neither the certificate nor the bylaws shall be amended
in any manner that would conflict with, or be inconsistent with, the provisions
of this Agreement.
8
<PAGE> 177
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have
executed this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
--------------------------------------
SHAREHOLDER
[SIG]
-----------------------------------------
9
<PAGE> 178
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have
executed this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
--------------------------------------
SHAREHOLDER
[SIG]
-----------------------------------------
9
<PAGE> 179
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have
executed this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
--------------------------------------
SHAREHOLDER
[SIG]
-----------------------------------------
9
<PAGE> 180
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have
executed this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
--------------------------------------
SHAREHOLDER
[SIG]
-----------------------------------------
9
<PAGE> 181
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have
executed this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
--------------------------------------
SHAREHOLDER
SECURITY INSURANCE COMPANY OF HARTFORD
-----------------------------------------
By: /s/ RAYMOND J. SCHUYLER
--------------------------------------
Raymond J. Schuyler
Its: Sr. Vice-President
Chief Investment Officer
9
<PAGE> 182
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
9
<PAGE> 183
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
9
<PAGE> 184
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
------------------------------
SHAREHOLDER
/s/ CHARLES J. LINDSAY
-----------------------------------
Charles J. Lindsay
<PAGE> 185
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
------------------------------
SHAREHOLDER
/s/ RAYMOND J. SCHUYLER
-----------------------------------
Raymond J. Schuyler
9
<PAGE> 186
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By: [SIG]
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
9
<PAGE> 187
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
9
<PAGE> 188
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 189
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 190
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 191
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 192
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 193
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 194
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 195
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
/s/ JANET H. RANSOM
-----------------------------------
<PAGE> 196
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 197
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 198
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 199
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 200
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
/s/ MARTIN V. HASPEL
-----------------------------------
Martin V. Haspel
<PAGE> 201
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 202
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
<PAGE> 203
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
/s/ JOHN W. WRIGHT
-----------------------------------
John W. Wright
on behalf of Craigie Incorporated
<PAGE> 204
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER -- SYNCOR INTERNATIONAL
CORPORTION
/s/ ROBERT G. FUNARI
-----------------------------------
Name: Robert G. Funari
Title: President and CEO
<PAGE> 205
IN WITNESS WHEREOF, the Company, Hanna and the Shareholders have executed
this agreement in counterparts as of the date first above specified.
INTRACEL CORPORATION
By:
------------------------------
SHAREHOLDER
[SIG]
-----------------------------------
President, Mentor Corp.
<PAGE> 206
SCHEDULE A TO
SHAREHOLDERS AGREEMENT
INTRACEL SHAREHOLDERS - COMMON STOCK
- -------------------------------------------
1. Northstar Advantage, High Total Return
2. Deborah Pavan Langston
3. George Jones
4. Simon R. McKenzie
5. Security Ins. Co. of Hartford
6. Charles Afeman
7. Charles & Celine Afeman
8. Dublind Partners, Inc.
9. Charles J. Lindsay, IRA
10. Raymond J. Schuyler
11. Mark Lieb
12. William Wong
13. Charles J. Lindsay
14. TD Partners
15. Helene E. Afeman
16. Steven D. Afeman
17. Susan Afeman-Howell
18. Anne R. Afeman-Norwood
10
<PAGE> 207
INTRACEL SHAREHOLDERS - SERIES A PREFERRED STOCK
- ------------------------------------------------
1. Raymond Schuyler
2. Northstar Advantage, High Total Return
3. Mark Lieb
4. Charles Lindsay
5. TD Partners
INTRACEL SHAREHOLDERS - SERIES A-1 PREFERRED STOCK
- --------------------------------------------------
1. Northstar Advantage, High total Return
2. Raymond Schuyler
3. Charles J. Lindsay
4. Mark Lieb
PERIMMUNE SHAREHOLDERS
- --------------------------
1. Michael G. Hanna, Jr.
2. Janet Hanlon
3. J.S. Webb
4. David Danjczek
5. Joseph Caliguiri
6. Gordon Wynant
7. Manny Subramanian
8. Janet Ransom
9. Nicholas Pomato
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10. Barry Kobrin
11. Jerry Klein
12. Leslie Levy
13. Martin Haspel
14. Diana Goroff
15. Bryan Butman
16. Craigie Incorporated
17. Syncor International Incorporated
18. Mentor Corporation
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EXHIBIT D
INTRACEL CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of January 2, 1998, by and among Intracel
Corporation, a Delaware corporation (the "Company"), and the Holders (as
hereinafter defined).
PREAMBLE
In light of the fact the Company desires to extend registration rights
to the Holders in connection with the Agreement and Plan of Reorganization
dated November 26, 1997 by and between the Company, PerImmune Holdings, Inc.
and Intracel Acquisition Sub, Inc. (the "Transaction").
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the Company and the Stockholders agree as follows:
Section 1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission,
or any other federal agency at the time administering the Securities Act.
(b) "Common Stock" means the common stock, par value $ .0001 per
share, of the Company.
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(c) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(d) "Holder" shall mean any holder of outstanding Registrable
Securities or anyone who holds outstanding Registrable Securities to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
(e) "Initiating Holders" shall mean any Holder or Holders of at
least twenty percent (20%) of the Registrable Securities then outstanding.
(f) "Preferred Stock" means the preferred stock, par value $ .0001
per share, of the Company.
(g) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registrable Securities.
(h) "Registrable Securities" shall mean all of the following to the
extent the same have not been sold to the public: (i) any and all shares of
Common Stock of the Company issued in connection with the Transaction; (ii) any
and all shares of Common Stock of the Company issued upon conversion of shares
of Preferred Stock issued in connection with the Transaction; (iii) stock issued
in respect of stock referred to in (i) or (ii) above in any reorganization; or
(iv) stock issued in respect of the stock referred to in (i) or (ii) or (iii) as
a result of a stock split, stock dividend, recapitalization or combination.
Notwithstanding the foregoing, Registrable Securities shall not include
otherwise Registrable Securities (i) sold by a person
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in a transaction in which his rights under this Agreement are not properly
assigned; or (ii) (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions,
and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale or (C) the registration rights associated with such
securities have been terminated pursuant to Section 16 of this Agreement.
(i) "Rule 144" shall mean Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144A.
(j) "Rule 144A" shall mean Rule 144A under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
Section 2. Restrictions on Transferability. The Registrable Securities
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. Each Holder will cause any proposed
purchaser, assignee, transferee, or pledgee of the Registrable Securities held
by a Holder to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Agreement.
Section 3. Restrictive Legend. Each certificate representing Registrable
Securities shall (unless other permitted by the provisions of Section 4 below)
be stamped or otherwise imprinted with a legend substantially in the following
form (in
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addition to any legend required under applicable state securities laws or
otherwise):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AND WERE ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT. THESE SHARES MAY NOT BE
RESOLD, REOFFERED, TRANSFERRED, PLEDGED, HYPOTHECATED, CONVEYED, OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH SAID ACT.
Each Holder consents to the Company making a notation on its records and
giving instructions to any transfer agent of the Registrable Securities in order
to implement the restrictions on transfer established in this Agreement.
Section 4. Notice of Proposed Transfer. The Holder of each certificate
representing Registrable Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 4. Each such Holder agrees not
to make any disposition of all or any portion of any Registrable Securities
unless and until:
(a) There is in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
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(b) (i) Such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and
(ii) If reasonably by the Company, such Holder shall furnish
the Company with an opinion of counsel, reasonably satisfactory to the Company
that such disposition shall not require registration of such shares under the
Securities Act. It is agreed, however, that no such opinion will be required for
Rule 144 or Rule 144A transactions.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is a partnership to a partner of such partnership or
a retired partner of such partnership who retires after the date hereof, or to
the estate of any such partner or retired partner or the transfer by gift, will
or intestate succession of any partner to his spouse or siblings, lineal
descendants or ancestors of such partner or spouse, provided, that such
transferee agrees in writing to be subject to all of the terms hereof to the
same extent as if he were an original Holder hereunder.
Section 5. Requested Registration.
(a) If the Company shall receive from Initiating Holders a written
request that the Company effect any registration with respect to all or any
portion of the issued and outstanding Registrable Securities held by Initiating
Holders, the Company shall:
(i) promptly give written notice of the proposed registration
to all other Holders, which notice shall include the approximate date that the
registration statement is expected to be filed with the Commission; and
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(ii) as soon as practicable use its best efforts to register
(including, without limitation, the execution of an undertaking to file
post-effective amendments and any other governmental requirements) all
Registrable Securities which the Initiating Holders request to be registered and
all Registrable Securities which the other Holders request to be registered
within twenty (20) days after receipt of such written notice from the Company;
provided, that the Company shall not be obligated to file a registration
statement pursuant to this Section 5:
(A) in any particular state in which the Company would be required
to execute a general consent to service of process in effecting such
registration;
(B) within 120 days following the effective date of any registered
offering of the Company's securities to the general public in which the Holders
of Registrable Securities shall have been able effectively to register all
Registrable Securities as to which registration shall have been requested; or
(C) after the Company has effected two such registrations pursuant
to this Section 5 and such registrations have been declared or ordered
effective, except as provided in Section 7.
Subject to the foregoing clauses (A) through (C), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practical, but in any event within forty-five (45) days
after receipt of the request or requests of the Initiating Holders and shall use
reasonable best efforts to have such registration statement promptly declared
effective by the Commission whether or not all Registrable Securities requested
to be registered can be included; provided, however, that if the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed within such forty-five (45) day period and it is therefore
essential to defer the
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filing of such registration statement, the Company shall have an additional
period of not more than forty-five (45) days after the expiration of the initial
forty-five (45-day) period within which to file such registration statement;
provided, that during such first forty-five (45) day period the Company may not
file a registration statement for securities to be issued and sold for its own
account.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request. In such event or if an
underwriting is required by subsection 5(c), the Company shall include such
information in the written notice referred to in subsection 5(a)(i). In either
such event, if so requested in writing by the Company, the Initiating Holders
shall negotiate with an underwriter selected by the Company with regard to the
underwriting of such requested registration; provided, however, that if a
majority in interest of the Initiating Holders have not agreed with such
underwriter as to the terms and conditions of such underwriting within twenty
(20) days following commencement of such negotiations, a majority in interest of
the Initiating Holders may select an underwriter of their choice for the
underwriting of all of such Registrable Securities being registered. The right
of any Holder to registration pursuant to Section 5 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. The Company shall (together with all Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 5, if the managing underwriter advises the Initiating Holders in writing
that marketing factors require a limitation of the number of shares to be
underwritten, the Company shall so advise all Holders, and the number of shares
of Registrable
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Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof who are affiliates (as such term is defined
in SEC Rule 145 (as hereinafter defined)) of the Company in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders and, to the extent that thereafter, any security to be
registerred among Holders who are not affiliates of the Company; provided,
however, that securities to be included in such registration statement as a
result of piggyback registration rights as well as any securities to be offered
by the Company, its officers and employees shall be excluded from the
registration statement prior to the exclusion of any Registrable Securities held
by the Holders. If any Holder disapproves of the terms of the underwriting, he
may elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Initiating Holders. If, by the withdrawal of such
Registrable Securities, a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the limit imposed by the
underwriters) the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the limitation
as set forth above. Any Registrable Securities which are excluded from the
underwriting by reason of the underwriter's marketing limitation or withdrawn
from such underwriting shall be withdrawn from such registration.
(c) Any registration pursuant to this Section 5 must be firmly
underwritten if the registration exceeds two percent (2%) of the Company's
outstanding Common Stock on an as-converted basis.
Section 6. Piggyback Registration.
(a) If at any time or from time to time, the Company shall determine
to register any of its securities, for its own account or the account of any of
its shareholders, other than a registration relating solely to employee benefit
plans, or a
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registration relating solely to a transaction of the type subject to Rule 145
("SEC Rule 145") promulgated under the Securities Act, or a registration on any
form (other than Form S-1, S-2 or S-3, or their successor forms) which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, the
Company will:
(i) give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement which notice shall
include the approximate date that the registration statement is expected to be
filed with the Commission; and
(ii) include in such registration and in any underwriting
involved therein on the same terms and conditions as the securities otherwise
being sold through the underwriters, all the Registrable Securities specified in
a written request or requests, made within thirty (30) days after receipt of
such written notice from the Company, by any Holder or Holders, except as set
forth in subsection (b) below.
(b) If the registration is for a registered public offering
involving an underwriting, the Company shall so advise the Holders as a part of
the written notice given pursuant to subsection 6(a)(i). In such event, the
right of any Holder to registration pursuant to Section 6 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
6, if the managing underwriter in good faith determines that marketing factors
require a limitation of the number of shares to be
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underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting. The Company
shall so advise all Holders and the other holders distributing their securities
through such underwriting pursuant to piggy-back registration rights similar to
this Section 6, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among all Holders and other holders who are affiliates (as such term
is defined in SEC Rule 145) of the Company in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders and other securities with such piggy-back registration rights held by
other holders at the time of filing the registration statement and, to the
extent that, thereafter, any additional security to be registered, among Holders
and other holders who are not affiliates of the Company and have such piggy-back
registration rights. If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. If, by the withdrawal of such Registrable
Securities, a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the limit imposed by the underwriters),
the Company shall offer to all Holders who have requested to have Registrable
Securities included in the registration the right to include additional
Registrable Securities in the same proportion used in determining the limitation
as set forth above. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
Section 7. Form S-3. The Company shall use its best efforts to qualify for
registration on Form S-3 or its successor form. After the Company has qualified
for the use of Form S-3, Initiating Holders shall have the right at any time to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of shares by such Holders), subject only to the
following:
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(a) The Company shall not be required to file a registration
statement pursuant to this Section 7 within ninety (90) days of the effective
date of any registration referred to in Sections 5 and 6 above in which the
Holders shall have been entitled to join pursuant to Section 5 or 6, provided
that there shall have been effectively registered all shares of Registrable
Securities as to which registration shall have been requested.
(b) The Company shall not be required to file more than two
registration statements pursuant to this Section 7 within any twelve-month
period.
The Company shall give written notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this Section
7 and shall provide a reasonable opportunity for other Holders to participate in
the registration which notice shall include the approximate date that the
registration statement is expected to be filed with the Commission; provided,
that if the registration is for an underwritten offering, the following terms
shall apply to all participants in such offering: The right of any Holder to
registration pursuant to Section 7 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other Holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 7, if the managing
underwriter in good faith determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all Holders of Registrable Securities
which would otherwise be registered and underwritten pursuant hereto, and the
number of shares of Registrable Securities and other securities that may be
included in
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the registration and underwriting shall be allocated among the Holders and other
holders who are affiliates (as such term is defined in SEC Rule 145) of the
Company in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders and other securities with such
registration rights requested by such Holders to be included in such
registration and, to the extent that thereafter, any security to be registered
among Holders who are not affiliates of the Company. If any Holder disapproves
of the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. If, by the withdrawal of such
Registrable Securities, a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the limit imposed by the
underwriters), the Company shall offer to all Holders who have requested to have
Registrable Securities included in the registration the right to include
additional Registrable Securities in the same proportion used in determining the
limitation as set forth above. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration. Subject to the
foregoing, the Company will use its best efforts to effect promptly the
registration of all shares of Registrable Securities on Form S-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition.
(c) The Company shall file a registration statement on Form S-3
covering the Registrable Securities so requested to be registered as soon as
practical, but in any event within forty-five (45) days after receipt of the
requests of the Initiating Holders and shall use reasonable best efforts to have
such registration statement promptly declared effective by the Commission.
Section 8. Expenses of Registration. In addition to the fees and expenses
contemplated by Section 9 hereof, all expenses incurred in connection with one
registration pursuant to Section 5 hereof and all registrations pursuant to
Sections 6 and 7 hereof, including without limitation all registration, filing
and qualification
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fees, printing, messenger, telephone and delivery expenses, fees and
disbursements of counsel and independent public accountants for the Company,
expenses of any special audits of the Company's financial statements incidental
to or required by such registration, reasonable fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance,
reasonable fees and disbursements for one counsel for the Holders of Registrable
Securities, shall be borne by the Company, except that the Company shall not be
required to pay underwriters' fees, discounts or commissions relating to the
sale of the Registrable Securities.
Section 9. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder participating therein advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense the Company will:
(a) keep such registration pursuant to Sections 5, 6 and 7
continuously effective for periods of one hundred eighty (180) days for each or,
in each case, such reasonable period necessary to permit the Holder or Holders
to complete the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) promptly prepare and file with the Commission such amendments
(both pre- and post-effective) and supplements to such registration statement
and the prospectus used in connection therewith as may be requested by any
Holder of Registrable Securities (including in the event any Holder notifies the
Company that such Holder wishes to amend or supplement such information
previously provided by such Holder) or as may be necessary to comply with the
provisions of the Securities Act, and to keep such registration statement
effective for that period of time specified in Section 9(a) above;
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(c) furnish such number of registration statements, prospectuses and
other documents incident thereto (including exhibits to such registration
statements) as a Holder from time to time may reasonably request for such
Holder's review;
(d) use reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction, at the earliest possible moment;
(e) subject to Section 5(a)(ii)(B), prior to any public offering of
Registrable Securities, if required by the applicable blue sky laws, register or
qualify such Registrable Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as any Holder or underwriter reasonably
requires, and keep such registration or qualification effective during the
period set forth in Section 9(a) above;
(f) cause all Registrable Securities covered by such registrations
to be listed on each securities exchange, including NASDAQ, on which similar
securities issued by the Company are then listed or, if no such listing exists,
use reasonable best efforts to list all Registrable Securities on one of the New
York Stock Exchanges the American Stock Exchange or NASDAQ; and
(g) cause its accountants to issue to the underwriter, if any, and
the Holders, comfort letters and updates thereof, in customary form and covering
matters of the type customarily covered in such letters with respect to
underwritten offerings;
(h) enter into such customary agreements (including underwriting
agreements in customary form, including customary representations and warranties
and indemnification provisions similar to those set forth in Section 10 of this
Agreement) and take all such other actions as the holders of a majority of the
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Registrable Securities being sold or the underwriters, if any, reasonably,
request in order to expedite or facilitate the disposition of such Registrable
Securities (including, without limitation, effecting a stock split or a
combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement; and
(j) if the offering is underwritten, at the request of any Holder of
Registrable Securities, furnish on the date that Registrable Securities are
delivered to the underwriters for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Company for the purposes of
such registration, addressed to the underwriters and to such Holder, stating
that such registration statement has become effective under the Securities Act
and that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements or other financial data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such Holder or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such Holder, stating that they are independent public
accountants within the meaning of the Securities Act and that,
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in the opinion of such accountants, the financial statements of the Company
included in the registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
(k) immediately notify each Holder, at any time a prospectus covered
by such registration statement is required to be delivered under the Securities
Act, of the happening of any event of which it has knowledge 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 a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and promptly
prepare a post-effective amendment with prospectus supplement, as counsel to
Company shall then advise the Company, revising such untrue statement or curing
such omission;
(l) notify each Holder at such time as such registration statement
becomes effective;
(m) notify each Holder upon the receipt of a request from the
Commission for amendments or supplements to such registration statement;
(n) notify each Holder in the event the Commission or any agency in
any state in which Registrable Securities are to be or have been sold either
issues a stop order with respect to such registration statement or notifies the
Company that it is initiating proceedings therefor; or
(o) take such other actions as shall be reasonably requested by any
Holder.
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Section 10. Indemnification.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 5, 6 or 7, the Company
will indemnify and hold harmless each Holder of such Registrable Securities
thereunder, each underwriter of such Registrable Securities thereunder and each
officer, director, employee or agent of any such Holder or underwriter and each
other person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act, against any losses, expenses, claims, damages or
liabilities, joint or several, to which such Holder, underwriter or other person
may become subject under the Securities Act or otherwise, insofar as such
losses, expenses, 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
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, 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 promulgated under the Securities Act or any state securities
law applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, and will reimburse each such
Holder, each of its officers, directors, employees, agents and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any reasonable legal and any other expenses
incurred in connection with investigating, defending or settling any such claim,
expense, loss, damage, liability or action, provided that the Company will not
be liable in any such case to the extent that any such claim, expense, loss,
damage, liability or action arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
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instrument duly executed by such Holder or underwriter specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by or issuable
to such Holder are included in the registration statement as to which such
registration is being effected, indemnify and hold harmless the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company and each underwriter within the meaning of the Securities Act, and
each other such Holder, each of its officers, directors and partners and each
person controlling such Holder, against all claims, losses, expenses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, any prospectus contained therein, or any
amendment or supplement thereof, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, partners, persons or underwriters for any reasonable
legal or any other expenses incurred in connection with investigating, defending
or settling any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein; provided, however,
the total amount for which any Holder, its officers, directors and partners, and
any person controlling such Holder, shall be liable under this Section 10(b)
shall be limited to the proportion of any such loss, claim, damage, liability or
expense which is equal to the proportion that the public offering price of the
Registrable Securities sold by the Holder under such registration statement
bears to the total public offering price of all securities sold thereunder, and
18
<PAGE> 227
shall not in any event exceed the aggregate proceeds received by such Holder
from the sale of Registrable Securities sold by such Holder in such
registration.
(c) Each party entitled to indemnification under this Section 10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in actual detriment to
the Indemnifying Party, provided, that in the event counsel to the Indemnified
Party determines that the Indemnified Party and Indemnifying Party have
conflicting interests, the Indemnified Party may employ one (1) separate counsel
at the expense of the Indemnifying Party to conduct a separate defense for the
Indemnified Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement (i) which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation or (ii) which involves any relief against the Indemnified Party other
than the payment of money which is to be paid in full by the Indemnifying Party.
(d) Notwithstanding the foregoing, to the extent that the provisions
on indemnification contained in the underwriting agreements entered into among
the selling Holders, the Company and the underwriters in connection with the
underwritten public
19
<PAGE> 228
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall be controlling as to the Registrable Securities
included in the public offering; provided, however, that if, as a result of this
Section 10(d), any Holder, its officers, directors, and partners and any person
controlling such Holder is held liable for an amount which exceeds the aggregate
proceeds received by such Holder from the sale of Registrable Securities
included in a registration, as provided in Section 10(b) above, pursuant to such
underwriting agreement (the "Excess Liability"), the Company shall reimburse any
such Holder for such Excess Liability.
(e) If the indemnification provided for in this Section 10 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or 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. Notwithstanding the
foregoing, the amount any Holder, its officers, directors and partners and any
person controlling
20
<PAGE> 229
such Holder shall be obligated to contribute pursuant to this Section 10(e)
shall be limited to an amount equal to the proceeds received by such Holder from
the sale of the Restricted Securities sold pursuant to the registration
statement which gives rise to such obligation to contribute (less the aggregate
amount of any damages which the Holder has otherwise been required to pay in
respect of such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the sale of such
Restricted Securities).
Each party agrees that it would not be just and equitable if
contribution pursuant to this Section 10 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above.
(f) Survival of Indemnity. The indemnification provided by this
Section 10 shall be a continuing right to indemnification and shall survive the
registration and sale of any securities by any Person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
Section 11. Lockup Agreement. In consideration for the Company agreeing to
its obligations under this Agreement, each Holder agrees in connection with any
registration of the Company's securities (whether or not such Holder is
participating in such registration) upon the request of the Company and the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days in the case of the Company's initial public offering) from the effective
date of such registration as the Company and the underwriters may specify, so
long as all Holders or stockholders holding more than one percent of the
outstanding
21
<PAGE> 230
common stock and all officers and directors of the Company are bound by a
comparable obligation provided, however, that nothing herein shall prevent any
Holder that is a partnership or corporation from making a distribution of
Registrable Securities to the partners or shareholders thereof that is otherwise
in compliance with applicable securities laws, so long as such distributees
agree to be so bound.
Section 12. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration referred to herein.
Section 13. Rule 144 and 144A Reporting. With a view to making available
to Holders of Registrable Securities the benefits of certain rules and
regulations of the Commission which may permit the sale of the Registrable
Securities to the public without registration, the Company agrees at all times
after ninety (90) days after the effective date of the first registration filed
by the Company for an offering of its securities to the general public (or the
Company shall otherwise have become subject to the periodic reporting
requirements of the Securities Exchange Act) to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 and Rule 144A (including earning statements
of the Company complying with Section 11(a) of the Securities Act no later than
45 days after the end of each of the Company's fiscal quarters (or 90 days after
the end of its fiscal year)), and make such information available to each Holder
upon written request;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
22
<PAGE> 231
(c) furnish to each Holder upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such Holder may reasonably request in availing itself of an
exemption for the sale of Registrable Securities without registration under the
Securities Act.
For purposes of facilitating sales pursuant to Rule 144A, so long as the
Company is not subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, each Holder and any prospective purchaser of such Holder's
securities shall have the right to obtain from the Company, upon request of the
Holder prior to the time of sale, a brief statement of the nature of the
business of the Company and the products and services it offers; and the
Company's most recent balance sheet and profit and loss and retained earnings
statements, and similar financial statements for the two preceding fiscal years
(the financial statements should be audited to the extent reasonably available).
Section 14. Transfer of Registration Rights. The rights granted hereunder
may be assigned by a Holder to any partner or shareholder of such Holder, to any
other Holder, or to a transferee or assignee who receives at least 500 shares of
Registrable Securities (as adjusted for stock splits and the like); provided,
that the Company is given written notice by the Holder at the time of or within
a reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned.
Section 15. Limitations on Subsequent Registration Rights. From and after
the date these registration rights are granted, the Company shall not, without
the prior written consent of the Holders of not less than fifty percent (50%) of
the Registrable Securities then held by Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company which
23
<PAGE> 232
would allow such holder or prospective holder to include such securities in any
registration filed under Sections 5, 6 or 7 hereof other than rights identical
or subordinate to the rights of any Holder hereunder.
Section 16. Termination of Rights.
(a) The rights of any particular Holder to cause the Company to
register Registrable Securities under Sections 5, 6 and 7 shall terminate with
respect to such Registrable Securities at such time, following a bona fide,
firmly underwritten public offering of shares of the Company's Common Stock
registered under the Securities Act (provided that the aggregate gross offering
price equals or exceeds $10,000,000), when such security is transferable
pursuant to paragraph (k) of Rule 144 (or any successor provision thereto) or
when all of such Holder's Registrable Securities are transferable in one sale
under the other provisions of Rule 144.
(b) Notwithstanding the provisions of paragraph (a) of this Section
16, all rights of any particular Holder under this Agreement shall terminate at
5:00 p.m. Eastern time on the date seven (7) years after the closing date of the
Company's first firmly underwritten public offering.
Section 17. Representations and Warranties of the Company. The Company
represents and warrants to the Holders as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Articles of Organization or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under
24
<PAGE> 233
any such indenture, agreement or other instrument or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to (i) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and other
laws of general application affecting enforcement of creditors' rights generally
and (ii) the availability of equitable remedies as such remedies may be limited
by equitable principles of general applicability (regardless of whether
enforcement is sought in a proceeding in equity or at law).
Section 18. Miscellaneous.
(a) Amendments. This Agreement may be amended only by a writing
signed by the Holders of more than fifty percent (50%) of the Registrable
Securities, as constituted from time to time. The Holders hereby consent to
future amendments to this Agreement that permit future investors, other than
employees, officers or directors of the Company, to be made parties hereto and
to become Holders of Registrable Securities; provided, however, that no such
future amendment may materially impair the rights of the Holders hereunder
without obtaining the requisite consent of the Holders, as set forth above. For
purposes of this Section, Registrable Securities held by the Company or
beneficially owned by any officer or employee of the Company shall be
disregarded and deemed not to be outstanding.
(b) Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute a single instrument.
25
<PAGE> 234
(c) Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and may be sent initially by facsimile
transmission and shall be mailed by registered or certified mail, postage
prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to a
Holder, at such Holder's address set forth on the books of the Company, or at
such other address as such Holder shall have furnished to the Company in
writing, or (b) if to any other holder of any Registrable Securities, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such securities who has so furnished an address to
the Company, or (c) if to the Company, one copy should be sent to the Company's
current address at 1871 N.W. Gilman Blvd., Issaqual, Washington 98027, or at
such other address as the Company shall have furnished to the Holders. Each such
notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by first class, postage pre-paid mail, at the earlier of
its receipt or seventy-two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
(d) Non public Information. Any other provisions of this agreement
to the contrary notwithstanding, the Company's obligation to file a registration
statement, or cause such registration statement to become and remain effective,
shall be suspended for a period not to exceed thirty (30) days (and for periods
not exceeding, in the aggregate, sixty (60) days in any twenty-four (24) month
period) if there exists at the time material non-public information relating to
the Company which, in the reasonable opinion of the Company, should not be
disclosed.
(e) Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid
26
<PAGE> 235
or unenforceable any other provision of this Agreement, and this Agreement shall
be carried out as if any such illegal, invalid or unenforceable provision were
not contained herein.
(f) Dilution. If, and as often as, there is any change in the Common
Stock by way of a stock split, stock dividend, combination or reclassification,
or through a merger, consolidation, reorganization or recapitalization, or by
any other means, appropriate adjustment shall be made in the provisions hereof
so that the rights and privileges granted hereby shall continue with respect to
the Registrable Securities as so changed.
(g) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York other than such laws as would result in
the application of the laws of a state other than the State of New York.
27
<PAGE> 236
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By [SIG]
-----------------------------------------------------------------------------
President
Holder:
- --------------------------------------------------------------------------------
28
<PAGE> 237
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 238
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 239
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 240
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 241
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 242
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG] 12/23/97
- --------------------------------------------------------------------------------
<PAGE> 243
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 244
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
/s/ JANET H. RANSOM
- --------------------------------------------------------------------------------
<PAGE> 245
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 246
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 247
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 248
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
/s/ LESLIE IVY
- --------------------------------------------------------------------------------
<PAGE> 249
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
/s/ MARTIN V. HASPEL
- --------------------------------------------------------------------------------
MARTIN V. HASPEL
<PAGE> 250
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG]
- --------------------------------------------------------------------------------
<PAGE> 251
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
/s/ BRYAN T. BUTMAN
- --------------------------------------------------------------------------------
<PAGE> 252
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
/s/ JOHN. W. WRIGHT
- --------------------------------------------------------------------------------
John W. Wright
on behalf of Craigie Incorporated
<PAGE> 253
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder: SYNCOR INTERNATIONAL CORPORATION
/s/ ROBERT G. FUNARI
- --------------------------------------------------------------------------------
Name: Robert G. Funari
Title: President and CEO
<PAGE> 254
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
INTRACEL CORPORATION
By
------------------------------------------------------------------------------
President
Holder:
[SIG] - President, Mentor Corp.
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.10
INTRACEL CORPORATION
EMPLOYMENT AGREEMENT
This Agreement is made this June 1, 1998, by and between Intracel
Corporation ("Intracel" or "Company"), a Delaware corporation of 2005 N.W.
Sammamish Road, Suite 107, Issaquah, Washington, and its affiliates and
subsidiaries, including but not limited to the Diagnostics Division of the
Company, and Persis M. Strong ("Strong" or "Employee") at 59 Tuttle Road,
Cumberland, ME 04201, hereby agrees to enter into an employment agreement based
on the terms below listed:
1. Title: Ms. Strong shall be employed by Intracel in the capacity of
President of the Company's Diagnostic Division. As such, Ms. Strong shall
perform all duties required in accord with said position as demanded.
2. Compensation: Ms. Strong shall be entitled to $160,000 per annum or as may
be amended from time to time. The Employee will be eligible for bonuses at
the discretion of management, such bonuses to be tied to performance goals
to be agreed upon between Employee and the Company.
3. Vacation: Employee will be entitled to three (3) weeks paid vacation per
annum.
4. Other Benefits: Employee shall be entitled to participation in the
Company's Health Plan and 401K plan, as amended from time to time at the
Company's discretion.
5. Performance Review: Employee shall be reviewed by the relevant supervisor
not less than one (1) time per annum.
6. Definitions:
(a) Proprietary Information. As used in this Agreement, "Proprietary
Information" means information which the Company possesses or to
which the Company has rights which has commercial value.
Proprietary Information includes, by way of example and without
limitation, trade secrets, product ideas, designs,
configurations, processes, techniques, formulas, software,
improvements, inventions, data, know-how, copyrightable
materials, marketing plans and strategies, sales and financial
reports and forecasts, and customer lists. Proprietary
Information includes information developed by Employee in the
course of this employment of by Company or otherwise relating to
Inventions which belong to the Company under Section 9 below, as
well as other information to which Employee may have access in
connection with this employment.
(b) Inventions and Developments. As used in this Agreement,
"Inventions and Developments" means any and all inventions,
developments, creative works and
<PAGE> 2
useful ideas of any description whatsoever, whether or not patentable.
Inventions and Developments include, by way of example and without
limitation, discoveries and improvements which consist of or relate to
any form of Proprietary Information.
(c) Company-Related Inventions and Developments. For purposes of this
Agreement, "Company-Related Inventions and Developments" means all
Inventions and Developments which either (a) relate at the time of
conception or development to the actual or demonstrably anticipated
business of the Company or to its actual or demonstrably anticipated
research and development; (b) result from or relate to any work
performed for the Company, whether or not during normal business hours;
(c) are developed on Company time; or (d) are developed through the use
of the Company's Proprietary Information, equipment and software, or
other facilities or resources.
7. Confidentiality. Employee understands and agrees that this employment
creates a relationship of confidence and trust between Employee and the
Company with respect to (a) all Proprietary information, and (b) the
confidential information of others with which the Company has a business
relationship. The information referred to in clauses (a) and (b) of the
preceding sentence is referred to in this Agreement, collectively, as
"Confidential Information". At all times, both during this employment with
the Company and after its termination, Employee will keep in confidence and
trust all such Confidential Information, and will not use or disclose any
such Confidential Information without the written consent of the Company,
except as may be necessary in the ordinary course of performing Employee's
duties to the Company. The restrictions set forth in this Section 9 will
not apply to information which is generally known to the public or in the
trade, unless such knowledge results from an unauthorized disclosure by
Employee, but this exception will not affect the application of any other
provision of this Agreement to such information in accordance with the
terms of such provision.
8. Documents, records, etc. All documents, records, apparatus, equipment and
other physical property, whether or not pertaining to Proprietary
Information, which are furnished to Employee by the Company or are produced
by Employee in connection with this employment will be and remain the sole
property of the Company. Employee will return to the Company all such
materials and property as and when requested by the Company. In any event,
Employee will return all such materials and property immediately upon
termination of this employment for any reason. Employee will not take in
any form any such material or property or any copies thereof upon such
termination.
9. Ownership of Inventions and Developments. Employee agrees that all
Company-Related Inventions and Developments which Employee conceives or
develops, in whole or in part, either alone or jointly with others, during
the term of this employment with the Company will be the sole property of
the Company. The Company will be the sole owner of all patents, copyrights
and other proprietary rights in and with respect to such Company-Related
Inventions and Developments. To the fullest extent permitted by law, such
Company-Related Inventions and Developments will be deemed works made for
hire. Employee
2
<PAGE> 3
hereby transfers and assigns to the Company and proprietary rights which
Employee may have or acquire in any such Company-Related Inventions and
Developments, and Employee waives any moral rights or other special rights
which Employee may have or accrue therein. Employee agrees to execute any
documents and take any actions that may be required to effect and confirm
such transfer and assignment and waiver. The provisions of this Section 9
will apply to all Company-Related Inventions and Developments which are
conceived or developed during the term of this employment with the Company,
whether before or after the date of this Agreement, and whether or not
further development or reduction to practice may take place after
termination of this employment, for which purpose it will be presumed that
any Company-Related Inventions and Developments conceived by Employee which
are reduced to practice within one year after termination of this
employment were conceived during the term of this employment with the
Company unless Employee is able to establish a later conception date by
clear and convincing evidence. The provisions of this Section 9 will not
apply, however, to any Inventions and Developments which may be disclosed
in a separate Schedule attached to this Agreement prior to its acceptance
by the Company, representing Inventions and Developments made by Employee
prior to this Employment by the Company.
10. Disclosure of Inventions and Developments. Employee agrees promptly to
disclose to the Company, or any persons designated by it, all
Company-Related Inventions and Developments which are or may be subject to
the provisions of Section 7.
11. Obtaining and Enforcing Proprietary Rights. Employee agrees to assist the
Company, at the Company's request from time to time and at the Company's
expense, to obtain and enforce patents, copyrights or other proprietary
rights with respect to Company-Related Inventions and Developments in any
and all countries. Employee will execute all documents reasonably necessary
or appropriate for this purpose. This obligation will survive the
termination of this employment, provided that the Company will compensate
Employee at a reasonable rate after such termination for time actually
spent by Employee at the Company's request on such assistance. In the event
that the Company is unable for any reason whatsoever to secure Employee's
signature to any document reasonable necessary or appropriate for any of
the foregoing purposes (including renewals, extensions, continuations,
divisions or continuations in part), Employee hereby irrevocably designates
and appoints the Company and its duly authorized officers and agents as
Employee's agents and attorneys-in-fact to act for Employee and on
Employee's behalf, but only for the purpose of executing and filing any
such document and doing all other lawfully permitted acts to accomplish the
foregoing purposes with the same legal force and effect as if executed by
Employee.
12. Competitive Activities. During the term of this employment with the Company
and for a period of 6 months thereafter, Employee will not, directly or
indirectly, whether as owner, partner, consultant, agent employee,
co-venturer or otherwise engage or participate in any business activity
anywhere in the world which develops, manufactures or markets products or
performs services which are competitive with the products or services of
the Company, or products or services which the Company has under
development or which are the subject of active planning at any time during
the term of this employment. Employee
3
<PAGE> 4
understands that the restrictions set forth in this Section 12 are intended
to protect the Company's interest in its Proprietary Information and
established customer relationships and goodwill, and agrees that such
restrictions are reasonable and appropriate for this purpose.
13. Third-Party Agreements and Rights. Employee hereby confirms that
Employee is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way Employee's use or
disclosure of information or Employee's engagement in any business, except
as may be disclosed in a separate Schedule attached to this Agreement prior
to its acceptance by the Company. Employee has delivered to the Company true
and complete copies of any agreements listed on said Schedule. Employee
represents to the Company that Employee's execution of this Agreement,
Employee's employment with the Company and the performance of Employee's
proposed duties for the Company will not violate any obligations Employee
may have to any such previous employer or other party. In Employee's work
for the Company, Employee will not disclose or make use of any information
in violation of any agreements with or rights of any such previous employer
or other party, and Employee will not bring to the premises of the Company
any copies or other tangible embodiments of non-public information belonging
to or obtained from any such previous employment or other party.
14. Injunction. Employee agrees that it would be difficult to measure any
damages caused to the Company which might result from any breach by Employee
of the promises set forth in this Agreement, and that in any event money
damages would be an inadequate remedy for any such breach. Accordingly,
Employee agrees that if Employee breaches, or proposes to breach, any
portion of this Agreement, the Company shall be entitled, in addition to all
other remedies that it may have, to an injunction or other appropriate
equitable relief to restrain any such breach without showing or proving any
actual damage to the Company.
15. No Employment Term. Employee understands that this employment with the
Company is at will. Employee understands that as an at will employee,
Employee may resign from employment with the Company at any time and for any
reason and the Company may terminate this employment at any time and for any
reason. Employee understands that this provisions of this Agreement may only
be modified by a formal written employment contract signed by both Employee
and an authorized representative of the Company's management.
16. Binding Effect. This Agreement will be binding upon Employee and
Employee's heirs, executors, administrators and legal representatives and
will inure to the benefit of the Company, any subsidiary of the Company, and
its and their respective successors and assigns.
17. Severance. When discharged for (a) no cause, (b) the sale or divestiture
of all or substantially all of the Company's Diagnostic Division, or (c) a
change in the control of the Company, then Employee will be entitled to six
months severance at Employee's salary at the time of discharge.
4
<PAGE> 5
18. Enforceability. If any portion or provision of this Agreement is to any
extent declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of
such portion or provision in circumstances other than those as to which it
is so declared illegal or unenforceable, will not be affected thereby, and
each portion or provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law. In the event that any provision of
this Agreement is determined by any court of competent jurisdiction to be
enforceable by reason of excessive scope as to court geographic, temporal
or functional coverage, such provision will be deemed to extend only over
the maximum geographic, temporal and functional scope as to which it may
be enforceable.
19. Entire Agreement. This Agreement constitutes the entire agreement between
the Company and Employee with respect to the subject matter hereof, and
supersedes all prior representations and agreements with respect to such
subject matter except previous agreements with explicit bonus provisions.
This Agreement may not be amended, modified or waived except by a written
instrument duly executed by the person against whom enforcement of such
amendment, modification or waiver is sought. The failure of any party to
require the performance of any term or obligation of this Agreement, or
the waiver by any party of any breach of this Agreement, in any particular
case will not prevent any subsequent enforcement of such term or
obligation or to be deemed a waiver of any separate or subsequent breach.
20. Notices. Any notices, requests, demand and other communications provided
for by this Agreement will be sufficient if in writing and delivered in
person or sent by registered or certified mail, postage prepaid, to
Employee at the last address which Employee has filed in writing with the
Company or, in the case of any notice to the Company, at its main offices,
to the attention of its Chief Executive Officer.
21. Governing Law. This is a Washington contract and shall be construed under
and be governed in all respects by the laws of the Commonwealth of
Washington.
5
<PAGE> 6
I UNDERSTAND THAT THIS AGREEMENT AFFECTS IMPORTANT RIGHTS. I HAVE READ
IT CAREFULLY AND AM SATISFIED THAT I UNDERSTAND IT COMPLETELY.
/s/ PERSIS M. STRONG
-----------------------------
Persis M. Strong
Accepted and Agreed to by
Intracel Corporation
By: /s/ SIMON R. McKENZIE
---------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
Date: August 6, 1998
6
<PAGE> 7
SCHEDULE OF PRIOR INVENTIONS
Employee Name: Persis M. Strong
-------------------------------
Date:
-------------------------------
/s/ Persis M. Strong
-------------------------------
Persis M. Strong
Accepted by
Intracel Corporation
By: /s/ Simon R. McKenzie
-------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
Date: August 6, 1998
7
<PAGE> 8
SCHEDULE OF THIRD-PARTY AGREEMENTS
Employee Name: Persis M. Strong
-------------------------------
Date:
-------------------------------
/s/ Persis M. Strong
-------------------------------
Persis M. Strong
Accepted by
Intracel Corporation
By: /s/ Simon R. McKenzie
-------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
Date: August 6, 1998
8
<PAGE> 1
EXHIBIT 10.11
INTRACEL CORPORATION
Employment Agreement with Lawrence A. Bloom
Dated: August 24, 1998
INTRACEL CORPORATION
EMPLOYMENT AGREEMENT
This Agreement is made as of August 24, 1998 by and between Intracel
Corporation ("Intracel" or "Company"), a Delaware Corporation having a place of
business at 2005 N.W. Sammamish Road, Suite 107, Issaquah, WA 98027 and its
affiliates and subsidiaries, and Lawrence A. Bloom of 10 Sunswyck Road, Darien,
CT 05820 ("Employee"), on the terms below listed:
1. Title: Employee shall be employed by Intracel in the capacity of Chief
Financial Officer and Senior Vice President, Corporate Development. As such,
Employee shall perform all duties required in accord with said position as
demanded.
2. Compensation: Employee shall be entitled to $180,000 per annum or as may
be amended from time to time. Employee will be eligible for bonuses at the
discretion of management, such bonuses to be tied to performance goals to be
agreed upon between Employee and the Company.
3. Vacation. Employee will be entitled to three (3) weeks paid vacation per
annum.
4. Other Benefits. Employee shall be entitled to participation in the
Company's Health Plan and 401K plan, as amended from time to time at the
Company's discretion.
5. Performance Review. Employee shall be reviewed by the relevant supervisor
not less than one (1) time per annum.
6. Definitions:
(a) Proprietary Information. As used in this Agreement, "Proprietary
Information" means information which the Company possesses or to which the
Company has rights which has commercial value. Proprietary Information includes,
by way of example and without limitation, trade secrets, product ideas, designs,
configurations, processes, techniques, formulas, software, improvements,
inventions, data, know-how, copyrightable materials, marketing plans and
<PAGE> 2
INTRACEL CORPORATION
Employment Agreement with Lawrence A. Bloom
Dated: August 24, 1998
strategies, sales and financial reports and forecasts, and customer lists.
Proprietary Information, includes information developed by Employee in the
course of this employment by Company or otherwise relating to inventions
which belong to the Company under Section 9 below, as well as other
information to which Employee may have access in connection with this
employment.
(b) Inventions and Developments. As used in this Agreement. "Inventions and
Developments" means any all inventions, developments, creative works and
useful ideas of any description whatsoever, whether or not patentable.
Inventions and Developments include, by way of example and without
limitation, discoveries and improvements which consist of or relate to any
form of Proprietary Information.
(c) Company-Related Inventions and Developments. For purposes of this
Agreement, "Company-Related Inventions and Developments" means all
Inventions and Developments which either (a) relate at the time of
conception or development to the actual or demonstrably anticipated
business of the Company or if its actual or demonstrably anticipated
research and development; (b) result from or relate to any work performed
for the Company, whether or not during normal business hours; (c) are
developed on Company time; or (d) are developed through the use of the
Company's Proprietary Information, equipment and software, or other
facilities or resources.
7. Confidentiality. Employee understands and agrees that this employment creates
a relationship of confidence and trust between Employee and the Company with
respect to (a) all Proprietary Information, and (b) the confidential information
of others with which the Company has a business relationship. The information
referred to in clauses (a) and (b) of the preceding sentence is referred to in
this Agreement, collectively, as "Confidential Information". At all times, both
during this employment with the Company and after its termination. Employee
will keep in confidence and trust all such Confidential Information, and will
not use or disclose any such Confidential Information, and will not use or
disclose any such Confidential Information without the written consent of the
Company, except as may be necessary in the ordinary course of performing
Employee's duties to the Company. The restrictions set forth in this Section 9
will not apply to information which is generally known to the public or in the
trade, unless such knowledge results from an unauthorized disclosure by
Employee, but this exception will not affect the application of any other
provision of this Agreement to such information in accordance with the terms of
such provision.
8. Documents, Records, etc. All documents, records, apparatus, equipment and
other physical property, whether or not pertaining to Proprietary Information,
which are furnished to Employee by the Company or are produced by Employee in
connection with this employment will be and remain the sole property of the
Company. Employee will return to the Company all such materials and property as
and when requested by
<PAGE> 3
INTRACEL CORPORATION
Employment Agreement with Lawrence A. Bloom
Dated: August 24, 1998
the Company. In any event, Employee will return all such materials and property
immediately upon termination of this employment for any reason. Employee will
not take in any form any such materials or property or any copies thereof upon
such termination.
9. Ownership of Inventions and Developments. Employee agrees that all
Company-Related Inventions and Developments which Employee conceives or
develops, in whole or in part, either alone or jointly with others, during the
term of this employment with the Company will be the sole property of the
Company. The Company will be the sole owner of all patents, copyrights and other
proprietary rights in and with respect to such Company-Related Inventions and
Developments. To the fullest extent permitted by law, such Company-Related
Inventions and Developments will be deemed works made for hire. Employee hereby
transfers and assigns to the Company any proprietary rights which Employee may
have or acquire in any such Company-Related Inventions and Developments, and
Employee waives any moral rights or other special rights which Employee may have
or accrue therein. Employee agrees to execute any documents and take any actions
that may be required to effect and confirm such transfer and assignment and
waiver. The provisions of this Section 9 will apply to all Company-Related
Inventions and Developments which are conceived or developed during the term of
the employment with the Company, whether before or after the date of this
Agreement, and whether or not further development or reduction to practice may
take place after termination of this employment, for which purpose it will be
presumed that any Company-Related inventions and developments conceived by
Employee which are reduced to practice within one year after termination of this
employment were conceived during the term of this employment with the Company
unless Employee is able to establish a later conception date by clear and
convincing evidence. The provisions of this Section 9 will not apply, however,
to any Inventions and Developments made by Employee prior to this employment by
the Company.
10. Disclosure of Inventions and Developments. Employee agrees promptly to
disclose to the company, or any persons designated by it, all Company-Related
Inventions and Developments which are or may be subject to the provisions of
Section 7.
11. Obtaining and Enforcing Proprietary Rights. Employee agrees to assist the
Company, at the Company's request from time to time and at the Company's
expense, to obtain and enforce patents, copyrights or other proprietary rights
with respect to Company-Related Inventions and Developments in any and all
countries. Employee will execute all documents reasonably necessary or
appropriate for this purpose. This obligation will survive the termination of
this employment, provided that the Company will compensate Employee at a
reasonable rate after such termination for time actually spent by Employee at
the Company's request on such assistance. In the event that the
<PAGE> 4
INTRACEL CORPORATION
Employment Agreement with Lawrence A. Bloom
Dated: August 24, 1998
Company is unable for any reason whatsoever to secure Employee's signature to
any document reasonably necessary or appropriate for any of the foregoing
purposes (including renewals, extensions, continuations, divisions or
continuations in part). Employee here irrevocably designates and appoints the
Company and its duly authorized officers and agents as Employee's agents and
attorneys-in-fact to act for Employee and on Employee's behalf, but only for
the purpose of executing and filing any such document and doing all other
lawfully permitted acts to accomplish the foregoing purposes with the same
legal force and effect as if executed by Employee.
12. Competitive Activities. During the term of this employment with the
Company and for a period of 6 months thereafter, Employee will not, directly or
indirectly, whether as owner, partner, consultant, agent, employee, co-venturer
or otherwise, engage in or participate in any business activity anywhere in the
world which develops, manufactures or markets products or performs services
which are competitive with the products or services of the Company, or products
or services which the Company has under development or which are the subject of
active planning at any time during the term of this employment. Employee
understands that the restrictions set forth in this Section 12 are intended to
protect the Company's interest in its Proprietary Information and established
customer relationships and goodwill, and agrees that such restrictions are
reasonable and appropriate for this purpose.
13. Third-Party Agreements and Rights. Employee hereby confirms that Employee
is not bound by the terms of any agreement with any previous employer or other
party which restricts in any way Employee's use or disclosure of information or
Employee's engagement in any business, except as may be disclosed in a separate
Schedule attached to this Agreement prior to its acceptance by the Company.
Employee has delivered to the Company true and complete copies of any agreements
listed on said Schedule. Employee represents to the Company that Employee's
execution of this Agreement, employee's employment with the Company and the
performance of Employee's proposed duties for the Company will not violate any
obligations Employee may have to any such previous employer or other party. In
Employee's work for the Company, Employee will not disclose or make use of any
information in violation of any agreements with or rights of any such previous
employer or other party, and Employee will not bring to the premises of the
Company any copies or other tangible embodiments of non-public information
belonging to or obtained from any such previous employment or other party.
14. Injunction. Employee agrees that it would be difficult to measure any
damages caused by the Company which might result from any breach by Employee
of the promises set forth in this Agreement, and that in any event money
damages would be an inadequate remedy for any such breach. Accordingly,
Employee agrees that if Employee breaches, or proposes to breach, any portion
of this Agreement, the
<PAGE> 5
INTRACEL CORP.
INTRACEL CORPORATION
Employment Agreement with Lawrence A. Bloom
Dated: August 24, 1998
Company shall be entitled, in addition to all other remedies that it may have
to an injunction or other appropriate equitable relief to restrain any such
breach without showing or proving any actual damage to the Company.
15. No Employment Term. Employee understands that this employment with the
Company is at will. Employee understands that as an at-will employee, Employee
may resign from employment with the Company at any time and for any reason and
the Company may terminate this employment at any time and for any reason.
Employee understands that this provision of this Agreement may only be
modified by a formal written employment contract signed by both Employee and an
authorized representative of the Company's management.
16. Binding Effect. This Agreement will be binding upon Employee and
Employee's heirs, executors, administrators and legal representatives and will
inure to the benefit of the Company, any subsidiary of the Company, and its and
their respective successors and assigns.
17. Severance. When discharged for (a) no cause, (b) the sale or divestiture of
all or substantially all of the Company, or (c) change in the control of the
Company, then Employee will be entitled to six months severance at Employee's
salary at the time of discharge.
18. Enforceability. If any portion or provision of this Agreement is to any
extent declared illegal or unenforceable by a court of competent jurisdiction,
then the remainder of this Agreement, or the application of such portion or
provision in circumstances other than those as to which it is so declared
illegal or unenforceable, will not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law. In the event that any provision of this Agreement is
determined by any court of competent jurisdiction to be unenforceable by reason
of excessive scope as to geographic, temporal or functional coverage, such
provision will be deemed to extend only over the maximum geographic, temporal
and functional scope as to which it may be enforceable.
19. Entire Agreement. This Agreement constitutes the entire agreement between
the Company and Employee with respect to the subject matter hereof, and
supersedes all prior representations and agreements with respect to such
subject matter except previous agreements with explicit bonus provisions. This
Agreement may not be amended, modified or waived except by a written instrument
duly executed by the person against whom enforcement of such amendment,
modification or waiver is sought. The failure of any party to require the
performance of any term or obligation of
<PAGE> 6
INTRACEL CORPORATION
Employment Agreement with Lawrence A. Bloom
Dated: August 24, 1998
this Agreement, or the waiver by any party of any breach of this Agreement, in
any particular case will not prevent any subsequent enforcement of such term or
obligation or to be deemed a waiver of any separate or subsequent breach.
20. Notices. Any notices, requests, demands and other communications provided
for by this agreement will be sufficient if in writing and delivered in person
or sent by registered or certified mail, postage prepaid, to Employee at the
last address which Employee has filed in writing with the Company or, in the
case of any notice to the Company, at its main offices, to the attention of its
Chief Executive Officer.
21. Governing Law. This is a Washington contract and shall be construed under
and be governed in all respects by the laws of the Commonwealth of Washington.
I UNDERSTAND THAT THIS AGREEMENT AFFECTS IMPORTANT RIGHTS. I HAVE READ IT
CAREFULLY AND AM SATISFIED THAT I UNDERSTAND IT COMPLETELY.
/s/ Lawrence A. Bloom
- ----------------------------------------------
Lawrence A. Bloom
Accepted and Agreed to by Intracel Corporation
By: /s/ SIMON R. McKENZIE
- ----------------------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
Date: August 24, 1998
<PAGE> 7
INTRACEL CORPORATION
Employment Agreement with Lawrence A. Bloom
Dated: August 24, 1998
SCHEDULE OF PRIOR INVENTIONS
Employee Name: Lawrence A. Bloom
Date: August 24, 1998
/s/ LAWRENCE A. BLOOM
- ----------------------------------------------
Lawrence A. Bloom
Accepted and Agreed to by Intracel Corporation
By: /s/ SIMON R. McKENZIE
- ----------------------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
Date: August 24, 1998
<PAGE> 8
INTRACEL CORPORATION
Employment Agreement with Lawrence A. Bloom
Dated: August 24, 1998
SCHEDULE OF THIRD-PARTY AGREEMENTS
Employee Name: Lawrence A. Bloom
Date: August 24, 1998
/s/ LAWRENCE A. BLOOM
- ----------------------------------------------
Lawrence A. Bloom
Accepted and Agreed to by Intracel Corporation
By: /s/ SIMON R. McKENZIE
- ----------------------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
Date: August 24, 1998
<PAGE> 1
EXHIBIT 10.13
PREFERRED STOCK
PURCHASE AGREEMENT
between
INTRACEL CORPORATION
and
NORTHSTAR HIGH TOTAL RETURN FUND
Dated as of March 12, 1997
<PAGE> 2
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I THE SERIES A-2 PREFERRED.............................................1
SECTION 1.1. Issuance, Sale and Delivery of the Series A-2 Preferred........................1
SECTION 1.2. Closing Date...................................................................1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................1
SECTION 2.1. Organization, Qualifications and Corporate Power...............................2
SECTION 2.2. Authorization of Agreements, etc...............................................2
SECTION 2.3. Validity.......................................................................3
SECTION 2.4. Authorized Capital Stock.......................................................3
SECTION 2.5. Financial Statements...........................................................4
SECTION 2.5A. Absence of Undisclosed Liabilities and Changes.................................5
SECTION 2.6. Events Subsequent to the Date of the Balance Sheet.............................5
SECTION 2.7. Litigation; Compliance with Law................................................5
SECTION 2.8. Title to Properties............................................................6
SECTION 2.9. Leasehold Interests............................................................6
SECTION 2.10. Insurance......................................................................6
SECTION 2.11. Taxes..........................................................................7
SECTION 2.12. Other Agreements...............................................................7
SECTION 2.13. Patents, Trademarks, etc.......................................................8
SECTION 2.14. Loans and Advances.............................................................9
SECTION 2.15. Assumptions, Guaranties, etc. of Indebtedness of Other Persons.................9
SECTION 2.16. Significant Customers and Suppliers............................................9
SECTION 2.17. Governmental Approvals.........................................................9
SECTION 2.18. Accuracy of Statements........................................................10
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 2.19. Employment Relations..........................................................10
SECTION 2.20. Compensation of Key Employees.................................................10
SECTION 2.21. Environmental Compliance......................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...................10
SECTION 3.1. Purchase of Series A-I Preferred..............................................10
SECTION 3.2. Authority.....................................................................11
SECTION 3.3. Projections...................................................................11
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER.....................11
SECTION 4.1. Opinion of Company's Counsel..................................................12
SECTION 4.2. Representations and Warranties to be True and Correct.........................12
SECTION 4.3. Performance...................................................................12
SECTION 4.4. All Proceedings to be Satisfactory............................................12
SECTION 4.5. Supporting Documents..........................................................12
SECTION 4.6. Legal Fees....................................................................13
SECTION 4.7. Certificate of Designation....................................................13
SECTION 4.8. Consents......................................................................13
ARTICLE V COVENANTS OF THE COMPANY............................................13
SECTION 5.1. Financial Statements, Reports, etc............................................13
SECTION 5.2. Corporate Existence...........................................................15
SECTION 5.3. Properties, Business, Insurance...............................................15
SECTION 5.4. Inspection, Consultation and Advice...........................................15
SECTION 5.5. Restrictive Agreements Prohibited.............................................15
SECTION 5.6. Board of Directors Meetings...................................................16
SECTION 5.7. Compliance with Laws..........................................................16
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 5.8. Keeping of Records and Books of Account.......................................16
SECTION 5.9. Maintaining Nature of Business................................................16
SECTION 5.10. Obligations and Taxes.........................................................16
SECTION 5.11. Further Issuances of Series A-I Preferred.....................................16
SECTION 5.12. Notices......................................................................16
SECTION 5.13. Environmental Matters.........................................................17
SECTION 5.14. The Exchange Notes; Security Interest; Guaranty...............................18
SECTION 5.15. Waivers.......................................................................18
SECTION 5.17. Further Assurances............................................................19
ARTICLE VI MISCELLANEOUS......................................................19
SECTION 6.1. Expenses......................................................................19
SECTION 6.2. Survival of Agreements........................................................19
SECTION 6.3. Brokerage.....................................................................19
SECTION 6.4. Parties in Interest...........................................................20
SECTION 6.5. Notices; Payment of Dividends.................................................20
SECTION 6.6. Replacement of Certificates...................................................20
SECTION 6.7. Governing Law.................................................................21
SECTION 6.8. Entire Agreement..............................................................21
SECTION 6.9. Submission to Jurisdiction; Waivers...........................................21
SECTION 6.10. Counterparts..................................................................21
SECTION 6.11. Amendments....................................................................22
SECTION 6.12. Severability..................................................................22
SECTION 6.13. Titles and Subtitles..........................................................22
SCHEDULE I....................................................................24
</TABLE>
<PAGE> 5
PREFERRED STOCK PURCHASE AGREEMENT, dated as of March 12, 1997 between Intracel
Corporation, a Massachusetts corporation (the "Company") and Northstar High
Total Return Fund (the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser an
aggregate of 40,000 shares (the "Shares") of the Company's Series A-2 Preferred
Stock, no par value (the "Series A-2 Preferred"), of which 155,000 shares are
authorized, for an aggregate purchase price of $4,000,000, which shares shall be
issued to the Purchaser in the amount and for the consideration set forth across
from the Purchaser's name as set forth on Schedule I hereto; and
WHEREAS, the Purchaser wishes to purchase the Series A-2 Preferred on
the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
ARTICLE I
THE SERIES A-2 PREFERRED
SECTION 1.1. Issuance, Sale and Delivery of the Series A-2 Preferred.
The Company agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, the Shares.
SECTION 1.2. Closing Date. The closing of the sale and purchase of the
Shares (the "Closing"), will take place at the offices of Morrison & Foerster
LLP, 1290 Avenue of the Americas, New York, NY 10104, at 10:00 a.m., New York
time, as of the date hereof, or at such other place, time and date as may be
otherwise mutually agreed in writing by the parties hereto. The date on which
the Closing occurs is referred to herein as the "Closing Date". At the Closing,
the Company shall issue and deliver to the Purchaser a stock certificate or
certificates in definitive form, registered in the name of the Purchaser,
representing the Series A-2 Preferred being purchased by it at the Closing, as
indicated on Schedule I hereto. The parties hereto agree that the Shares as are
to be purchased by the Purchaser shall be delivered to the Purchaser's
designated custodian for delivery to the Purchaser's funding agent which shall,
upon receipt of such certificate, release for delivery the Notes (as hereinafter
defined) to be delivered by Purchaser pursuant to Schedule I hereto and wire
transfer immediately available funds in the amount of the cash consideration to
be paid by the Purchaser in accordance with Schedule I for such Shares to the
account of the Company previously designated by it.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the Closing
Date that:
<PAGE> 6
SECTION 2.1. Organization, Qualifications and Corporate Power. The
Company is a corporation duly organized (originally under the name of Boston
Biological Technologies, Inc.), validly existing and in good standing under the
laws of the Commonwealth of Massachusetts; Bartels, Inc. (the Company's wholly
owned subsidiary)("Bartels") is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware; and each of the
Company and Bartels is duly licensed or qualified to transact business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business transacted by it or the character of the properties owned
or leased by it requires such licensing or qualification, except where the
failure so to qualify will not have a material adverse effect on the business,
operations, property or financial condition of the Company or Bartels,
respectively. Each of the Company and Bartels has the power and authority to own
and hold its properties and to carry on its business as now conducted and as
proposed to be conducted, to execute, deliver and perform this Agreement, and to
issue, sell and deliver the Series A-2 Preferred. The Company has no direct or
indirect subsidiaries, other than Bartels and the Company's ownership of
forty-five percent of the membership interests of the German-American Institute
for AIDS Research GmbH, a limited liability company formed under the laws of
Germany.
SECTION 2.2. Authorization of Agreements, etc. (a) The execution and
delivery by the Company of this Agreement, the performance by the Company of its
obligations hereunder and the issuance, sale and delivery of the Series A-2
Preferred have been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other agency of
government, the Articles of Organization of the Company, as amended (the
"Charter") or the By-laws of the Company, as amended, or any provision of any
indenture, agreement or other instrument to which either the Company or Bartels
is a party or by which either the Company or Bartels or any of its properties or
assets is bound, or conflict with, result in a breach of or constitute (whether
with or without notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company or Bartels other
than the Company's loan agreement with the Massachusetts Business Development
Corporation ("MBDC"), consent from which the Purchaser hereby expressly waives;
provided, however, that the Company shall either obtain the consent of MBDC to
the transactions contemplated by this Agreement by the date which is 60 days
after the Closing Date or, in the event the Company fails to obtain such consent
by such date, pay all amounts due under such loan agreement.
(b) The Series A-2 Preferred has been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully
paid and nonassessable with no personal liability attaching to the
ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company.
The issuance, sale or delivery of the Series A-2 Preferred is not
subject to any preemptive right of stockholders of the Company or to any
right of first refusal or other right in favor of any person.
2
<PAGE> 7
(c) Except as set forth in Schedule 2.2(c), there is no party
without whose consent the Company could not pay dividends in cash to the
Purchaser as provided under the terms of the Series A-2 Preferred.
SECTION 2.3. Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and
moratorium laws and other similar laws of general application affecting
enforcement of creditors' rights generally and (ii) the availability of
equitable remedies, including specific performance, which may be limited by
equitable principles of general applicability (regardless of whether enforcement
is sought in a proceeding in equity or at law).
SECTION 2.4. Authorized Capital Stock. The authorized capital stock of
(a) the Company consists of (i) 3,000,000 shares of Preferred Stock, no par
value per share (the "Preferred Stock"), of which 730,000 shares have been
designated Series A Preferred and 850,000 shares which have been designated
Series A-1 Preferred and 155,000 shares will have been designated Series A-2
Preferred in connection with this Closing and (ii) 5,000,000 shares of common
stock, no par value per share (the "Common Stock") and (b) Bartels consists of
1,000 shares of common stock, par value $.01 per share. Immediately prior to the
Closing, all of the capital stock of Bartels which is issued and outstanding
will be owned by the Company, 1,983,593 shares of Common Stock will be
outstanding, all of which will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof,
557,653 shares of Series A Preferred will be outstanding pursuant to the
Convertible Stock Purchase Agreement, dated July 22, 1994, by and among the
Company and the Purchasers set forth on Schedule I thereto (the "1994 Stock
Purchase Agreement") and 601,569 shares of Series A-1 Preferred will be
outstanding pursuant to the Convertible Stock Purchase Agreement, dated as of
September 22, 1995 by and among the Company and the Purchasers set forth on
Schedule I thereto (the "1995 Stock Purchase Agreement") and 136,658 shares of
Series A-1 Preferred will be issued and outstanding pursuant to a Convertible
Preferred Stock Purchase Agreement dated November 16, 1995, between the Company
and Creditanstalt American Corporation and 40,000 shares of Series A-2 Preferred
will be issued on even date herewith pursuant to this Agreement. No other shares
of capital stock of the Company or Bartels have been issued or reserved for
issuance, except 385,000 shares of Common Stock reserved for issuance in the
event options granted pursuant to the 1989 and 1990-1991 Stock Option Plans of
the Company are exercised, 730,000 shares of Common Stock reserved for issuance
in the event of the conversion of the shares of Series A Preferred Stock and
52,000 shares of Common Stock reserved for issuance in the event of the exercise
of the Series A Warrant, both having been granted pursuant to the 1994 Stock
Purchase Agreement, 850,000 shares of Common Stock reserved for issuance in the
event of the conversion of the shares of Series A-I Preferred Stock granted
pursuant to the 1995 Stock Purchase Agreement, 86,462 shares of Common Stock
reserved for issuance in the event of the exercise of warrants granted pursuant
to the Warrant Agreement, dated September 22, 1995, between the Company and
Dublind Investments, L.L.C., 91,177 shares of Common Stock reserved for issuance
in the event of the exercise of the warrants granted pursuant to the Warrant
Agreement, dated November 16, 1995, between the Company and Creditanstalt
Bankverein ("Creditanstalt"), 94,010 shares of Common Stock reserved for
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issuance in the event of exercise of the warrants granted pursuant to the Series
A-II Warrant and Note Purchase Agreement, dated December 27, 1995, between the
Company and Purchaser, 159,073 shares of Common Stock reserved for issuance in
the event of exercise of the warrants granted pursuant to the Note and Series
A-III Warrant Purchase Agreement, dated June 11, 1996 between the Company and
CoreStates Enterprise Fund, a division of CoreStates Bank, N.A. ("CoreStates")
and 79,537 shares of Common Stock reserved for issuance in the event of the
exercise of the Warrant granted pursuant to the Note and Series A-IV Warrant
Purchase Agreement, dated June 21, 1996 between the Company and Purchaser (the
"Note Agreement"). The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of the Series A
Preferred Stock, the Series A-1 Preferred Stock and the Series A-2 Preferred
Stock are as set forth in both of the Certificates of Vote of Directors
Establishing a Series of a Class of Stock, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable laws. Except as
provided for in the Charter, the Company has no obligation (contingent or other)
to purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. This Section 2.4 sets forth the aggregate number of outstanding
warrants, options, agreements, convertible securities or other commitments
pursuant to which the Company is or may become obligated to issue any shares of
its capital stock or other securities of the Company. Except as set forth above
in this Section 2.4, there are no preemptive or similar rights to purchase or
otherwise acquire shares of capital stock of the Company pursuant to any
provisions of law, the Charter or By-laws of the Company, in each case as
amended to the date hereof, or any agreement to which the Company is a party or
otherwise. Except as set forth above in this Section 2.4, or as contemplated
herein, immediately upon consummation at the Closing of the transactions
contemplated hereby there will be no agreement, restriction or encumbrance (such
as a right of first refusal, right of first offer, proxy, voting agreement,
voting trust, bring-along or come-along rights) with respect to the sale or
voting of any shares of capital stock of the Company (whether outstanding or
issuable upon conversion or exercise of outstanding securities) of which the
Company has knowledge.
SECTION 2.5. Financial Statements. The Company has furnished to the
Purchaser the audited balance sheet of the Company for the six months ended
December 31, 1995 (the "Balance Sheet") and the related audited statements of
income, stockholders' equity and cash flows of the Company for the six months
ended December 31, 1995, and the balance sheet of the Company as of September
30, 1996 and the related statements of income, stockholders' equity and cash
flows of the Company as of September 30, 1996. All such financial statements
have been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial position of the Company as
of December 31, 1995 and September 30, 1996, respectively, and the results of
its operations and cash flows as of December 31, 1995 and September 30, 1996,
respectively. Except as set forth on Schedule 2.12, since the date of the
Balance Sheet, (i) there has been no change in the assets, liabilities or
financial condition of the Company from that reflected in the Balance Sheet
except for changes in the ordinary course of business which in the aggregate
have not been materially adverse and (ii) none of the business, financial
condition, operations or property of the Company have been materially adversely
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affected by any occurrence or development, individually or in the aggregate,
whether or not insured against.
SECTION 2.5A. Absence of Undisclosed Liabilities and Changes. Except as
set forth on Schedule 2.5A attached hereto, as of the date hereof, (a) the
Company had no liabilities of any nature (matured or unmatured, fixed or
contingent) which were not provided for on the balance sheet of the Company as
of such date, except for (i) liabilities which, individually and in the
aggregate, were not material to the financial condition of the Company or (ii)
liabilities incurred in the ordinary course of the Company's business and not
required to be so provided for under generally accepted accounting principles,
and (b) all reserves established by the Company and set forth on such balance
sheet were adequate in all material respects. There are no loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5
("Statement No. 5") issued by the Financial Accounting Standards Board in March
1975) which are not adequately provided for in such balance sheet as required by
Statement No. 5.
SECTION 2.6. Events Subsequent to the Date of the Balance Sheet. Except
as set forth in the attached Schedule 2.6, since the date of the Balance Sheet,
except as contemplated by this Agreement, neither the Company nor Bartels has
(i) issued any stock, bond or other corporate security, (ii) borrowed any amount
or incurred or become subject to any liability (absolute, accrued or
contingent), except current liabilities incurred and liabilities under contracts
entered into in the ordinary course of business, (iii) discharged or satisfied
any lien or encumbrance or incurred or paid any obligation or liability
(absolute, accrued or contingent) other than current liabilities shown on the
Balance Sheet and current liabilities incurred since the date of the Balance
Sheet in the ordinary course of business, (iv) declared or made any payment or
distribution to stockholders or purchased or redeemed any share of its capital
stock or other security, (v) mortgaged, pledged or subjected to lien any of its
assets, tangible or intangible, other than liens of current real property taxes
not yet due and payable, (vi) sold, assigned or transferred any of its tangible
assets except in the ordinary course of business, or canceled any debt or claim,
(vii) sold, assigned, transferred or granted any exclusive license with respect
to any material patent, trademark, trade name, service mark, copyright, trade
secret or other intangible asset other than in the ordinary course of business,
(viii) suffered any material loss of property or waived any right of substantial
value, (ix) made any change in officer compensation except in the ordinary
course of business and consistent with past practice, (x) made any material
change in the manner of business or operations of the Company or Bartels,
respectively, (xi) entered into any transaction except in the ordinary course of
business or as otherwise contemplated hereby or (xii) entered into any
commitment (contingent or otherwise) to do any of the foregoing.
SECTION 2.7. Litigation; Compliance with Law. Except as set forth in the
attached Schedule 2.6, there is no material (i) action, suit, claim, proceeding
or investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company or Bartels, respectively, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceeding relating to the Company or Bartels, respectively, pending
under a collective bargaining agreement or otherwise or (iii) governmental
inquiry pending or, to
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the knowledge of the Company, threatened against or affecting the Company or
Bartels, respectively (including, without limitation, any inquiry as to the
qualification of the Company or Bartels, respectively, to hold or receive any
license or permit). The Company has not received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to its
business, financial condition, operations or property. The Company is not in
default with respect to any order, writ, injunction or decree known to or served
upon the Company of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no material action or suit by the Company pending
or threatened against others. Each of the Company and Bartels has complied in
all material respects with all laws, rules, regulations and orders applicable to
its business, operations, properties, assets, products and services, and each of
the Company and Bartels has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed to
be conducted, except where the failure to own or possess such permits, licenses
or authorizations could not, either singly or in the aggregate, have a material
adverse effect on the business, operations, properties or financial condition of
the Company.
SECTION 2.8. Title to Properties. Except in instances that, either
singly or in the aggregate, could not have a material adverse effect on the
business, operations, properties or financial condition of the Company, and
except as disclosed in Schedule 2.8 hereof, each of the Company and Bartels has
good and marketable title to its properties and assets reflected on the Balance
Sheet (other than properties and assets disposed of in the ordinary course of
business since the date of the Balance Sheet), and all such properties and
assets are free and clear of mortgages, pledges, security interests, liens,
charges, claims, restrictions and other encumbrances, except for liens for
current taxes not yet due and payable and minor imperfections of title, if any,
not material in nature or amount and not materially detracting from the value or
materially impairing the use of the property subject thereto or impairing the
operations or proposed operations of the Company or Bartels, respectively.
SECTION 2.9. Leasehold Interests. Each lease or agreement to which the
Company or Bartels, respectively, is a party under which it is a lessee of any
property, real or personal (a list of all leases being attached hereto as
Schedule 2.9), is a valid and subsisting agreement without any material default
of the Company or Bartels, respectively, thereunder and, to the knowledge of the
Company, without any material default thereunder of any other party thereto. No
event has occurred and is continuing which, with due notice or lapse of time or
both, would constitute a default or event of default by the Company or Bartels,
respectively, under any such lease or agreement or, to the knowledge of the
Company, by any other party thereto.
SECTION 2.10. Insurance. The Company holds valid policies covering all
of the insurance required to be maintained by it under Section 5.3. Schedule
2.10 lists all insurance policies which the Company maintains with respect to
its businesses, properties and employees. Such policies are in full force and
effect and the Company has received no notice of termination from the insurance
carriers. Such policies, with respect to their amounts, deductibles and types of
coverage, are adequate in the reasonable commercial judgment of the Company to
insure against risks to which the Company and its respective businesses are
subject. Since the date of
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the Balance Sheet, there has been no material adverse change in the Company's
relationship with its insurers or in the premiums payable pursuant to such
policies.
SECTION 2.11. Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns, foreign, Federal, state, county and local,
required to be filed by it, and the Company has paid all taxes shown to be due
by such returns and extensions as well as all other taxes, assessments and
governmental charges which have become due or payable, including, without
limitation, all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. All such taxes with respect to
which the Company has become obligated have been paid and adequate reserves have
been established for all taxes accrued but not yet payable. No deficiency
assessment with respect to or proposed adjustment of the Company's foreign,
Federal, state, county or local taxes is pending or, to the knowledge of the
Company, threatened. There is no tax lien in favor of any foreign, Federal,
state, county or local authority, outstanding against the assets, properties or
business of the Company. Neither the Company nor any of its stockholders has
ever filed a consent pursuant to Section 341(f) of the internal Revenue Code of
1986, as amended (the "Code"), relating to collapsible corporations.
SECTION 2.12. Other Agreements. Except as set forth in the attached
Schedule 2.12, neither the Company nor Bartels is a party to or otherwise bound
by any written or oral contract or instrument or other restriction which
individually or in the aggregate could materially adversely affect the business,
financial condition, operations or property of the Company. Except as set forth
in the attached Schedule 2.12, or as a result of the transactions contemplated
in this Agreement, neither the Company nor Bartels is a party to or otherwise
bound by any written or oral:
(a) distributor, dealer, manufacturer's representative or sales
agency contract or agreement which is not terminable on less than ninety
(90) days' notice without cost or other liability to the Company;
(b) sales contract which entitles any customer to a rebate or
right of set-off, to return any product to the Company after acceptance
thereof or to delay the acceptance thereof, or which varies in any
material respect from the Company's standard form contracts;
(c) contract with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of
its employees);
(d) contract or other commitment with any supplier containing any
provision permitting any party other than the Company or Bartels to
renegotiate the price or other terms, or containing any pay-back or
other similar provision, upon the occurrence of a failure by the Company
or Bartels to meet its obligations under the contract when due or the
occurrence of any other event;
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(e) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its
normal operating requirements;
(f) contract for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings) on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company,
except normal severance arrangements and accrued vacation pay;
(g) agreement or indenture relating to the borrowing of money or
to the mortgaging or pledging of, or otherwise placing a lien or
security interest on, any asset of the Company or Bartels;
(h) guaranty of any obligation for borrowed money or otherwise;
(i) agreement, or group of related agreements with the same party
or any group of affiliated parties, under which the Company or Bartels
has advanced or agreed to advance money or has agreed to lease any
property as lessee or lessor;
(j) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or
redeem any share of its capital stock or any of its other equity
securities;
(k) assignment, license or other agreement with respect to any
form of intangible property or Intellectual Property or the development
or use thereof;
(l) agreement under which it has granted any person any
registration rights;
(m) agreement under which it has limited or restricted its right
to compete with any person in any respect; or
(n) other contract or group of related contracts with the same
party involving more than $50,000 or continuing over a period of more
than one year from the date or dates thereof (including renewals or
extensions optional with another party), which contract or group of
contracts is not terminable by the Company or Bartels without penalty
upon notice of thirty (30) days or less, but excluding any contract or
group of contracts with a customer of the Company or Bartels for the
sale, lease or rental of the Company's or Bartels' products or services
if such contract or group of contracts was entered into by the Company
or Bartels in the ordinary course of business.
SECTION 2.13. Patents, Trademarks, etc. Set forth in Schedule 2.13 is a
list and brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such which are in the
process of being prepared, owned by or registered in the name of the Company or
Bartels, or of which the Company or Bartels is a licensor or licensee or in
which the Company or Bartels has any right, and in each case a brief description
of the nature of such right. Except as set forth on Schedule 2.13, each of the
Company and Bartels owns or
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possesses adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, copyrights, manufacturing processes, formulas, trade
secrets and know-how (collectively, "Intellectual Property") necessary to the
conduct of its business as presently conducted, and no claim is pending or, to
the knowledge of the Company, threatened to the effect that the operations of
the Company or Bartels infringe upon or conflict with the rights of any other
person under any Intellectual Property, and to the knowledge of the Company
there is no basis for any such claim. No claim is pending or to the knowledge of
the Company threatened to the effect that any such Intellectual Property owned
or licensed by the Company or Bartels, or which the Company or Bartels otherwise
has the right to use, is invalid or unenforceable by the Company, and to the
knowledge of the Company there is no basis for any such claim. To the knowledge
of the Company, all technical information developed by and belonging to the
Company or Bartels, as applicable, which has not been patented, has been kept
confidential. The Company has not granted or assigned to any other person or
entity any right to manufacture, have manufactured, assemble or sell any
products or proposed products of the Company and to the knowledge of the Company
no other person or entity has asserted any such right.
SECTION 2.14. Loans and Advances. Except as set forth on Schedule 2.14,
neither the Company nor Bartels has any outstanding loans or advances to any
person and is not obligated to make any such loans or advances, except, in each
case, for advances to employees of the Company or Bartels in respect of
reimbursable business expenses anticipated to be incurred by them in connection
with their performance of services for the Company or Bartels.
SECTION 2.15. Assumptions, Guaranties, etc. of Indebtedness of Other
Persons. Neither the Company nor Bartels has assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on any indebtedness of any
other person (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in a debtor, or otherwise to assure a creditor
against loss), except for guaranties by endorsement of negotiable instruments
for deposit or collection in the ordinary course of business.
SECTION 2.16. Significant Customers and Suppliers. No customer which
accounted for 10% or more of the Company's sales or revenues during the periods
covered by the financial statements referred to in Section 2.5 or which has been
significant to the Company thereafter has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from the Company. As
of the date of this Agreement, there is no supplier to the Company which is a
sole-source supplier.
SECTION 2.17. Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement and the issuance, sale and delivery of the Series A-2 Preferred,
other than filings pursuant to state securities laws in connection with the sale
of the Series A-2 Preferred.
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SECTION 2.18. Accuracy of Statements. Neither this Agreement nor any
Schedule, Exhibit, statement, list, document, certificate or other information
furnished by or on behalf of the Company to the Purchaser in connection with
this Agreement or any of the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
SECTION 2.19. Employment Relations. (a) The Company is in material
compliance with applicable federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, safety, terms and
conditions of employment and wages and hours.
(b) The Company does not maintain or contribute to any employee
benefit plan ("Employee Benefit Plan") within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to ERISA but which is not in substantial
compliance with ERISA, or which has incurred any material liability to
the Pension Benefit Guaranty Company ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of
its subsidiaries or ceased operations at any facility or withdrawn from
any such Plan in a manner which could subject it to material liability
under Section 462(f), 4063 or 4064 of ERISA, and knows of no facts or
circumstances which might give rise to any material liability of the
Company to the PBGC under Title IV of ERISA.
SECTION 2.20. Compensation of Key Employees. Schedule 2.20 sets forth
the aggregate compensation (salaries, wages and bonuses) paid by the Company to
its four most highly compensated employees for the 1996 fiscal year and the
amount of such compensation scheduled to be paid to such employees for the 1997
fiscal year.
SECTION 2.21. Environmental Compliance. The Company is in compliance
with all applicable laws relating to environmental matters in each jurisdiction
where it is presently engaged in a material manufacturing business, except for
such failures to comply which, in the aggregate, could reasonably be expected
not to have a material adverse effect on the Company. The Company is not subject
to any liability under any such environmental laws, that, in the aggregate for
all such liabilities, could be reasonably expected to have a material adverse
effect on the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as of the Closing
Date that:
SECTION 3.1. Purchase of Series A-2 Preferred. (a) It is an "accredited
investor" within the meaning of Rule 501 under the Securities Act and was not
organized for the specific purpose of acquiring the Series A-2 Preferred.
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(b) It has sufficient knowledge and experience in investing
in companies in a similar stage of development to the Company so as to
be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof.
(c) It has had an opportunity to discuss the Company's business,
management and financial condition with the Company's management.
(d) It is purchasing the Series A-2 Preferred for its own account
for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof.
(e) It understands that (i) the Series A-2 Preferred has not been
registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, (ii) the Series A-2 Preferred must be held
indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration requirements,
(iii) the Series A-2 Preferred will bear a legend to such effect and
(iv) the Company will make a notation on its transfer ledger to such
effect.
SECTION 3.2. Authority. It has all requisite power and authority to
execute, deliver and perform this Agreement, and has taken all necessary action
to authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement on the
Closing Date will constitute, the legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except (i) to the extent
that enforceability may be limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (ii) that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceedings therefor may be brought.
SECTION 3.3. Projections. It understands that any and all financial
projections and other estimates delivered to it were based on the Company's
experience in the industry and on assumptions of fact and opinion which the
Company believes to have been, and to be, reasonable. It understands that the
Company cannot and does not assure or guarantee the attainment of such
projections or other estimates.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to purchase and pay for the Series A-2
Preferred being purchased by it on the Closing Date is, at its option, subject
to the satisfaction of the Purchaser and its counsel, on or before the Closing
Date, of the following conditions:
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SECTION 4.1. Opinion of Company's Counsel. The Purchaser shall have
received from Morrison & Foerster LLP, counsel for the Company, an opinion dated
the Closing Date, in the form attached as Exhibit B and otherwise satisfactory
in form and scope to the Purchaser and its counsel as to such other matters as
the Purchaser or its counsel may reasonably request.
SECTION 4.2. Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II shall be true, complete
and correct on and as of such Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President of the Company shall have certified to such effect to the Purchaser in
writing.
SECTION 4.3. Performance. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the President of the Company shall
have certified to the Purchaser in writing to such effect and to the further
effect that all of the conditions set forth in this Article IV have been
satisfied.
SECTION 4.4. All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchaser and its counsel, and the Purchaser and its
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
SECTION 4.5. Supporting Documents. At the Closing, the Purchaser and
its counsel shall have received copies of the following documents:
(a) (i) the Charter, certified as of a recent date by the
Secretary of State of the Commonwealth of Massachusetts and (ii) a
certificate of said Secretary dated as of a recent date as to the due
incorporation and subsistence of the Company and listing all documents
of the Company on file with said Secretary;
(b) a certificate of the Clerk or an Assistant Clerk of the
Company dated the Closing Date and certifying: (i) that attached thereto
is a true and complete copy of the By-laws of the Company as in effect
on the date of such certification; (ii) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance of
this Agreement, the issuance, sale and delivery of the Series A-2
Preferred and that all such resolutions are in full force and effect and
are all the resolutions adopted in connection with the transactions
contemplated by this Agreement; (iii) that the Charter has not been
amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (a)(ii) above, except as
contemplated by Exhibit A; and (iv) to the incumbency and specimen
signature of each officer of the Company executing this Agreement or any
of the stock certificates representing the Series A-2 Preferred and any
certificate or instrument furnished pursuant hereto, and a certification
by another officer of the Company as to the
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incumbency and signature of the officer signing the certificate referred
to in this clause (b); and
(c) such additional supporting documents and other information
with respect to the operations of the Company as the Purchaser or its
counsel may reasonably request.
(d) Legal Fees. At the Closing, the Company shall pay the
reasonable fees and expenses of Reboul, MacMurray, Hewitt, Maynard &
Kristol incurred for Northstar in connection with the transactions
contemplated by this Agreement.
SECTION 4.6. Certificate of Designation. The Certificate of Vote of
Directors Establishing a Series or a Class of Stock with respect to the Series
A-2 Preferred in substantially the form of Exhibit A (the "Certificate of
Designation") shall have been filed with the Secretary of State of
Massachusetts.
SECTION 4.7. Consents. Except with respect to the consent of MBDC, the
obtaining of which consent the Purchaser has expressly waived, the written
consent of Creditanstalt Bankverein and any other party without whose consent
the Company could not effect the transactions contemplated hereby or pay cash
dividends to the Purchaser in respect of the Shares as provided for in the
Certificate of Designation shall have been received in form and substance
satisfactory to the Purchaser and its counsel.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchaser that so long as the
Purchaser (or an affiliate thereof) owns at least 25 % of the shares of Series
A-2 Preferred purchased by the Purchaser:
SECTION 5.1. Financial Statements, Reports, etc. The Company shall
furnish to each holder of Series A-2 Preferred:
(a) as soon as available, but in any event within 90 days after
the end of each fiscal year of the Company, a copy of the consolidated
balance sheet of the Company and its subsidiaries with which it is
consolidated for financial statement purposes ("Subsidiaries") as at the
end of such year and the related consolidated statements of income,
stockholders' equity and cash flows for such year, setting forth in each
case comparisons to the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Ernst & Young or
other independent certified public accountants of nationally recognized
standing;
(b) as soon as available, but in any event not later than 30 days
after the end of each month of each fiscal year of the Company, the
unaudited consolidated balance sheet
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<PAGE> 18
of the Company and its Subsidiaries as at the end of such month and the
related unaudited consolidated statements of income, stockholders'
equity and cash flows of the Company and its Subsidiaries for such month
and the portion of the fiscal year through the end of such month,
setting forth in each case comparisons to the figures for the previous
year certified by an executive officer of the Company (a "Responsible
Officer") as being fairly stated in all material respects (subject to
normal year-end audit adjustments);
(c) all such financial statements shall be complete and correct
in all material respects and shall be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such
accountants or officer, as the case may be, and disclosed therein) and
shall be accompanied by a management discussion and analysis in respect
of the fiscal periods reported on therein;
(d) concurrently with the delivery of the financial statements
referred to in clause (a) above, a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default (as such terms are
defined in the notes (the "Notes") issued pursuant to the Note
Agreement), except as specified in such certificate;
(e) concurrently with the delivery of the financial statements
referred to in clause (a) or clause (b) above, a certificate of a
Responsible Officer stating that, to the best of such officer's
knowledge, the Company during such period and as of the date of such
certificate has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement
to be observed, performed or satisfied by it, and that such officer has
obtained no knowledge of any Default or Event of Default during such
period or on or prior to the date of such certificate except as
specified in such certificate;
(f) not later than 30 days prior to the end of each fiscal year
of the Company, a copy of the projections by the Company for the
operating budget and cash flow budget of the Company and its
Subsidiaries for the succeeding fiscal year, such projections to be
accompanied by a certificate of a Responsible Officer to the effect that
such projections have been prepared on the basis of sound financial
planning practice and that such officer has no reason to believe they
are incorrect or misleading in any material respect;
(g) within 5 days after the same are sent, copies of all
financial statements and reports which the Company sends to its other
stockholders, and within 5 days after the same are filed, copies of all
financial statements and reports which the Company may make to, or file
with, the Securities and Exchange Commission or any successor or
analogous governmental authority;
(h) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations
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<PAGE> 19
or financial affairs given to the Company by its independent certified
public accountants (and not otherwise contained in other materials
provided hereunder);
(i) during the month of October in each calendar year, a report
of a reputable insurance broker with respect to the Company's insurance;
(j) promptly, and in any case within five business days
thereafter, written notice of the commencement of any action, suit or
proceeding before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting
the Company or any of its Subsidiaries, and of any material adverse
development in connection with any of the foregoing, in each case
described in reasonable detail (including a description of the parties,
the venue and the nature of the claim); and
(k) promptly, such additional financial and other information as
the holder of Series A-2 Preferred may from time to time reasonably
request.
SECTION 5.2. Corporate Existence. The Company shall maintain its
corporate existence, rights and franchises in full force and effect.
SECTION 5.3. Properties, Business, Insurance. The Company shall maintain
with financially sound and reputable insurers, insurance against such casualties
and contingencies and of such types and in such amounts and with such deductible
as are customary for companies similarly situated, including but not limited to
fire and other risks insured against by extended coverage, product liability
insurance, key person insurance and public liability insurance against claims
for personal injury or death or property damage occurring upon, in, about or in
connection with the use of any properties owned, occupied or controlled by the
Company, which insurance shall be deemed by the Company to be sufficient; and
maintain workers' compensation insurance and such other insurance as may be
required by law. The Company shall keep all property useful and necessary in its
business in good working order and condition in accordance with industry
standards and applicable law.
SECTION 5.4. Inspection, Consultation and Advice. The Company shall
permit the Purchaser at the expense of the Purchaser (unless occasioned by a
default by the Company of its obligations under this Agreement, or the terms of
the Series A-2 Preferred Stock, and then at the Company's expense), to visit and
inspect any of the properties of the Company, examine its books and take copies
and extracts therefrom, discuss the finances and accounts of the Company with
its officers, employees and public accountants (and the Company hereby
authorizes said accountants to discuss with the Purchaser such finances and
accounts), and consult with and advise the management of the Company and its
independent certified public accountants as to its finances and accounts, all at
reasonable times and upon reasonable notice.
SECTION 5.5. Restrictive Agreements Prohibited. The Company shall not
become a party to any agreement which by the terms thereof or as a result of the
performance thereof restricts the Company's performance of, or ability to
perform, this Agreement or the Charter.
15
<PAGE> 20
SECTION 5.6. Board of Directors Meetings. The Company shall use its
best efforts to ensure that meetings of its Board of Directors are held at least
semi-annually.
SECTION 5.7. Compliance with Laws. The Company shall comply with all
applicable laws, rules, regulations and orders, and each of its Contractual
Obligations (as defined in the Notes), in each case to the extent any such
noncompliance could materially adversely affect its business or condition,
financial or otherwise.
SECTION 5.8. Keeping of Records and Books of Account. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions of the Company, and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
SECTION 5.9. Maintaining Nature of Business. The Company will remain in
the business of researching and developing, manufacturing and distributing
biotechnology and healthcare products.
SECTION 5.10. Obligations and Taxes. The Company shall pay when due all
of its indebtedness and obligations promptly and in accordance with their terms
and pay and discharge promptly all taxes, assessments and governmental charges
or levies imposed upon it or its income or profits or in respect of its
properly, before the same shall become in default, as well as all lawful claims
for labor and supplies or otherwise which, if unpaid, might become a lien or
charge upon such properties or any part thereof, provided, however, that the
Company shall not be required to pay and discharge or to cause to be paid and
discharged any indebtedness, obligation, tax, assessment, charge, levy or claim
so long as the validity or amount thereof shall be contested in good faith by
appropriate proceedings and the Company shall have set aside on its books such
reserves as may be required by generally accepted accounting principles with
respect to any such tax, assessment, charge, levy or claim so contested.
SECTION 5.11. Further Issuances of Series A-2 Preferred. The Company
shall not, directly or indirectly, issue, offer to sell, effect any sale or
otherwise dispose of by any means any shares of Series A-2 Preferred or rights
to acquire such shares or securities convertible into or exchangeable for such
shares without the prior written consent of the majority of the holders of the
Series A-2 Preferred.
SECTION 5.12. Notices. The Company shall promptly give notice to each
holder of Series A-2 Preferred of:
(a) the occurrence of any Default or Event of Default;
(b) any (1) default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries or (2) litigation,
investigation or proceeding which may exist at any time between the
Company or any of its Subsidiaries and any Governmental Authority (as
such term is defined in the Notes), which in either case, if
16
<PAGE> 21
not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect (as such term
is defined in the Notes);
(c) any litigation or proceeding affecting the Company or any of
its Subsidiaries in which the amount involved is $250,000 or more and
not covered by insurance or in which injunctive or similar relief is
sought;
(d) the following events, as soon as possible and in any event
within 30 days after the Company knows or has reason to know thereof:
(1) the occurrence or expected occurrence of any Reportable Event (as
such term is defined in the Notes) with respect to any Plan, a failure
to make any required contribution to a Plan (as such term is defined in
the Notes), the creation of any Lien in favor of the PBGC (as such term
is defined in the Notes) or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency (as such terms are defined in
the Notes) of, any Multiemployer Plan (as such term is defined in the
Notes) or (2) the institution of proceedings or the taking of any other
action by the PBGC or the Company or any Commonly Controlled Entity (as
such term is defined in the Notes) or any Multiemployer Plan with
respect to the withdrawal from, or the terminating, Reorganization or
Insolvency of, any Plan;
(e) any material adverse change in the business, operations,
property, condition (financial or otherwise) or prospects of the Company
and its Subsidiaries taken as a whole;
(f) any application or registration relating to any material
patent or trademark of the Company or any of its Subsidiaries becoming
abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country)
regarding the Company's or Bartels' ownership of any material patent or
trademark or its right to register the same or to keep and maintain the
same.
Each notice pursuant to this Section 5.12 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Company proposes to take with respect
thereto.
SECTION 5.13. Environmental Matters. (a) The Company shall comply with,
and ensure compliance by all tenants and subtenants, if any, with, all
applicable Environmental Laws (as such term is defined in the Notes) and obtain
and comply with and maintain, and ensure that all tenants and subtenants obtain
and comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws.
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply with all lawful
orders and directives of all Governmental Authorities regarding
Environmental Laws.
17
<PAGE> 22
SECTION 5.14. The Exchange Notes; Security Interest; Guaranty. (a)
Immediately upon the issuance by the Company of one or more notes (the "Exchange
Notes") pursuant to the Certificate of Designation (which Exchange Notes shall
be in substantially the form of Exhibit C hereto), the Company and Bartels agree
to execute such agreements and other documents such that payment of the Exchange
Notes is guaranteed by Bartels and the Exchange Notes are secured by all of the
assets of the Company (including all intellectual property and the assets and
stock of subsidiaries formed after the date of this Agreement), with the
obligation of Bartels under the aforementioned guaranty to be secured by all of
the assets of Bartels (including all intellectual property), all the extent
practicable, to the same extent (limited only to the extent not then currently
possible) as payment of the Notes has been guaranteed and secured pursuant to
the:
(i) Junior Subordinated Security Agreement between the
Company, Bartels and Purchaser dated as of June 21, 1996;
(ii) Junior Subordinated Pledge Agreement between the
Company and Purchaser dated as of June 21, 1996;
(iii) Junior Subordinated subsidiary Guaranty by Bartels
in favor of Purchaser, as Lender, dated as of June 21, 1996;
(iv) Agreement (Patent) between the Company, as Grantor,
and Purchaser, as Lender, dated as of June 21, 1996;
(v) Agreement (Trademark) between the Company, as Grantor,
and Purchaser as Lender, dated as of June 21, 1996;
(vi) Agreement (Patent) between Bartels, as Grantor, and
Purchaser, as Lender, dated as of June 21, 1996;
(vii) Agreement (Trademark) between Bartels, as Grantor,
and Purchaser, as Lender, dated as of June 21, 1996;
(b) The Company and Bartels further agree to immediately take all
action necessary to perfect such security interests; provided, however,
that the preceding undertaking by the Company and Bartels shall not be
deemed to be a covenant by either of them that such security interests
shall have the same priority as those that have been heretofore securing
payment of the Notes.
SECTION 5.15. Waivers. The Company agrees that it will not enter into a
waiver with respect to a default under an agreement for borrowed money if such
waiver provides that cash dividends may not be paid under the terms of the
Certificate of Designation after the date on which the default has been cured
(other than a deemed cure of such default by reason of the existence of the
waiver).
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<PAGE> 23
SECTION 5.16. Payment of Dividends. The Company agrees to pay all
dividends due to Northstar High Total Return Fund as follows:
For cash payments:
CTC NJ
ABA No. 031207526
BNF=TRUST
OBI=NORTHSTAR HIGH TOTAL RETURN FUND
For payments in kind:
Custodial Trust Corp.
101 Carnegie Center
Princeton, NJ 08540
Attn.: Ms. Ann Pedersen
SECTION 5.17. Further Assurances. The Company and the Purchaser hereby
agree to take such further action as shall be commercially and reasonably
necessary to provide each party hereto with the benefits intended to be granted
by this Agreement to such party.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Expenses. (a) Except to the extent provided in Section
4.6, each party hereto will pay its own expenses in connection with the
transactions contemplated hereby whether or not such transactions shall be
consummated.
(b) The Company will also pay, and will save the Purchaser
harmless from, any and all liabilities with respect to any taxes, and
interest and penalties thereon (other than taxes which are measured
solely by the income of the Purchaser), which may be payable in respect
of the execution and delivery of this Agreement, or the issue of the
Series A-2 Preferred Stock.
SECTION 6.2. Survival of Agreements. Unless otherwise expressly stated
herein, or in any certificate or instrument delivered to the Purchaser pursuant
thereto, all covenants and agreements, made herein, or any certificate or
instrument delivered to the Purchaser pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement, and the
issuance, sale and delivery of the shares of the Series A-2 Preferred. All
statements contained in any certificate or other instrument delivered by the
Company hereunder or thereunder or in connection herewith or therewith shall be
deemed to constitute representations and warranties made by the Company.
SECTION 6.3. Brokerage. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements,
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<PAGE> 24
arrangements or understandings made or claimed to have been made by such party
with any third party.
SECTION 6.4. Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Purchaser shall inure to the benefit of any and all subsequent
holders from time to time of shares of Series A-2 Preferred.
SECTION 6.5. Notices; Payment of Dividends. All notices, requests,
consents and other communications hereunder shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, or telexed in the case of non U.S. residents, addressed as follows:
(a) if to the Company, at Intracel Corporation, 1871 N.W.
Gilman Blvd., Issaquah, WA 98027, Attention: Simon R. McKenzie, with a
copy to Joseph W. Bartlett, Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, New York 10104; and
(b) if to the Purchaser, at the address set forth beneath the
Purchaser's name; or, in any such case, at such other address or
addresses as shall have been furnished in writing by such party to the
others.
So long as the Purchaser or any affiliate of the Purchaser, or a nominee
of either, shall be the holder of Series A-2 Preferred, and in addition to any
provision contained in the Articles of Organization with respect to the method
of payment of dividends, the Company will pay all dividends on Series A-2
Preferred owned by such person by the method and at the addresses specified for
such purposes on the attached Schedule I, or by such other method or at such
other address as such person shall have specified to the Company in writing for
such purposes. The Company shall accord the benefits of this paragraph to any
institutional purchaser which shall have purchased shares of Series A-2
Preferred directly from the Purchaser or an affiliate of the Purchaser.
SECTION 6.6. Replacement of Certificates. Upon receipt of evidence
reasonable satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate evidencing ownership of shares of Series A-2
Preferred by the Purchaser or an affiliate of the Purchaser, or a nominee of
either (a "Certificate" for purposes of this Section 6.6) and, in the case of
loss, theft or destruction of any Certificate upon delivery of an indemnity bond
in such reasonable amount as the Company may determine (but if such holder is an
insurance company, an unsecured indemnity agreement from such holder shall
suffice) or, in the case of mutilation upon surrender of such Certificate for
cancellation to the Company at its principal office, the Company at its expense
will execute and deliver in lieu thereof a new Certificate for the same number
of shares as were evidenced by such lost, stolen, destroyed or mutilated
Certificate which
20
<PAGE> 25
shall be in such form and tenor as not to cause any loss of accrued dividends on
the shares evidenced by the lost, stolen, destroyed or mutilated Certificate.
SECTION 6.7. Governing Law. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of New York,
regardless of the jurisdiction of creation or domicile of the Company or its
successors or of the Purchaser (without giving effect to such jurisdiction's
choice of law principles that would result in the application of any law other
than that of the State of New York), except that the filing, perfection, effect
of perfection and enforcement of security interests and liens in other
jurisdictions shall be governed by the laws of the applicable jurisdictions in
accordance with the Uniform Commercial Code as then in effect under the laws of
the respective state of reference.
SECTION 6.8. Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 6.9. Submission to Jurisdiction; Waivers. Each of the Company
and the Purchaser hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the Courts of the State of New York, the courts
of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service or process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Company at its address set forth in Section 6.5 or at
such other address of which the Purchaser shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
SECTION 6.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 26
SECTION 6.11. Amendments. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the holders of at least two-thirds of the outstanding shares of the
Series A-2 Preferred.
SECTION 6.12. Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.13. Titles and Subtitles. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
22
<PAGE> 27
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the day and year first above written.
<TABLE>
<S> <C>
INTRACEL CORPORATION
[Corporate Seal] By:
-------------------------------------------
Name: Simon R. McKenzie
Title: President and Chief Executive
Officer
Attest: By:
-------------------------------------------
Name:
Title:
- -----------------------------------
Name: Cheryl Cataldo SOLELY FOR PURPOSES OF SECTION 5.14
Title: Clerk BARTELS, INC.
By:
-------------------------------------------
Name:
Title:
PURCHASER:
NORTHSTAR HIGH TOTAL RETURN FUND
By:
-------------------------------------------
Name: Thomas Ole Dial
Title: Vice President
Address: 2 Pickwick Plaza, c/o Thomas Ole
Dial, Greenwich, CT 06803
Attention: Michael Graves
copy to: Karen Wiedemann, Esq,
Reboul, MacMurray, Hewitt,
Maynard & Kristol
45 Rockefeller Plaza
New York, New York
</TABLE>
23
<PAGE> 28
EXHIBIT A
The following is a statement of the designation and the powers, privileges
and rights, and the qualifications, limitations, or restrictions thereof in
respect of the Series A-2 Preferred Stock of the Corporation, no par value per
share, which shall consist of and be limited to a number of shares not to
exceed 155,000 shares.
A. Series A-2 Preferred Stock.
1. Voting.
(a) General. Except as may otherwise be required hereby or by
law, the shares of Series A-2 Preferred Stock shall not
entitle the holder thereof to have any rights to vote or to
receive any notice of any meeting of the holders of the
Corporation's stock; provided, however, that in the event
the Corporation proposes to sell all or substantially all
of its assets, the holders of shares of Series A-2
Preferred Stock shall be entitled to a number of votes for
each share of Series A-2 Preferred Stock voting with the
holders of the Corporation's Common Stock, equal to 100
divided by the then-applicable "Conversion Price" for the
Corporation's Series A-1 Preferred Stock, (as such term is
defined in the Certificate of Vote of Directors
Establishing a Series or a Class of Stock with respect to
the Series A-1 Preferred Stock) at each meeting of
stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) at which such sale of all
or substantially all of the assets of the Corporation is
considered.
(b) Covenants. So long as any shares of Series A-2 Preferred
Stock originally authorized remain outstanding, in addition
to any other rights provided by law, without first
obtaining the affirmative vote or written consent of the
holders of not less than 51% of the then outstanding shares
of the Series A-2 Preferred Stock, the Corporation shall
not:
(i) except for authorizations or issuances provided in
the Corporation's Articles of Organization with
respect to the Corporation's Series A Preferred Stock
and Series A-1 Preferred Stock, amend or repeal any
provision of, or add any provision to, the
Corporation's Articles of Organization or By-laws if
such action would materially alter or change the
preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, any Series
A-2 Preferred Stock, or increase or decrease the
number of shares of Series A-2 Preferred Stock
authorized hereby;
(ii) authorize or issue shares of any class or series of
stock not expressly authorized herein having any
preference or
<PAGE> 29
priority as to dividends, assets or other rights superior to any such
preference or priority of the Series A-2 Preferred Stock, or authorize
or issue shares of stock of any class or any bonds, debentures, notes or
other obligations convertible into or exchangeable for, or having option
rights to purchase, any shares of stock of the Corporation having any
preference or priority as to dividends, assets or other rights superior
to any such preference or priority of the Series A-2 Preferred Stock;
(iii) pay or declare any dividend on any capital stock of the Corporation
which is junior to the Series A-2 Preferred Stock ("Junior Stock")
(other than (x) dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of
Common Stock with respect to Junior Stock other than Common Stock, and
(y) cash in lieu of fractional shares and aggregate dividends since the
last payment of a cash dividend on the Series A-2 Preferred Stock not in
excess of the aggregate cash dividend payment last made in respect of
the Series A-2 Preferred Stock) while the Series A-2 Preferred Stock
remains outstanding, or apply any of its assets to the redemption,
retirement, purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any Junior Stock, except from employees of
the Corporation, upon termination of employment or otherwise pursuant to
the terms of the employee stock purchase or employee stock option plans
of general application which provide for the repurchase of, or right of
first refusal with respect to such Junior Stock entered into with
participating employees;
(iv) recapitalize or reclassify any shares of Capital Stock.
(v) merge into or consolidate with any other corporation (except for a
merger or consolidation which provides the holders of the Series A-2
Preferred Stock with all cash consideration paid at closing equal to the
consideration which would have been received by such holders had the
Series A-2 Preferred Stock been redeemed on the date of such closing
under Section 4(a));
(vi) voluntarily liquidate, dissolve or wind up the Corporation;
(vii) materially change the principal business of the Corporation; or
2
<PAGE> 30
(viii) enter into any agreement that would prohibit, other than
during any period in which the Corporation is in default
under the terms of such agreement, the payment of the
Dividends (as hereinafter defined).
(c) Consent. The Corporation shall obtain the consent of the holders
of not less than 51% of the then outstanding shares of the
Series A-2 Preferred Stock (which consent shall not be
unreasonably withheld) prior to entering into any transaction or
series of related transactions pursuant to which the Corporation
incurs any "Obligation" (as hereinafter defined) of $3,500,000
or more. For purposes of the foregoing sentence. "Obligation"
shall mean any monetary obligation of the Corporation other than
(i) trade payables and other unsecured obligations incurred by
the Corporation in its ordinary course of business, (ii) that
which exists as of the Original Issue Date (as hereinafter
defined), (iii) that is acquired or assumed in connection with
an acquisition, provided that such obligation is secured only by
the assets so acquired, and (iv) any refinancing or replacement
of any obligation of the type described in (ii) and (iii) above,
provided that such refinancings do not result in an increase in
the original principal amount of such obligation (and, in the
event any such refinancing does result in such an increase, only
the amount of such increase shall be deemed to be an
"Obligation" for purposes of this Section 1(c)).
2. Dividends.
(a) The holders of record of outstanding shares of the Series A-2
Preferred Stock shall be entitled to receive dividends (the
"Dividends") payable in cash at a rate equal to thirteen and
one-half percent (13.5%) (the "Dividend Rate") of the
Liquidation Preference (as defined in Section 4(a) hereof),
which shall accrue daily; provided, however, that,
notwithstanding the foregoing, the Dividends with respect to any
period may be paid by the Corporation through the issuance of
additional shares of Series A-2 Preferred Stock ("in kind") when
(i) there has occurred, and is continuing on the date such
Dividends are declared, an event which causes a default (or with
the passage of time or notice would result in a default) under
any agreement for borrowed money to which the Corporation is a
party or under the terms of any preferred stock issued by the
Corporation; the Corporation agrees to use its best efforts to
cure the event causing such default, or (ii) the Corporation
determines that such dividends shall be paid in kind (which
determination may be made by the Corporation with
3
<PAGE> 31
respect to Dividends payable at any time but may not be
utilized by the Corporation with respect to more than ten
(10) payments of Dividends (in addition to the in kind
payments permitted by clause (i) above); provided further,
however, that the ability of the Corporation to pay
Dividends in kind pursuant to clause (i) and (ii) shall
terminate upon the date of repayment (the "Payoff Date") by
the Corporation of all obligations due by the Corporation
under that certain Credit Agreement dated as of November
16, 1995 between the Corporation, the lenders party thereto
and Creditanstalt Bankverein ("Creditanstalt"), as agent;
provided, further, however, that, notwithstanding the
foregoing, from and after February 28, 2007, the Dividend
Rate on all shares of Series A-2 Preferred Stock then
outstanding will increase to nineteen percent (19%) per
annum and the Dividend will be payable only in cash. In the
event a holder of Series A-2 Preferred Stock has not
received any Dividend (whether in cash or in kind) within
five (5) days after a Dividend Payment Date (as hereinafter
defined) (provided, that such holder shall provide notice
to the Corporation that such Dividend has not been paid),
the then-applicable Dividend Rate shall increase by two
percent (2%) for the period commencing on the respective
Dividend Payment Date and ending on the date on which such
Dividend is paid by the Corporation; provided, however,
that notwithstanding the foregoing, the Dividend Rate shall
not increase by two percent (2%) for such period if the
Corporation has in its possession evidence that such
Dividend was paid by it and sent for delivery to the
location directed by such holder in a manner which was
intended to provide for the delivery of such Dividend prior
to the expiration of such five (5) day period. All dividend
payments, regardless of form, shall be paid quarterly,
without notice from any holder of Series A-2 Preferred
Stock, at the rate of 3.375% of the Liquidation Preference,
on each of February 28, May 31, August 31 and November 30
(each, a "Dividend Payment Date") of each year commencing
on May 31, 1997. Each dividend paid in cash or in kind
shall be mailed to the holders of record of the Series A-2
Preferred Stock as their names and addresses appear on the
share register of the Corporation, or to such other name
and address as any holder of record shall have notified the
Corporation of Holders of Series A-2 Preferred Stock will
receive written notification from the Corporation if a
dividend is paid-in-kind, which notification will specify
the number of shares of Series A-2 Preferred Stock paid as
a dividend and the recipient's aggregate
4
<PAGE> 32
holdings of Series A-2 Preferred Stock as of that Dividend
Payment Date and after giving effect to the dividend.
(b) Dividends shall accrue until paid whether or not they have
been declared and whether or not there are profits,
surplus, or other funds legally available for the payment
of dividends. At the earlier of: (i) the redemption of the
Series A-2 Preferred Stock; (ii) the filing of a
registration statement in respect of an underwritten public
offering; or (iii) the liquidation sale or merger of the
Corporation, any accrued but undeclared dividends shall be
paid in cash to the holders of record of outstanding shares
of Series A-2 Preferred Stock.
3. Liquidation
(a) Series A-2 Preferred Stock.
(i) Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary,
the holders of the shares of the Series A-2 Preferred
Stock, only after (x) the holders of the Series A
Preferred Stock shall have been paid in full the
amounts to which they shall be entitled pursuant to
the Certificate of Vote of Directors Establishing a
Series or a Class of Stock with respect to the Series
A Preferred Stock (the "Series A Statement") and (y)
the holders of the Series A-1 Preferred Stock shall
have been paid in full the amounts to which they
shall be entitled pursuant the Certificate of Vote of
Directors Establishing a Series or a Class of Stock
with respect to the Series A-1 Preferred Stock (the
"Series A-1 Statement"), shall be entitled, before
any distribution or payment is made with respect to
the Common Stock or Junior Stock, to be paid in cash
an amount equal to $100.00 per share of the Series
A-2 Preferred Stock plus an amount equal to all
accrued but unpaid dividends thereon, computed to the
date payment thereof is made in immediately available
funds.
(ii) If upon such liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of the
Series A-2 Preferred Stock shall be insufficient to
permit distribution in full to the holders of the
Series A-2 Preferred Stock of the amounts set forth
in this Section 3(a), then the entire remaining
assets of the Corporation shall be distributed
ratably among the holders of the Series A-2 Preferred
Stock
5
<PAGE> 33
(based on their respective holdings of Series A-2
Preferred Stock).
(b) Junior and Common Stock. Upon any such liquidation,
dissolution or winding up of the Corporation, only after
the holders of the Series A Preferred Stock, the Series
A-1 Preferred Stock and Series A-2 Preferred Stock shall
have been paid in full the amounts to which they shall
be entitled pursuant to the Series A Statement, the
Series A-1 Statement and Section 3(a) above,
respectively, may the remaining net assets of the
Corporation be distributed to the holders of Common
Stock and Junior Stock.
(c) Notice. Written notice of such liquidation, dissolution
or winding up, stating a payment date and the place
where said payments shall be made, shall be given by
mail, postage prepaid, or by telex to non-U.S.
residents, not less than 20 days prior to the payment
date stated therein, to the holders of record of the
Series A-2 Preferred Stock, such notice to be addressed
to each such holder at its address as shown on the
records of the Corporation.
4. Redemption by the Corporation.
(a) Optional Redemption.
(i) The Series A-2 Preferred Stock shall be redeemable
by the Corporation, in whole or in part, (x) at
any time prior to February 28, 2000, at a per
share redemption price equal to $100.00 per share
(the "Liquidation Preference") (with all Preferred
Stock which has been issued for payment of
dividends in kind valued at such Liquidation
Preference) plus an amount equal to the additional
dividends that would have been paid by the
Corporation with respect to the originally issued
Series A-2 Preferred Stock (but not the Series A-2
Preferred Stock issued as payment in kind pursuant
to Section 2 hereof) ("Original Preferred Stock")
had the Preferred Stock provided for dividends at
a rate equal to 17.6% per annum rather than 13.5%
per annum; provided, however, that if not all
Preferred Stock is so redeemed, the amount of such
additional dividends to be paid shall be the
product of (A) the amount of additional dividends
calculated as stated above as if all shares being
redeemed were shares of Original Preferred Stock
and (B) a fraction, the numerator of which is the
number of shares of Original Preferred Stock and
the denominator of which is the number of shares
of Series A-2 Preferred Stock then
6
<PAGE> 34
outstanding, and (y) at any time after February
28, 2000, at a per share redemption price equal to
the Liquidation Preference (with all Series A-2
Preferred Stock which has been issued for payment
of dividends in kind valued at the Liquidation
Preference); provided, however, that
notwithstanding the foregoing, in the event that
the Payoff Date has not occurred at the time of
any proposed redemption pursuant to this clause
(i), the Corporation shall be required to obtain
the prior written consent of Creditanstalt prior
to the consummation of any such redemption.
(ii) Written notice of such redemption by the
Corporation, stating a payment date and the place
where said payments shall be made, shall be given
by mail, postage prepaid, or by telex to non-U.S.
residents, not less than 20 days prior to the
payment date stated therein, to the holders of
record of the Series A-2 Preferred Stock, such
notice to be addressed to each such holder at its
address shown on the records of the Corporation.
(iii) Upon receipt of such a notice, each holder of
Series A-2 Preferred Stock shall tender such
holder's shares to the Corporation for redemption,
at an address to be set forth in such notice, at
any time prior to 5:00 p.m. New York City time on
the 15th day following the notice given as
prescribed herein. After the notice of redemption
is sent, the Preferred Stock to which it relates
shall be deemed canceled and thereafter the
certificates evidencing such shares of Preferred
Stock shall represent only the right to receive
redemption proceeds as set forth in this Section.
(b) Cancellation of Redeemed Stock. Any shares of Series A-2
Preferred Stock redeemed pursuant to this Section 4 or
otherwise acquired by the Corporation in any manner
whatsoever shall be canceled and shall not under any
circumstances be reissued; and the Corporation may from
time to time take such appropriate corporate action as
may be necessary to reduce accordingly the number of
authorized shares of the Corporation's capital stock.
5. Right to Elect Directors.
(a) From and after the date on which the Series A-2
Preferred Stock is originally issued (the "Original
Issue Date"), if the Corporation shall be in arrears in
the payment of any three consecutive
7
<PAGE> 35
quarterly dividends on the outstanding shares of Series A-2
Preferred Stock, the number of directors of the Corporation
shall (in addition to any other permitted changes in the size
and composition of the Board of Directors) be increased to a
number (which number of directors, as so increased, shall be
maintained by the Corporation during the period this Section 5
applies) equal to one less than the number obtained by
multiplying the then current number of directors of the
Corporation by two (the number equal to the difference between
the number so obtained and the then current number of directors
of the Corporation, the "Number of Preferred Directors") and the
holders of Series A-2 Preferred Stock, voting separately as a
class, shall have the exclusive right to elect the Number of
Preferred Directors in addition to the number to be elected by
the holders of Common stock or any other shares of preferred
stock of the Corporation, at a special meeting of stockholders
called for the election of directors, and at every subsequent
meeting at which the terms of office of each directors so
elected by the holders of Series A-2 Preferred Stock expire,
provided that such arrearage or failure exists on the date of
such meeting or subsequent meetings, as the case may be.
(b) The right of the holders of Series A-2 Preferred Stock voting
separately as a class to elect the Number of Preferred Directors
as aforesaid shall continue until such time as either all
dividends accumulated on the Series A-2 Preferred Stock shall
have been paid in full (subject to revesting at such time as the
Corporation shall again be subject to Section 5(a)) or the
holders of Series A-2 Preferred Stock shall have exchanged their
Series A-2 Preferred Stock pursuant to the provisions of
Section 6 hereof.
(c) At any meeting held for the purpose of electing directors at
which the holders of Series A-2 Preferred Stock shall have the
right, voting separately as a class, to elect the Number of
Preferred Directors as aforesaid, the presence in person or by
proxy of the holders of at least thirty-three and one-third
percent (33-1/3%) of the outstanding Series A-2 Preferred Stock
shall be required to constitute a quorum of such Series A-2
Preferred Stock.
(d) Any vacancy occurring in the office of director elected by the
holders of Series A-2 Preferred Stock shall be filed by the
holders of Series A-2 Preferred Stock. Each director to be
elected by the holders of Series A-2 Preferred Stock shall
agree, prior to his election to office, to resign upon the
request of the respective holders of the Series A-2 Preferred
Stock which have the right
8
<PAGE> 36
hereunder to elect such director in the event of any
termination of the right of the holders of Series A-2
Preferred Stock to vote as a class for the Number of
Preferred Directors as herein provided, and upon any
such termination the director then in office elected by
the holders of Series A-2 Preferred Stock shall
forthwith resign. Unless otherwise required to resign as
aforesaid, the term of office of each director elected
by the holders of Series A-2 Preferred Stock shall
terminate upon the election of his successor at any
meeting of stockholders held for the purpose of electing
directors.
6. Exchange
(a) From and after the Original Issue Date, if the Corporation
shall be in arrears in the payment of any four consecutive
quarterly dividends, whether in cash or in kind, on the
outstanding shares of Series A-2 Preferred Stock, the
holders of Series A-2 Preferred Stock shall have the option
at any time thereafter until such time as all dividends
accumulated in the Series A-2 Preferred Stock shall have
been paid in full to exchange all or any portion of the
shares of Series A-2 Preferred Stock outstanding into notes
(the "Notes") having substantially the same terms and
conditions as the notes, as amended, issued under the Note
and Series A-IV Warrant Purchase Agreement dated as of June
21, 1996 between the Corporation and Northstar High Total
Return Fund (except that the maturity date for any Notes
issued in an exchange pursuant hereto on or prior to
February 28, 2007 shall be February 28, 2007, and Notes
issued on and after February 28, 2007 shall be payable on
demand), in the amount of $100 principal amount of Notes
for each share of Series A-2 Preferred Stock (assuming, for
purposes of the foregoing calculations, that all accrued
Dividends have been paid in kind pursuant to the provisions
of Section 2 in full through the date notice is provided
pursuant to Section 6(b) below).
(b) Any exchange pursuant to this Section 6 shall be made upon
prior written notice pursuant to the notice provisions set
forth in the Preferred Stock Purchase Agreement dated as of
March 12, 1997 between the Corporation and the Purchasers
named therein. Upon receipt of such notice by the
Corporation, all rights of the holders with respect to such
shares exchanged shall cease, except the right to receive
the Notes in the amount set forth in Section 6(a) above.
The Corporation shall not be required to declare or pay,
and the holders of Series A-2 Preferred Stock shall not be
entitled to receive, any dividends on such Series A-2
Preferred Stock from
9
<PAGE> 37
and after the date on which notice pursuant to this
Section 6(b) is provided.
10
<PAGE> 38
EXHIBIT B
March 12, 1997
Northstar High Total Return Fund
2 Pickwick Plaza
Greenwich, CT 06803
Re: PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF MARCH 12, 1997,
BETWEEN INTRACEL CORPORATION AND NORTHSTAR HIGH TOTAL RETURN FUND
Ladies and Gentlemen:
We have acted as special counsel for Intracel Corporation (the "Company")
in connection with the transaction contemplated by the Preferred Stock Purchase
Agreement, dated as of March 12, 1997 (the "Purchase Agreement") between the
Company and Northstar High Total Return Fund ("Northstar"). This opinion is
furnished to Northstar pursuant to Section 4.1 of the Purchase Agreement.
We have examined a copy of the Purchase Agreement and the Certificate of
Designation. Unless otherwise defined herein, terms defined in the Purchase
Agreement shall have the same meanings herein.
In addition, we have examined such records, documents, certificates of
public officials and of the Company, made such inquiries of officials of the
Company, and considered such questions of law as we have deemed necessary for
the purpose of rendering the opinions set forth herein.
We have assumed the genuineness of all signatures and the authenticity of
all items submitted to us as originals and the conformity with originals of all
items submitted to us as copies. In making our examination of the Purchase
Agreement, we have assumed that each party to the Purchase Agreement other than
the Company has the power and authority to execute and deliver, and to perform
and observe the provisions of, the Purchase Agreement, and has duly authorized,
executed and delivered the Purchase Agreement, and that the Purchase Agreement
constitutes the legal, valid and binding obligation of such party.
Our opinion in paragraph (a) below as to the good standing and
qualification of the Company is based solely upon certificates of public
officials in the states named in that paragraph. We have made no independent
investigation as to whether such certificates are accurate or complete, but we
have no knowledge of any such inaccuracy or incompleteness.
<PAGE> 39
Northstar High Total Return Fund
Page Two
With respect to the opinion expressed in paragraph (e) below, we have
assumed that Northstar is acquiring the Series A-2 Preferred Stock, no par
value per share, of the Company (the "Series A-2 Preferred Stock") with no
present intention of distributing the same other than in compliance with the
requirements, if any, of all applicable state and federal securities laws.
The opinions hereinafter expressed are subject to the following further
qualifications and exceptions.
(1) The effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, including, without limitation, laws relating to fraudulent
transfers or conveyances, preferences and equitable subordination.
(2) Limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of provisions of the
Purchase Agreement; and the effect of judicial decisions which have held that
certain provisions are unenforceable where their enforcement would violate the
implied covenant of good faith and fair dealing, or would be commercially
unreasonable.
(3) We express no opinion as to the effect on the opinions expressed
herein of (a) the compliance or non-compliance of any party to the Purchase
Agreement (other than the Company) with any laws or regulations applicable to
it, or (b) the legal or regulatory status or the nature of the business of any
such party.
(4) The enforceability of provisions of the Purchase Agreement
providing for indemnification, to the extent such indemnification is against
public policy.
(5) We express no opinion as to compliance by the Company with any
state securities law.
(6) We express no opinion as the matters discussed in Section 2.2 of
the Purchase Agreement.
Based upon and subject to the foregoing, we are of the opinion that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts, and has
the corporate power and authority to conduct its business as presently
conducted. The Company is duly qualified in the State of Washington.
<PAGE> 40
Northstar High Total Return Fund
Page Three
(b) The Company has the corporate power and authority to execute and
deliver the Purchase Agreement, and to perform and observe the provisions of
the Purchase Agreement and the Certificate of Designation.
(c) The Company has the corporate power and authority to issue the
Series A-2 Preferred Stock. The Series A-2 Preferred Stock has been duly
authorized and, upon delivery to Northstar against payment therefor in
accordance with the terms of the Purchase Agreement, will be validly issued,
fully paid and non-assessable.
(d) (i) The Purchase Agreement has been duly authorized, executed and
delivered by the Company. (ii) The Purchase Agreement constitutes valid and
binding obligations of the Company enforceable against the Company in
accordance with its terms.
(e) No registration with, consent or approval of, notice to, or other
action by, any federal or New York governmental entity, or any Massachusetts
governmental entity pursuant to the Business Corporation Law of the
Commonwealth of Massachusetts, is required on the part of the Company for the
execution, delivery or performance by the Company of the Purchase Agreement, or
if required, such registration has been made, such consent or approval has been
obtained, such notice has been given or such other appropriate action has been
taken. No registration with, consent or approval of, notice to, or other action
by, any federal or New York governmental entity, or any Massachusetts
governmental entity pursuant to the Business Corporation Law of the
Commonwealth of Massachusetts, is required on the part of the Company for the
issuance of the Series A-2 Preferred Stock by the Company (other than filings
pursuant to state securities laws in connection with the issuance of the Series
A-2 Preferred Stock, as to which we express no opinion), or if required, such
registration has been made, such consent or approval has been obtained, such
notice has been given or such other appropriate action has been taken.
(f) The execution, delivery and performance of the Purchase Agreement
by the Company is not in violation of its articles of organization or its
by-laws.
(g) The authorized capital stock of the Company consists of 5,000,000
shares of voting common stock, no par value per share, and 3,000,000 shares of
preferred stock, no par value per share (the "Authorized Preferred Stock"). The
Company has designated 155,000 shares of the Authorized Preferred Stock as
Series A-2 Preferred Stock. After giving effect to the transactions
contemplated by the Purchase Agreement, the Company will have 40,000 shares of
Series A-2 Preferred Stock outstanding.
<PAGE> 41
Northstar High Total Return Fund
Page Four
(h) The offering and sale of the Preferred Stock is exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to the exemption set forth under Section 4(2) of the Securities
Act.
We express no opinion as to matters governed by any laws other than the
substantive laws of the state of New York (including its applicable
choice-of-law rules), the Business Corporation Law of the Commonwealth of
Massachusetts (with respect to the opinions set forth in paragraphs (a), (b),
(c), (d)(i), (e), (f) and (g)), and federal laws of the United States, which, in
each case, are in effect on the date hereof. We have assumed, with your
permission, that any provision in the Purchase Agreement excepting New York
choice or conflicts of law rules from the New York choice-of-law provision in
the Purchase Agreement would not be interpreted to include Section 5-1401 of the
General Obligations Law of the State of New York. We express no opinion as to
the New York choice-of-law provision in the Purchase Agreement to the extent
that Section 1-105 of the Uniform Commercial Code of the State of New York
requires the application of the law of another jurisdiction. For purposes of
this opinion, we have assumed that Section 5-1401 of the General Obligations Law
of the State of New York would be given effect in accordance with its terms.
We bring your attention to the fact that while individual members of this
firm are admitted to practice in the Commonwealth of Massachusetts, (i) we
maintain no offices in that state, (ii) we do not purport to be experts on the
laws of the Commonwealth of Massachusetts, and (iii) the individual members of
this firm who are admitted to practice law in the Commonwealth of Massachusetts
do not regularly render advice on matters involving the laws of the Commonwealth
of Massachusetts.
This opinion is solely for Northstar's benefit and may not be relied upon
by, nor may copies be delivered to, any other person without our prior written
consent.
Very truly yours,
Morrison & Foerster LLP
<PAGE> 1
EXHIBIT 10.14
================================================================================
NOTE AND SERIES A- WARRANT
PURCHASE AGREEMENT
between
INTRACEL CORPORATION
and
NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND
Dated as of June 21, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
THE SECURITIES
1.1. Issuance, Sale and Delivery of the Securities.......................................1
1.2. Closing; Purchase Price; Purchase Price Allocation..................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. Organization, Qualifications and Corporate Power....................................2
2.2. Authorization of Agreements, etc....................................................2
2.3. Validity............................................................................3
2.4. Authorized Capital Stock............................................................3
2.5. Financial Statements................................................................4
2.5A. Absence of Undisclosed Liabilities and Changes......................................5
2.6. Events Subsequent to the Date of the Balance Sheet..................................5
2.7. Litigation; Compliance with Law.....................................................6
2.8. Title to Properties.................................................................6
2.9. Leasehold Interests.................................................................6
2.10. Taxes...............................................................................7
2.11. Other Agreements....................................................................7
2.12. Patents, Trademarks, etc............................................................8
2.13. Loans and Advances..................................................................9
2.14. Assumptions, Guaranties, etc. of Indebtedness of Other Persons......................9
2.15. Significant Customers and Suppliers.................................................9
2.16. Governmental Approvals..............................................................9
2.17. Accuracy of Statements.............................................................10
2.18. Insurance..........................................................................10
2.19. Employment Relations...............................................................10
2.20. Compensation of Key Employees......................................................10
2.21. Environmental Compliance...........................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3.1. Purchase of Securities.............................................................11
3.2. Authority..........................................................................11
3.3. Projections........................................................................12
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
4.1. Opinion of Company's Counsel.......................................................12
4.2. Representations and Warranties to be True and Correct..............................12
4.3. Performance........................................................................12
4.4. All Proceedings to be Satisfactory.................................................12
4.5. Supporting Documents...............................................................12
4.6. Fees of Purchaser..................................................................13
4.7. Warrant............................................................................14
4.8. Note and Other Loan Documents......................................................14
ARTICLE V
COVENANTS OF THE COMPANY
5.1. Reserve for Warrant Shares.........................................................14
5.2. Corporate Existence................................................................14
5.3. Restrictive Agreements Prohibited..................................................14
5.4. Compliance with Laws...............................................................15
5.5 Senior Indebtedness................................................................15
ARTICLE VI
REGISTRATION RIGHTS
6.1. Piggyback Registration.............................................................15
6.2. Registration Procedures............................................................17
6.3. Expenses...........................................................................19
6.4. Indemnification and Contribution...................................................19
6.5. Rule 144 Reporting.................................................................22
6.6. Termination of Piggyback Registration Rights.......................................22
6.7. Material Non-Public Information....................................................22
ARTICLE VII
MISCELLANEOUS
7.1. Expenses...........................................................................23
7.2. Survival of Agreements.............................................................23
7.3. Brokerage..........................................................................23
7.4. Parties in Interest................................................................23
7.5. Notices............................................................................23
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
7.6. Governing Law......................................................................24
7.7. Entire Agreement...................................................................24
7.8. Counterparts.......................................................................24
7.9. Amendments.........................................................................24
7.10. Severability.......................................................................24
7.11. Titles and Subtitles...............................................................24
</TABLE>
iii
<PAGE> 5
SCHEDULES
EXHIBITS
Exhibit A - Note
Exhibit B - Warrant
Exhibit C - Opinion of Counsel for the Company
<PAGE> 6
NOTE AND SERIES A- WARRANT PURCHASE AGREEMENT (this "Agreement"), dated as of
June 21, 1996, between Intracel Corporation, a Massachusetts corporation (the
"Company") and Northstar Advantage High Total Return Fund, a Massachusetts
business trust (the "Purchaser").
PREAMBLE:
WHEREAS, the Company wishes to issue and sell to the Purchaser (i) the Company's
secured promissory note, in the principal amount of $2,000,000, substantially in
the form attached hereto as Exhibit A (the "Note"), and (ii) the Series A-
Common Stock Warrant, substantially in the form attached hereto as Exhibit B
(the "Warrant") to purchase up to 79,537 shares of common stock, no par value
per share (the "Warrant Shares"), of the Company (the Note and the Warrant shall
collectively be referred to as the "Securities"); and
WHEREAS, the Purchaser wishes to purchase the Securities on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
ARTICLE I
THE SECURITIES
SECTION 1.1. Issuance, Sale and Delivery of the Securities. The Company
agrees to issue, sell and deliver to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, at the closing (the "Closing"), the (i)
Note and (ii) the Warrant.
SECTION 1.2. Closing; Purchase Price; Purchase Price Allocation. The
Closing shall take place at the offices of Morrison & Foerster LLP, 1290 Avenue
of the Americas, New York, NY 10104, at 10:00 a.m., New York time on June 21,
1996, or at such other place, date and time as may be otherwise mutually agreed
in writing by the parties hereto. The date on which the Closing actually occurs
is referred to herein as the "Closing Date." At the Closing, the Company shall
issue and deliver to the Purchaser the Note, in substantially the form attached
hereto as Exhibit A, and the Warrant, in substantially the form attached hereto
as Exhibit B. As payment in full for the Securities, and against delivery of the
Securities on the Closing Date, the Purchaser shall transfer the sum of
$1,960,000 by wire transfer of immediately available funds to such account or
accounts as the Company may direct. The Company and the Purchaser agree that
$100,000 of the aggregate consideration for the Securities shall be allocated to
the Warrants, and that the balance of such aggregate consideration shall be
allocated to the Note.
<PAGE> 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the Closing
Date that:
SECTION 2.1. Organization, Qualifications and Corporate Power. The
Company is a corporation duly organized (originally under the name of Boston
Biological Technologies, Inc.), validly existing and in good standing under the
laws of the Commonwealth of Massachusetts, Bartels, Inc. (the Company's
wholly-owned subsidiary) ("Bartels") is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and each
of the Company and Bartels is duly licensed or qualified to transact business as
a foreign corporation and is in good standing in each jurisdiction in which the
nature of the business transacted by it or the character of the properties owned
or leased by it requires such licensing or qualification, except where the
failure so to qualify will not have a material adverse effect on the business,
operations, property or financial condition of the Company or Bartels,
respectively. Each of the Company and Bartels has the power and authority to own
and hold its properties and to carry on its business as now conducted and as
proposed to be conducted, and the Company has the power and authority to
execute, deliver and perform this Agreement and the "Other Loan Documents" (as
defined in Section 4.8) (and, with respect to Bartels, the Security Agreement
and the Bartels Guaranty), to issue, sell and deliver the Note and the Warrant,
and to issue and deliver the Warrant Shares upon the exercise of the Warrant.
The Company has no subsidiaries, other than Bartels and the Company's ownership
of forty-five percent of the membership interests of German-American Institute
for AIDS Research GmbH, a limited liability company formed under the laws of
Germany.
SECTION 2.2. Authorization of Agreements, etc. (a) The execution and
delivery by the Company of this Agreement and the Other Loan Documents (and,
with respect to Bartels, the Security Agreement and the Bartels Guaranty), the
performance by the Company of its obligations hereunder and thereunder (and,
with respect to Bartels, the Security Agreement and the Bartels Guaranty), the
issuance, sale and delivery of the Note and the Warrant, and the issuance, sale
and delivery of the Warrant Shares upon the exercise of the Warrant, have been
duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government (except
that the issuance of the Warrant Shares may require filings under one or more
state securities laws, all of which filings will be made by the Company within
the requisite time period), the Articles of Organization of the Company, as
amended (the "Charter") or the By-laws of the Company, as amended (the
"By-laws") (or, with respect to Bartels, its Certificate of Incorporation or
By-laws), or any provision of any indenture, agreement or other instrument to
which either the Company or Bartels is a party or by which either the Company or
Bartels or any of its properties or assets is bound, or conflict with, result in
a breach of or constitute (whether with or without notice or lapse of time or
both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company or Bartels.
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(b) The Warrant has been authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company except as set
forth in this Agreement. The Warrant Shares have been duly authorized
and reserved for issuance upon exercise of the Warrant, and, when so
issued, will be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company except as set
forth in this Agreement. Neither the issuance, sale or delivery of the
Warrant, nor the issuance or delivery of the Warrant Shares is subject
to any preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person, except as set
forth in Article VI of this Agreement.
SECTION 2.3. Validity. Each of this Agreement, the Note, the Other Loan
Documents, and the Warrant has been (or at the Closing, shall be) duly executed
and delivered by the Company and, where applicable, Bartels, and constitute the
legal, valid and binding obligation of the Company, and, where applicable,
Bartels, enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and moratorium
laws and other similar laws of general application affecting enforcement of
creditors' rights generally and (ii) the availability of equitable remedies
including specific performance may be limited by equitable principles of general
applicability (regardless of whether enforcement is sought in a proceeding in
equity or at law).
SECTION 2.4. Authorized Capital Stock. The authorized capital stock of
(a) the Company consists of (i) 3,000,000 shares of preferred stock, no par
value per share (the "Preferred Stock"), of which 730,000 shares have been
designated "Series A Preferred" and 850,000 shares designated "Series A-I
Preferred" and (ii) 5,000,000 shares of common stock (the "Common Stock") and
(b) Bartels consists of 1,000 shares of common stock, par value $.01 per share.
Immediately prior to the Closing, all of the capital stock of Bartels which is
issued and outstanding will be owned by the Company, 1,983,450 shares of Common
Stock will be issued and outstanding all of which will be validly issued and
outstanding, fully paid and nonassessable with no personal liability attaching
to the ownership thereof, 525,492 shares of Series A Preferred Stock will be
issued and outstanding pursuant to the Convertible Stock Purchase Agreement,
dated July 22, 1994, by and among the Company and the Purchasers set forth on
"Schedule I" thereto (the "1994 Stock Purchase Agreement"), 566,874 shares of
Series A-I Preferred will be issued and outstanding pursuant to the Convertible
Stock Purchase Agreement, dated September 22, 1995, by and among the Company and
the purchasers set forth on "Schedule I" thereto (the "1995 Stock Purchase
Agreement") and 128,775 shares of Series A-I Preferred will be issued and
outstanding pursuant to a Convertible Preferred Stock Purchase Agreement, dated
November 16, 1995, between the Company and Northstar American Corporation. No
other shares of capital stock of the Company or Bartels have been issued or
reserved for issuance, except 385,000 shares of Common Stock reserved for
issuance in the event options granted pursuant to the 1989 and 1990-1991 Stock
Option Plans of the Company are exercised, 730,000 shares of Common Stock
reserved for issuance in the event of the conversion
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of the shares of Series A Preferred Stock and 52,000 shares of Common Stock
reserved for issuance in the event of the exercise of the Series A Warrant, both
having been granted pursuant to the 1994 Stock Purchase Agreement, 850,000
shares of Common Stock reserved for issuance in the event of the conversion of
the shares of Series A-I Preferred Stock granted pursuant to the 1995 Stock
Purchase Agreement, 86,462 shares of Common Stock reserved for issuance in the
event of the exercise of warrants granted pursuant to the Warrant Agreement,
dated September 22, 1995, between the Company and Dublind Investments, L.L.C.,
91,177 shares of Common Stock reserved for issuance in the event of the exercise
of the warrants granted pursuant to the Warrant Agreement, dated November 16,
1995, between the Company and Creditanstalt Bankverein ("Creditanstalt"), 94,010
shares of Common Stock reserved for issuance in the event of exercise of the
warrants granted pursuant to the Series A-II Warrant and Note Purchase
Agreement, dated December 27, 1995, between the Company and Purchaser, 159,073
shares of Common Stock reserved for issuance in the event of exercise of the
warrants granted pursuant to the Note and Series A-III Warrant Purchase
Agreement, dated June 11, 1996 between the Company and CoreStates Enterprise
Fund, a division of CoreStates Bank, N.A. ("CoreStates") and 79,537 shares of
Common Stock reserved for issuance in the event of the exercise of the Warrant
granted pursuant to this Agreement. The designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect of the Series A
Preferred Stock and the Series A-I Preferred Stock are as set forth in both of
the Certificates of Vote of Directors Establishing a Series of a Class of Stock,
and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and in
accordance with all applicable laws. Except as provided for in the Charter, the
Company has no obligation (contingent or other) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof. This Section 2.4
sets forth the aggregate number of outstanding warrants, options, agreements,
convertible securities or other commitments pursuant to which the Company is or
may become obligated to issue any shares of its capital stock or other
securities of the Company. Except as set forth above in this Section 2.4, there
are no preemptive or similar rights to purchase or otherwise acquire shares of
capital stock of the Company pursuant to any provisions of law, the Charter or
By-laws of the Company, in each case as amended to the date hereof, or any
agreement to which the Company is a party or otherwise. Except as set forth
above in this Section 2.4, or as contemplated herein, immediately upon
consummation at the Closing of the transactions contemplated hereby there will
be no agreement, restriction or encumbrance (such as a right of first refusal,
right of first offer, proxy, voting agreement, voting trust, bring-along or
come-along rights) with respect to the sale or voting of any shares of capital
stock of the Company (whether outstanding or issuable upon conversion or
exercise of outstanding securities) of which the Company has knowledge.
SECTION 2.5. Financial Statements . The Company has furnished to the
Purchaser the audited balance sheet of the Company for the year ended June 30,
1995 (the "Balance Sheet") and the related audited statements of income,
stockholders' equity and cash flows of the Company for the year ended June 30,
1995 and the balance sheet of the Company as of March 31, 1996 and the related
statements of income, stockholders' equity and cash flows of the Company as of
March 31, 1996. All such financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present
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the financial position of the Company as of June 30, 1995 and March 31, 1996
respectively, and the results of its operations and cash flows as of June 30,
1995 and March 31, 1996 respectively. Since the date of the Balance Sheet, (i)
there has been no change in the assets, liabilities or financial condition of
the Company from that reflected in the Balance Sheet except for changes in the
ordinary course of business which in the aggregate have not been materially
adverse and (ii) none of the business, financial condition, operations or
property of the Company have been materially adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
insured against.
SECTION 2.5A. Absence of Undisclosed Liabilities and Changes. Except as
set forth on Schedule 2.5A attached hereto, as of the date hereof, (a) the
Company had no liabilities of any nature (matured or unmatured, fixed or
contingent) which were not provided for on the balance sheet of the Company as
of such date, except for (i) liabilities which, individually and in the
aggregate, were not material to the financial condition of the Company or (ii)
liabilities incurred in the ordinary course of the Company's business and not
required to be so provided for under generally accepted accounting principles ,
and (b) all reserves established by the Company and set forth on such balance
sheet were adequate in all material respects. There are no loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5
("Statement No. 5") issued by the Financial Accounting Standards Board in March
1975) which are not adequately provided for in such balance sheet as required by
Statement No. 5.
SECTION 2.6. Events Subsequent to the Date of the Balance Sheet. Except
as set forth in the attached Schedule 2.6 or as contemplated by this Agreement,
since the date of the Balance Sheet neither the Company nor Bartels has (i)
issued any stock, bond or other corporate security, (ii) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts entered into
in the ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Balance Sheet and
current liabilities incurred since the date of the Balance Sheet in the ordinary
course of business, (iv) declared or made any payment or distribution to
stockholders or purchased or redeemed any share of its capital stock or other
security, (v) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, other than liens of current real property taxes not yet
due and payable, (vi) sold, assigned or transferred any of its tangible assets
except in the ordinary course of business, or canceled any debt or claim, (vii)
sold, assigned, transferred or granted any exclusive license with respect to any
material patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset other than in the ordinary course of business, (viii)
suffered any material loss of property or waived any right of substantial value,
(ix) made any change in officer compensation except in the ordinary course of
business and consistent with past practice, (x) made any material change in the
manner of business or operations of the Company or Bartels, respectively, (xi)
entered into any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xii) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
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SECTION 2.7. Litigation; Compliance with Law. There is no material (i)
action, suit, claim, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or Bartels,
respectively, at law or in equity, or before or by any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) arbitration proceeding relating to
the Company or Bartels, respectively, pending under a collective bargaining
agreement or otherwise or (iii) governmental inquiry pending or to the knowledge
of the Company, threatened against or affecting the Company or Bartels,
respectively, (including, without limitation, any inquiry as to the
qualification of the Company or Bartels, respectively, to hold or receive any
license or permit). The Company has not received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to its
business, financial condition, operations or property. The Company is not in
default with respect to any order, writ, injunction or decree known to or served
upon the Company of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no material action or suit by the Company pending
or threatened against others. Each of the Company and Bartels has complied in
all material respects with all laws, rules, regulations and orders applicable to
its business, operations, properties, assets, products and services, and each of
the Company and Bartels has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed to
be conducted, except where the failure to own or possess such permits, licenses
or authorizations could not, either singly or in the aggregate, have a material
adverse effect on the business, operations, properties or financial condition of
the Company.
SECTION 2.8. Title to Properties. Except in instances that, either
singly or in the aggregate, could not have a material adverse effect on the
business, operations, properties or financial condition of the Company, and
except as disclosed in Schedule 2.8 hereof, each of the Company and Bartels has
good and marketable title to its properties and assets reflected on the Balance
Sheet (other than properties and assets disposed of in the ordinary course of
business since the date of the Balance Sheet), and all such properties and
assets are free and clear of mortgages, pledges, security interests, liens,
charges, claims, restrictions and other encumbrances, except for liens for
current taxes not yet due and payable and minor imperfections of title, if any,
not material in nature or amount and not materially detracting from the value or
materially impairing the use of the property subject thereto or impairing the
operations or proposed operations of the Company or Bartels, respectively.
SECTION 2.9. Leasehold Interests. Each lease or agreement to which the
Company or Bartels, respectively, is a party under which it is a lessee of any
property, real or personal (a list of all such leases being attached hereto as
Schedule 2.9), is a valid and subsisting agreement without any material default
of the Company or Bartels, respectively, thereunder and, to the knowledge of the
Company, without any material default thereunder of any other party thereto. No
event has occurred and is continuing which, with due notice or lapse of time or
both, would constitute a default or event of default by the Company or Bartels,
respectively, under any such lease or agreement or, to the knowledge of the
Company, by any other party thereto.
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SECTION 2.10. Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns, Federal, state, county and local, required to
be filed by it, and the Company has paid all taxes shown to be due by such
returns and extensions as well as all other taxes, assessments and governmental
charges which have become due or payable, including, without limitation, all
taxes which the Company is obligated to withhold from amounts owing to
employees, creditors and third parties. All such taxes with respect to which the
Company has become obligated have been paid and adequate reserves have been
established for all taxes accrued but not yet payable. No deficiency assessment
with respect to or proposed adjustment of the Company's Federal, state, county
or local taxes is pending or, to the knowledge of the Company, threatened. There
is no tax lien in favor of any Federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its stockholders has ever filed a consent pursuant to
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to collapsible corporations.
SECTION 2.11. Other Agreements. Except as set forth in the attached
Schedule 2.11, neither the Company nor Bartels is a party to or otherwise bound
by any written or oral contract or instrument or other restriction which
individually or in the aggregate could materially adversely affect the business,
financial condition, operations or property of the Company. Except as set forth
in the attached Schedule 2.11, or as a result of the transactions contemplated
in this Agreement, the Note, the Other Loan Documents, or the Warrant, neither
the Company nor Bartels is a party to or otherwise bound by any written or oral:
(a) distributor, dealer, manufacturer's representative or sales
agency contract or agreement which is not terminable on less than ninety
(90) days' notice without cost or other liability to the Company or
Bartels;
(b) sales contract which entitles any customer to a rebate or
right of set-off, to return any product to the Company or Bartels after
acceptance thereof or to delay the acceptance thereof, or which varies
in any material respect from the Company's or Bartels' standard form
contracts;
(c) contract with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of
its or Bartels' employees);
(d) contract or other commitment with any supplier containing any
provision permitting any party other than the Company or Bartels to
renegotiate the price or other terms, or containing any pay-back or
other similar provision, upon the occurrence of a failure by the Company
or Bartels to meet its obligations under the contract when due or the
occurrence of any other event;
(e) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its
normal operating requirements;
(f) contract for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings), on a full-time or
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consulting basis which is not terminable on notice without cost or other
liability to the Company or Bartels, except normal severance
arrangements and accrued vacation pay;
(g) agreement or indenture relating to the borrowing of money or
to the mortgaging or pledging of, or otherwise placing a lien or
security interest on, any asset of the Company or Bartels;
(h) guaranty of any obligation for borrowed money or otherwise;
(i) agreement, or group of related agreements with the same party
or any group of affiliated parties, under which the Company or Bartels
has advanced or agreed to advance money or has agreed to lease any
property as lessee or lessor;
(j) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its capital stock or any of its other equity
securities;
(k) assignment, license or other agreement with respect to any
form of intangible property or Intellectual Property (as defined in
Section 2.12) or the development or use thereof;
(l) agreement under which it has granted any person any
registration rights;
(m) agreement under which it has limited or restricted its right
to compete with any person in any respect; or
(n) other contract or group of related contracts with the same
party involving more than $50,000 or continuing over a period of more
than one year from the date or dates thereof (including renewals or
extensions optional with another party), which contract or group of
contracts is not terminable by the Company or Bartels without penalty
upon notice of thirty (30) days or less, but excluding any contract or
group of contracts with a customer of the Company or Bartels for the
sale, lease or rental of the Company's or Bartels' respective products
or services if such contract or group of contracts was entered into by
the Company or Bartels, respectively, in the ordinary course of
business.
SECTION 2.12. Patents, Trademarks, etc. Set forth in Schedule 2.12 is a
list and brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such which are in the
process of being prepared, owned by or registered in the name of the Company or
Bartels, or of which the Company or Bartels is a licensor or licensee or in
which the Company or Bartels has any right, and in each case a brief description
of the nature of such right. Except as set forth in Schedule 2.12, each of the
Company and Bartels owns or possesses adequate licenses or other rights to use
all patents, patent applications, trademarks, trademark applications, service
marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets and know-how (collectively, "Intellectual
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Property") necessary to the conduct of its business as conducted, and no claim
is pending or, to the knowledge of the Company, threatened to the effect that
the operations of the Company or Bartels infringe upon or conflict with the
rights of any other person under any Intellectual Property, and to the knowledge
of the Company there is no basis for any such claim. No claim is pending or, to
the knowledge of the Company, threatened to the effect that any such
Intellectual Property owned or licensed by the Company or Bartels, or which the
Company or Bartels otherwise has the right to use, is invalid or unenforceable
by the Company or Bartels, as applicable, and to the knowledge of the Company
there is no basis for any such claim. To the knowledge of the Company, all
technical information developed by and belonging to the Company or Bartels, as
applicable, which has not been patented has been kept confidential. The Company
has not granted or assigned to any other person or entity any right to
manufacture or assemble any products or proposed products of the Company, other
than to its affiliates, and to the knowledge of the Company no other person or
entity has asserted any such right.
SECTION 2.13. Loans and Advances. Except as set forth on Schedule 2.13,
neither the Company nor Bartels has any outstanding loans or advances to any
person and is not obligated to make any such loans or advances, except, in each
case, for advances to employees of the Company or Bartels in respect of
reimbursable business expenses anticipated to be incurred by them in connection
with their performance of services for the Company or Bartels.
SECTION 2.14. Assumptions, Guaranties, etc. of Indebtedness of Other
Persons. Neither the Company nor Bartels has assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on any indebtedness of any
other person (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in a debtor, or otherwise to assure a creditor
against loss), except for guaranties by endorsement of negotiable instruments
for deposit or collection in the ordinary course of business.
SECTION 2.15. Significant Customers and Suppliers. No customer which
accounted for 10% or more of the Company's sales or revenues during the periods
covered by the financial statements referred to in Section 2.5 or which has been
significant to the Company thereafter has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from the Company. As
of the date of this Agreement, there is no supplier to the Company which is a
sole-source supplier.
SECTION 2.16. Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III hereof,
no registration or filing with, or consent or approval of or other action by,
any Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the Note, the Other Loan Documents or the Warrant (and, with
respect to Bartels, the Security Agreement or Bartels Guaranty), or the
issuance, sale and delivery of the Warrant Shares upon exercise of the Warrant,
other than (i) filings pursuant to state securities laws in connection with the
issuance and sale of the Warrant and (ii) with respect to the registration
rights provisions contained in Article VI of this Agreement, the registration of
the shares covered thereby with the Securities and Exchange
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Commission or any successor regulatory entity (the "Commission") and filings
pursuant to state securities laws.
SECTION 2.17. Accuracy of Statements. Neither this Agreement nor any
Schedule, Exhibit, statement, list, document, certificate or other information
furnished by or on behalf of the Company to the Purchaser in connection with
this Agreement or any of the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
SECTION 2.18. Insurance. Schedule 2.18 lists all insurance policies
which the Company maintains with respect to its businesses, properties and
employees. Such policies are in full force and effect and the Company has
received no notice of termination from the insurance carriers. Such policies,
with respect to their amounts and types of coverage, are adequate in the
reasonable commercial judgment of the Company to insure against risks to which
the Company and its respective businesses. Since the date of the Balance Sheet,
there has been no material adverse change in the Company's relationship with its
insurers or in the premiums payable pursuant to such policies.
SECTION 2.19. Employment Relations. (a) The Company is in material
compliance with applicable federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, safety, terms and
conditions of employment and wages and hours.
(b) The Company does not maintain or contribute to any employee
benefit plan ("Employee Benefit Plan") within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to ERISA but which is not in substantial
compliance with ERISA, or which has incurred any material liability to
the Pension Benefit Guaranty Company ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of
its subsidiaries or ceased operations at any facility or withdrawn from
any such Plan in a manner which could subject it to material liability
under Section 462(f), 4063 or 4064 of ERISA, and knows of no facts or
circumstances which might give rise to any material liability of the
Company to the PBGC under Title IV of ERISA.
SECTION 2.20. Compensation of Key Employees. Schedule 2.20 sets forth
the aggregate compensation (salaries, wages and bonuses) paid by the Company to
its four most highly compensated employees for the 1995 fiscal year and the
amount of such compensation scheduled to be paid to such employees for the 1996
fiscal year.
SECTION 2.21. Environmental Compliance. The Company is in compliance
with all applicable laws relating to environmental matters in each jurisdiction
where it is presently engaged in a material manufacturing business, except for
such failures to comply which, in the aggregate, could reasonably be expected
not to have a material adverse effect on the Company. The Company is not subject
to any liability under any such environmental laws, that, in the
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aggregate for all such liabilities, could be reasonably expected to have a
material adverse effect on the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as of the Closing
Date that:
SECTION 3.1. Purchase of Securities. (a) It is an "accredited investor"
within the meaning of Rule 501 under the Securities Act of 1933, as amended (the
"Securities Act") and was not organized for the specific purpose of acquiring
the Note or the Warrant.
(b) It has sufficient knowledge and experience in investing in
companies in a similar stage of development to the Company so as to be
able to evaluate the risks and merits of its investment in the Company
and it is able financially to bear the risks thereof.
(c) It has had an opportunity to discuss the Company's business,
management and financial condition with the Company's management.
(d) It is acquiring the Note and the Warrant for its own account
for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof.
(e) It understands that (i) the Note, the Warrant and, upon
exercise thereof, the Warrant Shares have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from
the registration requirements of the Securities Act pursuant to Section
4(2) thereof or Rule 505 or 506 promulgated under the Securities Act,
(ii) the Note, the Warrant and, upon exercise thereof, the Warrant
Shares must be held indefinitely unless a subsequent disposition thereof
is registered under the Securities Act or is exempt from such
registration, (iii) the Note, the Warrant and, upon exercise thereof,
the Warrant Shares will bear a legend to such effect and (iv) the
Company will make a notation on its transfer books to such effect.
SECTION 3.2. Authority. It has all requisite power and authority to
execute, deliver and perform this Agreement, the Note, the Other Loan Documents,
and the Warrant and has taken all necessary action to authorize the execution,
delivery and performance of this Agreement, the Note, the Other Loan Documents,
and the Warrant and the consummation of the transactions contemplated hereby and
thereby. This Agreement, the Note, the Other Loan Documents, and the Warrant on
the Closing Date will constitute the legal, valid and binding obligations of the
Purchaser, enforceable in accordance with their terms, except (i) to the extent
that enforceability may be limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (ii) that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceedings therefor may be brought.
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SECTION 3.3. Projections. It understands that any and all financial
projections and other estimates delivered to it were based on the Company's
experience in the industry and on assumptions of fact and opinion which the
Company believes to have been, and to be, reasonable. It understands that the
Company cannot and does not assure or guarantee the attainment of such
projections or other estimates.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to purchase and pay for the Note and
the Warrant, both being purchased by it on the Closing Date, are, at its option,
subject to the satisfaction of the following conditions on or before such
Closing Date:
SECTION 4.1. Opinion of Company's Counsel. The Purchaser shall have
received from Morrison & Foerster LLP, counsel for the Company, an opinion dated
the Closing Date, in the form attached hereto as Exhibit C.
SECTION 4.2. Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II hereof shall be true,
complete and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the President of the Company shall have certified to such effect to the
Purchaser in writing.
SECTION 4.3. Performance. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the President of the Company shall
have certified to the Purchaser in writing to such effect and to the further
effect that all of the conditions set forth in this Article IV have been
satisfied.
SECTION 4.4. All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transaction
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchaser and its counsel, and the Purchaser and its
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
SECTION 4.5. Supporting Documents. At the Closing, the Purchaser shall
have received copies of the following documents:
(a) (i) the Charter, certified as of a recent date by the
Secretary of State of the Commonwealth of Massachusetts and (ii)
a certificate (A) of said Secretary dated as of a recent date as
to the due incorporation and subsistence of the Company, and
listing all documents of the Company on file with said Secretary
and (B) from the Secretary of State of the State of Delaware
dated as of a recent
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date as to the due incorporation and subsistence of Bartels, and
listing all documents of Bartels on file with said Secretary;
(b) a certificate of the Clerk or an Assistant Clerk of
the Company dated the Closing Date and certifying: (i) that
attached thereto is a true and complete copy of all resolutions
adopted by the Board of Directors (the "Company Board") or the
stockholders of the Company authorizing the execution, delivery
and performance of this Agreement and the Other Loan Documents,
the issuance, sale, delivery, and performance of the Note and the
Warrant, and the reservation, issuance and delivery of the
Warrant Shares upon the exercise of the Warrant, and that all
such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions
contemplated by this Agreement; (ii) that the Charter has not
been amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (a)(ii) above; and
(iii) to the incumbency and specimen signature of each officer of
the Company executing this Agreement, the Note, the Other Loan
Documents, and the Warrant and any certificate or instrument
furnished pursuant hereto, and a certification by another officer
of the Company as to the incumbency and signature of the officer
signing the certificate referred to in this clause (b);
(c) the Purchaser shall have received an undated stock
power for each certificate representing shares of stock pledged
pursuant to the Junior Subordinated Pledge Agreement, dated as of
the Closing Date, between the Company and the Purchaser (the
"Subordinated Pledge Agreement"),executed in blank by a duly
authorized officer of the pledge thereof;
(d) the Purchaser shall have received evidence in form and
substance satisfactory to it that all filings, recordings,
registrations and other actions, including, without limitation,
the filing of duly executed financing statements on Form UCC-1,
necessary or, in the opinion of the Purchaser, desirable to
perfect the security interests created by the Other Loan
Documents and required by the Other Loan Documents have been
completed;
(e) a certificate from the Secretary or Assistant
Secretary of Bartels to the effect of the certificate deliverable
by the Company pursuant to clause (b) above; and
(f) such additional supporting documents and other
information with respect to the operations of the Company as the
Purchaser or its counsel may reasonably request.
SECTION 4.6. Fees of Purchaser. The Company shall have paid, in
accordance with Section 8.1, the reasonable legal and other fees and
disbursements of the Purchaser, as invoiced.
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SECTION 4.7. Warrant. The Company shall have issued the Warrant to the
Purchaser.
SECTION 4.8. Note and Other Loan Documents. The Purchaser shall have
received (i) the Note executed and delivered by a duly authorized officer of the
Company, and (ii) each of the following documents, each executed and delivered
by a duly authorized officer or representative of each of the parties thereof
and each dated as of the Closing Date: (A) the Junior Subordinated Security
Agreement between the Company, Bartels and the Purchaser (the "Security
Agreement"); (B) the Intercreditor and Subordination Agreement between the
Company, the Purchaser, CoreStates and Creditanstalt; (C) the Subordinated
Pledge Agreement; (D) the Junior Subordinated Subsidiary Guaranty (the "Bartels
Guaranty"); (E) the Agreement (Intracel Trademark) between the Company and the
Purchaser; (F) the Agreement (Intracel Patent) between the Company and the
Purchaser; (G) the Agreement (Bartels Patent) between Bartels and the Purchaser;
and (H) the Agreement (Bartels Trademark) between Bartels and the Purchaser
(collectively, the "Other Loan Documents").
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchaser that until the
Warrant is exercised in full or until the Warrant expires, whichever event
occurs first (other than the covenant in Section 5.5, which shall only survive
until the Note is repaid in full):
SECTION 5.1. Reserve for Warrant Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the exercise of the Warrant for Warrant
Shares, such number of its duly authorized shares of Common Stock as shall be
sufficient to effect the exercise of the Warrant. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the exercise of the Warrant, or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon the exercise of the Warrant.
SECTION 5.2. Corporate Existence. The Company shall maintain its
corporate existence, rights and franchises in full force and effect.
SECTION 5.3. Restrictive Agreements Prohibited. The Company shall not
become a party to any agreement which by the terms thereof or as a result of the
performance thereof restricts the Company's performance of this Agreement, the
Note, the Other Loan Documents or the Warrant.
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SECTION 5.4. Compliance with Laws. The Company shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
SECTION 5.5. Senior Indebtedness. The Company shall not incur any
indebtedness which is senior or pari passu in right of payment to the Note,
without first obtaining the consent of the Purchaser (which shall not be
unreasonably withheld) except for: (a) indebtedness existing on the Closing
Date; (b) any debt acquired or assumed in connection with an acquisition,
provided that such indebtedness is secured only by the assets so acquired; and
(c) any refinancings of indebtedness of the type described in (a) and (b) above,
provided that such refinancings do not result in an increase in the principal
amount of such loan, with respect to Creditanstalt, in excess of the original
principal amount of such indebtedness (and such amount in excess of the then
outstanding principal amount thereunder shall be amortized from and after July
1, 2001) and, with respect to CoreStates, in excess of the then outstanding
principal amount thereunder.
ARTICLE VI
REGISTRATION RIGHTS
SECTION 6.1. Piggyback Registration.
(a) If at any time or from time to time, the Company shall
determine to register any of its securities, for its own account or the
account of any of its shareholders, other than a registration relating
solely to employee benefit plans, or a registration relating solely to a
transaction of the type described in Rule 145(a) as promulgated under
the Exchange Act, a transaction relating solely to the sale of debt or
convertible debt instruments or a registration on any form (other than
Form S-1, S-2 or S-3, or their successor forms) which does not include
substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Stock, the
Company will:
(i) give to the holder of Registrable Stock written notice
thereof as soon as practicable prior to filing the registration
statement; and
(ii) include in such registration and in any underwriting
involved therein, all the Registrable Stock specified in a
written request or requests, made within fifteen (15) days after
receipt of such written notice from the Company, by the holder of
Registrable Stock, except as set forth in subsection (b) below.
(b) If the registration is for a registered public offering
involving an underwriting, the Company shall so advise the holder of
Registrable Stock as a part of the written notice given pursuant to
subsection (a)(i). In such event, the right of the holder of Registrable
Stock to registration pursuant to this Article VI shall be conditioned
upon the holder's participation in such underwriting to the extent
provided herein. If the holder of
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Registrable Stock proposes to distribute its securities through such
underwriting, it shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Article VI, if the managing
underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may
limit the number of Shares of Registrable Stock to be included in the
registration and underwriting, or may exclude Registrable Stock entirely
from such registration if the registration is the first registered
offering for the sale of the Company's securities to the general public,
or a registered offering pursuant to Section 3 of the Registration
Rights Agreement dated July 22, 1994 between the Company and each of the
purchasers of shares of the Series A Convertible Preferred Stock of the
Company named therein, Section 3 of the Registration Rights Agreement
dated September 22, 1994 between the Company and each of the purchasers
of shares of the Series A-I Convertible Preferred Stock of the Company
named therein, Section 9 of the Series A-I Warrant issued by the Company
to Dublind Investments, L.L.C. on September 22, 1995, Section 9 of the
Series A-I Warrant granted by the Company to Creditanstalt on November
21, 1995, Section 9 of the Series A-II Warrant granted by the Company to
the Purchaser or Article VI of the Note and Series A-III Warrant
Purchase Agreement between the Company and CoreStates dated as of June
11, 1996 (provided that no shares held by officers of the Company, other
than shares subject to other registration rights granted by the Company
that may be owned by officers, are included in the registration and
underwriting). The Company shall so advise the holder of Registrable
Stock and the other holders distributing their securities through such
underwriting, and the number of shares of securities that may be
included in the registration and underwriting shall be allocated among
the holder of Registrable Stock and other holders in proportion, as
nearly as practicable, to the respective amounts of Registrable Stock
held by the Holder and other securities held by other holders at the
time of filing the registration statement. If the Holder disapproves of
the terms of any such underwriting, if may elect to withdraw therefrom
by written notice to the Company and the managing underwriter. Any
Registrable Stock excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) As used in this Article VI the following terms, unless the
context otherwise requires, have the following respective meanings:
"Exchange Act" shall mean 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 at the time.
"Registrable Stock" shall mean the Warrant Shares, but
only so long as such shares continue to be Restricted Stock. Any such
shares shall continue to be Restricted Stock until such time as such
shares (i) have been disposed of in accordance with a registration
statement which has become effective under the Securities Act or
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(ii) have been publicly sold in compliance with Rule 144 (or any similar
provision then in force) under the Securities Act.
(d) If requested in writing by the underwriter or underwriters
for the initial underwritten public offering of securities of the
Company, the holder of Registrable Stock shall agree not to sell
publicly any shares of Registrable Stock or any other shares of Common
Stock (other than Registrable Stock or other shares of Common Stock
being registered in such offering), without the consent of such
underwriter or underwriters, for a period of not more than 120 days
following the effective date of the registration statement relating to
such initial public offering.
SECTION 6.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 6.1 to effect the registration of any
shares of Registrable Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Stock and use its best efforts to cause
such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as
hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Stock covered by such registration
statement in accordance with the holder's intended method of disposition
as set forth in such registration statement for such period;
(c) furnish to the holder of Registrable Stock and to each
underwriter such number of copies of the registration statement and
prospectus included therein (including each preliminary prospectus) as
such persons reasonably may request in order to facilitate the public
sale or other disposition of the Registrable Stock covered by such
registration statement;
(d) use its best efforts to register or qualify the Registrable
Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdiction as the holder of Registrable Stock
or, in the case of an underwritten public offering, the managing
underwriter reasonably shall request; provided, however, that the
Company shall not for any such purpose be required to qualify generally
to transact business as a foreign corporation in any jurisdiction where
it is not so qualified or to consent to general service of process in
any such jurisdiction;
(e) use its best efforts to list the Registrable Stock covered by
such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;
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(f) in addition to its obligations under Section 6.2 hereof,
immediately notify the holder of Registrable Stock and each underwriter
under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement,
as then in effect, includes an 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 not misleading in light of the
circumstances then existing;
(g) if the offering is underwritten, at the request of the holder
of Registrable Stock, furnish on the date that Registrable Stock is
delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing the Company for
the purposes of such registration, addressed to the underwriters and to
the holder of Registrable Stock, stating that such registration
statement has become effective under the Securities Act and that (A) to
the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act, (B) the registration statement, the related prospectus
and each amendment or supplement thereof comply as to form in all
material respects with the requirements of the Securities Act (except
that such counsel need not express any opinion as to financial
statements or other financial data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the
underwriters or by the Holder or its counsel and (ii) a letter dated
such date from the independent public accountants retained by the
Company, addressed to the underwriters and to the holder of Registrable
Stock, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such
accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information
as to the period ending no more than five business days prior to the
date of such letter) with respect to such registration as such
underwriters reasonably may request; and
(h) make available for inspection by the holder of Registrable
Stock, by any underwriter participating in any distribution pursuant to
such registration statement, and by any attorney, accountant or other
agent retained by the holder of Registrable Stock or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors
and employees to supply all information reasonably requested by the
holder of Registrable Stock and any underwriter, attorney, accountant or
agent in connection with such registration statement.
For purposes of this Agreement, the period of distribution, if not
otherwise described in the Registration Statement of Registrable Stock in a firm
commitment underwritten public offering, shall be deemed to extend until each
underwriter has completed the distribution of all securities purchased by it,
and the period of distribution of Registrable Stock in any other
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registration shall be deemed to extend until the earlier of the sale of all
Registrable Stock covered thereby or 120 days after the effective date thereof.
In connection with each registration hereunder, the holder of
Registrable Stock will furnish to the Company in writing such information with
respect to itself and the proposed distribution by it as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 6.1 covering an
underwritten public offering, the Company and the holder of Registrable Stock
agree to enter into a written agreement with the managing underwriter selected
in the manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
SECTION 6.3. Expenses. All expenses incurred by the Company in complying
with Section 6.1, including all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants for the
Company, reasonable fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance and reasonable fees and
disbursements of one counsel for the sellers of Registrable Stock, but excluding
any Selling Expenses, are called "Registration Expenses". "Selling Expenses"
shall include only such underwriting discounts and selling commissions
applicable to the sale of any Registrable Stock which would not have been
incurred in the absence of the registration and sale of the Registrable Stock.
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 6.1; provided, however, that in
connection with a registration statement filed under Section 6.1, the Company
shall not be obligated to pay fees and expenses (including counsel fees)
incurred in connection with complying with state securities laws in any state in
which the Company is not otherwise registering for sale any of the shares the
Company proposes to sell in the offering. All Selling Expenses in connection
with each registration statement filed pursuant to Section 6.1 shall be borne by
the participating sellers in proportion to the number of shares sold by each, or
by such participating sellers as they may agree.
SECTION 6.4. Indemnification and Contribution
(a) In the event of a registration of any of the Registrable
Stock under the Securities Act pursuant to Section 6.1, the Company will
indemnify and hold harmless the holder of Registrable Stock, each
underwriter of Registrable Stock and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or
several, to which the holder of Registrable Stock, underwriter 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
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statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Stock was
registered under the Securities Act pursuant to Section 6.1, any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the holder of Registrable Stock, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them 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 if and 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 so made in conformity with information
furnished by the holder of Registrable Stock, underwriter or controlling
person in writing specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any Registrable Stock under
the Securities Act pursuant to Section 6.1, the holder of Registrable
Stock will indemnify and hold harmless the Company, each person, if any,
who controls the Company within the meaning of the Securities Act, each
officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls
any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter 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 the registration statement
under which such Registrable Stock was registered under the Securities
Act pursuant to Section 6.1, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Holder will be liable
hereunder in any such case only if and 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 reliance upon and in conformity with information pertaining to
the holder of Registrable Stock, as such, furnished in writing to the
Company by the holder of Registrable Stock specifically for the use in
such registration statement or prospectus; provided, further, that the
liability of the holder of Registrable Stock shall be limited to the
proportion of any such loss, claim, damage, liability or expense which
is equal to the proportion that the public offering price of the
Registrable Stock sold by the holder of Registrable Stock under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds
received by the holder of
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Registrable Stock from the sale of Registrable Stock covered by such
registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but
the omission so to notify the indemnifying party shall not relieve it
from any liability which it may have to such indemnified party other
then under this Section 6.4 and shall only relieve it from any liability
which it may have to such indemnified party under this Section 6.4 if
and to the extent the indemnifying party is prejudiced by such omission.
In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
this Section 6.4 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so
selected; provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the
indemnified party reasonably may be considered by the indemnified party
to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and
to assume such legal defenses and otherwise to participate in the
defense of such action, with reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred. No indemnifying party,
in defense of any such action, shall, except with the consent of each
indemnified party, consent to the entry of any judgment or enter into
any settlement (i) which does not include as an unconditional term
thereof the giving, by the claimant or plaintiff, to such indemnified
party of a release from all liability in respect to such action or (ii)
which involves any relief against the indemnified party other than the
payment of money which is to be paid in full by the indemnifying party.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i)
the holder of Registrable Stock exercising rights under this Agreement,
or any controlling person of the holder of Registrable Stock, makes a
claim for indemnification pursuant to this Section 6.4 but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section
6.4 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of the holder of
Registrable Stock or any such controlling person in circumstances for
which indemnification is provided under this
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Section 6.4; then, and in each such case, the Company and such holder
will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such
proportion so that the holder of Registrable Stock is responsible for
the portion represented by the percentage that the public offering price
of its Registrable Stock offered by the registration statement bears to
the public offering price of all securities offered by such registration
statement, and the Company is responsible for the remaining portion;
provided, however, that, in any such case, (A) the holder of Registrable
Stock will not be required to contribute any amount in excess of the
public offering price of all such Registrable Stock sold by the holder
of Registrable Stock pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
SECTION 6.5. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of Registrable Stock to the public without registration, at
all times after 90 days after any registration statement covering a public
offering of securities of the Company under the Securities Act shall have become
effective (or the Company shall otherwise have become subject to the periodic
reporting requirements of the Exchange Act), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Registrable Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the
Company as such holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing such holder to sell any
Registrable Stock without registration.
SECTION 6.6. Termination of Piggyback Registration Rights. The
obligations of the Company to register shares of Registrable Stock under Section
6.1 shall terminate on April 1, 2005, unless such obligations terminate earlier
in accordance with the terms of the Warrant.
SECTION 6.7. Material Non-Public Information. Notwithstanding any
provision of this Agreement to the contrary, the Company's obligation to file a
registration statement, or cause such registration statement to become and
remain effective, shall be suspended for a period not to exceed 30 days (and for
periods not exceeding, in the aggregate, 60 days in any 24-month period) if
there exists at the time material non-public information relating to the Company
which, in the reasonable opinion of the Company, should not be disclosed.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby whether or not such
transactions shall be consummated; provided, however, that the Company shall pay
the reasonable legal and other fees and disbursements of the Purchaser, as
invoiced.
SECTION 7.2. Survival of Agreements. Unless otherwise expressly stated
herein, in the Warrant or in any certificate or instrument delivered pursuant to
or in connection therewith, all covenants and agreements made herein, in the
Warrant, or any certificate or instrument delivered to the Purchaser pursuant to
or in connection with this Agreement or the Warrant shall survive the execution
and delivery of this Agreement, the Warrant and the issuance and delivery of the
Warrant Shares from the date of this Agreement until the Warrant is exercised in
full or until the Warrant expires, whichever event occurs first; provided,
however, that the representations and warranties contained in the Note or the
Other Loan Documents shall survive until all amounts due under the Note shall be
paid in full. All statements contained in any certificate or other instrument
delivered by the Company hereunder or thereunder or in connection herewith or
therewith shall be deemed to constitute representations and warranties made by
the Company.
SECTION 7.3. Brokerage. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 7.4. Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Purchaser shall inure to the benefit of any and all subsequent
holders from time to time of the Note, the Warrant or the Warrant Shares.
SECTION 7.5. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person or
mailed by certified or registered mail, return receipt requested, as follows:
(a) if to the Company, at Intracel Corporation, 359
Allston Street, Cambridge, MA 02349, Attention: President, with a
copy to Joseph W. Bartlett, Esq., Morrison & Foerster LLP, 1290
Avenue of the Americas, New York, NY 10104; and
(b) if to the Purchaser, at the address set forth beneath
the Purchaser's name on the signature page to this Agreement,
with a copy to
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<PAGE> 29
Karen C. Wiedemann, Esq., Reboul, MacMurray, Hewitt, Maynard &
Kristol, 45 Rockefeller Plaza, New York, NY 10111.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other.
SECTION 7.6. Governing Law. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of New York,
regardless of the jurisdiction of creation or domicile of the Company or its
successors or of the Purchaser (without giving effect to its choice of law
principles).
SECTION 7.7. Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 7.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 7.9. Amendments. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the Purchaser.
SECTION 7.10. Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 7.11. Titles and Subtitles. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
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<PAGE> 30
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
[Corporate Seal] By:_______________________
Name:
Title:
Attest:
__________________________
Name:
Title:
NORTHSTAR ADVANTAGE
HIGH TOTAL RETURN FUND
By:______________________________
Name:
Title:
Address: c/o Thomas Ole Dial
2 Pickwick Plaza
Greenwich, CT 06830
Attn: Michael Graves
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<PAGE> 31
EXHIBIT A
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY
NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED
UNDER SUCH ACT OR IN COMPLIANCE WITH ANY EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
STATE SECURITIES LAWS.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL
INCOME TAX PURPOSES. FOR FURTHER INFORMATION CONTACT:
MORRISON & FOERSTER LLP
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104
ATTN: JOSEPH W. BARTLETT
THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS OF AN INTERCREDITOR AND
SUBORDINATION AGREEMENT DATED AS OF JUNE 21, 1996 IN FAVOR OF
CREDITANSTALT BANKVEREIN, CORESTATES ENTERPRISE FUND, A DIVISION OF
CORESTATES BANK, N.A. AND NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND,
WHICH AGREEMENT IS INCORPORATED HEREIN BY REFERENCE.
INTRACEL CORPORATION
SECURED PROMISSORY NOTE
June 21, 1996
FOR VALUE RECEIVED, INTRACEL CORPORATION, a Massachusetts corporation
(the "Company"), hereby promises to pay to the order of Northstar Advantage High
Total Return Fund, a Massachusetts business trust ("Northstar"), the Principal
Amount (as defined below) in eight equal quarterly installments payable pursuant
to Section 1 with interest payable pursuant to Section 2. Capitalized terms used
in this Note have the meanings provided in Section 11.
SECTION 1. Purchase of Note; Payments of Principal and Interest. (a)
Purchase of Note. On June 21, 1996 (the "Closing Date"), Northstar agrees to
purchase this Note for $1,860,000 and the principal amount of this Note shall be
deemed to be $2,000,000 (the "Principal Amount").
(b) Principal Payment Date. The Principal Amount of this Note
shall be due and payable in full on June 30, 2001 (the "Principal Payment
Date").
(c) Optional Prepayment; Prepayment Premium. The Company shall
have the right at any time upon 90 days' written notice to the Noteholder, to
prepay voluntarily the entire
<PAGE> 32
Unpaid Principal Amount without premium or penalty, except that any such
prepayment shall be accompanied by the payment of the difference between the
amount of interest actually paid by the Company under the terms hereof
(including through the issuance of PIK Notes and additional Notes under Section
15(b) hereof) and the amount of interest which would have been due hereunder if
such interest were calculated at a compounded rate of interest equal to 17.6%
per annum (a "Prepayment Fee") through the date of such prepayment. In the event
the Company elects to prepay this Note pursuant to this clause (c), it shall
also simultaneously prepay all PIK Notes which are then outstanding.
(d) Mandatory Prepayments. (i) In the event of a Change in
Control or redemption by the Company of shares of Preferred Stock in an amount
in excess of five percent (5%) of the number of shares of Preferred Stock
outstanding on the date hereof, the Unpaid Principal Amount and all accrued
interest thereon shall be prepaid in full.
(ii) Upon repayment in full of all obligations due under the
Credit Agreement and fulfillment by the Company of all its obligations
under Section 1(d)(ii) of the Secured Promissory Note (which shall be
deemed to include the repayment in full of all obligations due under the
Secured Promissory Note) (the "Senior Payoff Date"), the parties hereto
agree as follows. The holder of the Original Northstar Note, if such at
such time has not been repaid in full, shall be given the right to
receive payments with respect to all amounts due thereunder on the terms
set forth in Section 2.8 of the Credit Agreement (the "Sweep Payments"),
which payments shall permit the reduction of the set aside established
under Section 1(d) of the Secured Promissory Note on a dollar for dollar
basis. Such holder shall have the right to decline to receive the Sweep
Payments, in which case Northstar shall receive the Sweep Payments,
which shall first be applied against any unpaid interest which is due
and payable hereunder and thereafter to the Unpaid Principal Amounts. In
the event that, on the Senior Payoff Date, all obligations due under the
Original Northstar Note have been repaid in full, Northstar shall be
entitled to receive the Sweep Payments hereunder, which shall be applied
as set forth in the immediately preceding sentence.
(iii) No prepayment fee or penalty shall be payable in respect
of any mandatory prepayment pursuant to this subsection (d), other than
those events listed in clauses (i) through (v) of the definition of
"Change in Control", for which a prepayment fee shall be payable and
shall be calculated as if such prepayment were optional and shall be
equal to the Prepayment Fee that would be payable in connection with
such a prepayment under clause (c).
SECTION 2. Interest. (a) Interest Rate. Except as otherwise expressly
provided in Sections 1(c) and 6(b), interest shall accrue from the Closing Date
at the Applicable Interest Rate on the Unpaid Principal Amount, or (if less) at
the highest rate then permitted under applicable law. All computations of
interest shall be made on the basis of a year of three hundred and sixty (360)
days for the actual number of days.
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<PAGE> 33
(b) Interest Payment Dates. Interest shall be payable
quarterly in arrears on each Interest Payment Date, beginning with the Interest
Payment Date occurring on December 31, 1996.
(c) Payments In Cash or in Kind. Interest payments may be made by
the Company in cash; provided, however, that notwithstanding the foregoing, if
either (i) the ratio of Consolidated EBITDA to Consolidated Interest Expense is
less than or equal to 2.0 to 1.0 or (ii) the sum of the Company's cash and cash
equivalent investments and amounts available under any revolving credit facility
of the Company's is less than or equal to $3,500,000 (for each of (i) and (ii),
as reported in the then most recent annual financial statements delivered
pursuant to Section 4(a)(i)), such payment may be made by the Company in kind.
Payments in kind may be made through the issuance of one or more additional
Notes in the form of this Note (each, a "PIK Note"), on the relevant Interest
Payment Date and dated as of such date, in an aggregate principal amount equal
to the amount of interest that would be payable with respect to this Note if
such interest were paid in cash. Anything contained herein to the contrary
notwithstanding, all payments of interest that shall become due and payable on
the final Interest Payment Date shall be payable in cash in the manner set forth
herein.
(d) Application of Payments. Payments received by the Noteholder
from the Company on this Note shall be applied first to the payment of interest
which is due and payable, to the extent not paid by one or more PIK Notes, and,
thereafter, to the Unpaid Principal Amount.
(e) Applicable Interest Rate. For the period commencing on the
Closing Date until the second year anniversary of the Closing Date, the
"Applicable Interest Rate" shall be a fixed rate of interest equal to twelve
percent (12%) per annum and, thereafter, a fixed rate of interest equal to
thirteen percent (13%) per annum.
SECTION 3. Collateral Security. This Note and any PIK Note issued are
secured by and entitled to the benefits of the Security Documents on a pari
passu basis.
SECTION 4. Covenants. (a) The Company hereby agrees that, so long as any
amount is owing to the Noteholder (and, with respect to clause (i) below, until
the earlier to occur of (i) the Consummation of an IPO (as hereinafter defined),
and (ii) the date on which the Noteholder owns beneficially less than 50% of the
Common Stock of the Company, no par value per share ("Common Stock"), issuable
pursuant to that certain Series A-IV Common Stock Warrant issued by the Company
to the Noteholder in connection with the delivery of this Note), the Company
shall and (except in the case of delivery of financial information, reports and
notices) shall cause each of its Subsidiaries to:
(i) Financial Statements. Furnish to the Noteholder:
(A) as soon as available, but in any event within
90 days after the end of each fiscal year of the Company, a copy
of the consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income and stockholders'
equity and of
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<PAGE> 34
cash flows for such year, setting forth in each case comparisons
to the figures for the previous year, reported on without a
"going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Ernst &
Young or other independent certified public accountants of
nationally recognized standing; and
(B) as soon as available, but in any event not
later than 30 days after the end of each month of each fiscal
year of the Company, the unaudited consolidated balance sheet of
the Company and its consolidated Subsidiaries as at the end of
such month and the related unaudited consolidated statements of
income and stockholders' equity and of cash flows of the Company
and its consolidated Subsidiaries for such month and the portion
of the fiscal year through the end of such month, setting forth
in each case comparisons to the figures for the previous year
certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments).
All such financial statements shall be complete and correct in all
material respects and shall be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such
accountants or officer, as the case may be, and disclosed therein) and
shall be accompanied by a management discussion and analysis in respect
of the fiscal periods reported on therein.
(ii) Certificates; Other Information. Furnish to the Noteholder:
(A) concurrently with the delivery of the financial
statements referred to in Section 4(a)(i)(A), a certificate of
the independent certified public accountants reporting on such
financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(B) concurrently with the delivery of the financial
statements referred to in Section 4(a)(i)(A) and 4(a)(i)(B), a
certificate of a Responsible Officer stating that, to the best of
such officer's knowledge, the Company during such period and as
of the date of such certificate has observed or performed all of
its covenants and other agreements, and satisfied every
condition, contained in this Note to be observed, performed or
satisfied by it, and that such officer has obtained no knowledge
of any Default or Event of Default during such period or on or
prior to the date of such certificate except as specified in such
certificate;
(C) not later than 30 days prior to the end of each
fiscal year of the Company, a copy of the projections by the
Company of the operating budget and cash flow budget of the
Company and its Subsidiaries for the succeeding fiscal year, such
projections to be accompanied by a certificate of a Responsible
Officer to the effect that such projections have been prepared on
the basis of
4
<PAGE> 35
sound financial planning practice and that such officer has no
reason to believe they are incorrect or misleading in any
material respect;
(D) within 5 days after the same are sent, copies
of all financial statements and reports which the Company sends
to its stockholders, and within 5 days after the same are filed,
copies of all financial statements and reports which the Company
may make to, or file with, the Securities and Exchange Commission
or any successor or analogous Governmental Authority;
(E) promptly upon receipt thereof, any additional
reports, management letters or other detailed information
concerning significant aspects of the Company's operations or
financial affairs given to the Company by its independent
certified public accountants (and not otherwise contained in
other materials provided hereunder);
(F) during the month of October in each calendar
year, a report of a reputable insurance broker with respect to
insurance and such supplemental reports with respect thereto as
the Noteholder may reasonably request from time to time;
(G) promptly, and in any case within five Business
Days, written notice of the commencement of all actions, suits
and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Company or any of its Subsidiaries, and of
any material adverse development in connection with any of the
foregoing, in each case described in reasonable detail (including
a description of the parties, the venue and the nature of the
claim); and
(H) promptly, such additional financial and other
information as the Noteholder may from time to time reasonably
request.
(iii) Performance of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever nature,
except where the amount or validity thereof is currently being contested
in good faith by appropriate proceedings and reserves in conformity with
GAAP with respect thereto have been provided on the books of the Company
or its Subsidiaries, as the case may be. Comply with all Contractual
Obligations and Requirements of Law except to the extent the failure to
comply therewith could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(iv) Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now conducted
by it and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal
conduct of its business.
5
<PAGE> 36
(v) Maintenance of Property; Insurance. Keep all property
useful and necessary in its business in good working order and
condition; maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and
against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually
insured against in the same general area by companies engaged in the
same or a similar business; and furnish to the Noteholder, upon written
request, full information as to the insurance carried.
(vi) Inspection of Property; Books and Records;
Discussions. Keep proper books of records and accounts in which full,
true and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to its
business and activities; and permit representatives of the Noteholder to
visit and inspect any of its properties and examine and make abstracts
from any of its books and records at any reasonable time and as often as
may reasonably be desired and to discuss the business, operations,
properties and financial and other condition of the Company and its
Subsidiaries with officers and employees of the Company and its
Subsidiaries and with its independent certified public accountants;
provided that the Noteholder shall bear its own expenses if any such
inspection, examination or discussion occurs at a time when no Default
or Event of Default shall have occurred and be continuing.
(vii) Notices. Promptly give notice to the Noteholder of:
(A) the occurrence of any Default or Event of
Default;
(B) any (1) default or event of default under any
Contractual Obligation of the Company or any of its Subsidiaries
or (2) litigation, investigation or proceeding which may exist at
any time between the Company or any of its Subsidiaries and any
Governmental Authority, which in either case, if not cured or if
adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(C) any litigation or proceeding affecting the
Company or any of its Subsidiaries in which the amount involved
is $250,000 or more and not covered by insurance or in which
injunctive or similar relief is sought;
(D) the following events, as soon as possible and
in any event within 30 days after the Company knows or has reason
to know thereof: (1) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, a failure to make any
required contribution to a Plan, the creation of any Lien in
favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer
Plan or (2) the institution of proceedings or the taking of any
other action by the PBGC or the Company or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan;
6
<PAGE> 37
(E) any material adverse change in the business,
operations, property, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole;
(F) any Lien (other than security interests created
by the Security Agreement or Liens permitted hereunder or
thereunder) on any of the Collateral (as defined in the Security
Agreement) which would adversely affect the ability of the
Noteholder to exercise any of its remedies under the Security
Agreement;
(G) the occurrence of any event which would
reasonably be expected to have a material adverse effect on the
aggregate value of the Collateral or on the security interests
created by the Security Agreement; and
(H) any application or registration relating to any
material patent or trademark of the Company or any of its
Subsidiaries becoming abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or
any court or tribunal in any country regarding a Grantor's (as
defined in the Security Agreement) ownership of any material
patent or trademark or its right to register the same or to keep
and maintain the same.
Each notice pursuant to this Section 4(a)(vii) shall be
accompanied by a statement of a Responsible Officer setting forth
details of the occurrence referred to therein and stating what
action the Company proposes to take with respect thereto.
(viii) Environmental Matters. (A) Comply with, and ensure
compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and ensure
that all tenants and subtenants obtain and comply with and maintain, any
and all licenses, approvals, notifications, registrations or permits
required by applicable Environmental Laws.
(B) Conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws and promptly
comply with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws.
(ix) Additional Collateral; Subsidiaries. In each case,
subject to the terms of, and to the extent, and only to the extent,
permitted by, the Intercreditor Agreement:
(A) With respect to any assets of the type covered
by the Security Agreement acquired after the Closing Date by the
Company or any of its U.S. Subsidiaries, and, upon the occurrence
and during the continuance of an Event of Default and at the
request of the Noteholder, with respect to any other assets or
property of the Company or any of its U.S. Subsidiaries, as to
which the
7
<PAGE> 38
Noteholder does not have a perfected Lien, (1) execute and
deliver to the Noteholder such amendments to the Security
Agreement or such other documents as the Noteholder reasonably
requests in order to grant to the Noteholder a security interest
in such assets, (2) take all actions reasonably requested by the
Noteholder to grant to the Noteholder a perfected security
interest in such assets, including, without limitation, the
filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Security Agreement or by
law or as may be requested by the Noteholder and (3) if
requested by the Noteholder deliver to the Noteholder legal
opinions relating to the matters described in the preceding
clauses (1) and (2), which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the
Noteholder.
(B) With respect to any Subsidiary (other than a
Foreign Subsidiary) of the Company created or acquired after the
Closing Date by the Company, (1) have such Subsidiary become a
party to the Security Agreement and grant to the Noteholder a
perfected security interest in the Capital Stock and assets of
such Subsidiary, (2) deliver to the Noteholder or its agent the
certificates representing such Capital Stock, if any, together
with undated stock powers, executed in blank, in form and
substance satisfactory to the Noteholder, in respect to all
obligations of the Company hereunder, (3) execute and deliver
such amendments to this Note requested by the Noteholder to
reflect the existence of such Subsidiary, including, without
limitation, amendments to include such Subsidiary in the
covenants, representations and warranties and agreements
contained herein and (4) if requested by the Noteholder, deliver
to the Noteholder legal opinions relating to the matters
described in the preceding clauses (1), (2) and (3), which
opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Noteholder.
(C) With respect to any Foreign Subsidiary,
promptly upon the request of the Noteholder, (1) execute and
deliver to the Noteholder such amendments to this Note or the
Security Agreement or such other documents as the Noteholder
reasonably requests in order to grant to the Noteholder a
perfected security interest in the Capital Stock of such
Subsidiary which is owned by the Company or any of its
Subsidiaries (provided that in no event shall any Capital Stock
of any such Subsidiary be required to be so pledged to the extent
that such pledge would result in adverse tax consequences to the
Company or any such Subsidiary), (2) deliver to the Noteholder or
its agent the certificates representing such Capital Stock, if
any, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Company or such
Subsidiary, as the case may be, and take all such other action
under local laws as may be necessary or desirable to perfect the
Lien on such Capital Stock, and (3) if requested by the
Noteholder, deliver to the Noteholder legal opinions relating to
the matters described in the preceding clauses (1) and (2), which
opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Noteholder.
8
<PAGE> 39
(b) Transfer of Covenants. The Company hereby agrees that,
effective as of the date (the "Termination Date") on which all amounts
outstanding under the Secured Promissory Note, dated June 11, 1996 (as amended
and otherwise modified from time to time, the "Secured Promissory Note"),
between the Company and CoreStates, shall have been paid in full and all
commitments to make financial accommodations under the Secured Promissory Note
shall have been fully terminated, each of the covenants contained in Section
4(b) of the Secured Promissory Note as in effect on the Termination Date
(without giving effect to any amendment or other modification of such covenants
made in anticipation of the Termination Date) shall be incorporated herein by
reference and shall run to the benefit of the Noteholder.
(c) Purchase Agreement Covenant Regarding Senior Indebtedness.
Reference is hereby made to the covenant of the Company regarding senior
indebtedness set forth in Section 5.5 of the Purchase Agreement.
SECTION 5. Intercreditor Agreement. The Noteholder hereby acknowledges
and agrees that the exercise of remedies pursuant to Section 6 is, and shall at
all times be, subject to the limitations on the Noteholder's remedies set forth
in the Intercreditor Agreement.
SECTION 6. Events of Default. (a) Definition. For purposes of this Note,
an Event of Default shall be deemed to have occurred if
(i) the Company shall fail to pay any principal when due
in accordance with the terms hereof; or the Company shall fail to pay
any interest when due in accordance with the terms hereof or any PIK
Note, within 5 days after any such principal, interest or other amount
payable hereunder is due and payable in accordance with the terms
hereof; or
(ii) any representation or warranty made or deemed made by
the Company in Section 13 or in any Related Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Note or any
Related Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(iii) the Company shall default in the observance or
performance of any agreement contained in Section 4(a)(ix) or any
Related Document; or
(iv) the Company shall default in the observance or
performance of any other agreement contained in this Note (other than as
provided in Section 6(a)(i) through (iii)), and such default shall
continue unremedied for a period of 30 days; or
(v) the Company or any of its Subsidiaries shall (A)
default in any payment of principal of or interest on any Indebtedness
(including, without limitation, any indebtedness under the Credit
Agreement or the Secured Promissory Note) (after giving effect to any
applicable grace period); or (B) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or any Guarantee Obligation or contained in any instrument
or agreement evidencing, securing
9
<PAGE> 40
or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to give the
holder thereof the right to cause such Indebtedness to become due prior
to its stated maturity or such Guarantee Obligation to become payable
(whether by the terms of any document evidencing such Indebtedness or
Guarantee Obligation, upon the election of any holder of Indebtedness or
beneficiary of any Guarantee Obligation or otherwise); or
(vi) (A) the Company or any of its Subsidiaries shall
commence any case, proceeding or other action (1) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (2)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (B) there shall be
commenced against the Company or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (A) above
which (1) results in the entry of an order for relief or any such
adjudication or appointment or (2) remains undismissed, undischarged or
unbonded for a period of 60 days; or (C) there shall be commenced
against the Company or any of its Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (D) the Company or any
of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (A), (B) or (C) above; or (E) the Company or
any of its Subsidiaries shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due; or
(vii) (A) any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
code) involving any Plan, (B) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Company or any Commonly Controlled
Entity, (C) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the
Noteholder, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (D) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (E) the Company or any
Commonly Controlled Entity shall, or in the reasonable opinion of
Noteholder is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (F) any other event or condition shall occur or exist with
respect to a Plan; and in each case in clauses (A) through (E) above,
such
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<PAGE> 41
event or condition, together with all other such events or conditions,
if any, could reasonably be expected to have a Material Adverse Effect;
or
(viii) one or more final judgments or decrees shall be
entered against the Company or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance) of
$100,000 or more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days from
the entry thereof; or
(ix) (A) any of the Security Documents shall cease, for
any reason, to be in full force and effect, or the Company or any
Subsidiary shall so assert or (B) the Lien created by any of the
Security Documents shall cease to be enforceable and of the same effect
and priority purported to be created thereby;
(x) Senior Managers of the Company shall cease to own, of
record or beneficially, the issued and outstanding shares of Capital
Stock of the Company having at least 25% of the ordinary voting power
for the election of directors of the Company; or
(xi) Interest Events shall have occurred on three
consecutive Interest Payment Dates and none of such Interest Events
shall have been Cured, or Interest Events shall have occurred on a total
of five Interest Payment Dates and none of such Interest Events shall
have been Cured.
(b) Consequences of Events of Default.
(i) If any Event of Default has occurred, the interest
rate on this Note shall be the Default Interest Rate. Any increase of
the interest rate resulting from the operation of this clause shall
terminate as of the close of business on the date on which no Events of
Default exist (subject to subsequent increases pursuant to this clause).
(ii) If an Event of Default of the type described in
Section 6(a)(vi) has occurred, the aggregate principal amount of this
Note (together with all accrued interest thereon and all other amounts
due and payable with respect thereto) shall become immediately due and
payable without any action on the part of the Noteholder, and the
Company shall immediately pay to the Noteholder all amounts due and
payable with respect to this Note.
(iii) If any Event of Default has occurred (other than
under Section 6(a)(vi)), the Noteholder may declare this Note to be
immediately due and payable and may demand immediate payment of the
Unpaid Principal Amount (together with all accrued and unpaid interest
and all other amounts due and payable with respect thereto).
(iv) The Noteholder shall also have any other rights which
such holder may have been afforded under any contract or agreement
(including, without limitation,
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<PAGE> 42
the Security Documents) at any time and any other rights which such
holder may have pursuant to applicable law.
(c) Cure of Event of Default Relating to Interest Events. An
Event of Default pursuant to Section 6(a)(xi) may be cured at any time (provided
that no other Event of Default has occurred and is continuing) by Curing any
single Interest Event which was taken into account in declaring such Event of
Default.
SECTION 7. Waiver of Certain Rights. The Company hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Company hereunder.
SECTION 8. Transfer of this Note. Upon surrender for registration of
transfer of this Note at the principal office of the Company, the Company shall,
at the Noteholder's expense, execute and deliver one or more new Notes of like
tenor and of like aggregate principal amount, registered in the name of such
transferee or transferees. At the time this Note is surrendered for registration
of transfer, it shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the Noteholder or such holder's
attorney duly authorized in writing. Any Note or Notes issued upon transfer of
this Note shall carry the rights to unpaid interest and the accrual of interest
which were carried by this Note, so that neither gain nor loss of interest shall
result from any such transfer.
SECTION 9. Assignment. The rights and obligations of the Company and the
Noteholder shall be binding upon and benefit the permitted successors, assigns
and transferee of the parties; provided that in no event shall the Company
assign its rights hereunder without the prior written consent of the Noteholder.
SECTION 10. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Noteholder. No failure or delay on the part of the Noteholder in exercising any
power or right under this Note or any other Related Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right.
SECTION 11. Definitions. For purposes of this Note, the following
capitalized terms have the following meaning:
"Applicable Interest Rate" is defined in Section 2(e).
"Business Day" means any day other than a Saturday, a Sunday, or any
other day on which banking institutions in the City of New York are authorized
or required by law, regulation or executive order to remain closed.
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"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"Change of Control" means when:
(i) any "person," as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, becomes a
beneficial owner, as such term is used in Rule 13d-3 promulgated under
such Act, of securities of the Company representing 50% or more of the
combined voting power of the outstanding securities of the Company,
having the right to vote in the election of directors (any such owner
being herein referred to as an "Acquiring Person");
(ii) a majority of the Board of Directors of the Company
(the "Company Board") at any time consists of individuals elected to
membership at a Company Board meeting or a Company shareholders' meeting
other than individuals nominated or approved by the Company Board;
(iii) all or substantially all the business of the Company
is disposed of pursuant to a merger, consolidation or other transaction
(other than a merger, consolidation or other transaction with a company
of which 40% or more of the combined voting power of the outstanding
securities having a right to vote at the election of directors is owned,
directly or indirectly, by the Company both before and immediately after
the merger, consolidation or other transaction) in which the Company is
not the surviving corporation or the Company is materially or completely
liquidated;
(iv) the Company combines with another company and is the
surviving corporation (other than a merger, consolidation or other
transaction with a company of which 50% or more of the combined voting
power of the outstanding securities having a right to vote at the
election of directors is owned, directly or indirectly, by the Company
both before and immediately after the merger, consolidation or other
transaction) but, immediately, after the combination, the shareholders
of the Company hold, directly or indirectly, less than 50% of the total
outstanding securities of the combined company having the right to vote
in the election of directors;
(v) the Company consummates a sale of its assets which
represent in value more than 25% of the total assets of the Company at
the time of such sale; or
(vi) the Company consummates an underwriting for its
Common Stock pursuant to an offering registered under the Securities Act
of 1933, as amended, at a per share price of at least $18.00 (as
currently configured) in which the aggregate proceeds (net of offering
expenses and underwriters' discounts or commissions) received by the
Company equals or exceeds $10,000,000 (an "IPO").
"Closing Date" is defined in Section 1(a).
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"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"Company" is defined in the preamble.
"Consolidated EBITDA" means, for any period, Consolidated Net Income of
the Company and its Subsidiaries for such period plus, without duplication and
to the extent reflected as a charge in the statement of such Consolidated Net
Income, the sum of (a) income tax expense, (b) Consolidated Interest Expense,
(c) depreciation and amortization expense and (d) any extraordinary, non
recurring or unusual losses (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income, losses on the
sales of assets outside of the ordinary course of business), minus, without
duplication and to the extent reflected as income in the statement of such
Consolidated Net Income, any extraordinary, non recurring or unusual gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income, gains on the sales of assets outside
of the ordinary course of business).
"Consolidated Interest Expense" means, for any period, the amount of
interest expense, both expensed and capitalized, of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, for
such period on the aggregate principal amount of Indebtedness of the Company and
its Subsidiaries.
"Consolidated Net Income" means, for any period, net after tax income of
the Company and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Contractual Obligation" means as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CoreStates" means CoreStates Enterprise Fund, a Division of CoreStates
Bank, N.A.
"Credit Agreement" means the Credit Agreement, dated as of November 16,
1995, among the Company, the Lenders parties thereto, and Creditanstalt
Bankverein, as Agent for the Lenders, as amended and otherwise modified from
time to time.
"Credit Agreement Security Documents" means, collectively, the Global
Security Agreement (as defined in the Credit Agreement) and each other security
agreement relating to the Credit Agreement.
"Cured" means, with respect to any Interest Event, paid in full in cash
or in kind if in accordance with Section 2(c).
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"Default" means any of the events specified in Section 6, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Default Interest Rate" means a rate of interest equal to 15% per annum.
"Environmental Laws" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means each of the events described in Section 6;
provided, however, that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"GAAP" means generally accepted accounting principles in the United
States of America consistent with those utilized in preparing the audited
financial statements referred to in Section 4(a).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business.
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<PAGE> 46
The amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (x) an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee Obligation
is made and (y) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith.
"Indebtedness" means, of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person, (e) all obligations in respect of deferred
compensation and (f) all liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Insolvency" means with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Intercreditor Agreement" means the Intercreditor and Subordination
Agreement, dated as of the date hereof, among Creditanstalt Bankverein,
Northstar and CoreStates, as amended or otherwise modified from time to time.
"Interest Event" means the event of an interest payment not being made
in full in cash, or in kind if in accordance with Section 2(c), for any reason
(including, without limitation, if giving effect to the payment of interest in
cash there would be a Default under (and as defined in) the Credit Agreement or
the Secured Promissory Note).
"Interest Payment Date" means each of June 30, September 30, December 31
and March 31 of each year from the Closing Date through the Principal Payment
Date.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Company and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Note or any of the other Related Documents or the rights
or remedies of Noteholder hereunder or thereunder.
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<PAGE> 47
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Northstar" is defined in the preamble.
"Note" means this Secured Promissory Note issued by the Company to
Northstar.
"Noteholder" means Northstar and its permitted successors, transferees
and assigns.
"Original Northstar Note" means that certain Secured Promissory Note
dated December 27, 1995 (as amended and otherwise modified from time to time)
between the Company and Northstar.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PIK Note" is defined in Section 2(c).
"Plan" means at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means that certain Junior Subordinated Pledge
Agreement, dated the date hereof, between the Company and Northstar.
"Preferred Stock" means all series and classes of the Company's
Preferred Stock, no par value.
"Prime Rate" shall mean the rate of interest that is publicly announced
from time to time by Citibank, N.A., New York, New York as its "base" lending
rate, such rate to change automatically and without notice to the Company when
and as such prime lending rate changes.
"Principal Amount" is defined in Section 1(a).
"Principal Payment Date" is defined in Section 1(b).
"Purchase Agreement" means that certain Note and Series A-IV Common
Stock and Warrant Purchase Agreement, dated the date hereof, between the Company
and Northstar.
"Related Documents" means the Purchase Agreement, this Note, the
Security Documents and the Intercreditor Agreement.
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"Reorganization" means with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the 30 day notice period is waived
under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615.
"Requirements of Law" means the obligations of the Company under
federal, state and local laws applicable to it in the conduct of its business.
"Responsible Officer" means the chief executive officer and the
president of the Company or, with respect to financial matters, the chief
financial officer of the Company.
"Secured Promissory Note" is defined in Section 4(b).
"Security Agreement" means that certain Junior Subordinated Security
Agreement, dated the date hereof, between the Company and Northstar.
"Security Documents" means the Other Loan Documents (as such term is
defined in the Purchase Agreement) other than the Intercreditor Agreement.
"Solvent" shall mean with respect to any Person on a particular date,
the condition that on such date, (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value, on a going concern basis, of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (d) such
Person is not engaged in business or a transaction, and is not about to engage
in a business or a transaction, for which such Person's property would
constitute an unreasonably small amount of capital.
"Subsidiary" means as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Note shall refer to a Subsidiary or Subsidiaries of
the Company.
"Termination Date" is defined in Section 4(b).
"Uncured" means, with respect to any Interest Event, not paid in full in
cash, or in kind if in accordance with Section 2(c).
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"Uniform Commercial Code" means the Uniform Commercial Code as is then
in effect under the laws of the respective state of reference.
"Unpaid Principal Amount" means, at any time, the portion of the
Principal Amount outstanding at such time.
"U.S. Subsidiaries" means Subsidiaries organized under laws of the U.S.
or any state thereof.
SECTION 12. Cancellation. After all principal and accrued interest at
any time owed on this Note has been paid in full, this Note shall be surrendered
to the Company for cancellation and shall not be reissued.
SECTION 13. Representations of the Company. (a) The representations and
warranties of the Company to Northstar set forth in the Purchase Agreement shall
be deemed, mutatis mutandis, to be representations of the Company made to
Northstar for purposes of this Note on the date hereof to the same extent and
with the same effect as if such representations and warranties were set forth in
full herein.
(b) The Company is, and after giving effect to the incurrence of
all indebtedness and obligations being incurred in connection herewith will be
and will continue to be, Solvent.
SECTION 14. Payment of Expenses and Taxes. The Company hereby agrees (a)
to pay or reimburse the Noteholder for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this Note
and the other Related Documents after the occurrence of any Event of Default,
including, without limitation, the fees and disbursements of counsel to the
Noteholder, (b) to pay, indemnify, and hold the Noteholder harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Note and the other Related
Documents and (c) to pay, indemnify, and hold the Noteholder harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Note and the other Related Documents
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Company, any of its Subsidiaries or any of their
properties (all the foregoing in this clause (c), collectively, the "indemnified
liabilities"), provided that the Company shall have no obligation hereunder to
the Noteholder with respect to indemnified liabilities arising from (i) the
gross negligence or willful misconduct of the Noteholder, or (ii) legal
proceedings commenced against the Noteholder by any security holder or creditor
of the Company arising out of and based upon rights afforded any such security
holder or creditor solely in its capacity as such.
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SECTION 15. Payments. (a) Generally. Except for payments made in
accordance with Section 2(c), all payments to be made to the Noteholder shall be
made in the lawful money of the United States of America in immediately
available funds.
(b) Upon the later to occur of (i) April 1, 2001 and (ii) the
date on which all obligations under the Secured Promissory Note are satisfied in
full, the Noteholder shall be entitled to receive from the Company, within
fifteen (15) days from the occurrence thereof, the Make Whole Amount. For
purposes of the foregoing sentence, the "Make Whole Amount" shall be deemed to
be the issuance of additional Notes by the Company in the form of this Note and
in an amount which, when aggregated with the interest payments made to such date
by the Company (including the principal amount of all PIK Notes issued) and the
aggregate Dollar Value of the Company's unexercised warrants issued under the
Purchase Agreement ("Warrants") and shares of Common Stock issued pursuant to
the exercise thereof ("Warrant Shares"), would represent a twenty percent (20%)
compounded rate of return per annum for the Noteholder. For the purpose of the
foregoing sentence, "Dollar Value", (x) with respect to unexercised Warrants,
shall equal the product of the number of shares of Common Stock into which such
Warrants are exercisable and the difference between the then applicable exercise
price of such Warrants and the most recently reported price for one share of
Common Stock on any national securities exchange or quotation service (or, if
the Common Stock is not then so listed or quoted, the value of one share of
Common Stock as determined by the Independent Appraiser (as hereinafter
defined)) (such number, the "Per Share Value") and, (y) with respect to Warrant
Shares, the product of the number of Warrant Shares and the difference between
the Per Share Value and the exercise price actually paid in connection with the
exercise of the respective Warrants. In the event any calculation of "Dollar
Value" would, with respect to either Warrants or Warrant Shares, result in a
negative number, the "Dollar Value" with respect thereto shall be deemed to
equal zero. For purposes of the foregoing, the term "Independent Appraiser"
shall mean an appraiser mutually selected by the Company and the Noteholder or,
in the event of a disagreement as to such selection, an appraiser currently
receiving no fee income from either the Company or the Noteholder selected by
the mutual agreement of two other appraisers, one of which shall be selected by
the Company and the other by the Noteholder.
SECTION 16. Place of Cash Payment. Cash payments of principal and
interest shall be delivered to Northstar by wire transfer of immediately
available funds to such address and account as Northstar may specify in writing
to the Company, or to such other Noteholder at such other address or to the
attention of such other person or to such other account as specified by prior
written notice to the Company.
SECTION 17. Severability. Whenever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Note.
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SECTION 18. Descriptive Headings; Interpretation. The descriptive
headings of this Note are inserted for convenience only and do not constitute a
substantive part of this Note. The use of the word "including" in this Note
shall be by way of example rather than by limitation.
SECTION 19. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF NEW YORK, EXCEPT THAT THE FILING, PERFECTION, EFFECT OF PERFECTION AND
ENFORCEMENT OF SECURITY INTERESTS AND LIENS IN OTHER JURISDICTIONS SHALL BE
GOVERNED BY THE LAWS OF THE APPLICABLE JURISDICTIONS IN ACCORDANCE WITH THE UCC.
SECTION 20. WAIVERS. TO THE EXTENT PERMITTED BY LAW, THE COMPANY HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED REGISTERED MAIL DIRECTED TO IT AT
ITS ADDRESS SET FORTH IN SECTION 23. IN ADDITION, THE COMPANY HEREBY WAIVES
TRIAL BY JURY, ANY OBJECTIONS BASED ON FORUM NON CONVENIENS AND ANY OBJECTIONS
TO VENUE OF ANY ACTION ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL
TO THE TRANSACTIONS CONTEMPLATED BY OR THE RELATIONSHIPS ESTABLISHED IN
CONNECTION WITH THIS NOTE.
SECTION 21. JURISDICTION. EXCEPT AS OTHERWISE PROVIDED IN SECTION 22,
ALL DISPUTES AMONG OR BETWEEN SUCH HOLDER AND THE COMPANY ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED BY OR
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, MAY BE RESOLVED BY STATE
OR FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK, AND THE COMPANY
HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN SUCH COUNTY AND STATE; PROVIDED, HOWEVER, THAT ANY APPEALS FROM
THOSE COURTS MAY BE HEARD BY A COURT LOCATED OUTSIDE THE SOUTHERN DISTRICT OF
NEW YORK. THE COMPANY WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT CONSIDERING THE DISPUTE. NOTHING IN THIS SECTION 21
SHALL AFFECT THE RIGHT OF THE NOTEHOLDER TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF SUCH HOLDER TO BRING ANY ACTION
OR PROCEEDING AGAINST THE COMPANY OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 22. OTHER JURISDICTIONS. THE COMPANY AGREES THAT THE NOTEHOLDER
SHALL HAVE THE RIGHT TO PROCEED AGAINST THE COMPANY IN A COURT IN ANY LOCATION
TO ENABLE SUCH HOLDER TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF SUCH HOLDER. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE NOTEHOLDER HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS SECTION 22.
SECTION 23. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Note shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed by first-class, registered or
21
<PAGE> 52
certified mail, return receipt requested, postage prepaid, or (c) sent by
next-day or overnight mail or delivery or (d) sent by telecopy (with verbal
confirmation of receipt) or telegram.
If to Northstar:
Northstar Advantage High Total Return Fund
c/o Thomas Ole Dial
2 Pickwick Plaza
Greenwich, CT 06830
Attn: Michael Graves
Fax Number: (203) 862-8603
Confirm Number: (203) 863-6220
with a copy, which will
not constitute notice to
the Noteholder, to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attn: Karen Wiedemann
Fax Number: (212) 841-5725
Confirm Number: (212) 841-5781
If to the Company:
Intracel Corporation
359 Allston Street
Cambridge, Massachusetts 01239
Attn: Simon R. McKenzie
Fax Number: (617) 491-9015
Confirm Number: (617) 547-0011
with a copy, which will
not constitute notice to
the Company, to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett, Esq.
Fax No: (212) 468-7900
Confirm No.: (212) 468-8240
22
<PAGE> 53
or at such other address as may be specified in writing to the other parties in
accordance with this Section 23.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (a) if by personal delivery on the date after such
delivery, (b) if by certified or registered mail, on the seventh Business Day
after the mailing thereof, (c) if by next-day or overnight mail or delivery, on
the day delivered, (d) if by telecopy or telegram, on the next day following the
day on which such telecopy or telegram was sent, provided that a copy is also
sent by certified or registered mail.
SECTION 24. Business Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the State of New York, the payment shall be due and payable on,
and the time period shall automatically be extended to, the next Business Day
immediately following such Saturday, Sunday or legal holiday, and interest shall
continue to accrue at the required rate hereunder until any such payment is
made.
SECTION 25. Usury Laws. It is the intention of the Company and the
Noteholder to conform strictly to all applicable usury laws now or hereafter in
force, and any interest payable under this Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by
reason of an election by the holder hereof resulting from an Event of Default,
voluntary prepayment by the Company or otherwise, then earned interest may never
include more than the maximum amount permitted by law, computed from the date
hereof until payment, and any interest in excess of the maximum amount permitted
by law shall be canceled automatically and, if theretofore paid, shall at the
option of the holder hereof either be rebated to the Company or credited on the
principal amount of this Note, or if this Note has been paid, then the excess
shall be rebated to the Company. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable, or receivable under this Note shall under no circumstances exceed
the maximum legal rate upon the unpaid principal balance of this Note remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it shall be deemed a mistake and such excess shall be canceled automatically
and, if theretofore paid, rebated to the Company or credited on the principal
amount of this Note, or if this Note has been repaid, then such excess shall be
rebated to the Company.
* * * * *
23
<PAGE> 54
IN WITNESS WHEREOF, the Company has executed and delivered this Note on
June 21, 1996.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
-------------------------------------
Name: Simon R. McKenzie
Title: PRESIDENT/CEO
ACCEPTED AND AGREED TO:
NORTHSTAR ADVANTAGE
HIGH TOTAL RETURN FUND
By: /s/ THOMAS OLE DIAL
--------------------------------
Name: Thomas Ole Dial
Title: Vice President
<PAGE> 55
EXHIBIT B
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
SERIES A-IV COMMON STOCK WARRANT
Void after April 1, 2003 Right to purchase 79,537
shares of Common Stock
(subject to adjustment)
of Intracel Corporation
No. AIV-1
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Massachusetts corporation (the "Company"),
hereby certifies that, for value received, NORTHSTAR ADVANTAGE HIGH TOTAL RETURN
FUND (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time before 5:00 P.M. New
York time, on April 1, 2003 (or such earlier date as provided in Section 7
hereof) (the "Expiration Time"), up to seventy-nine thousand five hundred
thirty-seven (79,537) fully paid and nonassessable shares of the Company's
Common Stock, no par value per share, at a purchase price per share of $14.00
(the "Purchase Price"). The number and character of such shares of Common Stock
and the Purchase Price are subject to adjustment as provided herein.
This warrant (this "Warrant") is issued pursuant to a certain Note and
Warrant Purchase Agreement, dated as of June 21, 1996, between the Company and
the Holder, a copy of which is on file at the principal office of the Company
(the "Purchase Agreement").
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
"Affiliate" means, with reference to a specified person or
entity, any person or entity that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with the
specified person or entity. For purposes of this definition, "control"
(including, with correlative meaning, the terms "controlled by" and "under
common control with"), as used with respect to any person or entity, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting securities or by contract or otherwise.
"Common Stock" means the Company's common stock, no par value per
share, in existence on June 21, 1996, or any class or classes (however
designated) of such Common Stock
<PAGE> 56
subsequently existing as a result of any recapitalization, reorganization or
other reclassification of the Company's capital stock which affects the holders
of Common Stock.
"Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the
Company with or the merger of the Company into any other corporation or entity
(other than a consolidation or merger in which the Company is the continuing
entity) or the sale or transfer of all or substantially all of the assets of the
Company to another person or entity.
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities and Exchange Commission" or "Commission" refers to
the Securities and Exchange Commission or any other Federal agency then
administering the Securities Act.
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
1. Restricted Stock.
1.1 This Warrant and all rights hereunder may not be transferred
unless (i) the transferee is an Affiliate of the Holder, or (ii) the Company
gives its prior written consent to the transfer.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or exchange,
and in the case of an exercise of this Warrant if the Warrant Shares to be
issued thereupon are not registered pursuant to the Securities Act, the Company
may require a written statement that such Warrant or Warrant Shares, as the case
may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at the
time of exercise such Warrant Shares are registered under the Securities Act,
bear a legend substantially in the following form:
2
<PAGE> 57
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
2. Exercise of Warrant.
The Holder may exercise this Warrant in whole or in part (but not
as to fractional shares of Common Stock) by delivering this Warrant prior to the
Expiration Time, with the form of subscription at the end hereof duly executed
by the Holder, to the Company at its principal office. This Warrant and the
subscription shall be accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock called for on the form of
subscription by the Purchase Price, as such may be adjusted as provided herein.
In the event of the purchase of less than all of the shares of Common Stock
purchasable under this Warrant, the Company shall execute and deliver a
replacement Warrant of like tenor for the balance of the shares of Common Stock
purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this
Warrant shall be issued as soon as practicable after the exercise of this
Warrant in accordance with Section 2 hereof, but in no event later than 10 days
after the date of delivery to the Company of this Warrant for exercise, without
charge to the Holder, including, without limitation, any tax that may be payable
in respect thereof, and such certificates shall be issued and registered in the
name of, or, subject to Section 1.1, in such names as may be directed by, the
Holder; provided, however, that the Company shall not be required to pay any
income tax to which the Holder may be subject in connection with the issuance of
this Warrant or the shares of Common Stock upon exercise of this Warrant;
provided, further, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate in a name other than that of the Holder and the Company
shall not be required to issue or deliver such certificate unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at
any time or from time to time, the number of shares of Common Stock outstanding
is increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would
3
<PAGE> 58
have received if (A) this Warrant had been exercised into Common Stock on the
date of such event and (B) it had thereafter retained such securities and all
rights and distributions relating to them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event, the
Holder of this Warrant shall have the right thereafter to convert his or her
Warrant Shares into the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock which were
convertible immediately prior to such reorganization, reclassification, or
change. If, at any time or from time to time, the number of shares of Common
Stock outstanding is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date for such combination, the Purchase
Price shall appropriately increase and/or the number of Warrant Shares shall be
appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time after the
date hereof, the Company issues shares of Common Stock for a consideration per
share less than the Purchase Price per share, on the date such additional shares
are issued, the Purchase Price shall be adjusted in accordance with the
following formula:
p
-
E(1) = E x O + E
------
A
where: E(1) = the adjusted Purchase Price.
E = the Purchase Price immediately prior to the
adjustment.
O = the number of shares outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
A = the number of shares outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection does not apply to (i) any of the transactions
described in Sections 4.1 and 4.2 and the first paragraph of subsection (b) or
the issuance of common stock upon the
4
<PAGE> 59
exercise of such rights described therein, (ii) the issuance of shares of Common
Stock upon conversion of the Company's currently outstanding preferred stock,
preferred stock issued in lieu of cash dividends thereon, and upon the exercise
of rights under securities issued on or before the date hereof to convert,
exchange or exercise such securities into shares of Common Stock, or (iii) the
issuance of shares of Common Stock upon the exercise of rights, warrants or
options granted to employees and directors of the Company pursuant to employee
benefit plans or employee stock option plans available for grants to the
Company's executives in general, provided that the aggregate number of shares
issuable upon exercise of such rights, warrants and options (including all
shares previously issued upon exercise thereof) do not exceed ten percent (10%)
of the Company's then issued and outstanding Common Stock.
(b) Adjustment for Convertible Securities Issue. If at any time
after the date hereof, the Company issues any securities convertible into or
exchangeable or exercisable for shares of Common Stock for a consideration per
share of Common Stock initially deliverable upon conversion, exchange or
exercise of such securities less than the Purchase Price per share on the date
of issuance of such securities, the Purchase Price shall be adjusted in
accordance with the following formula:
P
-
E(1) = E x O + E
-----
A
where: E(1) = the adjusted Purchase Price.
E = the then current Purchase Price.
O = the number of shares outstanding immediately
prior to the issuance of such securities.
P = the sum of the aggregate consideration received
for the issuance of such securities plus the
additional consideration, if any, payable upon
conversion, exchange or exercise of such
securities at the initial conversion, exchange
or exercise rate.
D = the maximum number of shares deliverable upon
conversion, exchange or exercise of such
securities at the initial conversion, exchange
or exercise rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance. If
all of the Common Stock deliverable upon conversion, exchange or exercise of
such securities has not been issued when such securities are no longer
outstanding, then the Purchase Price shall promptly be readjusted to the
Purchase Price which would then be in effect had the adjustment upon the
issuance of such
5
<PAGE> 60
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion, exchange or exercise of such securities.
This subsection does not apply to (i) any of the transactions
described in Sections 4.1 and 4.2 and the first paragraph of subsection (a) or
(ii) the issuance of shares of Common Stock upon the exercise of rights,
warrants or options granted to employees or directors of the Company pursuant to
employee benefit plans or employee stock option plans available to the Company's
executives in general, provided that the aggregate number of shares issuable
upon exercise of such rights, warrants and options (including all shares
previously issued upon exercise thereof) do not exceed ten percent (10%) of the
Company's then issued and outstanding Common Stock.
(c) The foregoing adjustments shall be made only if the
adjusted Purchase Price shall be less than the Purchase Price.
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of like
tenor.
7. Accelerated Expiration of Warrants. Notwithstanding anything in this
Warrant to the contrary, this Warrant and the terms and provisions hereunder
shall immediately expire without further action by the Company or the Holder (a)
upon the closing of an underwritten public offering pursuant to an effective
registration statement on Form S-1 or successor form under the Securities Act
covering the offering and sale of Common Stock for the account of the Company at
a per share price of at least $18.00 (as currently configured) in which the
aggregate proceeds (net of offering expenses and underwriters' discounts or
commissions) received by the Company equals or exceeds $10,000,000 (an "Initial
Public Offering") (provided that the Company shall have given notice of the
initial filing of such registration statement promptly after the date of such
filing); or (b) on the day prior to the effective date of any Extraordinary
Transaction.
8. Notices.
8.1 Notices for Adjustments under Section 4 and Certain Other
Events. In the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to receive
any other right; or
6
<PAGE> 61
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or the occurrence of any Extraordinary Transaction; or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities (other than the issuance of
Warrant Shares);
then, and in each such event, the Company will mail by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company pursuant to Section 8.2 hereof, a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, Extraordinary Transaction, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable on
such reorganization, reclassification, recapitalization, Extraordinary
Transaction, dissolution, liquidation or winding up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made.
All notices to be given pursuant to subsection (a) of this Section 8.1
shall be mailed at least fifteen (15) days prior to the record date of such
events described therein. All notices to be given pursuant to subsections (b)
through (d) of this Section 8.1 shall be mailed at least thirty (30) days prior
to the record date of such events described therein.
8.2 Other Notices. (a) In the event of an Initial Public
Offering, the Company will mail by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company
pursuant to Section 8.2(b), notice of the initial filing of the registration
statement for the Initial Public Offering. Any notice to be given pursuant to
this Section 8.2(a) shall be mailed promptly after the date of such filing.
(b) All other notices and communications shall be mailed
by first class registered or certified mail, postage prepaid, addressed as
follows:
(i) if to the Holder, to the address for the Holder
as shown on the signature page hereof, with a copy
to:
Karen Wiedemann, Esq.
Reboul, MacMurray, Hewitt, Maynard & Kristol
7
<PAGE> 62
45 Rockefeller Plaza
New York, New York 10111
or
(ii) if to the Company, to:
Intracel Corporation
359 Allston Street
Cmbridge,MA 02349
Attention: President
with a copy to:
Joseph W. Bartlett, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104
or at such address as may have been furnished to the Company in writing by the
Holder or vice versa.
8.3 Receipt of Notices. All notices under this Warrant shall be
deemed to have been given three (3) days after being properly addressed and
deposited in the U.S. mail.
9. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware (without giving effect to its
choice of law principles). The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Warrant is being executed as an instrument under seal. All nouns and
pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
8
<PAGE> 63
10. Expiration. This Warrant shall expire, and be without further force
and effect, at 5:00 P.M., New York time, on April 1, 2003, or such earlier date
and time as provided in Section 7 hereof.
Dated: June 21, 1996 INTRACEL CORPORATION
(Corporate Seal) By: /s/ SIMON R. McKENZIE
------------------------------------
Its President
Attest: /s/ [SIG]
-----------------------------
Clerk
HOLDER:
NORTHSTAR ADVANTAGE
HIGH TOTAL RETURN FUND
By: /s/ THOMAS OLE DIAL
-------------------------------
Its Vice President
Address: c/o Thomas Ole Dial
2 Pickwick Plaza
Greenwich, CT 06830
Attn: Michael Graves
<PAGE> 64
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To Intracel Corporation:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _____________ shares of Common Stock of INTRACEL
CORPORATION and herewith makes payment of $________________ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to ____________________________, whose address is
Dated:
-----------------------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant)
-----------------------------------------------
(Address)
<PAGE> 65
EXHIBIT C
[MORRISON & FOERSTER LLP LETTERHEAD]
June 21, 1996
Northstar Advantage High Total Return Fund
2 Pickwick Plaza
Greenwich, CT 06830
Re: Note and Series A-IV Warrant Purchase Agreement, dated as of June
21, 1996, between Intracel Corporation and Northstar Advantage High
Total Return Fund
Ladies and Gentlemen:
We have acted as special counsel for Intracel Corporation (the
"Company") in connection with the transactions contemplated by the Note and
Series A-IV Warrant Purchase Agreement, dated as of June 21, 1996 (the "Purchase
Agreement") between the Company and Northstar Advantage High Total Return Fund
(the "Lender"). This opinion is furnished to the Lender pursuant to Section 4.1
of the Purchase Agreement.
We have examined originals or copies of the following documents (the
"Documents"):
(i) the Purchase Agreement;
(ii) the Series A-IV Common Stock Warrant, dated June 21, 1996,
between the Company and the Lender (the "Warrant");
(iii) the Secured Promissory Note, dated June 21, 1996, in the
principal amount of $2,000,000, by the Company, in favor of the
Lender, and acknowledged by the Lender (the "Note");
(iv) the Junior Subordinated Pledge Agreement, dated as of June 21,
1996, between the Company and the Lender (the "Pledge
Agreement");
(v) the Junior Subordinated Security Agreement, dated as of June 21,
1996, between the Company, Bartels, Inc., a wholly-owned
subsidiary of the
<PAGE> 66
[MORRISON & FOERSTER LLP LETTERHEAD]
Northstar Advantage High Total Return Fund
June 21, 1996
Page Two
Company ("Bartels") and the Lender (the "Security Agreement,"
and collectively with the Pledge Agreement, the "Security
Documents"); and
(vi) the Junior Subordinated Subsidiary Guaranty, dated as of June 21,
1996, by Bartels in favor of the Lender (the "Guaranty").
We have also examined originals or copies of the following: (a) the
articles of organization (with respect to the Company), the certificate of
incorporation (with respect to Bartels), and the by-laws, each as amended to
date, of each of the Company and Bartels; (b) the corporate proceedings of each
of the Company and Bartels; and (c) copies of UCC-1 financing statements naming
either the Company or Bartels as debtor and the Lender as secured party, and
which were filed in connection with the Series A-II Warrant and Note Purchase
Agreement, dated December 27, 1996, between the Company and the Lender, and the
transactions contemplated thereunder (collectively, the "Financing Statements").
For purposes of this opinion, "Obligors" means the Company and Bartels.
Unless otherwise defined herein, terms defined in the Purchase Agreement shall
have the same meanings herein.
In addition, we have examined such records, documents, certificates of
public officials and of the Company and Bartels, made such inquiries of
officials of the Company and Bartels, and considered such questions of law as we
have deemed necessary for the purpose of rendering the opinions set forth
herein.
In particular, our opinion in paragraph (a) below as to the good
standing of the Company is based solely upon a certificate of the Secretary of
the Commonwealth of the Commonwealth of Massachusetts, which certificate is
dated June 14, 1996. Our opinion in paragraph (a) below as to the good standing
(State of Delaware), and qualification and good standing (State of Washington)
of Bartels is based solely upon certificates of public officials in the States
of Delaware and Washington, which certificates are dated June 13, 1996
(Delaware) and June 14, 1996 (Washington). In rendering our opinion expressed in
paragraph (i) below, we have relied upon the representations and warranties of
the Lender contained in Article III of the Purchase Agreement, and have assumed
such representations and warranties to be true and correct in all material
respects. With respect to our opinions expressed in paragraphs (i) and (j)
below, we have relied on the Officer's Certificate of Simon R. McKenzie, the
President of the Company, attached hereto as Exhibit A, and the Officer's
Certificate of Simon R. McKenzie, the President of Bartels, attached hereto as
Exhibit B. We have made no independent investigation as to whether any of the
certificates referred to in this paragraph are accurate or complete.
<PAGE> 67
[MORRISON & FOERSTER LLP LETTERHEAD]
Northstar Advantage High Total Return Fund
June 21, 1996
Page Three
Our opinion in paragraph (e) below is based upon our review of those
statutes, rules, regulations and judicial decisions which are normally
applicable to or normally relevant in connection with transactions similar to
those contemplated by the Documents.
We have assumed (i) the genuineness of all signatures and the
authenticity of all items submitted to us as originals and the conformity with
originals of all items submitted to us as copies, and (ii) that each party
(other than the Company and Bartels) to one or more of the Documents has the
power and authority to execute and deliver, and to perform and observe the
provisions of, the Documents to which it is a party, and has duly authorized,
executed and delivered such Documents, and that such Documents constitute valid
and binding obligations of such party.
With respect to the opinion expressed in paragraph (d) below, we have
assumed that, at all times material to our opinion, the Company and Bartels have
"rights" in the personal property and fixtures described in the Security
Documents (collectively, the "Personal Property") within the meaning of Section
9-203(1)(c) of the New York Uniform Commercial Code ("NYUCC").
With respect to the opinion expressed in paragraph (e) below, we have
assumed that the Lender is acquiring the Warrant and the Note with no present
intention of distributing the same other than in compliance with the
requirements, if any, of all applicable state and federal securities laws.
We express no opinion as to (i) the enforceability of a security
interest in any property excluded from the NYUCC by Section 9-104 thereof, (ii)
the perfection or priority of the liens created by the Security Documents, or
the effect of the absence of such perfection or priority, (iii) the state of
title to the Personal Property, (iv) the accuracy or legal sufficiency of the
description of the Personal Property contained in the Security Documents or the
Financing Statements, (v) the effect of any regulation, law, covenant or
agreement relating to zoning, building codes, construction, use, occupancy,
subdivision or environmental control requirements as applied to the Personal
Property or (vi) whether the Financing Statements were duly filed.
The opinions hereinafter expressed are subject to the following further
qualifications:
(1) The effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, including, without limitation, laws relating to fraudulent
transfers or conveyances, preferences and equitable subordination. Without
limiting the generality of the foregoing qualification, we advise you that, if
the Guaranty has not been given for fair or reasonably
<PAGE> 68
[MORRISON & FOERSTER LLP LETTERHEAD]
Northstar Advantage High Total Return Fund
June 21, 1996
Page Four
equivalent consideration, and Bartels is, or by executing the Guaranty may
become, insolvent, or will be rendered insolvent by the transactions
contemplated by the Documents, or, after giving effect to such transactions,
will be left with unreasonably small capital with which to engage in its
anticipated business, or will have intended to incur, or will have believed it
has incurred, debts beyond its ability to pay as such debts mature, then the
Guaranty may be voidable by creditors of Bartels or by a trustee or receiver of
Bartels in bankruptcy or similar proceedings pursuant to bankruptcy, fraudulent
conveyance or similar laws.
(2) Limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of provisions of the
Documents and the effect of judicial decisions which have held that certain
provisions are unenforceable where their enforcement would violate the implied
covenant of good faith and fair dealing, or would be commercially unreasonable,
or where a default under the Documents is not material.
(3) The effect of statutes or judicial decisions rendering ineffective
or limiting certain remedial provisions contained in the Documents. However, in
our opinion, such statutes and judicial decisions do not operate to prevent the
Lender from accelerating the maturity of the Company's or Bartels' obligations
under the Documents in accordance with the terms thereof upon a material breach
by the Company or Bartels of a material covenant contained in one or more of the
Documents or the occurrence of any other material Event of Default (as defined
in the Note), or from exercising its remedy of foreclosure following such
acceleration, provided the rules and restrictions set forth in such statutes and
judicial decisions with respect to foreclosure are observed by the Lender.
(4) The enforceability of provisions of the Documents providing for
indemnification or contribution, to the extent such indemnification or
contribution is against public policy.
(5) The circumstances under which rights of setoff may be exercised.
(6) We express no opinion as to the effect on the opinions expressed
herein of (a) the compliance or non-compliance of any party to the Documents
(other than the Company and Bartels) with any laws or regulations applicable to
it, or (b) the legal or regulatory status or the nature of the business of any
such party.
(7) We express no opinion as to compliance by either Obligor with any
state securities law.
Based upon and subject to the foregoing, we are of the opinion that:
<PAGE> 69
[MORRISON & FOERSTER LLP LETTERHEAD]
Northstar Advantage High Total Return Fund
June 21, 1996
Page Five
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts, and has the
corporate power and authority to conduct its business as presently conducted.
Bartels is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, is duly qualified and in good standing
in the State of Washington, and has the corporate power and authority to conduct
its business as presently conducted.
(b) Each Obligor has the corporate power and authority to execute and
deliver, and to perform and observe the provisions of, the Documents (other than
the Warrant) to which it is a party. Each of the Documents (other than the
Warrant) to which either Obligor is a party has been duly authorized, executed
and delivered by such Obligor.
(c) The Company has the corporate power and authority to issue the
Warrant and to perform and observe the provisions of the Warrant. The Warrant
has been duly authorized and executed, and, upon delivery to the Lender against
payment therefor in accordance with the terms of the Purchase Agreement, will be
validly issued.
(d) Each of the Documents to which either Obligor is a party constitutes
valid and binding obligations of such Obligor enforceable against such Obligor
in accordance with its respective terms.
(e) No registration with, consent or approval of, notice to, or other
action by, any federal or New York governmental entity, any Delaware
governmental entity pursuant to the General Corporation Law of the State of
Delaware, or any Massachusetts governmental entity pursuant to the Business
Corporation Law of the Commonwealth of Massachusetts, is required on the part of
either Obligor for the execution, delivery or performance by such Obligor of the
Documents to which it is a party, or if required, such registration has been
made, such consent or approval has been obtained, such notice has been given or
such other appropriate action has been taken. No registration with, consent or
approval of, notice to, or other action by, any federal or New York governmental
entity, any Delaware governmental entity pursuant to the General Corporation Law
of the State of Delaware, or any Massachusetts governmental entity pursuant to
the Business Corporation Law of the Commonwealth of Massachusetts, is required
on the part of the Company for the issuance of the Warrant by the Company (other
than filings pursuant to state securities laws in connection with the issuance
of the Warrant as to which we express no opinion), or if required, such
registration has been made, such consent or approval has been obtained, such
notice has been given or such other appropriate action has been taken.
(f) The execution, delivery and performance by each Obligor of each of
the Documents to which it is a party is not in violation of its articles of
organization (with respect to the Company), its certificate of incorporation
(with respect to Bartels) or its by-
<PAGE> 70
[MORRISON & FOERSTER LLP LETTERHEAD]
Northstar Advantage High Total Return Fund
June 21, 1996
Page Six
laws. Repayment of the Note by the Company in accordance with the terms of the
Note will not violate (i) any federal or New York statute or regulation
applicable to the Company, (ii) the Business Corporation Law of the Commonwealth
of Massachusetts, or (iii) the General Corporation Law of the State of Delaware.
(g) The authorized capital stock of the Company consists of 5,000,000
shares of voting common stock, no par value per share (the "Common Stock"), and
3,000,000 shares of preferred stock, no par value per share.
(h) The shares of Common Stock which have been reserved for issuance
upon exercise of the Warrant have been duly authorized for issuance and validly
and effectively reserved by all necessary corporate action of the Company and,
when duly executed and delivered in accordance with the Warrant and against
payment therefor in accordance with the Warrant, will be validly issued and
outstanding, fully paid and nonassessable.
(i) The offering and sale of the Warrant and, assuming that the Warrant
is fully exercised upon receipt thereof, the Common Stock issuable upon the
exercise of the Warrant are exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to the exemption set forth
under Section 4(2) of the Securities Act.
(j) No Obligor is an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
We express no opinion as to matters governed by any laws other than the
substantive laws of the State of New York (including its applicable
choice-of-law rules), the Business Corporation Law of the Commonwealth of
Massachusetts, the General Corporation Law of the State of Delaware, and the
federal laws of the United States of America, which, in each case, are in effect
on the date hereof. Further, we express no opinion as to the enforceability of
the choice-of-law provision contained in the Warrant. We have assumed, with your
permission, that any provision in the Documents excepting New York choice or
conflicts of law rules from any New York choice-of-law provision would not be
interpreted to include Sections 5-1401 and 5-1402 of the General Obligations Law
of the State of New York. We express no opinion as to any New York choice-of-law
provision in the Documents to the extent that Section 1-105 of the NYUCC
requires the application of the law of another jurisdiction. For purposes of
this opinion, we have assumed that Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York would be given effect in accordance
with their terms.
<PAGE> 71
[MORRISON & FOERSTER LLP LETTERHEAD]
Northstar Advantage High Total Return Fund
June 21, 1996
Page Seven
We bring your attention to the fact that while individual members of
this firm are admitted to practice in the Commonwealth of Massachusetts, (i) we
maintain no offices in that state, (ii) we do not purport to be experts on the
laws of the Commonwealth of Massachusetts, and (iii) the individual members of
this firm who are admitted to practice law in the Commonwealth of Massachusetts
do not regularly render advice on matters involving the laws of the Commonwealth
of Massachusetts.
We note that the Warrant contains a provision to the effect that the
laws of the Commonwealth of Massachusetts are intended to govern. For purposes
of this opinion, we have assumed, without any independent investigation and with
your consent, that the laws of the Commonwealth of Massachusetts (other than the
Business Corporation Law of the Commonwealth of Massachusetts) are identical in
all relevant respects to the laws of the State of New York.
Our opinion as to the enforceability of any provision of the Documents
requiring the either Obligor to submit to the jurisdiction of a New York state
court is based solely on the statutes and regulations in effect in the State of
New York on the date hereof (including Section 5-1402 of the General Obligations
Law of the State of New York and Section 327 of the Civil Practice Law and Rules
of the State of New York). We express no opinion as to the enforceability of any
provision of the Documents requiring either Obligor to submit to the
jurisdiction of any federal court sitting in New York. We further express no
opinion as to the enforceability of any provision of the Documents which purport
to establish a particular court (other than a New York state court) as the forum
for the adjudication of any controversy relating to the Documents.
This opinion is solely for the Lender's benefit and may not be relied
upon by, nor may copies be delivered to, any other person without our prior
written consent.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
---------------------------
Morrison & Foerster LLP
<PAGE> 1
EXHIBIT 10.15
================================================================================
NOTE AND SERIES A-III WARRANT
PURCHASE AGREEMENT
between
INTRACEL CORPORATION
and
CORESTATES ENTERPRISE FUND, A DIVISION OF
CORESTATES BANK, N.A.
Dated as of June 11, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
THE SECURITIES
1.1. Issuance, Sale and Delivery of the Securities.......................................1
1.2. Closing; Purchase Price; Purchase Price Allocation..................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. Organization, Qualifications and Corporate Power....................................2
2.2. Authorization of Agreements, etc....................................................2
2.3. Validity............................................................................3
2.4. Authorized Capital Stock............................................................3
2.5. Financial Statements................................................................4
2.5A. Absence of Undisclosed Liabilities and Changes......................................5
2.6. Events Subsequent to the Date of the Balance Sheet..................................5
2.7. Litigation; Compliance with Law.....................................................5
2.8. Title to Properties.................................................................6
2.9. Leasehold Interests.................................................................6
2.10. Taxes...............................................................................6
2.11. Other Agreements....................................................................7
2.12. Patents, Trademarks, etc............................................................8
2.13. Loans and Advances..................................................................9
2.14. Assumptions, Guaranties, etc. of Indebtedness of Other Persons......................9
2.15. Significant Customers and Suppliers.................................................9
2.16. Governmental Approvals..............................................................9
2.17. Accuracy of Statements..............................................................9
2.18. Insurance..........................................................................10
2.19. Employment Relations...............................................................10
2.20. Compensation of Key Employees......................................................10
2.21. Environmental Compliance...........................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3.1. Purchase of Securities.............................................................11
3.2. Authority..........................................................................11
3.3. Projections........................................................................11
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
4.1. Opinion of Company's Counsel.......................................................12
4.2. Representations and Warranties to be True and Correct..............................12
4.3. Performance........................................................................12
4.4. All Proceedings to be Satisfactory.................................................12
4.5. Supporting Documents...............................................................12
4.6. Fees of Purchaser..................................................................13
4.7. Warrant............................................................................13
4.8. Note and Other Loan Documents......................................................13
4.9. Commitment Fee.....................................................................14
ARTICLE V
COVENANTS OF THE COMPANY
5.1. Reserve for Warrant Shares.........................................................14
5.2. Corporate Existence................................................................14
5.3. Restrictive Agreements Prohibited..................................................14
5.4. Compliance with Laws...............................................................14
5.5 Senior Indebtedness................................................................14
ARTICLE VI
REGISTRATION RIGHTS
6.1. Piggyback Registration.............................................................14
6.2. Registration Procedures............................................................16
6.3. Expenses...........................................................................18
6.4. Indemnification and Contribution...................................................19
6.5. Rule 144 Reporting.................................................................21
6.6. Termination of Piggyback Registration Rights.......................................22
6.7. Material Non-Public Information....................................................22
ARTICLE VII
BOARD OBSERVATION RIGHTS
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE VIII
MISCELLANEOUS
8.1. Expenses...........................................................................22
8.2. Survival of Agreements.............................................................22
8.3. Brokerage..........................................................................23
8.4. Parties in Interest................................................................23
8.5. Notices............................................................................23
8.6. Governing Law......................................................................23
8.7. Entire Agreement...................................................................23
8.8. Counterparts.......................................................................23
8.9. Amendments.........................................................................23
8.10. Severability.......................................................................24
8.11. Titles and Subtitles...............................................................24
</TABLE>
iii
<PAGE> 5
SCHEDULES
EXHIBITS
Exhibit A - Note
Exhibit B - Warrant
Exhibit C - Opinion of Counsel for the Company
<PAGE> 6
NOTE AND SERIES A-III WARRANT PURCHASE AGREEMENT (this "Agreement"),
dated as of June 11, 1996, between Intracel Corporation, a Massachusetts
corporation (the "Company") and CoreStates Enterprise Fund, a division of
CoreStates Bank, N.A. (the "Purchaser").
PREAMBLE:
WHEREAS, the Company wishes to issue and sell to the Purchaser (i) the
Company's secured promissory note, in the principal amount of $4,000,000
substantially in the form attached hereto as Exhibit A (the "Note"), and (ii)
the Series A-III Common Stock Warrant, substantially in the form attached hereto
as Exhibit B (the "Warrant") to purchase up to 159,073 shares of common stock,
no par value per share (the "Warrant Shares"), of the Company (the Note and the
Warrant shall collectively be referred to as the "Securities"); and
WHEREAS, the Purchaser wishes to purchase the Securities on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
ARTICLE I
THE SECURITIES
SECTION 1.1. Issuance, Sale and Delivery of the Securities. The Company
agrees to issue, sell and deliver to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, at the closing (the "Closing"), the (i)
Note and (ii) the Warrant.
SECTION 1.2. Closing; Purchase Price; Purchase Price Allocation. The
Closing shall take place at the offices of Morrison & Foerster LLP, 1290 Avenue
of the Americas, New York, NY 10104, at 10:00 a.m., New York time on June 11,
1996, or at such other place, date and time as may be otherwise mutually agreed
in writing by the parties hereto. The date on which the Closing actually occurs
is referred to herein as the "Closing Date." At the Closing, the Company shall
issue and deliver to the Purchaser the Note, in substantially the form attached
hereto as Exhibit A, and the Warrant, in substantially the form attached hereto
as Exhibit B. As payment in full for the Securities, and against delivery of the
Securities on the Closing Date, the Purchaser shall transfer the sum of
$4,000,000 by wire transfer of immediately available funds to such account or
accounts as the Company may direct. The Company and the Purchaser agree that
$200,000 of the aggregate consideration for the Securities shall be allocated to
the Warrants, and that the balance of such aggregate consideration shall be
allocated to the Note.
<PAGE> 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the Closing
Date that:
SECTION 2.1. Organization, Qualifications and Corporate Power. The
Company is a corporation duly organized (originally under the name of Boston
Biological Technologies, Inc.), validly existing and in good standing under the
laws of the Commonwealth of Massachusetts, Bartels, Inc. (the Company's
wholly-owned subsidiary) ("Bartels") is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and each
of the Company and Bartels is duly licensed or qualified to transact business as
a foreign corporation and is in good standing in each jurisdiction in which the
nature of the business transacted by it or the character of the properties owned
or leased by it requires such licensing or qualification, except where the
failure so to qualify will not have a material adverse effect on the business,
operations, property or financial condition of the Company or Bartels,
respectively. Each of the Company and Bartels has the power and authority to own
and hold its properties and to carry on its business as now conducted and as
proposed to be conducted, and the Company has the power and authority to
execute, deliver and perform this Agreement and the "Other Loan Documents" (as
defined in Section 4.8) (and, with respect to Bartels, the Security Agreement
and the Bartels Guaranty), to issue, sell and deliver the Note and the Warrant,
and to issue and deliver the Warrant Shares upon the exercise of the Warrant.
The Company has no subsidiaries, other than Bartels and the Company's ownership
of forty-five percent of the membership interests of German-American Institute
for AIDS Research GbmH, a limited liability company formed under the laws of
Germany.
SECTION 2.2. Authorization of Agreements, etc. (a) The execution and
delivery by the Company of this Agreement and the Other Loan Documents (and,
with respect to Bartels, the Security Agreement and the Bartels Guaranty), the
performance by the Company of its obligations hereunder and thereunder (and,
with respect to Bartels, the Security Agreement and the Bartels Guaranty), the
issuance, sale and delivery of the Note and the Warrant, and the issuance, sale
and delivery of the Warrant Shares upon the exercise of the Warrant, have been
duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government (except
that the issuance of the Warrant Shares may require filings under one or more
state securities laws, all of which filings will be made by the Company within
the requisite time period), the Articles of Organization of the Company, as
amended (the "Charter") or the By-laws of the Company, as amended (the
"By-laws") (or, with respect to Bartels, its Certificate of Incorporation or
By-laws), or any provision of any indenture, agreement or other instrument to
which either the Company or Bartels is a party or by which either the Company or
Bartels or any of its properties or assets is bound, or conflict with, result in
a breach of or constitute (whether with or without notice or lapse of time or
both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company or Bartels.
2
<PAGE> 8
(b) The Warrant has been authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company except as set
forth in this Agreement. The Warrant Shares have been duly authorized
and reserved for issuance upon exercise of the Warrant, and, when so
issued, will be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company except as set
forth in this Agreement. Neither the issuance, sale or delivery of the
Warrant, nor the issuance or delivery of the Warrant Shares is subject
to any preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person, except as set
forth in Article VI of this Agreement.
SECTION 2.3. Validity. Each of this Agreement, the Note, the Other Loan
Documents, and the Warrant has been (or at the Closing, shall be) duly executed
and delivered by the Company and, where applicable, Bartels, and constitute the
legal, valid and binding obligation of the Company, and, where applicable,
Bartels, enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and moratorium
laws and other similar laws of general application affecting enforcement of
creditors' rights generally and (ii) the availability of equitable remedies
including specific performance may be limited by equitable principles of general
applicability (regardless of whether enforcement is sought in a proceeding in
equity or at law).
SECTION 2.4. Authorized Capital Stock. The authorized capital stock of
(a) the Company consists of (i) 3,000,000 shares of preferred stock, no par
value per share (the "Preferred Stock"), of which 730,000 shares have been
designated "Series A Preferred" and 850,000 shares designated "Series A-I
Preferred" and (ii) 5,000,000 shares of common stock (the "Common Stock") and
(b) Bartels consists of 1,000 shares of common stock, par value $.01 per share.
Immediately prior to the Closing, all of the capital stock of Bartels which is
issued and outstanding will be owned by the Company, 1,983,450 shares of Common
Stock will be issued and outstanding all of which will be validly issued and
outstanding, fully paid and nonassessable with no personal liability attaching
to the ownership thereof, 525,492 shares of Series A Preferred Stock will be
issued and outstanding pursuant to the Convertible Stock Purchase Agreement,
dated July 22, 1994, by and among the Company and the Purchasers set forth on
"Schedule I" thereto (the "1994 Stock Purchase Agreement"), 566,874 shares of
Series A-I Preferred will be issued and outstanding pursuant to the Convertible
Stock Purchase Agreement, dated September 22, 1995, by and among the Company and
the purchasers set forth on "Schedule I" thereto (the "1995 Stock Purchase
Agreement") and 128,775 shares of Series A-I Preferred will be issued and
outstanding pursuant to a Convertible Preferred Stock Purchase Agreement, dated
November 16, 1995, between the Company and Northstar American Corporation. No
other shares of capital stock of the Company or Bartels have been issued or
reserved for issuance, except 385,000 shares of Common Stock reserved for
issuance in the event options granted pursuant to the 1989 and 1990-1991 Stock
Option Plans of the Company are exercised, 730,000 shares of Common Stock
reserved for issuance in the event of the conversion
3
<PAGE> 9
of the shares of Series A Preferred Stock and 52,000 shares of Common Stock
reserved for issuance in the event of the exercise of the Series A Warrant, both
having been granted pursuant to the 1994 Stock Purchase Agreement, 850,000
shares of Common Stock reserved for issuance in the event of the conversion of
the shares of Series A-I Preferred Stock granted pursuant to the 1995 Stock
Purchase Agreement, 86,462 shares of Common Stock reserved for issuance in the
event of the exercise of warrants granted pursuant to the Warrant Agreement,
dated September 22, 1995, between the Company and Dublind Investments, L.L.C.,
91,177 shares of Common Stock reserved for issuance in the event of the exercise
of the warrants granted pursuant to the Warrant Agreement, dated November 16,
1995, between the Company and Creditanstalt Bankverein ("Creditanstalt"), 94,010
shares of Common Stock reserved for issuance in the event of exercise of the
warrants granted pursuant to the Series A-II Warrant and Note Purchase
Agreement, dated December 27, 1995, between the Company and Northstar Advantage
High Total Return Fund ("Northstar"), and 159,073 shares of Common Stock
reserved for issuance in the event of the exercise of the Warrant granted
pursuant to this Agreement. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of the Series A
Preferred Stock and the Series A-I Preferred Stock are as set forth in both of
the Certificates of Vote of Directors Establishing a Series of a Class of Stock,
and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and in
accordance with all applicable laws. Except as provided for in the Charter, the
Company has no obligation (contingent or other) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof. This Section 2.4
sets forth the aggregate number of outstanding warrants, options, agreements,
convertible securities or other commitments pursuant to which the Company is or
may become obligated to issue any shares of its capital stock or other
securities of the Company. Except as set forth above in this Section 2.4, there
are no preemptive or similar rights to purchase or otherwise acquire shares of
capital stock of the Company pursuant to any provisions of law, the Charter or
By-laws of the Company, in each case as amended to the date hereof, or any
agreement to which the Company is a party or otherwise. Except as set forth
above in this Section 2.4 or as contemplated herein, immediately upon
consummation at the Closing of the transactions contemplated hereby there will
be no agreement, restriction or encumbrance (such as a right of first refusal,
right of first offer, proxy, voting agreement, voting trust, bring-along or
come-along rights) with respect to the sale or voting of any shares of capital
stock of the Company (whether outstanding or issuable upon conversion or
exercise of outstanding securities) of which the Company has knowledge.
SECTION 2.5. Financial Statements. The Company has furnished to the
Purchaser the audited balance sheet of the Company for the year ended June 30,
1995 (the "Balance Sheet") and the related audited statements of income,
stockholders' equity and cash flows of the Company for the year ended June 30,
1995 and the balance sheet of the Company as of March 31, 1996 and the related
statements of income, stockholders' equity and cash flows of the Company as of
March 31, 1996. All such financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the financial position of the Company as of June 30, 1995 and March 31,
1996 respectively, and the results of its operations and cash flows as of June
30, 1995 and March 31, 1996 respectively. Since the date of the Balance Sheet,
(i) there has been no change in the assets, liabilities or financial
4
<PAGE> 10
condition of the Company from that reflected in the Balance Sheet except for
changes in the ordinary course of business which in the aggregate have not been
materially adverse and (ii) none of the business, financial condition,
operations or property of the Company have been materially adversely affected by
any occurrence or development, individually or in the aggregate, whether or not
insured against.
SECTION 2.5A. Absence of Undisclosed Liabilities and Changes. Except as
set forth on Schedule 2.5A attached hereto, as of the date hereof, (a) the
Company had no liabilities of any nature (matured or unmatured, fixed or
contingent) which were not provided for on the balance sheet of the Company as
of such date, except for (i) liabilities which, individually and in the
aggregate, were not material to the financial condition of the Company or (ii)
liabilities incurred in the ordinary course of the Company's business and not
required to be so provided for under generally accepted accounting principles ,
and (b) all reserves established by the Company and set forth on such balance
sheet were adequate in all material respects. There are no loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5
("Statement No. 5") issued by the Financial Accounting Standards Board in March
1975) which are not adequately provided for in such balance sheet as required by
Statement No. 5.
SECTION 2.6. Events Subsequent to the Date of the Balance Sheet. Except
as set forth in the attached Schedule 2.6 or as contemplated by this Agreement,
since the date of the Balance Sheet neither the Company nor Bartels has (i)
issued any stock, bond or other corporate security, (ii) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts entered into
in the ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Balance Sheet and
current liabilities incurred since the date of the Balance Sheet in the ordinary
course of business, (iv) declared or made any payment or distribution to
stockholders or purchased or redeemed any share of its capital stock or other
security, (v) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, other than liens of current real property taxes not yet
due and payable, (vi) sold, assigned or transferred any of its tangible assets
except in the ordinary course of business, or canceled any debt or claim, (vii)
sold, assigned, transferred or granted any exclusive license with respect to any
material patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset other than in the ordinary course of business, (viii)
suffered any material loss of property or waived any right of substantial value,
(ix) made any change in officer compensation except in the ordinary course of
business and consistent with past practice, (x) made any material change in the
manner of business or operations of the Company or Bartels, respectively, (xi)
entered into any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xii) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
SECTION 2.7. Litigation; Compliance with Law. There is no material (i)
action, suit, claim, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or Bartels,
respectively, at law or in equity, or before or by any Federal, state, municipal
or other governmental department, commission, board, bureau, agency
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or instrumentality, domestic or foreign, (ii) arbitration proceeding relating to
the Company or Bartels, respectively, pending under a collective bargaining
agreement or otherwise or (iii) governmental inquiry pending or to the knowledge
of the Company, threatened against or affecting the Company or Bartels,
respectively, (including, without limitation, any inquiry as to the
qualification of the Company or Bartels, respectively, to hold or receive any
license or permit). The Company has not received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to its
business, financial condition, operations or property. The Company is not in
default with respect to any order, writ, injunction or decree known to or served
upon the Company of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no material action or suit by the Company pending
or threatened against others. Each of the Company and Bartels has complied in
all material respects with all laws, rules, regulations and orders applicable to
its business, operations, properties, assets, products and services, and each of
the Company and Bartels has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed to
be conducted, except where the failure to own or possess such permits, licenses
or authorizations could not, either singly or in the aggregate, have a material
adverse effect on the business, operations, properties or financial condition of
the Company.
SECTION 2.8. Title to Properties. Except in instances that, either
singly or in the aggregate, could not have a material adverse effect on the
business, operations, properties or financial condition of the Company, and
except as disclosed in Schedule 2.8 hereof, each of the Company and Bartels has
good and marketable title to its properties and assets reflected on the Balance
Sheet (other than properties and assets disposed of in the ordinary course of
business since the date of the Balance Sheet), and all such properties and
assets are free and clear of mortgages, pledges, security interests, liens,
charges, claims, restrictions and other encumbrances, except for liens for
current taxes not yet due and payable and minor imperfections of title, if any,
not material in nature or amount and not materially detracting from the value or
materially impairing the use of the property subject thereto or impairing the
operations or proposed operations of the Company or Bartels, respectively.
SECTION 2.9. Leasehold Interests. Each lease or agreement to which the
Company or Bartels, respectively, is a party under which it is a lessee of any
property, real or personal (a list of all such leases being attached hereto as
Schedule 2.9), is a valid and subsisting agreement without any material default
of the Company or Bartels, respectively, thereunder and, to the knowledge of the
Company, without any material default thereunder of any other party thereto. No
event has occurred and is continuing which, with due notice or lapse of time or
both, would constitute a default or event of default by the Company or Bartels,
respectively, under any such lease or agreement or, to the knowledge of the
Company, by any other party thereto.
SECTION 2.10. Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns, Federal, state, county and local, required to
be filed by it, and the Company has paid all taxes shown to be due by such
returns and extensions as well as all other taxes, assessments and
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governmental charges which have become due or payable, including, without
limitation, all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. All such taxes with respect to
which the Company has become obligated have been paid and adequate reserves have
been established for all taxes accrued but not yet payable. No deficiency
assessment with respect to or proposed adjustment of the Company's Federal,
state, county or local taxes is pending or, to the knowledge of the Company,
threatened. There is no tax lien in favor of any Federal, state, county or local
taxing authority, outstanding against the assets, properties or business of the
Company. Neither the Company nor any of its stockholders has ever filed a
consent pursuant to Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), relating to collapsible corporations.
SECTION 2.11. Other Agreements. Except as set forth in the attached
Schedule 2.11, neither the Company nor Bartels is a party to or otherwise bound
by any written or oral contract or instrument or other restriction which
individually or in the aggregate could materially adversely affect the business,
financial condition, operations or property of the Company. Except as set forth
in the attached Schedule 2.11, or as a result of the transactions contemplated
in this Agreement, the Note, the Other Loan Documents, or the Warrant, neither
the Company nor Bartels is a party to or otherwise bound by any written or oral:
(a) distributor, dealer, manufacturer's representative or sales
agency contract or agreement which is not terminable on less than ninety
(90) days' notice without cost or other liability to the Company or
Bartels;
(b) sales contract which entitles any customer to a rebate or
right of set-off, to return any product to the Company or Bartels after
acceptance thereof or to delay the acceptance thereof, or which varies
in any material respect from the Company's or Bartels' standard form
contracts;
(c) contract with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of
its or Bartels' employees);
(d) contract or other commitment with any supplier containing any
provision permitting any party other than the Company or Bartels to
renegotiate the price or other terms, or containing any pay-back or
other similar provision, upon the occurrence of a failure by the Company
or Bartels to meet its obligations under the contract when due or the
occurrence of any other event;
(e) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its
normal operating requirements;
(f) contract for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings), on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company or
Bartels, except normal severance arrangements and accrued vacation pay;
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(g) agreement or indenture relating to the borrowing of money or
to the mortgaging or pledging of, or otherwise placing a lien or
security interest on, any asset of the Company or Bartels;
(h) guaranty of any obligation for borrowed money or otherwise;
(i) agreement, or group of related agreements with the same party
or any group of affiliated parties, under which the Company or Bartels
has advanced or agreed to advance money or has agreed to lease any
property as lessee or lessor;
(j) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its capital stock or any of its other equity
securities;
(k) assignment, license or other agreement with respect to any
form of intangible property or Intellectual Property (as defined in
Section 2.12) or the development or use thereof;
(l) agreement under which it has granted any person any
registration rights;
(m) agreement under which it has limited or restricted its right
to compete with any person in any respect; or
(n) other contract or group of related contracts with the same
party involving more than $50,000 or continuing over a period of more
than one year from the date or dates thereof (including renewals or
extensions optional with another party), which contract or group of
contracts is not terminable by the Company or Bartels without penalty
upon notice of thirty (30) days or less, but excluding any contract or
group of contracts with a customer of the Company or Bartels for the
sale, lease or rental of the Company's or Bartels' respective products
or services if such contract or group of contracts was entered into by
the Company or Bartels, respectively, in the ordinary course of
business.
SECTION 2.12. Patents, Trademarks, etc. Set forth in Schedule 2.12 is a
list and brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such which are in the
process of being prepared, owned by or registered in the name of the Company or
Bartels, or of which the Company or Bartels is a licensor or licensee or in
which the Company or Bartels has any right, and in each case a brief description
of the nature of such right. Except as set forth in Schedule 2.12, each of the
Company and Bartels owns or possesses adequate licenses or other rights to use
all patents, patent applications, trademarks, trademark applications, service
marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets and know-how (collectively, "Intellectual
Property") necessary to the conduct of its business as conducted, and no claim
is pending or, to the knowledge of the Company, threatened to the effect that
the operations of the Company or Bartels infringe upon or conflict with the
rights of any other person under any Intellectual Property, and to the knowledge
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of the Company there is no basis for any such claim. No claim is pending or, to
the knowledge of the Company, threatened to the effect that any such
Intellectual Property owned or licensed by the Company or Bartels, or which the
Company or Bartels otherwise has the right to use, is invalid or unenforceable
by the Company or Bartels, as applicable, and to the knowledge of the Company
there is no basis for any such claim. To the knowledge of the Company, all
technical information developed by and belonging to the Company or Bartels, as
applicable, which has not been patented has been kept confidential. The Company
has not granted or assigned to any other person or entity any right to
manufacture or assemble any products or proposed products of the Company, other
than to its affiliates, and to the knowledge of the Company no other person or
entity has asserted any such right.
SECTION 2.13. Loans and Advances. Except as set forth on Schedule 2.13,
neither the Company nor Bartels has any outstanding loans or advances to any
person and is not obligated to make any such loans or advances, except, in each
case, for advances to employees of the Company or Bartels in respect of
reimbursable business expenses anticipated to be incurred by them in connection
with their performance of services for the Company or Bartels.
SECTION 2.14. Assumptions, Guaranties, etc. of Indebtedness of Other
Persons. Neither the Company nor Bartels has assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on any indebtedness of any
other person (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in a debtor, or otherwise to assure a creditor
against loss), except for guaranties by endorsement of negotiable instruments
for deposit or collection in the ordinary course of business.
SECTION 2.15. Significant Customers and Suppliers. No customer which
accounted for 10% or more of the Company's sales or revenues during the periods
covered by the financial statements referred to in Section 2.5 or which has been
significant to the Company thereafter has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from the Company. As
of the date of this Agreement, there is no supplier to the Company which is a
sole-source supplier.
SECTION 2.16. Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III hereof,
no registration or filing with, or consent or approval of or other action by,
any Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the Note, the Other Loan Documents or the Warrant (and, with
respect to Bartels, the Security Agreement or Bartels Guaranty), or the
issuance, sale and delivery of the Warrant Shares upon exercise of the Warrant,
other than (i) filings pursuant to state securities laws in connection with the
issuance and sale of the Warrant and (ii) with respect to the registration
rights provisions contained in Article VI of this Agreement, the registration of
the shares covered thereby with the Securities and Exchange Commission or any
successor regulatory entity (the "Commission") and filings pursuant to state
securities laws.
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SECTION 2.17. Accuracy of Statements. Neither this Agreement nor any
Schedule, Exhibit, statement, list, document, certificate or other information
furnished by or on behalf of the Company to the Purchaser in connection with
this Agreement or any of the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
SECTION 2.18. Insurance. Schedule 2.18 lists all insurance policies
which the Company maintains with respect to its businesses, properties and
employees. Such policies are in full force and effect and the Company has
received no notice of termination from the insurance carriers. Such policies,
with respect to their amounts and types of coverage, are adequate in the
reasonable commercial judgment of the Company to insure against risks to which
the Company and its respective businesses. Since the date of the Balance Sheet,
there has been no material adverse change in the Company's relationship with its
insurers or in the premiums payable pursuant to such policies.
SECTION 2.19. Employment Relations. (a) The Company is in material
compliance with applicable federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, safety, terms and
conditions of employment and wages and hours.
(b) The Company does not maintain or contribute to any employee
benefit plan ("Employee Benefit Plan") within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to ERISA but which is not in substantial
compliance with ERISA, or which has incurred any material liability to
the Pension Benefit Guaranty Company ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of
its subsidiaries or ceased operations at any facility or withdrawn from
any such Plan in a manner which could subject it to material liability
under Section 462(f), 4063 or 4064 of ERISA, and knows of no facts or
circumstances which might give rise to any material liability of the
Company to the PBGC under Title IV of ERISA.
SECTION 2.20. Compensation of Key Employees. Schedule 2.20 sets forth
the aggregate compensation (salaries, wages and bonuses) paid by the Company to
its four most highly compensated employees for the 1995 fiscal year and the
amount of such compensation scheduled to be paid to such employees for the 1996
fiscal year.
SECTION 2.21. Environmental Compliance. The Company is in compliance
with all applicable laws relating to environmental matters in each jurisdiction
where it is presently engaged in a material manufacturing business, except for
such failures to comply which, in the aggregate, could reasonably be expected
not to have a material adverse effect on the Company. The Company is not subject
to any liability under any such environmental laws, that, in the aggregate for
all such liabilities, could be reasonably expected to have a material adverse
effect on the Company.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as of the Closing
Date that:
SECTION 3.1. Purchase of Securities. (a) It is an "accredited investor" within
the meaning of Rule 501 under the Securities Act of 1933, as amended (the
"Securities Act") and was not organized for the specific purpose of acquiring
the Note or the Warrant.
(b) It has sufficient knowledge and experience in investing in
companies in a similar stage of development to the Company so as to be
able to evaluate the risks and merits of its investment in the Company
and it is able financially to bear the risks thereof.
(c) It has had an opportunity to discuss the Company's business,
management and financial condition with the Company's management.
(d) It is acquiring the Note and the Warrant for its own account
for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof.
(e) It understands that (i) the Note, the Warrant and, upon
exercise thereof, the Warrant Shares have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from
the registration requirements of the Securities Act pursuant to Section
4(2) thereof or Rule 505 or 506 promulgated under the Securities Act,
(ii) the Note, the Warrant and, upon exercise thereof, the Warrant
Shares must be held indefinitely unless a subsequent disposition thereof
is registered under the Securities Act or is exempt from such
registration, (iii) the Note, the Warrant and, upon exercise thereof,
the Warrant Shares will bear a legend to such effect and (iv) the
Company will make a notation on its transfer books to such effect.
SECTION 3.2. Authority. It has all requisite power and authority to
execute, deliver and perform this Agreement, the Note, the Other Loan Documents,
and the Warrant and has taken all necessary action to authorize the execution,
delivery and performance of this Agreement, the Note, the Other Loan Documents,
and the Warrant and the consummation of the transactions contemplated hereby and
thereby. This Agreement, the Note, the Other Loan Documents, and the Warrant on
the Closing Date will constitute the legal, valid and binding obligations of the
Purchaser, enforceable in accordance with their terms, except (i) to the extent
that enforceability may be limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (ii) that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceedings therefor may be brought.
SECTION 3.3. Projections. It understands that any and all financial
projections and other estimates delivered to it were based on the Company's
experience in the industry and on assumptions of fact and opinion which the
Company believes to have been, and to be,
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reasonable. It understands that the Company cannot and does not assure or
guarantee the attainment of such projections or other estimates.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to purchase and pay for the Note and
the Warrant, both being purchased by it on the Closing Date, are, at its option,
subject to the satisfaction of the following conditions on or before such
Closing Date:
SECTION 4.1. Opinion of Company's Counsel. The Purchaser shall have
received from Morrison & Foerster LLP, counsel for the Company, an opinion dated
the Closing Date, in the form attached hereto as Exhibit C.
SECTION 4.2. Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II hereof shall be true,
complete and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the President of the Company shall have certified to such effect to the
Purchaser in writing.
SECTION 4.3. Performance. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the President of the Company shall
have certified to the Purchaser in writing to such effect and to the further
effect that all of the conditions set forth in this Article IV have been
satisfied.
SECTION 4.4. All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transaction
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchaser and its counsel, and the Purchaser and its
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
SECTION 4.5. Supporting Documents. At the Closing, the Purchaser shall
have received copies of the following documents:
(a) (i) the Charter, certified as of a recent date by the
Secretary of State of the Commonwealth of Massachusetts and (ii) a
certificate (A) of said Secretary dated as of a recent date as to the
due incorporation and subsistence of the Company, and listing all
documents of the Company on file with said Secretary and (B) from the
Secretary of State of the State of Delaware dated as of a recent date as
to the due incorporation and subsistence of Bartels, and listing all
documents of Bartels on file with said Secretary;
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(b) a certificate of the Clerk or an Assistant Clerk of the
Company dated the Closing Date and certifying: (i) that attached thereto
is a true and complete copy of all resolutions adopted by the Board of
Directors (the "Company Board") or the stockholders of the Company
authorizing the execution, delivery and performance of this Agreement
and the Other Loan Documents, the issuance, sale, delivery, and
performance of the Note and the Warrant, and the reservation, issuance
and delivery of the Warrant Shares upon the exercise of the Warrant, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by
this Agreement; (ii) that the Charter has not been amended since the
date of the last amendment referred to in the certificate delivered
pursuant to clause (a)(ii) above; and (iii) to the incumbency and
specimen signature of each officer of the Company executing this
Agreement, the Note, the Other Loan Documents, and the Warrant and any
certificate or instrument furnished pursuant hereto, and a certification
by another officer of the Company as to the incumbency and signature of
the officer signing the certificate referred to in this clause (b);
(c) the Purchaser shall have received an undated stock power for
each such certificate representing shares of stock pledged pursuant to
the Junior Subordinated Pledge Agreement, dated as of the Closing Date,
between the Company and the Purchaser (the "Subordinated Pledge
Agreement"),executed in blank by a duly authorized officer of the pledge
thereof;
(d) the Purchaser shall have received evidence in form and
substance satisfactory to it that all filings, recordings, registrations
and other actions, including, without limitation, the filing of duly
executed financing statements on Form UCC-1, necessary or, in the
opinion of the Purchaser, desirable to perfect the security interests
created by the Other Loan Documents and required by the Other Loan
Documents have been completed;
(e) a certificate from the Secretary or Assistant Secretary of
Bartels to the effect of the certificate deliverable by the Company
pursuant to clause (b) above; and
(f) such additional supporting documents and other information
with respect to the operations of the Company as the Purchaser or its
counsel may reasonably request.
SECTION 4.6. Fees of Purchaser. The Company shall have paid, in
accordance with Section 8.1, the reasonable legal and other fees and
disbursements of the Purchaser, as invoiced.
SECTION 4.7. Warrant. The Company shall have issued the Warrant to the
Purchaser.
SECTION 4.8. Note and Other Loan Document. The Purchaser shall have
received (i) the Note executed and delivered by a duly authorized officer of the
Company, and (ii) each of
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the following documents, each executed and delivered by a duly authorized
officer or representative of each of the parties thereof and each dated as of
the Closing Date: (A) the Junior Subordinated Security Agreement between the
Company, Bartels and the Purchaser (the "Security Agreement"); (B) the
Intercreditor and Subordination Agreement between Creditanstalt, Northstar,
Purchaser and the Company; (C) the Subordinated Pledge Agreement; (D) the Junior
Subordinated Subsidiary Guaranty (the "Bartels Guaranty"); (E) the Agreement
(Intracel Trademark) between the Company and the Purchaser; (F) the Agreement
(Intracel Patent) between the Company and the Purchaser; (G) the Agreement
(Bartels Patent) between Bartels and the Purchaser; and (H) the Agreement
(Bartels Trademark) between Bartels and the Purchaser (collectively, the "Other
Loan Documents").
SECTION 4.9. Commitment Fee. The Purchaser shall have received from the
Company, in the form of a cash payment, a commitment fee in the amount of
$80,000.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchaser that until the
Warrant is exercised in full or until the Warrant expires, whichever event
occurs first (other than the covenant in Section 5.5, which shall only survive
until the Note is repaid in full):
SECTION 5.1. Reserve for Warrant Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the exercise of the Warrant for Warrant
Shares, such number of its duly authorized shares of Common Stock as shall be
sufficient to effect the exercise of the Warrant. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the exercise of the Warrant, or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon the exercise of the Warrant.
SECTION 5.2. Corporate Existence. The Company shall maintain its
corporate existence, rights and franchises in full force and effect.
SECTION 5.3. Restrictive Agreements Prohibited. The Company shall not
become a party to any agreement which by the terms thereof or as a result of the
performance thereof restricts the Company's performance of this Agreement, the
Note, the Other Loan Documents or the Warrant.
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SECTION 5.4. Compliance with Laws. The Company shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
SECTION 5.5. Senior Indebtedness. The Company shall not incur any
indebtedness which is senior or pari passu in right of payment to the Note,
without first obtaining the consent of the Purchaser (which shall not be
unreasonably withheld) except for: (a) indebtedness existing on the Closing
Date; (b) any debt acquired or assumed in connection with an acquisition,
provided that such indebtedness is secured only by the assets so acquired; and
(c) any refinancings of indebtedness of the type described in (a) and (b) above,
provided that such refinancings do not result in an increase in the principal
amount of such loan, with respect to Creditanstalt, in excess of the original
principal amount of such indebtedness (and such amount in excess of the then
outstanding principal amount thereunder shall be amortized from and after July
1, 2001) and, with respect to Northstar, in excess of the then outstanding
principal amount thereunder.
ARTICLE VI
REGISTRATION RIGHTS
SECTION 6.1. Piggyback Registration.
(a) If at any time or from time to time, the Company shall
determine to register any of its securities, for its own account or the
account of any of its shareholders, other than a registration relating
solely to employee benefit plans, or a registration relating solely to a
transaction of the type described in Rule 145(a) as promulgated under
the Exchange Act, a transaction relating solely to the sale of debt or
convertible debt instruments or a registration on any form (other than
Form S-1, S-2 or S-3, or their successor forms) which does not include
substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Stock, the
Company will:
(i) give to the holder of Registrable Stock written notice
thereof as soon as practicable prior to filing the registration
statement; and
(ii) include in such registration and in any underwriting
involved therein, all the Registrable Stock specified in a
written request or requests, made within fifteen (15) days after
receipt of such written notice from the Company, by the holder of
Registrable Stock, except as set forth in subsection (b) below.
(b) If the registration is for a registered public offering
involving an underwriting, the Company shall so advise the holder of
Registrable Stock as a part of the written notice given pursuant to
subsection (a)(i). In such event, the right of the holder of Registrable
Stock to registration pursuant to this Article VI shall be conditioned
upon the holder's participation in such underwriting to the extent
provided herein. If the holder of
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Registrable Stock proposes to distribute its securities through such
underwriting, it shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Article VI, if the managing
underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may
limit the number of Shares of Registrable Stock to be included in the
registration and underwriting, or may exclude Registrable Stock entirely
from such registration if the registration is the first registered
offering for the sale of the Company's securities to the general public,
or a registered offering pursuant to Section 3 of the Registration
Rights Agreement dated July 22, 1994 between the Company and each of the
purchasers of shares of the Series A Convertible Preferred Stock of the
Company named therein, Section 3 of the Registration Rights Agreement
dated September 22, 1994 between the Company and each of the purchasers
of shares of the Series A-I Convertible Preferred Stock of the Company
named therein, Section 9 of the Series A-I Warrant issued by the Company
to Dublind Investments, L.L.C. on September 22, 1995, Section 9 of the
Series A-I Warrant granted by the Company to Creditanstalt on November
21, 1995 or Section 9 of the Series A-II Warrant granted by the Company
to Northstar (provided that no shares held by officers of the Company,
other than shares subject to other registration rights granted by the
Company that may be owned by officers, are included in the registration
and underwriting). The Company shall so advise the holder of Registrable
Stock and the other holders distributing their securities through such
underwriting, and the number of shares of securities that may be
included in the registration and underwriting shall be allocated among
the holder of Registrable Stock and other holders in proportion, as
nearly as practicable, to the respective amounts of Registrable Stock
held by the Holder and other securities held by other holders at the
time of filing the registration statement. If the Holder disapproves of
the terms of any such underwriting, if may elect to withdraw therefrom
by written notice to the Company and the managing underwriter. Any
Registrable Stock excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) As used in this Article VI the following terms, unless the
context otherwise requires, have the following respective meanings:
"Exchange Act" shall mean 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 at the time.
"Registrable Stock" shall mean the Warrant Shares, but
only so long as such shares continue to be Restricted Stock. Any such
shares shall continue to be Restricted Stock until such time as such
shares (i) have been disposed of in accordance with a registration
statement which has become effective under the Securities Act or (ii)
have been publicly sold in compliance with Rule 144 (or any similar
provision then in force) under the Securities Act.
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(d) If requested in writing by the underwriter or underwriters
for the initial underwritten public offering of securities of the
Company, the holder of Registrable Stock shall agree not to sell
publicly any shares of Registrable Stock or any other shares of Common
Stock (other than Registrable Stock or other shares of Common Stock
being registered in such offering), without the consent of such
underwriter or underwriters, for a period of not more than 120 days
following the effective date of the registration statement relating to
such initial public offering.
SECTION 6.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 6.1 to effect the registration of any
shares of Registrable Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Stock and use its best efforts to cause
such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as
hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Stock covered by such registration
statement in accordance with the holder's intended method of disposition
as set forth in such registration statement for such period;
(c) furnish to the holder of Registrable Stock and to each
underwriter such number of copies of the registration statement and
prospectus included therein (including each preliminary prospectus) as
such persons reasonably may request in order to facilitate the public
sale or other disposition of the Registrable Stock covered by such
registration statement;
(d) use its best efforts to register or qualify the Registrable
Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdiction as the holder of Registrable Stock
or, in the case of an underwritten public offering, the managing
underwriter reasonably shall request; provided, however, that the
Company shall not for any such purpose be required to qualify generally
to transact business as a foreign corporation in any jurisdiction where
it is not so qualified or to consent to general service of process in
any such jurisdiction;
(e) use its best efforts to list the Registrable Stock covered by
such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;
(f) in addition to its obligations under Section 6.2 hereof,
immediately notify the holder of Registrable Stock and each underwriter
under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the
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<PAGE> 23
Securities Act, of the happening of any event of which the Company has
knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an 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 not
misleading in light of the circumstances then existing;
(g) if the offering is underwritten, at the request of the holder
of Registrable Stock, furnish on the date that Registrable Stock is
delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing the Company for
the purposes of such registration, addressed to the underwriters and to
the holder of Registrable Stock, stating that such registration
statement has become effective under the Securities Act and that (A) to
the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act, (B) the registration statement, the related prospectus
and each amendment or supplement thereof comply as to form in all
material respects with the requirements of the Securities Act (except
that such counsel need not express any opinion as to financial
statements or other financial data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the
underwriters or by the Holder or its counsel and (ii) a letter dated
such date from the independent public accountants retained by the
Company, addressed to the underwriters and to the holder of Registrable
Stock, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such
accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information
as to the period ending no more than five business days prior to the
date of such letter) with respect to such registration as such
underwriters reasonably may request; and
(h) make available for inspection by the holder of Registrable
Stock, by any underwriter participating in any distribution pursuant to
such registration statement, and by any attorney, accountant or other
agent retained by the holder of Registrable Stock or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors
and employees to supply all information reasonably requested by the
holder of Registrable Stock and any underwriter, attorney, accountant or
agent in connection with such registration statement.
For purposes of this Agreement, the period of distribution, if not
otherwise described in the Registration Statement of Registrable Stock in a firm
commitment underwritten public offering, shall be deemed to extend until each
underwriter has completed the distribution of all securities purchased by it,
and the period of distribution of Registrable Stock in any other registration
shall be deemed to extend until the earlier of the sale of all Registrable Stock
covered thereby or 120 days after the effective date thereof.
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<PAGE> 24
In connection with each registration hereunder, the holder of
Registrable Stock will furnish to the Company in writing such information with
respect to itself and the proposed distribution by it as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 6.1 covering an
underwritten public offering, the Company and the holder of Registrable Stock
agree to enter into a written agreement with the managing underwriter selected
in the manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
SECTION 6.3. Expenses. All expenses incurred by the Company in complying
with Section 6.1, including all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants for the
Company, reasonable fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance and reasonable fees and
disbursements of one counsel for the sellers of Registrable Stock, but excluding
any Selling Expenses, are called "Registration Expenses". "Selling Expenses"
shall include only such underwriting discounts and selling commissions
applicable to the sale of any Registrable Stock which would not have been
incurred in the absence of the registration and sale of the Registrable Stock.
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 6.1; provided, however, that in
connection with a registration statement filed under Section 6.1, the Company
shall not be obligated to pay fees and expenses (including counsel fees)
incurred in connection with complying with state securities laws in any state in
which the Company is not otherwise registering for sale any of the shares the
Company proposes to sell in the offering. All Selling Expenses in connection
with each registration statement filed pursuant to Section 6.1 shall be borne by
the participating sellers in proportion to the number of shares sold by each, or
by such participating sellers as they may agree.
SECTION 6.4. Indemnification and Contribution
(a) In the event of a registration of any of the Registrable
Stock under the Securities Act pursuant to Section 6.1, the Company will
indemnify and hold harmless the holder of Registrable Stock, each
underwriter of Registrable Stock and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or
several, to which the holder of Registrable Stock, underwriter 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 Registrable Stock was
registered under the Securities Act pursuant to Section 6.1, any
preliminary prospectus or final prospectus contained therein,
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<PAGE> 25
or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the holder of Registrable
Stock, each such underwriter and each such controlling person for any
legal or other expenses reasonably incurred by them 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 if and 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 so made in conformity
with information furnished by the holder of Registrable Stock,
underwriter or controlling person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any Registrable Stock under
the Securities Act pursuant to Section 6.1, the holder of Registrable
Stock will indemnify and hold harmless the Company, each person, if any,
who controls the Company within the meaning of the Securities Act, each
officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls
any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter 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 the registration statement
under which such Registrable Stock was registered under the Securities
Act pursuant to Section 6.1, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Holder will be liable
hereunder in any such case only if and 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 reliance upon and in conformity with information pertaining to
the holder of Registrable Stock, as such, furnished in writing to the
Company by the holder of Registrable Stock specifically for the use in
such registration statement or prospectus; provided, further, that the
liability of the holder of Registrable Stock shall be limited to the
proportion of any such loss, claim, damage, liability or expense which
is equal to the proportion that the public offering price of the
Registrable Stock sold by the holder of Registrable Stock under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds
received by the holder of Registrable Stock from the sale of Registrable
Stock covered by such registration statement.
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<PAGE> 26
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but
the omission so to notify the indemnifying party shall not relieve it
from any liability which it may have to such indemnified party other
then under this Section 6.4 and shall only relieve it from any liability
which it may have to such indemnified party under this Section 6.4 if
and to the extent the indemnifying party is prejudiced by such omission.
In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
this Section 6.4 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so
selected; provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the
indemnified party reasonably may be considered by the indemnified party
to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and
to assume such legal defenses and otherwise to participate in the
defense of such action, with reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred. No indemnifying party,
in defense of any such action, shall, except with the consent of each
indemnified party, consent to the entry of any judgment or enter into
any settlement (i) which does not include as an unconditional term
thereof the giving, by the claimant or plaintiff, to such indemnified
party of a release from all liability in respect to such action or (ii)
which involves any relief against the indemnified party other than the
payment of money which is to be paid in full by the indemnifying party.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i)
the holder of Registrable Stock exercising rights under this Agreement,
or any controlling person of the holder of Registrable Stock, makes a
claim for indemnification pursuant to this Section 6.4 but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section
6.4 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of the holder of
Registrable Stock or any such controlling person in circumstances for
which indemnification is provided under this Section 6.4; then, and in
each such case, the Company and such holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that the
holder of Registrable Stock is
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<PAGE> 27
responsible for the portion represented by the percentage that the
public offering price of its Registrable Stock offered by the
registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any
such case, (A) the holder of Registrable Stock will not be required to
contribute any amount in excess of the public offering price of all such
Registrable Stock sold by the holder of Registrable Stock pursuant to
such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
SECTION 6.5. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of Registrable Stock to the public without registration, at
all times after 90 days after any registration statement covering a public
offering of securities of the Company under the Securities Act shall have become
effective (or the Company shall otherwise have become subject to the periodic
reporting requirements of the Exchange Act), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Registrable Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the
Company as such holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing such holder to sell any
Registrable Stock without registration.
SECTION 6.6. Termination of Piggyback Registration Rights. The
obligations of the Company to register shares of Registrable Stock under Section
6.1 shall terminate on April 1, 2005, unless such obligations terminate earlier
in accordance with the terms of the Warrant.
SECTION 6.7. Material Non-Public Information. Notwithstanding any
provision of this Agreement to the contrary, the Company's obligation to file a
registration statement, or cause such registration statement to become and
remain effective, shall be suspended for a period not to exceed 30 days (and for
periods not exceeding, in the aggregate, 60 days in any 24-month period) if
there exists at the time material non-public information relating to the Company
which, in the reasonable opinion of the Company, should not be disclosed.
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ARTICLE VII
BOARD OBSERVATION RIGHTS
From and after the Closing Date, and so long as the Note remains
outstanding, the Purchaser shall be entitled to have a representative present at
all meetings (including, without limitation, those conducted by telephone) of
the Company Board (and the Purchaser shall be given copies of all minutes and
consents to action of the Company Board) and to receive all notices required by
the Charter or the By-laws to be given to members of the Company Board;
provided, however, that all rights provided for in this Article VII shall lapse
when all obligations under the Note have been satisfied.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby whether or not such
transactions shall be consummated; provided, however, that the Company shall pay
the reasonable legal and other fees and disbursements of the Purchaser, as
invoiced.
SECTION 8.2. Survival of Agreements. Unless otherwise expressly stated
herein, in the Warrant or in any certificate or instrument delivered pursuant to
or in connection therewith, all covenants and agreements made herein, in the
Warrant, or any certificate or instrument delivered to the Purchaser pursuant to
or in connection with this Agreement or the Warrant shall survive the execution
and delivery of this Agreement, the Warrant and the issuance and delivery of the
Warrant Shares from the date of this Agreement until the Warrant is exercised in
full or until the Warrant expires, whichever event occurs first; provided,
however, that the representations and warranties contained in the Note or the
Other Loan Documents shall survive until all amounts due under the Note shall be
paid in full. All statements contained in any certificate or other instrument
delivered by the Company hereunder or thereunder or in connection herewith or
therewith shall be deemed to constitute representations and warranties made by
the Company.
SECTION 8.3. Brokerage. Each party hereto will indemnify and hold
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 8.4. Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and
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<PAGE> 29
agreements benefiting the Purchaser shall inure to the benefit of any and all
subsequent holders from time to time of the Note, the Warrant or the Warrant
Shares.
SECTION 8.5. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person or
mailed by certified or registered mail, return receipt requested, as follows:
(a) if to the Company, at Intracel Corporation, 359 Allston
Street, Cambridge, MA 02349, Attention: President, with a copy to Joseph
W. Bartlett, Esq., Morrison & Foerster LLP, 1290 Avenue of the Americas,
New York, NY 10104; and
(b) if to the Purchaser, at the address set forth beneath the
Purchaser's name on the signature page to this Agreement, with a copy to
Lee Hitchner, Esq., Pepper, Hamilton & Scheetz, 3000 Two Logan Square,
Philadelphia, PA 19103
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other.
SECTION 8.6. Governing Law. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the Commonwealth of
Pennsylvania, regardless of the jurisdiction of creation or domicile of the
Company or its successors or of the Purchaser (without giving effect to its
choice of law principles).
SECTION 8.7. Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 8.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.9. Amendments. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the Purchaser.
SECTION 8.10. Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 8.11. Titles and Subtitles. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
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<PAGE> 30
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
[Corporate Seal] By:___________________________________
Name: Simon R. McKenzie
Title: President
Attest:
_____________________________
Name: Cheryl Cataldo
Title: Clerk
CORESTATES ENTERPRISE FUND, A DIVISION
OF CORESTATES BANK, N.A.
By:___________________________________
Name:
Title:
Address: 1345 Chestnut Street
Philadelphia, PA 19107
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<PAGE> 31
EXHIBIT A
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD,
OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER SUCH ACT OR IN
COMPLIANCE WITH ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS.
THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS OF AN INTERCREDITOR AND
SUBORDINATION AGREEMENT DATED AS OF JUNE 11, 1996 IN FAVOR OF CREDITANSTALT
BANKVEREIN AND NORTHSTAR ADVANTAGE HIGH TOTAL RETURN FUND, WHICH AGREEMENT IS
INCORPORATED HEREIN BY REFERENCE.
INTRACEL CORPORATION
SECURED PROMISSORY NOTE
June 11, 1996
FOR VALUE RECEIVED, INTRACEL CORPORATION, a Massachusetts corporation
(the "Company"), hereby promises to pay to the order of CoreStates Enterprise
Fund, a division of CoreStates Bank, N.A. ("CoreStates"), the Principal Amount
(as defined below) payable pursuant to Section 1 with interest payable pursuant
to Section 2. Capitalized terms used in this Note have the meanings provided in
Section 11.
SECTION 1. Purchase of Note; Payments of Principal and Interest. (a)
Purchase of Note. On June 11, 1996 (the "Closing Date"), CoreStates agrees to
purchase this Note for $3,800,000, and the principal amount of this Note shall
be deemed to be $4,000,000 (the "Principal Amount").
(b) Principal Payment Date. The Principal Amount of this Note
shall be due and payable in full on June 30, 2001 (the "Principal Payment
Date").
(c) Optional Prepayment; Prepayment Premium. The Company shall
have the right at any time upon 90 days' written notice to the Noteholder, to
prepay voluntarily the entire Unpaid Principal Amount without premium or
penalty, except that any such prepayment shall be accompanied by the payment of
the difference between the amount of interest actually paid by the Company under
the terms hereof (including through the issuance of PIK Notes and additional
Notes under Section 15(b) hereof) and the amount of interest which would have
been due hereunder if such interest were calculated at a compounded rate of
interest equal to 17.6% per annum (a "Prepayment Fee") through the date of such
prepayment. In the event the Company elects to prepay this Note pursuant to this
clause (c), it shall also simultaneously prepay all PIK Notes which are then
outstanding.
<PAGE> 32
(d) Mandatory Prepayments. (i) In the event of a Change in
Control or redemption by the Company of shares of Preferred Stock in an amount
(together with all prior redemptions in the aggregate) in excess of five percent
(5%) of the number of shares of Preferred Stock outstanding on the date hereof,
the Unpaid Principal Amount and all accrued interest thereon shall be prepaid in
full.
(ii) Upon repayment in full of all obligations due under
the Credit Agreement (the "Senior Payoff Date"), the parties hereto
agree as follows. The holder of the Secured Promissory Note shall be
given the right to receive payments with respect to all amounts due
thereunder on the terms set forth in Section 2.8 of the Credit Agreement
(the "Sweep Payments"). Such holder shall have the right to decline to
receive the Sweep Payments and, in connection therewith, either to allow
CoreStates to receive the Sweep Payments, in which case the Sweep
Payments shall first be applied against any unpaid interest which is due
and payable hereunder and thereafter to the Unpaid Principal Amounts, or
to disallow CoreStates to receive the Sweep Payments, in which case the
Company shall set aside that portion of the funds which would have
otherwise been Sweep Payments until an amount has been set aside equal
to the total aggregate payments necessary under the Secured Promissory
Note from and after the Senior Payoff Date until its maturity to defease
or prepay or otherwise retire the Secured Promissory Note; thereafter,
the Company shall pay to CoreStates the Sweep Payments as if such holder
had allowed CoreStates to receive the Sweep Payments.
(iii) No prepayment fee or penalty shall be payable in
respect of any mandatory prepayment pursuant to this subsection (d),
other than those events listed in clauses (i) through (v) of the
definition of "Change in Control", for which a prepayment fee shall be
payable and shall be calculated as if such prepayment were optional and
shall be equal to the Prepayment Fee that would be payable in connection
with such a prepayment under clause (c).
SECTION 2. Interest. (a) Interest Rate. Except as otherwise expressly
provided in Sections 1(c) and 6(b), interest shall accrue from the Closing Date
at the Applicable Interest Rate on the Unpaid Principal Amount, or (if less) at
the highest rate then permitted under applicable law. All computations of
interest shall be made on the basis of a year of three hundred and sixty (360)
days for the actual number of days.
(b) Interest Payment Dates. Interest shall be payable quarterly
in arrears on each Interest Payment Date, beginning with the Interest Payment
Date occurring on September 30, 1996.
(c) Payments In Cash or in Kind. Interest payments may be made by
the Company in cash; provided, however, that notwithstanding the foregoing, if
either (i) the ratio of Consolidated EBITDA to Consolidated Interest Expense is
less than or equal to 2.0 to 1.0 or (ii) the sum of the Company's cash and cash
equivalent investments and amounts available under any revolving credit facility
of the Company's is less than or equal to $3,500,000 (for each of (i) and (ii),
as reported in the then most recent annual financial statements delivered
pursuant to
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<PAGE> 33
Section 4(a)(i)), such payment may be made by the Company in kind. Payments in
kind may be made through the issuance of one or more additional Notes in the
form of this Note (each, a "PIK Note"), on the relevant Interest Payment Date
and dated as of such date, in an aggregate principal amount equal to the amount
of interest that would be payable with respect to this Note if such interest
were paid in cash. Anything contained herein to the contrary notwithstanding,
(i) all payments of interest that shall become due and payable on the final
Interest Payment Date shall be payable in cash in the manner set forth herein
and (ii) in the event the Company pays cash dividends on the Preferred Stock, it
shall also make interest payments under this Note in cash.
(d) Application of Payments. Payments received by the Noteholder
from the Company on this Note shall be applied first to the payment of interest
which is due and payable, to the extent not paid by one or more PIK Notes, and,
thereafter, to the Unpaid Principal Amount.
(e) Applicable Interest Rate. For the period commencing on the
Closing Date until the second year anniversary of the Closing Date, the
"Applicable Interest Rate" shall be a fixed rate of interest equal to twelve
percent (12%) per annum and, thereafter, a fixed rate of interest equal to
thirteen percent (13%) per annum.
SECTION 3. Collateral Security. This Note and any PIK Note issued are
secured by and entitled to the benefits of the Security Documents on a pari
passu basis.
SECTION 4. Covenants. (a) The Company hereby agrees that, so long as any
amount is owing to the Noteholder (and, with respect to clause (i) below, until
the earlier to occur of (i) the Consummation of an IPO (as hereinafter defined),
and (ii) the date on which the Noteholder owns beneficially and of record less
than 50% of the Common Stock of the Company, no par value per share ("Common
Stock"), issuable pursuant to that certain Series A-III Common Stock Warrant
issued by the Company to the Noteholder in connection with the delivery of this
Note), the Company shall and (except in the case of delivery of financial
information, reports and notices) shall cause each of its Subsidiaries to:
(i) Financial Statements. Furnish to the Noteholder:
(A) as soon as available, but in any event within
90 days after the end of each fiscal year of the Company, a copy
of the consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income and stockholders'
equity and of cash flows for such year, setting forth in each
case comparisons to the figures for the previous year, reported
on without a "going concern" or like qualification or exception,
or qualification arising out of the scope of the audit, by Ernst
& Young or other independent certified public accountants of
nationally recognized standing; and
(B) as soon as available, but in any event not
later than 30 days after the end of each month of each fiscal
year of the Company, the unaudited consolidated balance sheet of
the Company and its consolidated Subsidiaries as at
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the end of such month and the related unaudited consolidated
statements of income and stockholders' equity and of cash flows
of the Company and its consolidated Subsidiaries for such month
and the portion of the fiscal year through the end of such month,
setting forth in each case comparisons to the figures for the
previous year certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments).
All such financial statements shall be complete and correct in all
material respects and shall be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such
accountants or officer, as the case may be, and disclosed therein) and
shall be accompanied by a management discussion and analysis in respect
of the fiscal periods reported on therein.
(ii) Certificates; Other Information. Furnish to the
Noteholder:
(A) concurrently with the delivery of the financial
statements referred to in Section 4(a)(i)(A), a certificate of
the independent certified public accountants reporting on such
financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(B) concurrently with the delivery of the financial
statements referred to in Section 4(a)(i)(A) and 4(a)(i)(B), a
certificate of a Responsible Officer stating that, to the best of
such officer's knowledge, the Company during such period and as
of the date of such certificate has observed or performed all of
its covenants and other agreements, and satisfied every
condition, contained in this Note to be observed, performed or
satisfied by it, and that such officer has obtained no knowledge
of any Default or Event of Default during such period or on or
prior to the date of such certificate except as specified in such
certificate;
(C) not later than 30 days prior to the end of each
fiscal year of the Company, a copy of the projections by the
Company of the operating budget and cash flow budget of the
Company and its Subsidiaries for the succeeding fiscal year, such
projections to be accompanied by a certificate of a Responsible
Officer to the effect that such projections have been prepared on
the basis of sound financial planning practice and that such
officer has no reason to believe they are incorrect or misleading
in any material respect;
(D) within 5 days after the same are sent, copies
of all financial statements and reports which the Company sends
to its stockholders, and within 5 days after the same are filed,
copies of all financial statements and reports which the Company
may make to, or file with, the Securities and Exchange Commission
or any successor or analogous Governmental Authority;
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(E) promptly upon receipt thereof, any additional
reports, management letters or other detailed information
concerning significant aspects of the Company's operations or
financial affairs given to the Company by its independent
certified public accountants (and not otherwise contained in
other materials provided hereunder);
(F) during the month of October in each calendar
year, a report of a reputable insurance broker with respect to
insurance and such supplemental reports with respect thereto as
the Noteholder may reasonably request from time to time;
(G) promptly, and in any case within five Business
Days, written notice of the commencement of all actions, suits
and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Company or any of its Subsidiaries, and of
any material adverse development in connection with any of the
foregoing, in each case described in reasonable detail (including
a description of the parties, the venue and the nature of the
claim); and
(H) promptly, such additional financial and other
information as the Noteholder may from time to time reasonably
request.
(iii) Performance of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever nature,
except where the amount or validity thereof is currently being contested
in good faith by appropriate proceedings and reserves in conformity with
GAAP with respect thereto have been provided on the books of the Company
or its Subsidiaries, as the case may be. Comply with all Contractual
Obligations and Requirements of Law except to the extent the failure to
comply therewith could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(iv) Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now conducted
by it and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal
conduct of its business.
(v) Maintenance of Property; Insurance. Keep all property
useful and necessary in its business in good working order and
condition; maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and
against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually
insured against in the same general area by companies engaged in the
same or a similar business; and furnish to the Noteholder, upon written
request, full information as to the insurance carried.
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<PAGE> 36
(vi) Inspection of Property; Books and Records;
Discussions. Keep proper books of records and accounts in which full,
true and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to its
business and activities; and permit representatives of the Noteholder to
visit and inspect any of its properties and examine and make abstracts
from any of its books and records at any reasonable time and as often as
may reasonably be desired and to discuss the business, operations,
properties and financial and other condition of the Company and its
Subsidiaries with officers and employees of the Company and its
Subsidiaries and with its independent certified public accountants;
provided that the Noteholder shall bear its own expenses if any such
inspection, examination or discussion occurs at a time when no Default
or Event of Default shall have occurred and be continuing.
(vii) Notices. Promptly give notice to the Noteholder of:
(A) the occurrence of any Default or Event of
Default;
(B) any (1) default or event of default under any
Contractual Obligation of the Company or any of its Subsidiaries
or (2) litigation, investigation or proceeding which may exist at
any time between the Company or any of its Subsidiaries and any
Governmental Authority, which in either case, if not cured or if
adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(C) any litigation or proceeding affecting the
Company or any of its Subsidiaries in which the amount involved
is $250,000 or more and not covered by insurance or in which
injunctive or similar relief is sought;
(D) the following events, as soon as possible and
in any event within 30 days after the Company knows or has reason
to know thereof: (1) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, a failure to make any
required contribution to a Plan, the creation of any Lien in
favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer
Plan or (2) the institution of proceedings or the taking of any
other action by the PBGC or the Company or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan;
(E) any material adverse change in the business,
operations, property, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole;
(F) any Lien (other than security interests created
by the Security Agreement or Liens permitted hereunder or
thereunder) on any of the Collateral (as defined in the Security
Agreement) which would adversely affect the ability of the
Noteholder to exercise any of its remedies under the Security
Agreement;
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(G) the occurrence of any event which would
reasonably be expected to have a material adverse effect on the
aggregate value of the Collateral or on the security interests
created by the Security Agreement; and
(H) any application or registration relating to any
material patent or trademark of the Company or any of its
Subsidiaries becoming abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or
any court or tribunal in any country regarding a Grantor's (as
defined in the Security Agreement) ownership of any material
patent or trademark or its right to register the same or to keep
and maintain the same.
Each notice pursuant to this Section 4(a)(vii) shall be
accompanied by a statement of a Responsible Officer setting forth
details of the occurrence referred to therein and stating what
action the Company proposes to take with respect thereto.
(viii) Environmental Matters. (A) Comply with, and ensure
compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and ensure
that all tenants and subtenants obtain and comply with and maintain, any
and all licenses, approvals, notifications, registrations or permits
required by applicable Environmental Laws.
(B) Conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws and promptly
comply with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws.
(ix) Additional Collateral; Subsidiaries. In each case,
subject to the terms of, and to the extent, and only to the extent,
permitted by, the Intercreditor Agreement:
(A) With respect to any assets of the type covered
by the Security Agreement acquired after the Closing Date by the
Company or any of its U.S. Subsidiaries, and, upon the occurrence
and during the continuance of an Event of Default and at the
request of the Noteholder, with respect to any other assets or
property of the Company or any of its U.S. Subsidiaries, as to
which the Noteholder does not have a perfected Lien, (1) execute
and deliver to the Noteholder such amendments to the Security
Agreement or such other documents as the Noteholder reasonably
requests in order to grant to the Noteholder a security interest
in such assets, (2) take all actions reasonably requested by the
Noteholder to grant to the Noteholder a perfected security
interest in such assets, including, without limitation, the
filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Security Agreement or by
law or as may be requested by the Noteholder and (3) if requested
by the
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<PAGE> 38
Noteholder deliver to the Noteholder legal opinions relating to
the matters described in the preceding clauses (1) and (2), which
opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Noteholder.
(B) With respect to any Subsidiary (other than a
Foreign Subsidiary) of the Company created or acquired after the
Closing Date by the Company, (1) have such Subsidiary become a
party to the Security Agreement and grant to the Noteholder a
perfected security interest in the Capital Stock and assets of
such Subsidiary, (2) deliver to the Noteholder or its agent the
certificates representing such Capital Stock, if any, together
with undated stock powers, executed in blank, in form and
substance satisfactory to the Noteholder, in respect to all
obligations of the Company hereunder, (3) execute and deliver
such amendments to this Note requested by the Noteholder to
reflect the existence of such Subsidiary, including, without
limitation, amendments to include such Subsidiary in the
covenants, representations and warranties and agreements
contained herein and (4) if requested by the Noteholder, deliver
to the Noteholder legal opinions relating to the matters
described in the preceding clauses (1), (2) and (3), which
opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Noteholder.
(C) With respect to any Foreign Subsidiary,
promptly upon the request of the Noteholder, (1) execute and
deliver to the Noteholder such amendments to this Note or the
Security Agreement or such other documents as the Noteholder
reasonably requests in order to grant to the Noteholder a
perfected security interest in the Capital Stock of such
Subsidiary which is owned by the Company or any of its
Subsidiaries (provided that in no event shall any Capital Stock
of any such Subsidiary be required to be so pledged to the extent
that such pledge would result in adverse tax consequences to the
Company or any such Subsidiary), (2) deliver to the Noteholder or
its agent the certificates representing such Capital Stock, if
any, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Company or such
Subsidiary, as the case may be, and take all such other action
under local laws as may be necessary or desirable to perfect the
Lien on such Capital Stock, and (3) if requested by the
Noteholder, deliver to the Noteholder legal opinions relating to
the matters described in the preceding clauses (1) and (2), which
opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Noteholder.
(b) Transfer of Covenants. The Company hereby agrees that,
effective as of the date (the "Termination Date") on which all amounts
outstanding under the Secured Promissory Note, dated December 27, 1995 (as
amended and otherwise modified from time to time, the "Secured Promissory
Note"), between the Company and Northstar, shall have been paid in full and all
commitments to make financial accommodations under the Secured Promissory Note
shall have been fully terminated, each of the covenants contained in Section
4(b) of the Secured Promissory Note as in effect on the Termination Date
(without giving effect to any amendment
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<PAGE> 39
or other modification of such covenants made in anticipation of the Termination
Date) shall be incorporated herein by reference (mutatis mutandis, with
references therein to the Noteholder being deemed to be reference to the
Noteholder, references therein to the Company being deemed to be references to
the Company, and references therein to the Note being deemed to be references to
this Note) and shall run to the benefit of the Noteholder.
SECTION 5. Intercreditor Agreement. The Noteholder hereby acknowledges
and agrees that the exercise of remedies pursuant to Section 6 is, and shall at
all times be, subject to the limitations on the Noteholder's remedies set forth
in the Intercreditor Agreement.
SECTION 6. Events of Default. (a) Definition. For purposes of this Note,
an Event of Default shall be deemed to have occurred if
(i) the Company shall fail to pay any principal when due
in accordance with the terms hereof; or the Company shall fail to pay
any interest when due in accordance with the terms hereof or any PIK
Note, within 5 days after any such principal, interest or other amount
payable hereunder is due and payable in accordance with the terms
hereof; or
(ii) any representation or warranty made or deemed made by
the Company in Section 13 or in any Related Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Note or any
Related Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(iii) the Company shall default in the observance or
performance of any agreement contained in Section 4(a)(ix) or any
Related Document; or
(iv) the Company shall default in the observance or
performance of any other agreement contained in this Note (other than as
provided in Section 6(a)(i) through (iii)), and such default shall
continue unremedied for a period of 30 days; or
(v) the Company or any of its Subsidiaries shall (A)
default in any payment of principal of or interest on any Indebtedness
(including, without limitation, any indebtedness under the Credit
Agreement or the Secured Promissory Note) (after giving effect to any
applicable grace period); or (B) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or any Guarantee Obligation or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or
other event or condition is to give the holder thereof the right to
cause such Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation to become payable (whether by the terms of any
document evidencing such Indebtedness or Guarantee Obligation, upon the
election of any holder of Indebtedness or beneficiary of any Guarantee
Obligation or otherwise); or
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(vi) (A) the Company or any of its Subsidiaries shall
commence any case, proceeding or other action (1) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (2)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (B) there shall be
commenced against the Company or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (A) above
which (1) results in the entry of an order for relief or any such
adjudication or appointment or (2) remains undismissed, undischarged or
unbonded for a period of 60 days; or (C) there shall be commenced
against the Company or any of its Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (D) the Company or any
of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (A), (B) or (C) above; or (E) the Company or
any of its Subsidiaries shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due; or
(vii) (A) any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
code) involving any Plan, (B) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Company or any Commonly Controlled
Entity, (C) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the
Noteholder, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (D) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (E) the Company or any
Commonly Controlled Entity shall, or in the reasonable opinion of
Noteholder is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (F) any other event or condition shall occur or exist with
respect to a Plan; and in each case in clauses (A) through (E) above,
such event or condition, together with all other such events or
conditions, if any, could reasonably be expected to have a Material
Adverse Effect; or
(viii) one or more final judgments or decrees shall be
entered against the Company or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance) of
$100,000 or more, and all such judgments or decrees shall not
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<PAGE> 41
have been vacated, discharged, stayed or bonded pending appeal within 30
days from the entry thereof; or
(ix) (A) any of the Security Documents shall cease, for
any reason, to be in full force and effect, or the Company or any
Subsidiary shall so assert or (B) the Lien created by any of the
Security Documents shall cease to be enforceable and of the same effect
and priority purported to be created thereby;
(x) Senior Managers of the Company shall cease to own, of
record or beneficially, the issued and outstanding shares of Capital
Stock of the Company having at least 25% of the ordinary voting power
for the election of directors of the Company; or
(xi) Interest Events shall have occurred on three
consecutive Interest Payment Dates and none of such Interest Events
shall have been Cured, or Interest Events shall have occurred on a total
of five Interest Payment Dates and none of such Interest Events shall
have been Cured.
(b) Consequences of Events of Default.
(i) If any Event of Default has occurred, the interest
rate on this Note shall be the Default Interest Rate. Any increase of
the interest rate resulting from the operation of this clause shall
terminate as of the close of business on the date on which no Events of
Default exist (subject to subsequent increases pursuant to this clause).
(ii) If an Event of Default of the type described in
Section 6(a)(vi) has occurred, the aggregate principal amount of this
Note (together with all accrued interest thereon and all other amounts
due and payable with respect thereto) shall become immediately due and
payable without any action on the part of the Noteholder, and the
Company shall immediately pay to the Noteholder all amounts due and
payable with respect to this Note.
(iii) If any Event of Default has occurred (other than
under Section 6(a)(vi)), the Noteholder may declare this Note to be
immediately due and payable and may demand immediate payment of the
Unpaid Principal Amount (together with all accrued and unpaid interest
and all other amounts due and payable with respect thereto).
(iv) The Noteholder shall also have any other rights which
such holder may have been afforded under any contract or agreement
(including, without limitation, the Security Documents) at any time and
any other rights which such holder may have pursuant to applicable law.
(c) Cure of Event of Default Relating to Interest Events. An
Event of Default pursuant to Section 6(a)(xi) may be cured at any time (provided
that no other Event of Default has occurred and is continuing) by Curing any
single Interest Event which was taken into account in declaring such Event of
Default.
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SECTION 7. Waiver of Certain Rights. The Company hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Company hereunder.
SECTION 8. Transfer of this Note. Upon surrender for registration of
transfer of this Note at the principal office of the Company, the Company shall,
at the Noteholder's expense, execute and deliver one or more new Notes of like
tenor and of like aggregate principal amount, registered in the name of such
transferee or transferees. At the time this Note is surrendered for registration
of transfer, it shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the Noteholder or such holder's
attorney duly authorized in writing. Any Note or Notes issued upon transfer of
this Note shall carry the rights to unpaid interest and the accrual of interest
which were carried by this Note, so that neither gain nor loss of interest shall
result from any such transfer.
SECTION 9. Assignment. The rights and obligations of the Company and the
Noteholder shall be binding upon and benefit the permitted successors, assigns
and transferee of the parties; provided that in no event shall the Company
assign its rights hereunder without the prior written consent of the Noteholder.
SECTION 10. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Noteholder. No failure or delay on the part of the Noteholder in exercising any
power or right under this Note or any other Related Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right.
SECTION 11. Definitions. For purposes of this Note, the following
capitalized terms have the following meaning:
"Applicable Interest Rate" is defined in Section 2(e).
"Business Day" means any day other than a Saturday, a Sunday, or any
other day on which banking institutions in the City of New York are authorized
or required by law, regulation or executive order to remain closed.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"Change of Control" means when:
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(i) any "person," as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, becomes a
beneficial owner, as such term is used in Rule 13d-3 promulgated under
such Act, of securities of the Company representing 50% or more of the
combined voting power of the outstanding securities of the Company,
having the right to vote in the election of directors (any such owner
being herein referred to as an "Acquiring Person");
(ii) a majority of the Board of Directors of the Company
(the "Company Board") at any time consists of individuals elected to
membership at a Company Board meeting or a Company shareholders' meeting
other than individuals nominated or approved by the Company Board;
(iii) all or substantially all the business of the Company
is disposed of pursuant to a merger, consolidation or other transaction
(other than a merger, consolidation or other transaction with a company
of which 40% or more of the combined voting power of the outstanding
securities having a right to vote at the election of directors is owned,
directly or indirectly, by the Company both before and immediately after
the merger, consolidation or other transaction) in which the Company is
not the surviving corporation or the Company is materially or completely
liquidated;
(iv) the Company combines with another company and is the
surviving corporation (other than a merger, consolidation or other
transaction with a company of which 50% or more of the combined voting
power of the outstanding securities having a right to vote at the
election of directors is owned, directly or indirectly, by the Company
both before and immediately after the merger, consolidation or other
transaction) but, immediately, after the combination, the shareholders
of the Company hold, directly or indirectly, less than 50% of the total
outstanding securities of the combined company having the right to vote
in the election of directors;
(v) the Company consummates a sale of its assets which
represent in value more than 25% of the total assets of the Company at
the time of such sale; or
(vi) the Company consummates an underwriting for its
Common Stock pursuant to an offering registered under the Securities Act
of 1933, as amended, at a per share price of at least $18.00 (as
currently configured) in which the aggregate proceeds (net of offering
expenses and underwriters' discounts or commissions) received by the
Company equals or exceeds $10,000,000 (an "IPO").
"Closing Date" is defined in Section 1(a).
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"Company" is defined in the preamble.
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"Consolidated EBITDA" means, for any period, Consolidated Net Income of
the Company and its Subsidiaries for such period plus, without duplication and
to the extent reflected as a charge in the statement of such Consolidated Net
Income, the sum of (a) income tax expense, (b) Consolidated Interest Expense,
(c) depreciation and amortization expense and (d) any extraordinary,
non-recurring or unusual losses (including, whether or not otherwise includable
as a separate item in the statement of such Consolidated Net Income, losses on
the sales of assets outside of the ordinary course of business), minus, without
duplication and to the extent reflected as income in the statement of such
Consolidated Net Income, any extraordinary, non-recurring or unusual gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income, gains on the sales of assets outside
of the ordinary course of business).
"Consolidated Interest Expense" means, for any period, the amount of
interest expense, both expensed and capitalized, of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, for
such period on the aggregate principal amount of Indebtedness of the Company and
its Subsidiaries.
"Consolidated Net Income" means for any period, net after-tax income of
the Company and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Contractual Obligation" means as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CoreStates" is defined in the preamble.
"Credit Agreement" means the Credit Agreement, dated as of November 16,
1995, among the Company, the Lenders parties thereto, and Creditanstalt
Bankverein, as Agent for the Lenders, as amended and otherwise modified from
time to time.
"Credit Agreement Security Documents" means, collectively, the Global
Security Agreement (as defined in the Credit Agreement) and each other security
agreement relating to the Credit Agreement.
"Cured" means, with respect to any Interest Event, paid in full in cash
or in kind if in accordance with Section 2(c).
"Default" means any of the events specified in Section 6, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Default Interest Rate" means a rate of interest equal to 15% per annum.
"Environmental Laws" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or
14
<PAGE> 45
imposing liability or standards of conduct concerning protection of human health
or the environment, as now or may at any time hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means each of the events described in Section 6;
provided, however, that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"GAAP" means generally accepted accounting principles in the United
States of America consistent with those utilized in preparing the audited
financial statements referred to in Section 4(a).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (x) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (y) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Company in good
faith.
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<PAGE> 46
"Indebtedness" means, of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person, (e) all obligations in respect of deferred
compensation and (f) all liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Insolvency" means with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Intercreditor Agreement" means the Intercreditor and Subordination
Agreement, dated as of the date hereof, among Creditanstalt Bankverein,
Northstar and CoreStates, as amended or otherwise modified from time to time.
"Interest Event" means the event of an interest payment not being made
in full in cash, or in kind if in accordance with Section 2(c), for any reason
(including, without limitation, if giving effect to the payment of interest in
cash there would be a Default under (and as defined in) the Credit Agreement or
the Secured Promissory Note).
"Interest Payment Date" means each of June 30, September 30, December 31
and March 31 of each year from the Closing Date through the Principal Payment
Date.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Company and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Note or any of the other Related Documents or the rights
or remedies of Noteholder hereunder or thereunder.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Northstar" means Northstar Advantage High Total Return Fund, a
Massachusetts business trust.
"Note" means this Secured Promissory Note issued by the Company to
CoreStates.
"Noteholder" means CoreStates and its permitted successors, transferees
and assigns.
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<PAGE> 47
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PIK Note" is defined in Section 2(c).
"Plan" means at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means that certain Junior Subordinated Pledge
Agreement, dated the date hereof, between the Company and CoreStates.
"Preferred Stock" means all series and classes of the Company's
Preferred Stock, no par value.
"Prime Rate" shall mean the rate of interest that is publicly announced
from time to time by CoreStates in Philadelphia, Pennsylvania as its prime
lending rate, such rate to change automatically and without notice to the
Company when and as such prime lending rate changes. The Prime Rate is a
reference rate and does not necessarily represent the best or lowest rate
actually charged by CoreStates to any customer. CoreStates may make commercial
loans or other loans at rates of interest at, above or below the Prime Rate.
"Principal Amount" is defined in Section 1(a).
"Principal Payment Date" is defined in Section 1(b).
"Purchase Agreement" means that certain Note and Series A-III Common
Stock and Warrant Purchase Agreement, dated the date hereof, between the Company
and CoreStates.
"Related Documents" means the Purchase Agreement, this Note, the
Security Documents and the Intercreditor Agreement.
"Reorganization" means with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the 30 day notice period is waived
under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615.
"Requirements of Law" means the obligations of the Company under
federal, state and local laws applicable to it in the conduct of its business.
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<PAGE> 48
"Responsible Officer" means the chief executive officer and the
president of the Company or, with respect to financial matters, the chief
financial officer of the Company.
"Secured Promissory Note" is defined in Section 4(b).
"Security Agreement" means that certain Junior Subordinated Security
Agreement, dated the date hereof, between the Company and CoreStates.
"Security Documents" means the Other Loan Documents (as such term is
defined in the Purchase Agreement) other than the Intercreditor Agreement.
"Solvent" shall mean with respect to any Person on a particular date,
the condition that on such date, (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value, on a going concern basis, of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (d) such
Person is not engaged in business or a transaction, and is not about to engage
in a business or a transaction, for which such Person's property would
constitute an unreasonably small amount of capital.
"Subsidiary" means as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Note shall refer to a Subsidiary or Subsidiaries of
the Company.
"Termination Date" is defined in Section 4(b).
"Uncured" means, with respect to any Interest Event, not paid in full in
cash, or in kind if in accordance with Section 2(c).
"Uniform Commercial Code" means the Uniform Commercial Code as is then
in effect under the laws of the respective state of reference.
"Unpaid Principal Amount" means, at any time, the portion of the
Principal Amount outstanding at such time.
"U.S. Subsidiaries" means Subsidiaries organized under laws of the U.S.
or any state thereof.
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<PAGE> 49
SECTION 12. Cancellation. After all principal and accrued interest at
any time owed on this Note has been paid in full, this Note shall be surrendered
to the Company for cancellation and shall not be reissued.
SECTION 13. Representations of the Company. (a) The representations and
warranties of the Company to CoreStates set forth in the Purchase Agreement
shall be deemed, mutatis mutandis, to be representations of the Company made to
CoreStates for purposes of this Note on the date hereof to the same extent and
with the same effect as if such representations and warranties were set forth in
full herein.
(b) The Company is, and after giving effect to the incurrence of
all indebtedness and obligations being incurred in connection herewith will be
and will continue to be, Solvent.
SECTION 14. Payment of Expenses and Taxes. The Company hereby agrees (a)
to pay or reimburse the Noteholder for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this Note
and the other Related Documents after the occurrence of any Event of Default,
including, without limitation, the fees and disbursements of counsel to the
Noteholder, (b) to pay, indemnify, and hold the Noteholder harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Note and the other Related
Documents and (c) to pay, indemnify, and hold the Noteholder harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Note and the other Related Documents
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Company, any of its Subsidiaries or any of their
properties (all the foregoing in this clause (c), collectively, the "indemnified
liabilities"), provided that the Company shall have no obligation hereunder to
the Noteholder with respect to indemnified liabilities arising from (i) the
gross negligence or willful misconduct of the Noteholder, or (ii) legal
proceedings commenced against the Noteholder by any security holder or creditor
of the Company arising out of and based upon rights afforded any such security
holder or creditor solely in its capacity as such.
SECTION 15. Payments. (a) Generally. Except for payments made in
accordance with Section 2(c), all payments to be made to the Noteholder shall be
made in the lawful money of the United States of America in immediately
available funds.
(b) Upon the later to occur of (i) April 1, 2001 and (ii) the
date on which all obligations under the Secured Promissory Note are satisfied in
full, the Noteholder shall be entitled to receive from the Company, within
fifteen (15) days from the occurrence thereof, the Make Whole Amount. For
purposes of the foregoing sentence, the "Make Whole Amount" shall be deemed to
be the issuance of additional Notes by the Company in the form of this Note and
in
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<PAGE> 50
an amount which, when aggregated with the interest payments made to such date by
the Company (including the principal amount of all PIK Notes issued) and the
aggregate Dollar Value of the Company's unexercised warrants issued under the
Purchase Agreement ("Warrants") and shares of Common Stock issued pursuant to
the exercise thereof ("Warrant Shares"), would represent a twenty percent (20%)
compounded rate of return per annum for the Noteholder. For the purpose of the
foregoing sentence, "Dollar Value", (iii) with respect to unexercised Warrants,
shall equal the product of the number of shares of Common Stock into which such
Warrants are exercisable and the difference between the then applicable exercise
price of such Warrants and the most recently reported price for one share of
Common Stock on any national securities exchange or quotation service (or, if
the Common Stock is not then so listed or quoted, the value of one share of
Common Stock as determined by the Independent Appraiser (as hereinafter
defined)) (such number, the "Per Share Value") and, (iv) with respect to Warrant
Shares, the product of the number of Warrant Shares and the difference between
the Per Share Value and the exercise price actually paid in connection with the
exercise of the respective Warrants. In the event any calculation of "Dollar
Value" would, with respect to either Warrants or Warrant Shares, result in a
negative number, the "Dollar Value" with respect thereto shall be deemed to
equal zero. For purposes of the foregoing, the term "Independent Appraiser"
shall mean an appraiser mutually selected by the Company and CoreStates or, in
the event of a disagreement as to such selection, an appraiser currently
receiving no fee income from either the Company or CoreStates selected by the
mutual agreement of two other appraisers, one of which shall be selected by the
Company and the other by CoreStates.
SECTION 16. Place of Cash Payment. Cash payments of principal and
interest shall be delivered to CoreStates by wire transfer of immediately
available funds to such address and account as CoreStates may specify in writing
to the Company, or to such other Noteholder at such other address or to the
attention of such other person or to such other account as specified by prior
written notice to the Company.
SECTION 17. Severability. Whenever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Note.
SECTION 18. Descriptive Headings; Interpretation. The descriptive
headings of this Note are inserted for convenience only and do not constitute a
substantive part of this Note. The use of the word "including" in this Note
shall be by way of example rather than by limitation.
SECTION 19. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
RULES OR PROVISIONS (WHETHER OF THE COMMONWEALTH OF PENNSYLVANIA OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE COMMONWEALTH OF PENNSYLVANIA.
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<PAGE> 51
SECTION 20. WAIVERS. TO THE EXTENT PERMITTED BY LAW, THE COMPANY HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED REGISTERED MAIL DIRECTED TO IT AT
ITS ADDRESS SET FORTH IN SECTION 23. IN ADDITION, THE COMPANY HEREBY WAIVES
TRIAL BY JURY, ANY OBJECTIONS BASED ON FORUM NON CONVENIENS AND ANY OBJECTIONS
TO VENUE OF ANY ACTION ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL
TO THE TRANSACTIONS CONTEMPLATED BY OR THE RELATIONSHIPS ESTABLISHED IN
CONNECTION WITH THIS NOTE.
SECTION 21. JURISDICTION. EXCEPT AS OTHERWISE PROVIDED IN SECTION 22,
ALL DISPUTES AMONG OR BETWEEN SUCH HOLDER AND THE COMPANY ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED BY OR
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, MAY BE RESOLVED BY STATE
OR FEDERAL COURTS LOCATED IN PHILADELPHIA, PENNSYLVANIA, AND THE COMPANY HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN SUCH COUNTY AND STATE; PROVIDED, HOWEVER, THAT ANY APPEALS FROM THOSE
COURTS MAY BE HEARD BY A COURT LOCATED OUTSIDE OF PHILADELPHIA, PENNSYLVANIA.
THE COMPANY WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE. NOTHING IN THIS SECTION 21 SHALL
AFFECT THE RIGHT OF THE NOTEHOLDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF SUCH HOLDER TO BRING ANY ACTION OR
PROCEEDING AGAINST THE COMPANY OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 22. OTHER JURISDICTIONS. THE COMPANY AGREES THAT THE NOTEHOLDER
SHALL HAVE THE RIGHT TO PROCEED AGAINST THE COMPANY IN A COURT IN ANY LOCATION
TO ENABLE SUCH HOLDER TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF SUCH HOLDER. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE NOTEHOLDER HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS SECTION 22.
SECTION 23. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Note shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or (c) sent by next-day or overnight mail or
delivery or (d) sent by telecopy (with verbal confirmation of receipt) or
telegram.
If to CoreStates:
CoreStates Enterprise Fund, a division of
CoreStates Bank, N.A.
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
Attn: Chris Jones
Fax Number: (215) 973-6900
Confirm Number: (215) 973-1155
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<PAGE> 52
with a copy, which will
not constitute notice to
the Noteholder, to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, Pennsylvania 19103-2799
Attn: Lee Hitchner, Esq.
Fax Number: (215) 981-4750
Confirm Number: (215) 981-4682
If to the Company:
Intracel Corporation
359 Allston Street
Cambridge, Massachusetts 01239
Attn: Simon R. McKenzie
Fax Number: (617) 491-9015
Confirm Number: (617) 547-0011
with a copy, which will
not constitute notice to
the Company, to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett, Esq.
Fax No: (212) 468-7900
Confirm No.: (212) 468-8240
or at such other address as may be specified in writing to the other parties in
accordance with this Section 23.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (a) if by personal delivery on the date after such
delivery, (b) if by certified or registered mail, on the seventh Business Day
after the mailing thereof, (c) if by next-day or overnight mail or delivery, on
the day delivered, (d) if by telecopy or telegram, on the next day following the
day on which such telecopy or telegram was sent, provided that a copy is also
sent by certified or registered mail.
SECTION 24. Business Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is a Saturday, Sunday or
legal holiday in the Commonwealth of Pennsylvania, the payment shall be due and
payable on, and the time period
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<PAGE> 53
shall automatically be extended to, the next Business Day immediately following
such Saturday, Sunday or legal holiday, and interest shall continue to accrue at
the required rate hereunder until any such payment is made.
SECTION 25. Usury Laws. It is the intention of the Company and the
Noteholder to conform strictly to all applicable usury laws now or hereafter in
force, and any interest payable under this Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by
reason of an election by the holder hereof resulting from an Event of Default,
voluntary prepayment by the Company or otherwise, then earned interest may never
include more than the maximum amount permitted by law, computed from the date
hereof until payment, and any interest in excess of the maximum amount permitted
by law shall be canceled automatically and, if theretofore paid, shall at the
option of the holder hereof either be rebated to the Company or credited on the
principal amount of this Note, or if this Note has been paid, then the excess
shall be rebated to the Company. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable, or receivable under this Note shall under no circumstances exceed
the maximum legal rate upon the unpaid principal balance of this Note remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it shall be deemed a mistake and such excess shall be canceled automatically
and, if theretofore paid, rebated to the Company or credited on the principal
amount of this Note, or if this Note has been repaid, then such excess shall be
rebated to the Company.
* * * * *
23
<PAGE> 54
IN WITNESS WHEREOF, the Company has executed and delivered this Note on
_________, 1996.
INTRACEL CORPORATION
By: ___________________________________
Name: Simon R. McKenzie
Title: President
ACCEPTED AND AGREED TO:
CORESTATES ENTERPRISE FUND,
A DIVISION OF CORESTATES BANK, N.A.
By: _______________________________
Name:
Title:
24
<PAGE> 55
EXHIBIT B
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
SERIES A-III COMMON STOCK WARRANT
Void after April 1, 2003 Right to purchase 159,073
shares of Common Stock
(subject to adjustment )
of Intracel Corporation
No. AIII-1
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Massachusetts corporation (the "Company"),
hereby certifies that, for value received, CORESTATES ENTERPRISE FUND, A
DIVISION OF CORESTATES BANK, N.A. (the "Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company at any time or from time to
time before 5:00 P.M. New York time, on April 1, 2003 (or such earlier date as
provided in Section 7 hereof) (the "Expiration Time"), up to one hundred
fifty-nine thousand seventy-three (159,073) fully paid and nonassessable shares
of the Company's Common Stock, no par value per share, at a purchase price per
share of $14.00 (the "Purchase Price"). The number and character of such shares
of Common Stock and the Purchase Price are subject to adjustment as provided
herein.
This warrant (this "Warrant") is issued pursuant to a certain Note and
Warrant Purchase Agreement, dated as of June 11, 1996, between the Company and
the Holder, a copy of which is on file at the principal office of the Company
(the "Purchase Agreement").
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
"Affiliate" means, with reference to a specified person or
entity, any person or entity that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with the
specified person or entity. For purposes of this definition, "control"
(including, with correlative meaning, the terms "controlled by" and "under
common control with"), as used with respect to any person or entity, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting securities or by contract or otherwise.
"Common Stock" means the Company's common stock, no par value per
share, in existence on June 11, 1996, or any class or classes (however
designated) of such Common Stock
<PAGE> 56
subsequently existing as a result of any recapitalization, reorganization or
other reclassification of the Company's capital stock which affects the holders
of Common Stock.
"Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the
Company with or the merger of the Company into any other corporation or entity
(other than a consolidation or merger in which the Company is the continuing
entity) or the sale or transfer of all or substantially all of the assets of the
Company to another person or entity.
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities and Exchange Commission" or "Commission" refers to
the Securities and Exchange Commission or any other Federal agency then
administering the Securities Act.
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
1. Restricted Stock.
1.1 This Warrant and all rights hereunder may not be transferred
unless (i) the transferee is an Affiliate of the Holder, or (ii) the Company
gives its prior written consent to the transfer.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or exchange,
and in the case of an exercise of this Warrant if the Warrant Shares to be
issued thereupon are not registered pursuant to the Securities Act, the Company
may require a written statement that such Warrant or Warrant Shares, as the case
may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at the
time of exercise such Warrant Shares are registered under the Securities Act,
bear a legend substantially in the following form:
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<PAGE> 57
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
2. Exercise of Warrant.
The Holder may exercise this Warrant in whole or in part (but not
as to fractional shares of Common Stock) by delivering this Warrant prior to the
Expiration Time, with the form of subscription at the end hereof duly executed
by the Holder, to the Company at its principal office. This Warrant and the
subscription shall be accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock called for on the form of
subscription by the Purchase Price, as such may be adjusted as provided herein.
In the event of the purchase of less than all of the shares of Common Stock
purchasable under this Warrant, the Company shall execute and deliver a
replacement Warrant of like tenor for the balance of the shares of Common Stock
purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this
Warrant shall be issued as soon as practicable after the exercise of this
Warrant in accordance with Section 2 hereof, but in no event later than 10 days
after the date of delivery to the Company of this Warrant for exercise, without
charge to the Holder, including, without limitation, any tax that may be payable
in respect thereof, and such certificates shall be issued and registered in the
name of, or, subject to Section 1.1, in such names as may be directed by, the
Holder; provided, however, that the Company shall not be required to pay any
income tax to which the Holder may be subject in connection with the issuance of
this Warrant or the shares of Common Stock upon exercise of this Warrant;
provided, further, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate in a name other than that of the Holder and the Company
shall not be required to issue or deliver such certificate unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at
any time or from time to time, the number of shares of Common Stock outstanding
is increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would
3
<PAGE> 58
have received if (A) this Warrant had been exercised into Common Stock on the
date of such event and (B) it had thereafter retained such securities and all
rights and distributions relating to them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event, the
Holder of this Warrant shall have the right thereafter to convert his or her
Warrant Shares into the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock which were
convertible immediately prior to such reorganization, reclassification, or
change. If, at any time or from time to time, the number of shares of Common
Stock outstanding is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date for such combination, the Purchase
Price shall appropriately increase and/or the number of Warrant Shares shall be
appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time
after the date hereof, the Company issues shares of Common Stock for a
consideration per share less than the Purchase Price per share, on the date such
additional shares are issued, the Purchase Price shall be adjusted in accordance
with the following formula:
P
-
E1 = E x O + E
--------
A
where: E1 = the adjusted Purchase Price.
E = the Purchase Price immediately prior to the
adjustment.
O = the number of shares outstanding immediately prior
to the issuance of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
A = the number of shares outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection does not apply to (i) any of the transactions
described in Sections 4.1 and 4.2 and the first paragraph of subsection (b) or
the issuance of common stock upon the exercise of such rights described therein,
(ii) the issuance of shares of Common Stock upon
4
<PAGE> 59
conversion of the Company's currently outstanding preferred stock, preferred
stock issued in lieu of cash dividends thereon up to the amounts through the
dates provided for under the terms of the applicable designations on the date
hereof (except, in the case of the Company's Series A Preferred Stock, such
payments of preferred stock in lieu of cash dividends shall be deemed to be
allowed through January 1, 1997 rather than July 1, 1996), and upon the exercise
of rights under securities issued on or before the date hereof to convert,
exchange or exercise such securities into shares of Common Stock, or (iii) the
issuance of shares of Common Stock upon the exercise of rights, warrants or
options granted to employees and directors of the Company pursuant to employee
benefit plans or employee stock option plans available for grants to the
Company's executives in general, provided that the aggregate number of shares
issuable upon exercise of such rights, warrants and options (including all
shares previously issued upon exercise thereof) do not exceed ten percent (10%)
of the Company's then issued and outstanding Common Stock.
(b) Adjustment for Convertible Securities Issue. If at any
time after the date hereof, the Company issues any securities convertible into
or exchangeable or exercisable for shares of Common Stock for a consideration
per share of Common Stock initially deliverable upon conversion, exchange or
exercise of such securities less than the Purchase Price per share on the date
of issuance of such securities, the Purchase Price shall be adjusted in
accordance with the following formula:
P
-
E1 = E x O + E
-----
A
where: E1 = the adjusted Purchase Price.
E = the then current Purchase Price.
O = the number of shares outstanding immediately
prior to the issuance of such securities.
P = the sum of the aggregate consideration received
for the issuance of such securities plus the
additional consideration, if any, payable upon
conversion, exchange or exercise of such securities
at the initial conversion, exchange or exercise
rate.
D = the maximum number of shares deliverable upon
conversion, exchange or exercise of such securities
at the initial conversion, exchange or exercise
rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance. If
all of the Common Stock deliverable upon conversion, exchange or exercise of
such securities has not been issued when such securities are no longer
outstanding, then the Purchase Price shall promptly be readjusted to the
Purchase Price which would then be in effect had the adjustment upon the
issuance of such
5
<PAGE> 60
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion, exchange or exercise of such securities.
This subsection does not apply to (i) any of the transactions
described in Sections 4.1 and 4.2 and the first paragraph of subsection (a) or
(ii) the issuance of shares of Common Stock upon the exercise of rights,
warrants or options granted to employees or directors of the Company pursuant to
employee benefit plans or employee stock option plans available to the Company's
executives in general, provided that the aggregate number of shares issuable
upon exercise of such rights, warrants and options (including all shares
previously issued upon exercise thereof) do not exceed ten percent (10%) of the
Company's then issued and outstanding Common Stock.
(c) The foregoing adjustments shall be made only if the
adjusted Purchase Price shall be less than the Purchase Price.
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of like
tenor.
7. Accelerated Expiration of Warrants. Notwithstanding anything in this
Warrant to the contrary, this Warrant and the terms and provisions hereunder
shall immediately expire without further action by the Company or the Holder (a)
upon the closing of an underwritten public offering pursuant to an effective
registration statement on Form S-1 or successor form under the Securities Act
covering the offering and sale of Common Stock for the account of the Company at
a per share price of at least $18.00 (as currently configured) in which the
aggregate proceeds (net of offering expenses and underwriters' discounts or
commissions) received by the Company equals or exceeds $10,000,000 (an "Initial
Public Offering") (provided that the Company shall have given notice of the
initial filing of such registration statement promptly after the date of such
filing); or (b) on the day prior to the effective date of any Extraordinary
Transaction.
8. Notices.
8.1 Notices for Adjustments under Section 4 and Certain Other
Events. In the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to receive
any other right; or
6
<PAGE> 61
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or the occurrence of any Extraordinary Transaction; or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company; or
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any right or
option to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities (other than the issuance of
Warrant Shares);
then, and in each such event, the Company will mail by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company pursuant to Section 8.2 hereof, a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, Extraordinary Transaction, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable on
such reorganization, reclassification, recapitalization, Extraordinary
Transaction, dissolution, liquidation or winding up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made.
All notices to be given pursuant to subsection (a) of this Section 8.1
shall be mailed at least fifteen (15) days prior to the record date of such
events described therein. All notices to be given pursuant to subsections (b)
through (d) of this Section 8.1 shall be mailed at least thirty (30) days prior
to the record date of such events described therein.
8.2 Other Notices. (a) In the event of an Initial Public
Offering, the Company will mail by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company
pursuant to Section 8.2(b), notice of the initial filing of the registration
statement for the Initial Public Offering. Any notice to be given pursuant to
this Section 8.2(a) shall be mailed promptly after the date of such filing.
(b) All other notices and communications shall be mailed
by first class registered or certified mail, postage prepaid, addressed as
follows:
(i) if to the Holder, to the address for the Holder
as shown on the signature page hereof, with a copy to:
Lee Hitchner, Esq.
Pepper, Hamilton & Scheetz
7
<PAGE> 62
3000 Two Logan Square
Philadelphia, PA 19103
or
(ii) if to the Company, to:
Intracel Corporation
359 Allston Street
Cambridge, MA 02349
Attention: President
with a copy to:
Joseph W. Bartlett, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104
or at such address as may have been furnished to the Company in writing by the
Holder or vice versa.
8.3 Receipt of Notices. All notices under this Warrant shall be
deemed to have been given three (3) days after being properly addressed and
deposited in the U.S. mail.
9. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts (without giving effect
to its choice of law principles). The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof. This Warrant is being executed as an instrument under seal. All nouns
and pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
10. Expiration. This Warrant shall expire, and be without further force
and effect, at 5:00 P.M., New York time, on April 1, 2003, or such earlier date
and time as provided in Section 7 hereof.
Dated: INTRACEL CORPORATION
(Corporate Seal) By:
---------------------------------
Simon R. McKenzie, President
Chief Executive Officer
Attest:
8
<PAGE> 63
HOLDER:
CORESTATES ENTERPRISE FUND,
A DIVISION OF CORESTATES BANK, N.A.
By:
----------------------------------
Its
Address: 1345 Chestnut Street
Philadelphia, PA 19107
Attention: Chris Jones
9
<PAGE> 64
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To Intracel Corporation:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _____________ shares of Common Stock of INTRACEL
CORPORATION and herewith makes payment of $________________ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to ____________________________, whose address is
Dated:
-----------------------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant)
-----------------------------------------------
(Address)
<PAGE> 65
EXHIBIT C
June 11, 1996
CoreStates Enterprise Fund, a Division of CoreStates Bank, N.A.
1345 Chestnut Street
Philadelphia, PA 19107
Re:Note and Series A-III Warrant Purchase Agreement, dated as of June
11, 1996, between Intracel Corporation and CoreStates Enterprise
Fund, a Division of CoreStates Bank, N.A.
Ladies and Gentlemen:
We have acted as special counsel for Intracel Corporation (the
"Company") in connection with the transactions contemplated by the Note and
Series A-III Warrant Purchase Agreement, dated as of June 11, 1996 (the
"Purchase Agreement") between the Company and CoreStates Enterprise Fund, a
division of CoreStates Bank, N.A. (the "Lender"). This opinion is furnished to
the Lender pursuant to Section 4.1 of the Purchase Agreement.
We have examined originals or copies of the following documents (the
"Documents"):
(i) the Purchase Agreement;
(ii) the Series A-III Common Stock Warrant, dated June 11, 1996,
between the Company and the Lender (the "Warrant");
(iii) the Secured Promissory Note, dated June 11, 1996, in the
principal amount of $4,000,000, by the Company, in favor of the
Lender, and acknowledged by the Lender (the "Note");
(iv) the Junior Subordinated Pledge Agreement, dated as of June 11,
1996, between the Company and the Lender (the "Pledge
Agreement");
(v) the Junior Subordinated Security Agreement, dated as of June 11,
1996, between the Company, Bartels, Inc., a wholly-owned
subsidiary of the Company ("Bartels") and the Lender (the
"Security Agreement," and collectively with the Pledge Agreement,
the "Security Documents"); and
<PAGE> 66
CoreStates Enterprise Fund, a Division of CoreStates Bank, N.A.
June 11, 1996
Page Two
(vi) the Junior Subordinated Subsidiary Guaranty, dated as of June 11,
1996, by Bartels in favor of the Lender (the "Guaranty").
We have also examined originals or copies of the following: (a) the
articles of organization (with respect to the Company), the certificate of
incorporation (with respect to Bartels), and the by-laws, each as amended to
date, of each of the Company and Bartels; (b) the corporate proceedings of each
of the Company and Bartels; and (c) unfiled copies of UCC-1 financing statements
naming either the Company or Bartels as debtor and the Lender as secured party,
and which we understand will be filed in the filing offices listed on Schedule I
hereto (collectively, the "Financing Statements").
For purposes of this opinion, "Obligors" means the Company and Bartels.
Unless otherwise defined herein, terms defined in the Purchase Agreement shall
have the same meanings herein.
In addition, we have examined such records, documents, certificates of
public officials and of the Company and Bartels, made such inquiries of
officials of the Company and Bartels, and considered such questions of law as we
have deemed necessary for the purpose of rendering the opinions set forth
herein.
In particular, our opinion in paragraph (a) below as to the good
standing of the Company is based solely upon a certificate of the Secretary of
the Commonwealth of the Commonwealth of Massachusetts, which certificate is
dated May 24, 1996. Our opinion in paragraph (a) below as to the good standing
(State of Delaware), and qualification and good standing (State of Washington)
of Bartels is based solely upon certificates of public officials in the States
of Delaware and Washington, which certificates are dated May 20, 1996 (Delaware)
and May 20, 1996 (Washington). In rendering our opinion expressed in paragraph
(i) below, we have relied upon the representations and warranties of the Lender
contained in Article III of the Purchase Agreement, and have assumed such
representations and warranties to be true and correct in all material respects.
With respect to our opinions expressed in paragraphs (i) and (j) below, we have
relied on the Officer's Certificate of Simon R. McKenzie, the President of the
Company, attached hereto as Exhibit A, and the Officer's Certificate of Simon R.
McKenzie, the President of Bartels, attached hereto as Exhibit B. We have made
no independent investigation as to whether any of the certificates referred to
in this paragraph are accurate or complete.
Our opinion in paragraph (e) below is based upon our review of those
statutes, rules, regulations and judicial decisions which are normally
applicable to or normally relevant in connection with transactions similar to
those contemplated by the Documents.
<PAGE> 67
CoreStates Enterprise Fund, a Division of CoreStates Bank, N.A.
June 11, 1996
Page Three
We have assumed (i) the genuineness of all signatures and the
authenticity of all items submitted to us as originals and the conformity with
originals of all items submitted to us as copies, and (ii) that each party
(other than the Company and Bartels) to one or more of the Documents has the
power and authority to execute and deliver, and to perform and observe the
provisions of, the Documents to which it is a party, and has duly authorized,
executed and delivered such Documents, and that such Documents constitute valid
and binding obligations of such party.
With respect to the opinion expressed in paragraph (d) below, we have
assumed that, at all times material to our opinion, the Company and Bartels have
"rights" in the personal property and fixtures described in the Security
Documents (collectively, the "Personal Property") within the meaning of Section
9-203(1)(c) of the New York Uniform Commercial Code ("NYUCC").
With respect to the opinion expressed in paragraph (e) below, we have
assumed that the Lender is acquiring the Warrant and the Note with no present
intention of distributing the same other than in compliance with the
requirements, if any, of all applicable state and federal securities laws.
We express no opinion as to (i) the enforceability of a security
interest in any property excluded from the NYUCC by Section 9-104 thereof, (ii)
the perfection or priority of the liens created by the Security Documents, or
the effect of the absence of such perfection or priority, (iii) the state of
title to the Personal Property, (iv) the accuracy or legal sufficiency of the
description of the Personal Property contained in the Security Documents or the
Financing Statements, (v) the effect of any regulation, law, covenant or
agreement relating to zoning, building codes, construction, use, occupancy,
subdivision or environmental control requirements as applied to the Personal
Property or (vi) whether the Financing Statements were duly filed.
The opinions hereinafter expressed are subject to the following further
qualifications:
(1) The effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, including, without limitation, laws relating to fraudulent
transfers or conveyances, preferences and equitable subordination. Without
limiting the generality of the foregoing qualification, we advise you that, if
the Guaranty has not been given for fair or reasonably equivalent consideration,
and Bartels is, or by executing the Guaranty may become, insolvent, or will be
rendered insolvent by the transactions contemplated by the Documents, or, after
giving effect to such transactions, will be left with unreasonably
<PAGE> 68
CoreStates Enterprise Fund, a Division of CoreStates Bank, N.A.
June 11, 1996
Page Four
small capital with which to engage in its anticipated business, or will have
intended to incur, or will have believed it has incurred, debts beyond its
ability to pay as such debts mature, then the Guaranty may be voidable by
creditors of Bartels or by a trustee or receiver of Bartels in bankruptcy or
similar proceedings pursuant to bankruptcy, fraudulent conveyance or similar
laws.
(2) Limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of provisions of the
Documents and the effect of judicial decisions which have held that certain
provisions are unenforceable where their enforcement would violate the implied
covenant of good faith and fair dealing, or would be commercially unreasonable,
or where a default under the Documents is not material.
(3) The effect of statutes or judicial decisions rendering ineffective
or limiting certain remedial provisions contained in the Documents. However, in
our opinion, such statutes and judicial decisions do not operate to prevent the
Lender from accelerating the maturity of the Company's or Bartels' obligations
under the Documents in accordance with the terms thereof upon a material breach
by the Company or Bartels of a material covenant contained in one or more of the
Documents or the occurrence of any other material Event of Default (as defined
in the Note), or from exercising its remedy of foreclosure following such
acceleration, provided the rules and restrictions set forth in such statutes and
judicial decisions with respect to foreclosure are observed by the Lender.
(4) The enforceability of provisions of the Documents providing for
indemnification or contribution, to the extent such indemnification or
contribution is against public policy.
(5) The circumstances under which rights of setoff may be exercised.
(6) We express no opinion as to the effect on the opinions expressed
herein of (a) the compliance or non-compliance of any party to the Documents
(other than the Company and Bartels) with any laws or regulations applicable to
it, or (b) the legal or regulatory status or the nature of the business of any
such party.
(7) We express no opinion as to compliance by either Obligor with any
state securities law.
(8) We express no opinion as to the enforceability of any provision of
any Document which purports to establish a particular court or courts as the
forum for the adjudication of any controversy relating to such Document.
<PAGE> 69
CoreStates Enterprise Fund, a Division of CoreStates Bank, N.A.
June 11, 1996
Page Five
(9) We express no opinion as to the enforceability of any choice-of-law
provision contained in the Documents.
Based upon and subject to the foregoing, we are of the opinion that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts, and has the
corporate power and authority to conduct its business as presently conducted.
Bartels is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, is duly qualified and in good standing
in the State of Washington, and has the corporate power and authority to conduct
its business as presently conducted.
(b) Each Obligor has the corporate power and authority to execute and
deliver, and to perform and observe the provisions of, the Documents (other than
the Warrant) to which it is a party. Each of the Documents (other than the
Warrant) to which either Obligor is a party has been duly authorized, executed
and delivered by such Obligor.
(c) The Company has the corporate power and authority to issue the
Warrant and to perform and observe the provisions of the Warrant. The Warrant
has been duly authorized and executed, and, upon delivery to the Lender against
payment therefor in accordance with the terms of the Purchase Agreement, will be
validly issued.
(d) Each of the Documents to which either Obligor is a party constitutes
valid and binding obligations of such Obligor enforceable against such Obligor
in accordance with its respective terms.
(e) No registration with, consent or approval of, notice to, or other
action by, any federal or New York governmental entity, any Delaware
governmental entity pursuant to the General Corporation Law of the State of
Delaware, or any Massachusetts governmental entity pursuant to the Business
Corporation Law of the Commonwealth of Massachusetts, is required on the part of
either Obligor for the execution, delivery or performance by such Obligor of the
Documents to which it is a party, or if required, such registration has been
made, such consent or approval has been obtained, such notice has been given or
such other appropriate action has been taken. No registration with, consent or
approval of, notice to, or other action by, any federal or New York governmental
entity, any Delaware governmental entity pursuant to the General Corporation Law
of the State of Delaware, or any Massachusetts governmental entity pursuant to
the Business Corporation Law of the Commonwealth of Massachusetts, is required
on the part of the Company for the issuance of the Warrant by the Company (other
than filings pursuant to state securities laws in connection with the issuance
of the Warrant as to which we
<PAGE> 70
CoreStates Enterprise Fund, a Division of CoreStates Bank, N.A.
June 11, 1996
Page Six
express no opinion), or if required, such registration has been made, such
consent or approval has been obtained, such notice has been given or such other
appropriate action has been taken.
(f) The execution, delivery and performance by each Obligor of each of
the Documents to which it is a party is not in violation of its articles of
organization (with respect to the Company), its certificate of incorporation
(with respect to Bartels) or its by-laws.
(g) The authorized capital stock of the Company consists of 5,000,000
shares of voting common stock, no par value per share (the "Common Stock"), and
3,000,000 shares of preferred stock, no par value per share.
(h) The shares of Common Stock which have been reserved for issuance
upon exercise of the Warrant have been duly authorized for issuance and validly
and effectively reserved by all necessary corporate action of the Company and,
when duly executed and delivered in accordance with the Warrant and against
payment therefor in accordance with the Warrant, will be validly issued and
outstanding, fully paid and nonassessable.
(i) The offering and sale of the Warrant and, assuming that the Warrant
is fully exercised upon receipt thereof, the Common Stock issuable upon the
exercise of the Warrant are exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to the exemption set forth
under Section 4(2) of the Securities Act.
(j) No Obligor is an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
We express no opinion as to matters governed by any laws other than the
substantive laws of the State of New York (without reference to its
choice-of-laws rules), the General Corporation Law of the State of Delaware, the
Business Corporation Law of the Commonwealth of Massachusetts and federal laws
of the United States, which, in each case, are in effect on the date hereof. We
bring your attention to the fact that while individual members of this firm are
admitted to practice in the Commonwealth of Massachusetts, (i) we maintain no
offices in that state, (ii) we do not purport to be experts on the laws of the
Commonwealth of Massachusetts, and (iii) the individual members of this firm who
are admitted to practice law in the Commonwealth of Massachusetts do not
<PAGE> 71
CoreStates Enterprise Fund, a Division of CoreStates Bank, N.A.
June 11, 1996
Page Seven
regularly render advice on matters involving the laws of the Commonwealth of
Massachusetts.
We note that the Documents each contain a provision to the effect that
the laws of the State of Pennsylvania are intended to govern (other than the
Warrant which contains a provision that it is to be governed by the laws of the
Commonwealth of Massachusetts). For purposes of this opinion, we have assumed,
without any independent investigation and with your consent, that the laws of
the State of Pennsylvania and the Commonwealth of Massachusetts (other than the
Business Corporation Law of the Commonwealth of Massachusetts) are identical in
all relevant respects to the laws of the State of New York.
This opinion is solely for the Lender's benefit and may not be relied
upon by, nor may copies be delivered to, any other person without our prior
written consent.
Very truly yours,
Morrison & Foerster LLP
<PAGE> 1
EXHIBIT 10.16
================================================================================
NOTE AND WARRANT
PURCHASE AGREEMENT
between
INTRACEL CORPORATION,
NORTHSTAR HIGH YIELD FUND
AND
NORTHSTAR HIGH TOTAL RETURN FUND II
Dated as of April 1, 1998
================================================================================
<PAGE> 2
NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement"), dated as of
April 1, 1998, by and among Intracel Corporation, a Delaware corporation (the
"Company"), Northstar High Yield Fund and Northstar High Total Return Fund II
(each, a "Purchaser" and, together, the "Purchasers").
PREAMBLE
WHEREAS, the Company wishes to issue and sell to the Purchasers (i) the
Company's promissory notes, in the original aggregate principal amount of
$8,000,000, such promissory notes being substantially in the form attached
hereto as Exhibit A-1 and Exhibit A-2 (each, a "Note" and, collectively, the
"Notes"), and (ii) the Common Stock Warrants, substantially in the form attached
hereto as Exhibit B-1 and Exhibit B-2 (each, a "Warrant" and, collectively, the
"Warrants"), to purchase in the aggregate up to 98,132 shares of common stock,
$.0001 par value per share (the "Warrant Shares"), of the Company (the Notes and
the Warrants shall collectively be referred to as the "Securities").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
ARTICLE I
THE SECURITIES
SECTION 1.1. Issuance, Sale and Delivery of the Securities. The Company
hereby agrees to issue, sell and deliver to: (a) Northstar High Yield Fund, and
Northstar High Yield Fund hereby agrees to purchase from the Company, at the
closing (the "Closing") for the purchase price of $4,000,000, a Note in the
original principal amount of $4,000,000 and a Warrant to purchase 49,066 Warrant
Shares and (b) Northstar High Total Return Fund II, and Northstar High Total
Return Fund II hereby agrees to purchase from the Company, at the Closing for
the purchase price of $4,000,000, a Note in the original principal amount of
$4,000,000 and a Warrant to purchase 49,066 Warrant Shares.
SECTION 1.2. Closing; Purchase Price; Purchase Price Allocation. The
Closing shall take place at the offices of Morrison & Foerster LLP, 1290 Avenue
of the Americas, New York, NY 10104, at 10:00 a.m., New York time, on the date
hereof, or at such other place, date and time as may be otherwise mutually
agreed in writing by the parties hereto. The date on which the Closing actually
occurs is referred to herein as the "Closing Date." At the Closing, the Company
shall issue and deliver to the Purchasers the Notes in the aggregate original
principal amount of $8,000,000 and the Warrants to purchase 98,132 Warrant
Shares in the aggregate. As payment in full for the Securities, and against
delivery of the Securities on the Closing Date, the Purchasers shall transfer
the sum of $8,000,000 by wire transfer of immediately available funds to such
account or accounts as the Company may direct in writing. The Company and the
Purchasers agree that 3.57% of the aggregate consideration for the Securities
shall be allocated to the Warrants (one-half of such amount being allocated to
each of the Warrants), and that the
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balance of such aggregate consideration shall be allocated to the Notes
(one-half of such amount being allocated to each of the Notes).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company (and for purposes of this Article II, unless the context
requires otherwise, the term "the Company" shall be deemed to include all
wholly-owned subsidiaries of Intracel Corporation) represents and warrants to
the Purchasers as of the Closing Date that:
SECTION 2.1. Organization, Qualifications and Corporate Power. The
Company is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware, and the Company is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification, except where the failure so to qualify will not have a material
adverse effect on the business, operations, property or financial condition of
the Company. The Company has the power and authority to own and hold its
properties and to carry on its business as now conducted and as proposed to be
conducted, and the Company has the power and authority to execute, deliver and
perform this Agreement and to issue, sell and deliver the Notes and the
Warrants, and to issue and deliver the Warrant Shares upon the exercise of the
Warrants.
SECTION 2.2. Authorization of Agreements, etc.
(a) The execution and delivery by the Company of this Agreement
and the performance by the Company of its obligations hereunder, the
issuance, sale and delivery of the Notes and the Warrants, and the
issuance, sale and delivery of the Warrant Shares upon the exercise of
the Warrants, have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court
or other agency of government (except that the issuance of the Warrant
Shares may require filings under one or more state securities laws, all
of which filings will be made by the Company within the requisite time
period), the Amended and Restated Certificate of Incorporation of the
Company (the "Charter") or the By-laws of the Company, as amended (the
"By-laws") or any provision of any indenture, agreement or other
instrument to which either the Company is a party or by which either the
Company or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (whether with or without notice or
lapse of time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon
any of the properties or assets of the Company.
(b) The Warrants have been authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges,
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restrictions, claims and encumbrances imposed by or through the Company
except as set forth in this Agreement. The Warrant Shares have been duly
authorized and reserved for issuance upon exercise of the Warrants, and,
when so issued, will be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company except as set
forth in this Agreement. Neither the issuance, sale or delivery of the
Warrants, nor the issuance or delivery of the Warrant Shares is subject
to any preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person.
SECTION 2.3. Validity. Each of this Agreement, the Notes, and the
Warrants have been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and moratorium laws and other similar laws
of general application affecting enforcement of creditors' rights generally and
(ii) the availability of equitable remedies including specific performance may
be limited by equitable principles of general applicability (regardless of
whether enforcement is sought in a proceeding in equity or at law).
SECTION 2.4. Authorized Capital Stock. The authorized capital stock of
the Company consists of 25,000,000 shares of common stock, $.0001 par value (the
"Common Stock"), and 5,000,000 shares of preferred stock ("Preferred Stock"). As
of March 30, 1998, 10,917,256 shares of Common Stock were issued and
outstanding, all of which are validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof. The
Company has authorized 730,000 shares of Series A Convertible Preferred Stock,
$.0001 par value per share (the "Series A Preferred"). As of March 30, 1998, a
total of 603,624 shares of Series A Preferred were issued and outstanding. The
Company has authorized 850,000 shares of Series A-1 Convertible Preferred Stock,
$.0001 par value per share (the "Series A-1 Preferred"). As of March 30, 1998, a
total of 651,171 shares of Series A-1 Preferred were issued and outstanding. The
Company has authorized 155,000 shares of Series A-2 Preferred Stock, $.0001 par
value per share (the "Series A-2 Preferred"). As of March 30, 1998, a total of
45,482 shares of Series A-2 were issued and outstanding. The Company has
authorized 200,000 shares of Series A-3 Convertible Preferred Stock, $.0001 par
value per share (the "Series A-3 Preferred"). As of March 30, 1998, 147,922
shares of Series A-3 Preferred were issued and outstanding. The Company has
authorized 100 shares of Series B-1 Convertible Preferred Stock, $.0001 par
value per share (the "Series B-1 Preferred"). As of March 30, 1998, 100 shares
of Series B-1 Preferred are outstanding. The Company has authorized 120 shares
of Series B-2 Convertible Preferred Stock, $.0001 par value per share (the
"Series B-2 Preferred"). As of March 30, 1998, 120 shares of Series B-2
Preferred are outstanding.
SECTION 2.5. Financial Statements . The Company has furnished to the
Purchaser the unaudited balance sheets of the Company and PerImmune Holdings,
Inc. ("PerImmune") for the fiscal year ended December 31, 1997 (the "Balance
Sheet") and the related unaudited statements of income, stockholders' equity and
cash flows of the Company and PerImmune for the fiscal year ended December 31,
1997. All such financial statements have been prepared in
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accordance with generally accepted accounting principles consistently applied
and fairly present the financial position of the Company and PerImmune as of
December 31, 1997, and the results of their respective operations and cash flows
as of December 31, 1997. Except as set forth in Schedule 2.5 hereto, since the
date of the Balance Sheet, (i) there has been no change in the assets,
liabilities or financial condition of the Company or PerImmune from that
reflected in the Balance Sheet except for changes in the ordinary course of
business which in the aggregate have not been materially adverse and (ii) none
of the business, financial condition, operations or property of the Company or
PerImmune have been materially adversely affected by any occurrence or
development, individually or in the aggregate, whether or not insured against.
SECTION 2.6. Absence of Undisclosed Liabilities and Changes. Except as
set forth on Schedule 2.6 attached hereto, as of the date hereof, (a) the
Company had no liabilities of any nature (matured or unmatured, fixed or
contingent) which were not provided for on the Balance Sheet, except for (i)
liabilities which, individually and in the aggregate, were not material to the
financial condition of the Company or (ii) liabilities incurred in the ordinary
course of the Company's business and not required to be so provided for under
generally accepted accounting principles, and (b) all reserves established by
the Company or PerImmune and set forth on such balance sheet were adequate in
all material respects. There are no loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 ("Statement No. 5") issued by
the Financial Accounting Standards Board in March 1975) which are not adequately
provided for in such balance sheet as required by Statement No. 5.
SECTION 2.7. Events Subsequent to the Date of the Balance Sheet. Except
as set forth in the attached Schedule 2.7 or as contemplated by this Agreement,
since the date of the Balance Sheet the Company has not (i) issued any stock,
bond, note or other corporate security, (ii) borrowed any amount or incurred or
become subject to any liability (absolute, accrued or contingent), except
current liabilities incurred and liabilities under contracts entered into in the
ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Balance Sheet and
current liabilities incurred since the date of the Balance Sheet in the ordinary
course of business, (iv) declared or made any payment or distribution to
stockholders or purchased or redeemed any share of its capital stock or other
security, (v) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, other than liens of current real property taxes not yet
due and payable, (vi) sold, assigned or transferred any of its tangible assets
except in the ordinary course of business, or canceled any debt or claim, (vii)
sold, assigned, transferred or granted any exclusive license with respect to any
material patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset other than in the ordinary course of business, (viii)
suffered any material loss of property or waived any right of substantial value,
(ix) made any change in officer compensation except in the ordinary course of
business and consistent with past practice, (x) made any material change in the
manner of business or operations of the Company, (xi) entered into any
transaction except in the ordinary course of business or as otherwise
contemplated hereby or (xii) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
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SECTION 2.8. Litigation; Compliance with Law. There is no material (i)
action, suit, claim, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceeding relating to the Company, pending under a collective
bargaining agreement or otherwise or (iii) governmental inquiry pending or to
the knowledge of the Company, threatened against or affecting the Company,
(including, without limitation, any inquiry as to the qualification of the
Company, to hold or receive any license or permit). The Company has not received
any opinion or memorandum or legal advice from legal counsel to the effect that
it is exposed, from a legal standpoint, to any liability or disadvantage which
may be material to its business, financial condition, operations or property.
The Company is not in default with respect to any order, writ, injunction or
decree known to or served upon the Company of any court or of any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign. There is no material action or
suit by the Company pending or threatened against others. The Company has
complied in all material respects with all laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services, and the Company has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed to
be conducted, except where the failure to own or possess such permits, licenses
or authorizations could not, either singly or in the aggregate, have a material
adverse effect on the business, operations, properties or financial condition of
the Company.
SECTION 2.9. Title to Properties. Except in instances that, either
singly or in the aggregate, could not have a material adverse effect on the
business, operations, properties or financial condition of the Company, and
except as disclosed in Schedule 2.9 hereof, the Company has good and marketable
title to its properties and assets reflected on the Balance Sheet (other than
properties and assets disposed of in the ordinary course of business since the
date of the Balance Sheet), and all such properties and assets are free and
clear of mortgages, pledges, security interests, liens, charges, claims,
restrictions and other encumbrances, except for liens for current taxes not yet
due and payable and minor imperfections of title, if any, not material in nature
or amount and not materially detracting from the value or materially impairing
the use of the property subject thereto or impairing the operations or proposed
operations of the Company.
SECTION 2.10. Leasehold Interests. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal
(a list of all such leases being attached hereto as Schedule 2.10), is a valid
and subsisting agreement without any material default of the Company, thereunder
and, to the knowledge of the Company, without any material default thereunder of
any other party thereto. No event has occurred and is continuing which, with due
notice or lapse of time or both, would constitute a default or event of default
by the Company, under any such lease or agreement or, to the knowledge of the
Company, by any other party thereto.
SECTION 2.11. Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax
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returns, Federal, state, county, local and foreign, required to be filed by it,
and the Company has paid all taxes shown to be due by such returns and
extensions as well as all other taxes, assessments and governmental charges
which have become due or payable, including, without limitation, all taxes which
the Company is obligated to withhold from amounts owing to employees, creditors
and third parties. All such taxes with respect to which the Company has become
obligated have been paid and adequate reserves have been established for all
taxes accrued but not yet payable. No deficiency assessment with respect to or
proposed adjustment of the Company's Federal, state, county or local taxes is
pending or, to the knowledge of the Company, threatened. There is no tax lien in
favor of any Federal, state, county or local taxing authority, outstanding
against the assets, properties or business of the Company.
SECTION 2.12. Other Agreements. Except as set forth in the attached
Schedule 2.12, the Company is not a party to or otherwise bound by any written
or oral contract or instrument or other restriction which individually or in the
aggregate could materially adversely affect the business, financial condition,
operations or property of the Company. Except as set forth in the attached
Schedule 2.12, or as a result of the transactions contemplated in this
Agreement, the Notes, or the Warrants, the Company is not a party to or
otherwise bound by any written or oral:
(a) distributor, dealer, manufacturer's representative or sales
agency contract or agreement which is not terminable on less than ninety
(90) days' notice without cost or other liability to the Company;
(b) sales contract which entitles any customer to a rebate or
right of set-off, to return any product to the Company after acceptance
thereof or to delay the acceptance thereof, or which varies in any
material respect from the Company's standard form contracts;
(c) contract with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of
its employees);
(d) contract or other commitment with any supplier containing any
provision permitting any party other than the Company to renegotiate the
price or other terms, or containing any pay-back or other similar
provision, upon the occurrence of a failure by the Company to meet its
obligations under the contract when due or the occurrence of any other
event;
(e) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its
normal operating requirements;
(f) contract for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings), on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company
except normal severance arrangements and accrued vacation pay;
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(g) agreement or indenture relating to the borrowing of money or
to the mortgaging or pledging of, or otherwise placing a lien or
security interest on, any asset of the Company;
(h) guaranty of any obligation for borrowed money or otherwise;
(i) agreement, or group of related agreements with the same party
or any group of affiliated parties, under which the Company has advanced
or agreed to advance money or has agreed to lease any property as lessee
or lessor;
(j) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its capital stock or any of its other equity
securities;
(k) assignment, license or other agreement with respect to any
form of intangible property or Intellectual Property (as defined in
Section 2.13) or the development or use thereof;
(l) agreement under which it has granted any person any
registration rights;
(m) agreement under which it has limited or restricted its right
to compete with any person in any respect; or
(n) other contract or group of related contracts with the same
party involving more than $500,000 or continuing over a period of more
than one (1) year from the date or dates thereof (including renewals or
extensions optional with another party), which contract or group of
contracts is not terminable by the Company without penalty upon notice
of thirty (30) days or less, but excluding any contract or group of
contracts with a customer of the Company for the sale, lease or rental
of the Company's products or services if such contract or group of
contracts was entered into by the Company in the ordinary course of
business.
Except as set forth in Schedule 2.12, there are no material defaults by the
Company or, to the Company's knowledge, by any other party to any of the
foregoing agreements.
SECTION 2.13. Patents, Trademarks, etc. Set forth in Schedule 2.13 is a
list and brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such which are in the
process of being prepared, owned by or registered in the name of the Company, or
of which the Company is a licensor or licensee or in which the Company has any
right, and in each case a brief description of the nature of such right. Except
as set forth in Schedule 2.13, the Company owns or possesses adequate licenses
or other rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, copyrights,
manufacturing processes, formulae, trade secrets and know-how (collectively,
"Intellectual Property") necessary to the conduct of its business as conducted,
and no claim is pending or, to the knowledge of the Company, threatened to the
effect
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that the operations of the Company infringe upon or conflict with the rights of
any other person under any Intellectual Property, and to the knowledge of the
Company there is no basis for any such claim. No claim is pending or, to the
knowledge of the Company, threatened to the effect that any such Intellectual
Property owned or licensed by the Company, or which the Company otherwise has
the right to use, is invalid or unenforceable by the Company, and to the
knowledge of the Company there is no basis for any such claim. To the knowledge
of the Company, all technical information developed by and belonging to the
Company which has not been patented has been kept confidential. Except as set
forth in Schedule 2.13, the Company has not granted or assigned to any other
person or entity any right to manufacture or assemble any products or proposed
products of the Company, other than to its affiliates, and to the knowledge of
the Company no other person or entity has asserted any such right.
SECTION 2.14. Loans and Advances. Except as set forth on Schedule 2.14,
the Company does not have any outstanding loans or advances to any person and is
not obligated to make any such loans or advances, except, in each case, for
advances to employees of the Company in respect of reimbursable business
expenses anticipated to be incurred by them in connection with their performance
of services for the Company.
SECTION 2.15. Assumptions, Guaranties, etc. of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in a debtor, or otherwise to assure a creditor against loss),
except for guaranties by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business.
SECTION 2.16. Significant Customers and Suppliers. No customer which
accounted for 10% or more of the Company's sales or revenues during the periods
covered by the financial statements referred to in Section 2.5 or which has been
significant to the Company thereafter has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from the Company. As
of the date of this Agreement, there is no supplier to the Company which is a
sole-source supplier.
SECTION 2.17. Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article III
hereof, no registration or filing with, or consent or approval of or other
action by, any Federal, state or other governmental agency or instrumentality is
or will be necessary for the valid execution, delivery and performance by the
Company of this Agreement, the Notes or the Warrants, or the issuance, sale and
delivery of the Warrant Shares upon exercise of the Warrants, other than filings
pursuant to state securities laws in connection with the issuance and sale of
the Notes and Warrants.
SECTION 2.18. Accuracy of Statements. Neither this Agreement nor any
Schedule, Exhibit, statement, list, document, certificate or other information
furnished by or on behalf of the Company to the Purchasers in connection with
this Agreement or any of the transactions contemplated hereby contains any
untrue statement of a material
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fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
SECTION 2.19. Insurance. Schedule 2.19 lists all insurance policies
which the Company maintains with respect to its businesses, properties and
employees. Such policies are in full force and effect and the Company has
received no notice of termination from the insurance carriers. Such policies,
with respect to their amounts and types of coverage, are adequate in the
reasonable commercial judgment of the Company to insure against risks to which
the Company and its respective businesses. Since the date of the Balance Sheet,
there has been no material adverse change in the Company's relationship with its
insurers or in the premiums payable pursuant to such policies.
SECTION 2.20. Employment Relations.
(a) The Company is in material compliance with applicable
federal, state or other applicable laws, domestic or foreign, respecting
employment and employment practices, safety, terms and conditions of
employment and wages and hours.
(b) The Company does not maintain or contribute to any employee
benefit plan ("Employee Benefit Plan") within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to ERISA but which is not in substantial
compliance with ERISA, or which has incurred any material liability to
the Pension Benefit Guaranty Company ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of
its subsidiaries or ceased operations at any facility or withdrawn from
any such Plan in a manner which could subject it to material liability
under Section 462(f), 4063 or 4064 of ERISA, and knows of no facts or
circumstances which might give rise to any material liability of the
Company to the PBGC under Title IV of ERISA.
SECTION 2.21. Compensation of Key Employees. Schedule 2.21 sets forth
the aggregate compensation (salaries, wages and bonuses) paid by the Company to
its four most highly compensated employees for the 1997 fiscal year and the
amount of such compensation scheduled to be paid to such employees for the 1998
fiscal year.
SECTION 2.22. Environmental Compliance. The Company is in compliance
with all applicable laws relating to environmental matters in each jurisdiction
where it is presently engaged in a material manufacturing business, except for
such failures to comply which, in the aggregate, could reasonably be expected
not to have a material adverse effect on the Company. The Company is not subject
to any liability under any such environmental laws, that, in the aggregate for
all such liabilities, could be reasonably expected to have a material adverse
effect on the Company.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers represents and warrants to the Company as of the
Closing Date that:
SECTION 3.1. Purchase of Securities.
(a) It is an "accredited investor" within the meaning of Rule 501
under the Securities Act of 1933, as amended (the "Securities Act") and
was not organized for the specific purpose of acquiring the Note or the
Warrant.
(b) It has sufficient knowledge and experience in investing in
companies in a similar stage of development to the Company so as to be
able to evaluate the risks and merits of its investment in the Company
and it is able financially to bear the risks thereof.
(c) It has had an opportunity to discuss the Company's business,
management and financial condition with the Company's management.
(d) It is acquiring the respective Note and Warrant for its own
account for the purpose of investment and not with a view to or for sale
in connection with any distribution thereof.
(e) It understands that (i) its respective Note, Warrant and,
upon exercise thereof, Warrant Shares have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from
the registration requirements of the Securities Act pursuant to Section
4(2) thereof, (ii) its respective Note, Warrant and, upon exercise
thereof, Warrant Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt
from such registration, (iii) its respective Note, Warrant and, upon
exercise thereof, Warrant Shares will bear a legend to such effect and
(iv) the Company will make a notation on its transfer books to such
effect.
SECTION 3.2. Authority. It has all requisite power and authority to
execute, deliver and perform this Agreement, and to purchase its respective Note
and Warrant and has taken all necessary action to authorize the execution,
delivery and performance of this Agreement, and the purchase of its respective
Note and Warrant and the consummation of the transactions contemplated hereby
and thereby. This Agreement on the Closing Date will constitute the legal, valid
and binding obligations of such Purchaser, enforceable in accordance with their
terms, except (i) to the extent that enforceability may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceedings therefor may be brought.
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ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligations of each of the Purchasers to purchase and pay for the
Notes and the Warrants being purchased by it on the Closing Date, are, at its
option, subject to the satisfaction of the following conditions on or before
such Closing Date:
SECTION 4.1. Supporting Documents. At the Closing, the Purchasers shall
have received copies of the following documents:
(a) (i) the Charter, certified as of a recent date by the
Secretary of State of the State of Delaware and (ii) a certificate of
said Secretary dated as of a recent date as to the due incorporation and
subsistence of the Company; and
(b) a certificate of the Secretary or an Assistant Secretary of
the Company dated the Closing Date and certifying: (i) that attached
thereto is a true and complete copy of all resolutions adopted by the
Board of Directors (the "Company Board") or the stockholders of the
Company authorizing the execution, delivery and performance of this
Agreement, the issuance, sale, delivery, and performance of the Notes
and the Warrants, and the reservation, issuance and delivery of the
Warrant Shares upon the exercise of the Warrants, and that all such
resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this
Agreement; (ii) that the Charter has not been amended since the date of
the certified Charter delivered pursuant to clause (a)(i) above; and
(iii) to the incumbency and specimen signature of each officer of the
Company executing this Agreement, the Notes, and the Warrants and any
certificate or instrument furnished pursuant hereto, and a certification
by another officer of the Company as to the incumbency and signature of
the officer signing the certificate referred to in this clause (b).
SECTION 4.2. Fees of Purchasers. The Company shall have paid, in
accordance with Section 7.1, the reasonable legal and other fees and
disbursements of the Purchasers, as invoiced in an aggregate amount not to
exceed $15,000.00.
SECTION 4.3. Warrants. The Company shall have issued the Warrants to the
Purchasers.
SECTION 4.4. Notes. The Purchasers shall have received the Notes
executed and delivered by a duly authorized officer of the Company.
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<PAGE> 13
ARTICLE V
PAYMENT FOR PURCHASE OF NOTE AND WARRANT
Simultaneously with the satisfaction of the obligations of the Company
as set forth in Article IV of this Agreement, the Purchasers shall transfer to
the Company the aggregate sum of $8,000,000, as specified in Section 1.2 of this
Agreement.
ARTICLE VI
COVENANTS
SECTION 6.1. Piggyback Registration.
(a) As used in this Article VI the following terms, unless the
context otherwise requires, have the following respective meanings:
"Exchange Act" shall mean 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 at the time.
"Registrable Stock" shall mean the Warrant Shares, but
only so long as such shares continue to be Restricted Stock. Any such
shares shall continue to be "Restricted Stock" until such time as such
shares (i) have been disposed of in accordance with a registration
statement which has become effective under the Securities Act or (ii)
have been publicly sold in compliance with Rule 144 (or any similar
provision then in force) under the Securities Act.
(b) If at any time or from time to time, the Company shall
determine to register any of its securities, for its own account or the
account of any of its shareholders, other than a registration relating
solely to employee benefit plans, or a registration relating solely to a
transaction of the type described in Rule 145(a) as promulgated under
the Exchange Act, a transaction relating solely to the sale of debt or
convertible debt instruments or a registration on any form (other than
Form S-1, S-2 or S-3, or their successor forms) which does not include
substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Stock, the
Company will:
(i) give to the holder of Registrable Stock written notice
thereof as soon as practicable prior to filing the registration
statement; and
(ii) include in such registration and in any underwriting
involved therein, all the Registrable Stock specified in a written
request or requests, made within fifteen (15) days after receipt of such
written notice from the Company, by the holder of Registrable Stock,
except as set forth in subsection (C) below.
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<PAGE> 14
(c) If the registration is for a registered public offering
involving an underwriting, the Company shall so advise the holder of
Registrable Stock as a part of the written notice given pursuant to
subsection (B)(i). In such event, the right of the holder of Registrable
Stock to registration pursuant to this Article VI shall be conditioned
upon the holder's participation in such underwriting to the extent
provided herein. If the holder of Registrable Stock proposes to
distribute its securities through such underwriting, it shall (together
with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Article VI, if the managing underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten,
the managing underwriter may limit the number of Shares of Registrable
Stock to be included in the registration and underwriting, or may
exclude Registrable Stock entirely from such registration if the
registration is the first registered offering for the sale of the
Company's securities to the general public, or a registered offering
pursuant to Section 3 of the Registration Rights Agreement dated July
22, 1994 between the Company and each of the purchasers of shares of the
Series A Convertible Preferred Stock of the Company named therein,
Section 3 of the Registration Rights Agreement dated September 22, 1994
between the Company and each of the purchasers of shares of the Series
A-I Convertible Preferred Stock of the Company named therein, Section 9
of the Series A-I Warrant issued by the Company to Dublind Investments,
L.L.C. on September 22, 1995, Section 9 of the Series A-I Warrant
granted by the Company to Creditanstalt on November 21, 1995, Section 9
of the Series A-II Warrant granted by the Company to the Purchaser or
Article VI of the Note and Series A-III Warrant Purchase Agreement
between the Company and CoreStates dated as of June 11, 1996 (provided
that no shares held by officers of the Company, other than shares
subject to other registration rights granted by the Company that may be
owned by officers, are included in the registration and underwriting).
The Company shall so advise the holder of Registrable Stock and the
other holders distributing their securities through such underwriting,
and the number of shares of securities that may be included in the
registration and underwriting shall be allocated among the holder of
Registrable Stock and other holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Stock held by the
Holder and other securities held by other holders at the time of filing
the registration statement. If the Holder disapproves of the terms of
any such underwriting, if may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any Registrable
Stock excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
(d) If requested in writing by the underwriter or underwriters
for the initial underwritten public offering of securities of the
Company, the holder of Registrable Stock shall agree not to sell
publicly any shares of Registrable Stock or any other shares of Common
Stock (other than Registrable Stock or other shares of Common Stock
being registered in such offering), without the consent of such
underwriter or underwriters, for a period of not more than 128 days
following the effective date of the registration statement relating to
such initial public offering.
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<PAGE> 15
SECTION 6.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 6.1 to effect the registration of any
shares of Registrable Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Stock and use its best efforts to cause
such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as
hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Stock covered by such registration
statement in accordance with the holder's intended method of disposition
as set forth in such registration statement for such period;
(c) furnish to the holder of Registrable Stock and to each
underwriter such number of copies of the registration statement and
prospectus included therein (including each preliminary prospectus) as
such persons reasonably may request in order to facilitate the public
sale or other disposition of the Registrable Stock covered by such
registration statement;
(d) use its best efforts to register or qualify the Registrable
Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdiction as the holder of Registrable Stock
or, in the case of an underwritten public offering, the managing
underwriter reasonably shall request; provided, however, that the
Company shall not for any such purpose be required to qualify generally
to transact business as a foreign corporation in any jurisdiction where
it is not so qualified or to consent to general service of process in
any such jurisdiction;
(e) use its best efforts to list the Registrable Stock covered by
such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;
(f) in addition to its obligations under Section 6.2 hereof,
immediately notify the holder of Registrable Stock and each underwriter
under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement,
as then in effect, includes an 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 not misleading in light of the
circumstances then existing;
(g) if the offering is underwritten, at the request of the holder
of Registrable Stock, furnish on the date that Registrable Stock is
delivered to the underwriters for sale
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<PAGE> 16
pursuant to such registration: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration,
addressed to the underwriters and to the holder of Registrable Stock,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no
stop order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the registration statement,
the related prospectus and each amendment or supplement thereof comply
as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as
to financial statements or other financial data contained therein) and
(C) to such other effects as reasonably may be requested by counsel for
the underwriters or by the Holder or its counsel and (ii) a letter dated
such date from the independent public accountants retained by the
Company, addressed to the underwriters and to the holder of Registrable
Stock, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such
accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information
as to the period ending no more than five business days prior to the
date of such letter) with respect to such registration as such
underwriters reasonably may request; and
(h) make available for inspection by the holder of Registrable
Stock, by any underwriter participating in any distribution pursuant to
such registration statement, and by any attorney, accountant or other
agent retained by the holder of Registrable Stock or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors
and employees to supply all information reasonably requested by the
holder of Registrable Stock and any underwriter, attorney, accountant or
agent in connection with such registration statement.
For purposes of this Agreement, the period of distribution, if not
otherwise described in the Registration Statement of Registrable Stock in a firm
commitment underwritten public offering, shall be deemed to extend until each
underwriter has completed the distribution of all securities purchased by it,
and the period of distribution of Registrable Stock in any other registration
shall be deemed to extend until the earlier of the sale of all Registrable Stock
covered thereby or 120 days after the effective date thereof.
In connection with each registration hereunder, the holder of
Registrable Stock will furnish to the Company in writing such information with
respect to itself and the proposed distribution by it as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Section 6.1 covering an
underwritten public offering, the Company and the holder of Registrable Stock
agree to enter into a written agreement with the managing underwriter selected
in the manner herein provided in such form
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<PAGE> 17
and containing such provisions as are customary in the securities business for
such an arrangement between such underwriter and companies of the Company's size
and investment stature.
SECTION 6.3. Expenses. All expenses incurred by the Company in complying
with Section 6.1, including all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants for the
Company, reasonable fees and expenses (including counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance and reasonable fees and
disbursements of one counsel for the sellers of Registrable Stock, but excluding
any Selling Expenses, are called "Registration Expenses". "Selling Expenses"
shall include only such underwriting discounts and selling commissions
applicable to the sale of any Registrable Stock which would not have been
incurred in the absence of the registration and sale of the Registrable Stock.
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 6.1; provided, however, that in
connection with a registration statement filed under Section 6.1, the Company
shall not be obligated to pay fees and expenses (including counsel fees)
incurred in connection with complying with state securities laws in any state in
which the Company is not otherwise registering for sale any of the shares the
Company proposes to sell in the offering. All Selling Expenses in connection
with each registration statement filed pursuant to Section 6.1 shall be borne by
the participating sellers in proportion to the number of shares sold by each, or
by such participating sellers as they may agree.
SECTION 6.4. Indemnification and Contribution
(a) In the event of a registration of any of the Registrable
Stock under the Securities Act pursuant to Section 6.1, the Company will
indemnify and hold harmless the holder of Registrable Stock, each
underwriter of Registrable Stock and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or
several, to which the holder of Registrable Stock, underwriter 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 Registrable Stock was
registered under the Securities Act pursuant to Section 6.1, any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the holder of Registrable Stock, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them 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 if and to
the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue
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<PAGE> 18
statement or omission or alleged omission so made in conformity with
information furnished by the holder of Registrable Stock, underwriter or
controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any Registrable Stock under
the Securities Act pursuant to Section 6.1, the holder of Registrable
Stock will indemnify and hold harmless the Company, each person, if any,
who controls the Company within the meaning of the Securities Act, each
officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls
any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter 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 the registration statement
under which such Registrable Stock was registered under the Securities
Act pursuant to Section 6.1, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Holder will be liable
hereunder in any such case only if and 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 reliance upon and in conformity with information pertaining to
the holder of Registrable Stock, as such, furnished in writing to the
Company by the holder of Registrable Stock specifically for the use in
such registration statement or prospectus; provided, further, that the
liability of the holder of Registrable Stock shall be limited to the
proportion of any such loss, claim, damage, liability or expense which
is equal to the proportion that the public offering price of the
Registrable Stock sold by the holder of Registrable Stock under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds
received by the holder of Registrable Stock from the sale of Registrable
Stock covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but
the omission so to notify the indemnifying party shall not relieve it
from any liability which it may have to such indemnified party other
then under this Section 6.4 and shall only relieve it from any liability
which it may have to such indemnified party under this Section 6.4 if
and to the extent the indemnifying party is prejudiced by such omission.
In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement
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thereof, the indemnifying party shall be entitled to participate in and,
to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified party of
its election so to assume and undertake the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
this Section 6.4 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so
selected; provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the
indemnified party reasonably may be considered by the indemnified party
to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and
to assume such legal defenses and otherwise to participate in the
defense of such action, with reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred. No indemnifying party,
in defense of any such action, shall, except with the consent of each
indemnified party, consent to the entry of any judgment or enter into
any settlement (i) which does not include as an unconditional term
thereof the giving, by the claimant or plaintiff, to such indemnified
party of a release from all liability in respect to such action or (ii)
which involves any relief against the indemnified party other than the
payment of money which is to be paid in full by the indemnifying party.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i)
the holder of Registrable Stock exercising rights under this Agreement,
or any controlling person of the holder of Registrable Stock, makes a
claim for indemnification pursuant to this Section 6.4 but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section
6.4 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of the holder of
Registrable Stock or any such controlling person in circumstances for
which indemnification is provided under this Section 6.4; then, and in
each such case, the Company and such holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that the
holder of Registrable Stock is responsible for the portion represented
by the percentage that the public offering price of its Registrable
Stock offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, and the
Company is responsible for the remaining portion; provided, however,
that, in any such case, (A) the holder of Registrable Stock will not be
required to contribute any amount in excess of the public offering price
of all such Registrable Stock sold by the holder of Registrable Stock
pursuant to such registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be
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<PAGE> 20
entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
SECTION 6.5. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of Registrable Stock to the public without registration, at
all times after 90 days after any registration statement covering a public
offering of securities of the Company under the Securities Act shall have become
effective (or the Company shall otherwise have become subject to the periodic
reporting requirements of the Exchange Act), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Registrable Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the
Company as such holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing such holder to sell any
Registrable Stock without registration.
SECTION 6.6. Termination of Piggyback Registration Rights. The
obligations of the Company to register shares of Registrable Stock under Section
6.1 shall terminate on March 31, 2003, unless such obligations terminate earlier
in accordance with the terms of the Warrant.
SECTION 6.7. Material Non-Public Information. Notwithstanding any
provision of this Agreement to the contrary, the Company's obligation to file a
registration statement, or cause such registration statement to become and
remain effective, shall be suspended for a period not to exceed 30 days (and for
periods not exceeding, in the aggregate, 60 days in any 24-month period) if
there exists at the time material non-public information relating to the Company
which, in the reasonable opinion of the Company, should not be disclosed.
SECTION 6.8. Security Interest; Further Assurances. As collateral
security for all of the obligations of the Company to the Purchasers hereunder
and under the Notes, the Company hereby pledges and assigns to the Purchasers
and grants to the Purchasers, to the maximum extent permissible subject to the
liens disclosed on Schedule 2.9 hereof, a continuing security interest in and to
all of the Company's right, title and interest in, to and under, the
"Collateral" (as such term is defined in the Junior Subordinated Security
Agreement dated as of June 21, 1996 by the Company and Bartels, Inc., in favor
of Northstar High Total Return Fund then known as Northstar Advantage High Total
Return Fund) and the Company agrees, upon the written request of the Purchasers,
(a) to promptly execute and deliver (i) a security agreement or agreements, (ii)
UCC-1 financing Statements, and (iii) all such other documents and instruments,
in each case
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in form and substance reasonably satisfactory to the Purchasers; and (b) to take
all such other actions; as the Purchasers shall reasonably request in connection
with the perfection of the security interest granted hereby. The parties agree
that such security interest shall be, to the extent permissible, a first
priority interest, and otherwise shall be the highest priority not inconsistent
with the liens listed on Schedule 2.9 hereof. The Company also agrees that,
during the period between the date hereof and the date on which such security
interest has been perfected to the reasonable satisfaction of the Purchasers, it
shall not (and shall not permit any of its subsidiaries to) grant, create or
permit to exist, any mortgage, pledge, security interest, lien, charge, claim or
other encumbrance on any of the Collateral except for (i) those set forth on
Schedule 2.9 hereof and (ii) those of a nature not required to be listed on said
Schedule. Notwithstanding anything in this Section 6.8 to the contrary, nothing
herein shall be deemed to require the Company to take any action which would be
in violation of or create a default under any other agreement of the Company or
any of its subsidiaries.
ARTICLE VI
MISCELLANEOUS
SECTION 7.1. Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby whether or not such
transactions shall be consummated; provided, however, that the Company shall pay
the reasonable legal and other fees and disbursements of the Purchasers, as
invoiced, in an aggregate amount not to exceed $15,000.00.
SECTION 7.2. Brokerage. Each party hereto will indemnify and hold
harmless any other party hereto against and in respect of any claim for
brokerage or other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party.
SECTION 7.3. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, sent by next
day or overnight mail or delivery or sent by telecopy (with verbal confirmation
of receipt), as follows:
(a) if to the Company, at Intracel Corporation, 1871 N.W. Gilman
Blvd., Issaqua, Washington 98027, Attn: Chief Executive Officer, with a
copy to Joseph W. Bartlett, Esq., Morrison & Foerster LLP, 1290 Avenue
of the Americas, New York, NY 10104; and
(b) if to the Purchasers, c/o Northstar Investment Management
Corporation, Two Pickwick Plaza, Greenwich, CT 06830, Attn.: Michael
Graves, with a copy to Karen Wiedemann, Esq, Reboul, MacMurray, Hewitt,
Maynard & Kristol, 45 Rockefeller Plaza, New York, New York 10111.
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or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other.
SECTION 7.4. Governing Law. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of New York as
permitted by Section 5-401 of the New York General Obligations Law (or any
similar successor provision) without giving effect to any choice of law rule
that would cause the application of the laws of any jurisdiction other than the
internal laws of the State of New York. The parties hereto irrevocably waive, to
the fullest extent they may do so under applicable law, trial by jury. Except as
otherwise provided herein, all disputes among or between the parties hereto
arising out of, connected with, related to or incidental to the transactions
contemplated by or the relationship established between them in connection with
this Agreement, and whether arising in contract, tort, equity or otherwise, may
be resolved by state and federal courts located in the City of New York, New
York, and each party hereto consents and submits to the jurisdiction of any
state or federal court located within such county and state. Each party hereto
waives in all disputes any objection that it may have to the location of the
court considering the dispute. Each party hereto agrees that the other parties
hereto shall have the right to proceed against it in a court in any location to
enable such party to enforce a judgment or other court order entered in favor of
such party. Each party hereto waives any objection that it may have to the
location of the court in which such party has commenced a proceeding of the type
described in the immediately preceeding sentence.
SECTION 7.5. Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 7.6. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 7.7. Amendments. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the Purchasers.
SECTION 7.8. Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 7.9. Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
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IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
INTRACEL CORPORATION
By:________________________________
Name: Simon R. McKenzie
Title: Chief Executive Officer
NORTHSTAR HIGH YIELD FUND
By:_______________________
Name:
Title:
NORTHSTAR HIGH TOTAL RETURN FUND II
By:________________________________
Name:
Title:
22
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EXHIBIT A-1
NOTE
<PAGE> 25
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD,
OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER SUCH ACT OR IN
COMPLIANCE WITH ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S.FEDERAL INCOME
TAX PURPOSES. FOR FURTHER INFORMATION, CONTACT: MORRISON & FOERSTER LLP, 1290
AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10104, ATTN: JOSEPH W. BARTLETT, ESQ.
INTRACEL CORPORATION
PROMISSORY NOTE
April 1, 1998 $4,000,000
FOR VALUE RECEIVED, INTRACEL CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to the order of NORTHSTAR HIGH YIELD FUND
(the "Noteholder"), the Principal Amount (as defined below) payable pursuant to
Section 1 with interest payable pursuant to Section 2. Capitalized terms used in
this Note have the meanings provided in Section 9.
SECTION 1. Payments of Principal and Interest.
(a) Principal Amount. On April 1, 1998 (the "Closing Date"),
the Noteholder purchased this Note for Three Million Eight Hundred Fifty-Seven
Thousand Seventy Three Dollars ($3,857,073), and the principal amount of this
Note is deemed to be Four Million Dollars ($4,000,000), (the "Principal
Amount").
(b) Principal Payment Date. The Principal Amount of this Note
shall be due and payable in full on April 17, 1998 (the "Principal Payment
Date").
SECTION 2. Interest.
(a) Interest Rate. Except as otherwise expressly provided in
Section 4(b), interest shall accrue from the Closing Date at the rate of twelve
and one-half percent (12.5%) per annum on the Unpaid Principal Amount. All
computations of interest shall be made on the basis of a year of three hundred
and sixty (360) days for the actual number of days.
<PAGE> 26
(b) Interest Payment Date. Interest shall be payable in full
on the Principal Payment Date.
SECTION 3. Covenants.
(a) The Company hereby agrees that, so long as any amount is
owing to the Noteholder, it shall and shall cause its subsidiaries to:
(i) Performance of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever
nature, except where the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company. Comply with all
Contractual Obligations and Requirements of Law except to the
extent the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(ii) Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same type as now conducted
by it and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in
the normal conduct of its business.
(iii) Maintenance of Property; Insurance. Keep all
property useful and necessary in its business in good working
order and condition and in accordance with Requirements of Law;
maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts
and against at least such risks (but including in any event
public liability, product liability and business interruption)
as are usually insured against in the same general area by
companies engaged in the same or a similar business; and furnish
to the Noteholder, upon written request, full information as to
the insurance carried.
(iv) Inspection of Property; Books and Records;
Discussions. Keep proper books of records and accounts in which
full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities; and
permit representatives of the Noteholder to visit and inspect
any of its properties and examine and make abstracts from any of
its books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations,
properties and financial and other condition of the Company with
officers and employees of the Company and with its independent
certified public accountants; provided that the Noteholder shall
bear its own expenses if any such inspection, examination or
discussion occurs at a time when no Default or Event of Default
shall have occurred and be continuing.
(v) Notices. Promptly give notice to the Noteholder of:
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<PAGE> 27
(A) the occurrence of any Default or Event of
Default;
(B) any (1) default or event of default under
any Contractual Obligation of the Company or (2)
litigation, investigation or proceeding which may exist
at any time between the Company and any Governmental
Authority, which in either case, if not cured or if
adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse
Effect;
(C) any litigation or proceeding affecting the
Company in which the amount involved is one million
dollars ($1,000,000) or more and not covered by
insurance or in which injunctive or similar relief is
sought;
(D) the following events, as soon as possible
and in any event within thirty (30) days after the
Company knows or has reason to know thereof: (1) the
occurrence or expected occurrence of any Reportable
Event with respect to any Plan, a failure to make any
required contribution to a Plan, the creation of any
Lien in favor of the PBGC or a Plan or any withdrawal
from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan or (2) the institution of
proceedings or the taking of any other action by the
PBGC or the Company or any Commonly Controlled Entity or
any Multiemployer Plan with respect to the withdrawal
from, or the terminating, Reorganization or Insolvency
of, any Plan;
(E) any material adverse change in the business,
operations, property, condition (financial or otherwise)
or prospects of the Company;
(F) any application or registration relating to
any material patent or trademark of the Company becoming
abandoned or dedicated, or of any adverse determination
or development (including, without limitation, the
institution of, or any such determination or development
in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country
regarding the Company's ownership of any material patent
or trademark or its right to register the same or to
keep and maintain the same).
Each notice pursuant to this Section 3(a)(v) shall be
accompanied by a statement of a Responsible Officer
setting forth details of the occurrence referred to
therein and stating what action the Company proposes to
take with respect thereto.
(vi) Environmental Matters.
(A) Comply with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and
maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all
licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws.
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(B) Conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal
and other actions required under Environmental Laws and
promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental
Laws.
SECTION 4. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default
shall be deemed to have occurred if:
(i) the Company shall fail to pay any principal when due
in accordance with the terms hereof; or the Company shall fail
to pay any interest when due in accordance with the terms
hereof, om the date that any such principal or interest payable
hereunder is due and payable in accordance with the terms
hereof; or
(ii) any representation or warranty made or deemed made
by the Company in any certificate, document or financial or
other statement furnished by it at any time under or in
connection with this Note shall prove to have been incorrect in
any material respect on or as of the date made or deemed made;
or
(iii) the Company shall default in the observance or
performance of any other agreement contained in this Note; or
(iv) the Company shall (A) default in any payment of
principal of or interest on any Indebtedness (after giving
effect to any applicable grace period); or (B) default in the
observance or performance of any other agreement or condition
relating to any such Indebtedness or any Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition
is to give the holder thereof the right to cause such
Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable (whether by the terms of
any document evidencing such Indebtedness or Guarantee
Obligation, upon the election of any holder of Indebtedness or
beneficiary of any Guarantee Obligation or otherwise); or
(v) (A) the Company shall commence any case, proceeding
or other action (1) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have
an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with
respect to it or its debts, or (2) seeking appointment of a
receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its
assets, or the Company shall make a general assignment for the
benefit of its creditors; or (B) there shall be commenced
against the Company any case, proceeding or other action of a
nature referred to in clause (A) above which (1) results in the
entry of an order for relief or any such adjudication or
appointment or (2) remains undismissed, undischarged or unbonded
for a period of one
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hundred and twenty (120) days; or (C) there shall be commenced
against the Company any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its
assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed
or bonded pending appeal within one hundred and twenty (120)
days from the entry thereof; or (D) the Company shall take any
action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (A),
(B) or (C) above; or (E) the Company shall generally not, or
shall be unable to, or shall admit in writing its inability to,
pay its debts as they become due; or
(vi) one or more final judgments or decrees shall be
entered against the Company involving in the aggregate a
liability (not paid or fully covered by insurance) of one
million dollars ($1,000,000) or more.
(b) Consequences of Events of Default.
(i) If any Event of Default has occurred, the interest
rate on this Note shall be the Default Interest Rate. Any
increase of the interest rate resulting from the operation of
this clause shall terminate as of the close of business on the
date on which no Events of Default exist (subject to subsequent
increases pursuant to this clause).
(ii) If an Event of Default of the type described in
Section 4(a)(v) has occurred, the aggregate principal amount of
this Note (together with all accrued interest thereon and all
other amounts due and payable with respect thereto) shall become
immediately due and payable without any action on the part of
the Noteholder, and the Company shall immediately pay to the
Noteholder all amounts due and payable with respect to this
Note.
(iii) If any Event of Default has occurred (other than
under Section 4(a)(v)), the Noteholder may declare this Note to
be immediately due and payable and may demand immediate payment
of the Unpaid Principal Amount (together with all accrued and
unpaid interest and all other amounts due and payable with
respect thereto).
(iv) The Noteholder shall also have any other rights
which such holder may have been afforded under any contract or
agreement at any time and any other rights which such holder may
have pursuant to applicable law or in equity.
SECTION 5. Waiver of Certain Rights. The Company hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Company hereunder.
SECTION 6. Transfer of this Note. Upon surrender for registration of
transfer of this Note at the principal office of the Company, the Company shall,
at the Noteholder's expense, execute and deliver one or more new Notes of like
tenor and of like aggregate principal amount,
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<PAGE> 30
registered in the name of such transferee or transferees. At the time this Note
is surrendered for registration of transfer, it shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the Noteholder
or such holder's attorney duly authorized in writing. Any Note or Notes issued
upon transfer of this Note shall carry the rights to unpaid interest and the
accrual of interest which were carried by this Note, so that neither gain nor
loss of interest shall result from any such transfer.
SECTION 7. Assignment. The rights and obligations of the Company and the
Noteholder shall be binding upon and benefit the permitted successors, assigns
and transferees of the parties; provided that in no event shall the Company
assign its rights hereunder without the prior written consent of the Noteholder.
SECTION 8. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Noteholder. No failure or delay on the part of the Noteholder in exercising any
power or right under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right.
SECTION 9. Definitions. For purposes of this Note, the following
capitalized terms have the following meaning:
"Business Day" means any day other than a Saturday, a Sunday, or any
other day on which banking institutions in the City of New York are authorized
or required by law, regulation or executive order to remain closed.
"Closing Date" is defined in Section 1(a).
"Common Stock" means the common stock of the Company.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"Company" is defined in the preamble.
"Contractual Obligation" means as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default" means any of the events specified in Section 4, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Default Interest Rate" means a rate of interest equal to fifteen
percent (15%) per annum.
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<PAGE> 31
"Environmental Laws" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means each of the events described in Section 4;
provided, however, that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"GAAP" means generally accepted accounting principles in the United
States of America consistent with those utilized in preparing the audited
financial statements referred to in Section 3(a).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (x) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (y) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such
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<PAGE> 32
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith.
"Indebtedness" means, of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person, (e) all obligations in respect of deferred
compensation and (f) all liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Insolvency" means with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Lien" means any claim, encumbrance or charges on the property of the
Company other than mechanics', workers', or similar Liens arising in the
ordinary course of business, Liens for current property taxes and assessments,
usual and customary non-monetary real property encumbrances that do not
materially interfere with the operations of the Company, and Liens securing
purchase money obligations under equipment leases which, in the aggregate, are
not material in amount and have not arisen other than in the ordinary course of
business.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Company or (b) the validity or enforceability of this Note or the rights
or remedies of Noteholder hereunder or thereunder.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Note" means this Promissory Note.
"Noteholder" means the Person defined as such in the first paragraph
hereof and its permitted successors, transferees and assigns.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly Controlled
Entity is (or, if such plan were
8
<PAGE> 33
terminated at such time, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"Principal Amount" is defined in Section 1(a).
"Principal Payment Date" is defined in Section 1(b).
"Reorganization" means with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the 30 day notice period is waived
under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615.
"Requirements of Law" means the obligations of the Company under
federal, state, local and foreign laws, rules, regulations, orders, statutes,
ordinances, codes, decrees, or requirements of any Governmental Authority
applicable to it in the conduct of its business.
"Responsible Officer" means the chief executive officer and the
president of the Company or, with respect to financial matters, the chief
financial officer of the Company.
"Subsidiary" means as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Note shall refer to a Subsidiary or Subsidiaries of
the Company.
"Unpaid Principal Amount" means, at any time, the portion of the
Principal Amount outstanding at such time.
SECTION 10. Cancellation. After all principal and accrued interest at
any time owed on this Note has been paid in full, this Note shall be surrendered
to the Company for cancellation and shall not be reissued.
SECTION 11. Payment of Expenses and Taxes. The Company hereby agrees (a)
to pay or reimburse the Noteholder for all its reasonable and documented costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Note after the occurrence of any Event of Default, including,
without limitation, the reasonable and documented fees and disbursements of
counsel to the Noteholder, (b) to pay, indemnify, and hold the Noteholder
harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any
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<PAGE> 34
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Note and (c) to pay, indemnify, and hold the Noteholder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Note including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Company, or any of its properties (all the foregoing in this clause (c),
collectively, the "indemnified liabilities"), provided, however, that the
Company shall have no obligation hereunder to the Noteholder with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the Noteholder, or (ii) legal proceedings commenced against the
Noteholder by any security holder or creditor of the Company arising out of and
based upon rights afforded any such security holder or creditor solely in its
capacity as such.
SECTION 12. Payments. All payments to be made to the Noteholder shall be
made in the lawful money of the United States of America in immediately
available funds.
SECTION 13. Place of Payment. Payments of principal and interest shall
be delivered to the Noteholder by wire transfer of immediately available funds
to the following account: State Street Bank & Trust, Boston/SPEC/WJ09, ABA
#011-000-028, For further credit to: Northstar High Yield Fund, Regarding:
Intracel 12.5% Promissory Note due April 1998, Taxpayer ID# 04-3089746, or to
such other Noteholder at such other address or to the attention of such other
person or to such other account as specified by prior written notice to the
Company.
SECTION 14. Severability. Whenever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Note.
SECTION 15. Descriptive Headings; Interpretation. The descriptive
headings of this Note are inserted for convenience only and do not constitute a
substantive part of this Note. The use of the word "including" in this Note
shall be by way of example rather than by limitation.
SECTION 16. Governing Law. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of New York as
permitted by Section 5-401 of the New York General Obligations Law (or any
similar successor provision) without giving effect to any choice of law rule
that would cause the application of the laws of any jurisdiction other than the
internal laws of the State of New York.
SECTION 17. Waivers. To the extent permitted by law, the Company hereby
waives personal service of any and all process upon it and consents that all
such service of process be made by certified registered mail directed to it at
its address set forth in Section 20. In addition, the Company hereby waives
trial by jury, any objections based on forum non conveniens and any objections
to venue of any action arising out of, connected with, related to or incidental
to the transactions contemplated by or the relationships established in
connection with this Note.
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SECTION 18. Jurisdiction. Except as otherwise provided in Section 19,
all disputes among or between such holder and the Company arising out of,
connected with, related to or incidental to the transactions contemplated by or
the relationship established between them in connection with this Note, and
whether arising in contract, tort, equity or otherwise, may be resolved by state
or federal courts located in the City of New York, New York, and the Company
hereby consents and submits to the jurisdiction of any state or federal court
located within such county and state. The Company waives in all disputes any
objection that it may have to the location of the court considering the dispute.
Nothing in this Section 18 shall affect the right of the Noteholder to serve
legal process in any other manner permitted by law or affect the right of such
holder to bring any action or proceeding against the Company or its property in
the courts of any other jurisdiction.
SECTION 19. Other Jurisdictions. The Company agrees that the Noteholder
shall have the right to proceed against the Company in a court in any location
to enable such holder to enforce a judgment or other court order entered in
favor of such holder. The Company waives any objection that it may have to the
location of the court in which the Noteholder has commenced a proceeding
described in this Section 19.
SECTION 20. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Note shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or (c) sent by next-day or overnight mail or
delivery or (d) sent by telecopy (with verbal confirmation of receipt) or
telegram.
If to the Noteholder:
Northstar High Yield Fund
Two Pickwick Plaza
Greenwich, CT 06830
Attn: Michael Graves
Fax Number (203) 862-8601
Confirm Number (203) 863-6224
with a copy, which will
not constitute notice to
the Noteholder, to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attn: Karen Wiedemann, Esq.
Fax Number (212) 841-5725
Confirm Number (212) 841-5781
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If to the Company:
Intracel Corporation
1871 N.W. Gilman Boulevard
Issaqua, Washington 98027
Attn: Simon R. McKenzie
Fax Number: (425) 391-3695
Confirm Number: (425) 391-0416
with a copy, which will
not constitute notice to
the Company, to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett, Esq.
Fax No: (212) 468-7900
Confirm No.: (212) 468-8240
or at such other address as may be specified in writing to the other parties in
accordance with this Section 20.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (a) if by personal delivery on the date after such
delivery, (b) if by certified or registered mail, on the seventh (7th) Business
Day after the mailing thereof, (c) if by next-day or overnight mail or delivery,
on the day delivered, (d) if by telecopy or telegram, on the next day following
the day on which such telecopy or telegram was sent, provided that a copy is
also sent by certified or registered mail.
SECTION 21. Business Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is not a Business Day,
the payment shall be due and payable on, and the time period shall automatically
be extended to, the next Business Day immediately following such day, and
interest shall continue to accrue at the required rate hereunder until any such
payment is made.
SECTION 22. Usury Laws. It is the intention of the Company and the
Noteholder to conform strictly to all applicable usury laws now or hereafter in
force, and any interest payable under this Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by
reason of an election by the holder hereof resulting from an Event of Default,
voluntary prepayment by the Company or otherwise, then earned interest may never
include more than the maximum amount permitted by law, computed from the date
hereof until payment, and any interest in excess of the maximum amount permitted
by law shall be canceled automatically and, if theretofore paid, shall
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<PAGE> 37
at the option of the holder hereof either be rebated to the Company or credited
on the principal amount of this Note, or if this Note has been paid, then the
excess shall be rebated to the Company. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable, or receivable under this Note shall under no circumstances exceed
the maximum legal rate upon the unpaid principal balance of this Note remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it shall be deemed a mistake and such excess shall be canceled automatically
and, if theretofore paid, rebated to the Company or credited on the principal
amount of this Note, or if this Note has been repaid, then such excess shall be
rebated to the Company.
* * * * *
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IN WITNESS WHEREOF, the Company has executed and delivered this Note on
_________, 1998.
INTRACEL CORPORATION
By: _____________________________
Name: Simon R. McKenzie
Title: Chief Executive Officer
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EXHIBIT A-2
<PAGE> 40
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD,
OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER SUCH ACT OR IN
COMPLIANCE WITH ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S.FEDERAL INCOME
TAX PURPOSES. FOR FURTHER INFORMATION, CONTACT: MORRISON & FOERSTER LLP, 1290
AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10104, ATTN: JOSEPH W. BARTLETT, ESQ.
INTRACEL CORPORATION
PROMISSORY NOTE
April 1, 1998 $4,000,000
FOR VALUE RECEIVED, INTRACEL CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to the order of NORTHSTAR HIGH TOTAL RETURN
FUND II (the "Noteholder"), the Principal Amount (as defined below) payable
pursuant to Section 1 with interest payable pursuant to Section 2. Capitalized
terms used in this Note have the meanings provided in Section 9.
SECTION 1. Payments of Principal and Interest.
(a) Principal Amount. On April 1, 1998 (the "Closing Date"),
the Noteholder purchased this Note for Three Million Eight Hundred Fifty Seven
Thousand Seventy-Three Dollars ($3,857,073), and the principal amount of this
Note is deemed to be Four Million Dollars ($4,000,000), (the "Principal
Amount").
(b) Principal Payment Date. The Principal Amount of this Note
shall be due and payable in full on April 17, 1998 (the "Principal Payment
Date").
SECTION 2. Interest.
(a) Interest Rate. Except as otherwise expressly provided in
Section 4(b), interest shall accrue from the Closing Date at the rate of twelve
and one-half percent (12.5%) per annum on the Unpaid Principal Amount. All
computations of interest shall be made on the basis of a year of three hundred
and sixty (360) days for the actual number of days.
<PAGE> 41
(b) Interest Payment Date. Interest shall be payable in full
on the Principal Payment Date.
SECTION 3. Covenants.
(a) The Company hereby agrees that, so long as any amount is
owing to the Noteholder, it shall and shall cause its subsidiaries to:
(i) Performance of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever
nature, except where the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company. Comply with all
Contractual Obligations and Requirements of Law except to the
extent the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(ii) Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same type as now conducted
by it and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in
the normal conduct of its business.
(iii) Maintenance of Property; Insurance. Keep all
property useful and necessary in its business in good working
order and condition and in accordance with Requirements of Law;
maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts
and against at least such risks (but including in any event
public liability, product liability and business interruption)
as are usually insured against in the same general area by
companies engaged in the same or a similar business; and furnish
to the Noteholder, upon written request, full information as to
the insurance carried.
(iv) Inspection of Property; Books and Records;
Discussions. Keep proper books of records and accounts in which
full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities; and
permit representatives of the Noteholder to visit and inspect
any of its properties and examine and make abstracts from any of
its books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations,
properties and financial and other condition of the Company with
officers and employees of the Company and with its independent
certified public accountants; provided that the Noteholder shall
bear its own expenses if any such inspection, examination or
discussion occurs at a time when no Default or Event of Default
shall have occurred and be continuing.
(v) Notices. Promptly give notice to the Noteholder of:
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(A) the occurrence of any Default or Event of
Default;
(B) any (1) default or event of default under
any Contractual Obligation of the Company or (2)
litigation, investigation or proceeding which may exist
at any time between the Company and any Governmental
Authority, which in either case, if not cured or if
adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse
Effect;
(C) any litigation or proceeding affecting the
Company in which the amount involved is one million
dollars ($1,000,000) or more and not covered by
insurance or in which injunctive or similar relief is
sought;
(D) the following events, as soon as possible
and in any event within thirty (30) days after the
Company knows or has reason to know thereof: (1) the
occurrence or expected occurrence of any Reportable
Event with respect to any Plan, a failure to make any
required contribution to a Plan, the creation of any
Lien in favor of the PBGC or a Plan or any withdrawal
from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan or (2) the institution of
proceedings or the taking of any other action by the
PBGC or the Company or any Commonly Controlled Entity or
any Multiemployer Plan with respect to the withdrawal
from, or the terminating, Reorganization or Insolvency
of, any Plan;
(E) any material adverse change in the business,
operations, property, condition (financial or otherwise)
or prospects of the Company;
(F) any application or registration relating to
any material patent or trademark of the Company becoming
abandoned or dedicated, or of any adverse determination
or development (including, without limitation, the
institution of, or any such determination or development
in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country
regarding the Company's ownership of any material patent
or trademark or its right to register the same or to
keep and maintain the same).
Each notice pursuant to this Section 3(a)(v) shall be
accompanied by a statement of a Responsible Officer
setting forth details of the occurrence referred to
therein and stating what action the Company proposes to
take with respect thereto.
(vi) Environmental Matters.
(A) Comply with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and
maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all
licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws.
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(B) Conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal
and other actions required under Environmental Laws and
promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental
Laws.
SECTION 4. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default
shall be deemed to have occurred if:
(i) the Company shall fail to pay any principal when due
in accordance with the terms hereof; or the Company shall fail
to pay any interest when due in accordance with the terms
hereof, on the date that such principal or interest payable
hereunder is due and payable in accordance with the terms
hereof; or
(ii) any representation or warranty made or deemed made
by the Company in any certificate, document or financial or
other statement furnished by it at any time under or in
connection with this Note shall prove to have been incorrect in
any material respect on or as of the date made or deemed made;
or
(iii) the Company shall default in the observance or
performance of any other agreement contained in this Note; or
(iv) the Company shall (A) default in any payment of
principal of or interest on any Indebtedness (after giving
effect to any applicable grace period); or (B) default in the
observance or performance of any other agreement or condition
relating to any such Indebtedness or any Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition
is to give the holder thereof the right to cause such
Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable (whether by the terms of
any document evidencing such Indebtedness or Guarantee
Obligation, upon the election of any holder of Indebtedness or
beneficiary of any Guarantee Obligation or otherwise); or
(v) (A) the Company shall commence any case, proceeding
or other action (1) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have
an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with
respect to it or its debts, or (2) seeking appointment of a
receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its
assets, or the Company shall make a general assignment for the
benefit of its creditors; or (B) there shall be commenced
against the Company any case, proceeding or other action of a
nature referred to in clause (A) above which (1) results in the
entry of an order for relief or any such adjudication or
appointment or (2) remains undismissed, undischarged or unbonded
for a period of one
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<PAGE> 44
hundred and twenty (120) days; or (C) there shall be commenced
against the Company any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its
assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed
or bonded pending appeal within one hundred and twenty (120)
days from the entry thereof; or (D) the Company shall take any
action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (A),
(B) or (C) above; or (E) the Company shall generally not, or
shall be unable to, or shall admit in writing its inability to,
pay its debts as they become due; or
(vi) one or more final judgments or decrees shall be
entered against the Company involving in the aggregate a
liability (not paid or fully covered by insurance) of one
million dollars ($1,000,000) or more.
(b) Consequences of Events of Default.
(i) If any Event of Default has occurred, the interest
rate on this Note shall be the Default Interest Rate. Any
increase of the interest rate resulting from the operation of
this clause shall terminate as of the close of business on the
date on which no Events of Default exist (subject to subsequent
increases pursuant to this clause).
(ii) If an Event of Default of the type described in
Section 4(a)(v) has occurred, the aggregate principal amount of
this Note (together with all accrued interest thereon and all
other amounts due and payable with respect thereto) shall become
immediately due and payable without any action on the part of
the Noteholder, and the Company shall immediately pay to the
Noteholder all amounts due and payable with respect to this
Note.
(iii) If any Event of Default has occurred (other than
under Section 4(a)(v)), the Noteholder may declare this Note to
be immediately due and payable and may demand immediate payment
of the Unpaid Principal Amount (together with all accrued and
unpaid interest and all other amounts due and payable with
respect thereto).
(iv) The Noteholder shall also have any other rights
which such holder may have been afforded under any contract or
agreement at any time and any other rights which such holder may
have pursuant to applicable law or in equity.
SECTION 5. Waiver of Certain Rights. The Company hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Company hereunder.
SECTION 6. Transfer of this Note. Upon surrender for registration of
transfer of this Note at the principal office of the Company, the Company shall,
at the Noteholder's expense, execute and deliver one or more new Notes of like
tenor and of like aggregate principal amount,
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<PAGE> 45
registered in the name of such transferee or transferees. At the time this Note
is surrendered for registration of transfer, it shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the Noteholder
or such holder's attorney duly authorized in writing. Any Note or Notes issued
upon transfer of this Note shall carry the rights to unpaid interest and the
accrual of interest which were carried by this Note, so that neither gain nor
loss of interest shall result from any such transfer.
SECTION 7. Assignment. The rights and obligations of the Company and the
Noteholder shall be binding upon and benefit the permitted successors, assigns
and transferees of the parties; provided that in no event shall the Company
assign its rights hereunder without the prior written consent of the Noteholder.
SECTION 8. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Noteholder. No failure or delay on the part of the Noteholder in exercising any
power or right under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right.
SECTION 9. Definitions. For purposes of this Note, the following
capitalized terms have the following meaning:
"Business Day" means any day other than a Saturday, a Sunday, or any
other day on which banking institutions in the City of New York are authorized
or required by law, regulation or executive order to remain closed.
"Closing Date" is defined in Section 1(a).
"Common Stock" means the common stock of the Company.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"Company" is defined in the preamble.
"Contractual Obligation" means as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default" means any of the events specified in Section 4, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Default Interest Rate" means a rate of interest equal to fifteen
percent (15%) per annum.
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<PAGE> 46
"Environmental Laws" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means each of the events described in Section 4;
provided, however, that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"GAAP" means generally accepted accounting principles in the United
States of America consistent with those utilized in preparing the audited
financial statements referred to in Section 3(a).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (x) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (y) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such
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<PAGE> 47
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith.
"Indebtedness" means, of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person, (e) all obligations in respect of deferred
compensation and (f) all liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Insolvency" means with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Lien" means any claim, encumbrance or charges on the property of the
Company other than mechanics', workers', or similar Liens arising in the
ordinary course of business, Liens for current property taxes and assessments,
usual and customary non-monetary real property encumbrances that do not
materially interfere with the operations of the Company, and Liens securing
purchase money obligations under equipment leases which, in the aggregate, are
not material in amount and have not arisen other than in the ordinary course of
business.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Company or (b) the validity or enforceability of this Note or the rights
or remedies of Noteholder hereunder or thereunder.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Note" means this Promissory Note.
"Noteholder" means the Person defined as such in the first paragraph
hereof and its permitted successors, transferees and assigns.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly Controlled
Entity is (or, if such plan were
8
<PAGE> 48
terminated at such time, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"Principal Amount" is defined in Section 1(a).
"Principal Payment Date" is defined in Section 1(b).
"Reorganization" means with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the 30 day notice period is waived
under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615.
"Requirements of Law" means the obligations of the Company under
federal, state, local and foreign laws, rules, regulations, orders, statutes,
ordinances, codes, decrees or requirements of any Governmental Authority
applicable to it in the conduct of its business.
"Responsible Officer" means the chief executive officer and the
president of the Company or, with respect to financial matters, the chief
financial officer of the Company.
"Subsidiary" means as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Note shall refer to a Subsidiary or Subsidiaries of
the Company.
"Unpaid Principal Amount" means, at any time, the portion of the
Principal Amount outstanding at such time.
SECTION 10. Cancellation. After all principal and accrued interest at
any time owed on this Note has been paid in full, this Note shall be surrendered
to the Company for cancellation and shall not be reissued.
SECTION 11. Payment of Expenses and Taxes. The Company hereby agrees (a)
to pay or reimburse the Noteholder for all its reasonable and documented costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Note after the occurrence of any Event of Default, including,
without limitation, the reasonable and documented fees and disbursements of
counsel to the Noteholder, (b) to pay, indemnify, and hold the Noteholder
harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any
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<PAGE> 49
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Note and (c) to pay, indemnify, and hold the Noteholder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Note including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Company, or any of its properties (all the foregoing in this clause (c),
collectively, the "indemnified liabilities"), provided, however, that the
Company shall have no obligation hereunder to the Noteholder with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the Noteholder, or (ii) legal proceedings commenced against the
Noteholder by any security holder or creditor of the Company arising out of and
based upon rights afforded any such security holder or creditor solely in its
capacity as such.
SECTION 12. Payments. All payments to be made to the Noteholder shall be
made in the lawful money of the United States of America in immediately
available funds.
SECTION 13. Place of Payment. Payments of principal and interest shall
be delivered to the Noteholder by wire transfer of immediately available funds
to the following account: State Street Bank & Trust, Boston/SPEC/WJ16, ABA
#011-000-028, For further credit to: Northstar HTR Fund II, Regarding: Intracel
12.5% Promissory Note due April 1998, Taxpayer ID# 06-1472914, or to such other
Noteholder at such other address or to the attention of such other person or to
such other account as specified by prior written notice to the Company.
SECTION 14. Severability. Whenever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Note.
SECTION 15. Descriptive Headings; Interpretation. The descriptive
headings of this Note are inserted for convenience only and do not constitute a
substantive part of this Note. The use of the word "including" in this Note
shall be by way of example rather than by limitation.
SECTION 16. Governing Law. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of New York as
permitted by Section 5-401 of the New York General Obligations Law (or any
similar successor provision) without giving effect to any choice of law rule
that would cause the application of the laws of any jurisdiction other than the
internal laws of the State of New York.
SECTION 17. Waivers. To the extent permitted by law, the Company hereby
waives personal service of any and all process upon it and consents that all
such service of process be made by certified registered mail directed to it at
its address set forth in Section 20. In addition, the Company hereby waives
trial by jury, any objections based on forum non conveniens and any objections
to venue of any action arising out of, connected with, related to or incidental
to the transactions contemplated by or the relationships established in
connection with this Note.
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SECTION 18. Jurisdiction. Except as otherwise provided in Section 19,
all disputes among or between such holder and the Company arising out of,
connected with, related to or incidental to the transactions contemplated by or
the relationship established between them in connection with this Note, and
whether arising in contract, tort, equity or otherwise, may be resolved by state
or federal courts located in the City of New York, New York, and the Company
hereby consents and submits to the jurisdiction of any state or federal court
located within such county and state. The Company waives in all disputes any
objection that it may have to the location of the court considering the dispute.
Nothing in this Section 18 shall affect the right of the Noteholder to serve
legal process in any other manner permitted by law or affect the right of such
holder to bring any action or proceeding against the Company or its property in
the courts of any other jurisdiction.
SECTION 19. Other Jurisdictions. The Company agrees that the Noteholder
shall have the right to proceed against the Company in a court in any location
to enable such holder to enforce a judgment or other court order entered in
favor of such holder. The Company waives any objection that it may have to the
location of the court in which the Noteholder has commenced a proceeding
described in this Section 19.
SECTION 20. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Note shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or (c) sent by next-day or overnight mail or
delivery or (d) sent by telecopy (with verbal confirmation of receipt) or
telegram.
If to the Noteholder:
Northstar High Total Return Fund II
Two Pickwick Plaza
Greenwich, CT 06830
Attn: Michael Graves
Fax Number (203) 862-8601
Confirm Number (203) 863-6224
with a copy, which will
not constitute notice to
the Noteholder, to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attn: Karen Wiedemann, Esq.
Fax Number (212) 841-5725
Confirm Number (212) 841-5781
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If to the Company:
Intracel Corporation
1871 N.W. Gilman Boulevard
Issaqua, Washington 98027
Attn: Simon R. McKenzie
Fax Number: (425) 391-3695
Confirm Number: (425) 391-0416
with a copy, which will
not constitute notice to
the Company, to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett, Esq.
Fax No: (212) 468-7900
Confirm No.: (212) 468-8240
or at such other address as may be specified in writing to the other parties in
accordance with this Section 20.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (a) if by personal delivery on the date after such
delivery, (b) if by certified or registered mail, on the seventh (7th) Business
Day after the mailing thereof, (c) if by next-day or overnight mail or delivery,
on the day delivered, (d) if by telecopy or telegram, on the next day following
the day on which such telecopy or telegram was sent, provided that a copy is
also sent by certified or registered mail.
SECTION 21. Business Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is not a Business Day,
the payment shall be due and payable on, and the time period shall automatically
be extended to, the next Business Day immediately following such day, and
interest shall continue to accrue at the required rate hereunder until any such
payment is made.
SECTION 22. Usury Laws. It is the intention of the Company and the
Noteholder to conform strictly to all applicable usury laws now or hereafter in
force, and any interest payable under this Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by
reason of an election by the holder hereof resulting from an Event of Default,
voluntary prepayment by the Company or otherwise, then earned interest may never
include more than the maximum amount permitted by law, computed from the date
hereof until payment, and any interest in excess of the maximum amount permitted
by law shall be canceled automatically and, if theretofore paid, shall
12
<PAGE> 52
at the option of the holder hereof either be rebated to the Company or credited
on the principal amount of this Note, or if this Note has been paid, then the
excess shall be rebated to the Company. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable, or receivable under this Note shall under no circumstances exceed
the maximum legal rate upon the unpaid principal balance of this Note remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it shall be deemed a mistake and such excess shall be canceled automatically
and, if theretofore paid, rebated to the Company or credited on the principal
amount of this Note, or if this Note has been repaid, then such excess shall be
rebated to the Company.
* * * * *
13
<PAGE> 53
IN WITNESS WHEREOF, the Company has executed and delivered this Note on
_________, 1998.
INTRACEL CORPORATION
By: __________________________________
Name: Simon R. McKenzie
Title: Chief Executive Officer
14
<PAGE> 54
EXHIBIT B-2
WARRANT
<PAGE> 55
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS
BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
SERIES A-V COMMON STOCK WARRANT
Void after April 17, 2003 Right to purchase 49,066
shares of Common Stock
(subject to adjustment)
of Intracel Corporation
No. A-V-2
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Northstar High Total Return Fund II (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time before 5:00 P.M. New York time, on
April 17, 2003 (or such earlier date as provided in Section 7 hereof) (the
"Expiration Time"), up to Forty-Nine Thousand Sixty Six (49,066) fully paid and
nonassessable shares of the Company's Common Stock, $.0001 par value per share,
at a purchase price per share of $7.64 (the "Purchase Price"). The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
This warrant (this "Warrant") is issued pursuant to a certain Note and
Warrant Purchase Agreement, dated as of April 1, 1998, between, among other
parties, the Company and the Holder, a copy of which is on file at the principal
office of the Company (the "Purchase Agreement").
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
"Affiliate" means, with reference to a specified person or
entity, any person or entity that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with the
specified person or entity. For purposes of this definition, "control"
(including, with correlative meaning, the terms "controlled by" and "under
common control with"), as used with respect to any person or entity, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting securities or by contract or otherwise.
"Common Stock" means the Company's common stock, $.0001 par value
per share, in existence on the date of this Warrant, or any class or classes
(however designated) of
<PAGE> 56
such Common Stock subsequently existing as a result of any recapitalization,
reorganization or other reclassification of the Company's capital stock which
affects the holders of Common Stock.
"Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the
Company with or the merger of the Company into any other corporation or entity
(other than a consolidation or merger in which the Company is the continuing
entity) or the sale or transfer of all or substantially all of the assets of the
Company to another person or entity.
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities and Exchange Commission" or "Commission" refers to
the Securities and Exchange Commission or any other Federal agency then
administering the Securities Act.
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
1. Restricted Stock.
1.1 This Warrant and all rights hereunder may not be transferred
unless (i) the transferee is an Affiliate of the Holder, or (ii) the Company
gives its prior written consent to the transfer.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or exchange,
and in the case of an exercise of this Warrant if the Warrant Shares to be
issued thereupon are not registered pursuant to the Securities Act, the Company
may require a written statement that such Warrant or Warrant Shares, as the case
may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at the
time of exercise such Warrant Shares are registered under the Securities Act,
bear a legend substantially in the following form:
2
<PAGE> 57
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
2. Exercise of Warrant.
The Holder may exercise this Warrant in whole or in part (but not
as to fractional shares of Common Stock) by delivering this Warrant prior to the
Expiration Time, with the form of subscription at the end hereof duly executed
by the Holder, to the Company at its principal office. This Warrant and the
subscription shall be accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock called for on the form of
subscription by the Purchase Price, as such may be adjusted as provided herein.
In the event of the purchase of less than all of the shares of Common Stock
purchasable under this Warrant, the Company shall execute and deliver a
replacement Warrant of like tenor for the balance of the shares of Common Stock
purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this
Warrant shall be issued as soon as practicable after the exercise of this
Warrant in accordance with Section 2 hereof, but in no event later than 10 days
after the date of delivery to the Company of this Warrant for exercise, without
charge to the Holder, including, without limitation, any tax that may be payable
in respect thereof, and such certificates shall be issued and registered in the
name of, or, subject to Section 1.1, in such names as may be directed by, the
Holder; provided, however, that the Company shall not be required to pay any
income tax to which the Holder may be subject in connection with the issuance of
this Warrant or the shares of Common Stock upon exercise of this Warrant;
provided, further, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate in a name other than that of the Holder and the Company
shall not be required to issue or deliver such certificate unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at
any time or from time to time, the number of shares of Common Stock outstanding
is increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would
3
<PAGE> 58
have received if (A) this Warrant had been exercised into Common Stock on the
date of such event and (B) it had thereafter retained such securities and all
rights and distributions relating to them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event, the
Holder of this Warrant shall have the right thereafter to convert his or her
Warrant Shares into the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock which were
convertible immediately prior to such reorganization, reclassification, or
change. If, at any time or from time to time, the number of shares of Common
Stock outstanding is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date for such combination, the Purchase
Price shall appropriately increase and/or the number of Warrant Shares shall be
appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time after the
date hereof, the Company issues shares of Common Stock for a consideration per
share less than the Purchase Price per share, on the date such additional shares
are issued, the Purchase Price shall be adjusted in accordance with the
following formula:
P
-
E1 = E x O + E
------
A
where: E1 = the adjusted Purchase Price.
E = the Purchase Price immediately prior to the adjustment.
O = the number of shares outstanding immediately prior to the
issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
A = the number of shares outstanding immediately after the issuance
of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection does not apply to (i) any of the transactions
described in Sections 4.1 and 4.2 and the first paragraph of subsection (b) or
the issuance of common stock upon the
4
<PAGE> 59
exercise of such rights described therein, (ii) the issuance of shares of Common
Stock upon conversion of the Company's currently outstanding preferred stock,
preferred stock issued in lieu of cash dividends thereon as provided for under
the terms of the applicable designations or provisions of the Company's
certificate of incorporation on the date hereof, and upon the exercise of rights
under securities issued on or before the date hereof to convert, exchange or
exercise such securities into shares of Common Stock, or (iii) the issuance of
shares of Common Stock upon the exercise of rights, warrants or options granted
to employees and directors of the Company pursuant to employee benefit plans or
employee stock option plans available for grants to the Company's executives in
general.
(b) Adjustment for Convertible Securities Issue. If at any time
after the date hereof, the Company issues any securities convertible into or
exchangeable or exercisable for shares of Common Stock for a consideration per
share of Common Stock initially deliverable upon conversion, exchange or
exercise of such securities less than the Purchase Price per share on the date
of issuance of such securities, the Purchase Price shall be adjusted in
accordance with the following formula:
P
-
E1 = E x O + E
------
D
where: E1 = the adjusted Purchase Price.
E = the then current Purchase Price.
O = the number of shares outstanding immediately prior to the
issuance of such securities.
P = the sum of the aggregate consideration received for the
issuance of such securities plus the additional consideration,
if any, payable upon conversion, exchange or exercise of
such securities at the initial conversion, exchange or
exercise rate.
D = the maximum number of shares deliverable upon conversion,
exchange or exercise of such securities at the initial
conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance. If
all of the Common Stock deliverable upon conversion, exchange or exercise of
such securities has not been issued when such securities are no longer
outstanding, then the Purchase Price shall promptly be readjusted to the
Purchase Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion, exchange or exercise of such
securities.
5
<PAGE> 60
This subsection does not apply to (i) any of the transactions
described in Sections 4.1 and 4.2 and the first paragraph of subsection (a) or
(ii) the issuance of shares of Common Stock upon the exercise of rights,
warrants or options granted to employees or directors of the Company pursuant to
employee benefit plans or employee stock option plans available to the Company's
executives in general.
(c) The foregoing adjustments shall be made only if the adjusted
Purchase Price shall be less than the Purchase Price.
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of like
tenor.
7. Accelerated Expiration of Warrants. Notwithstanding anything in this
Warrant to the contrary, this Warrant and the terms and provisions hereunder
shall immediately expire without further action by the Company or the Holder (a)
10 business days after notice provided by the Company to the Holder, which
notice may be provided at any time after the date of the closing of an
underwritten public offering pursuant to an effective registration statement on
Form S-1 or successor form under the Securities Act covering the offering and
sale of Common Stock for the account of the Company (an "Initial Public
Offering"), and which notice shall specify that the closing price for the Common
Stock on the exchange on which it is traded or on NASDAQ, as applicable, has
exceeded for 20 consecutive trading days 150% of its per share price as
specified on the cover of the final prospectus for the Initial Public Offering
(giving effect, in such calculation, to any stock dividends, stock splits or
other recapitalization or similar events occurring from and after the closing
date of the Initial Public Offering); or (b) on the day prior to the effective
date of any Extraordinary Transaction.
8. Notices.
8.1 Notices for Adjustments under Section 4 and Certain Other
Events. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or the occurrence of any Extraordinary Transaction; or
6
<PAGE> 61
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities (other than the issuance of Warrant
Shares);
then, and in each such event, the Company will mail by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company pursuant to Section 8.2 hereof, a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, Extraordinary Transaction, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable on
such reorganization, reclassification, recapitalization, Extraordinary
Transaction, dissolution, liquidation or winding up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made.
All notices to be given pursuant to subsection (a) of this Section 8.1
shall be mailed at least fifteen (15) days prior to the record date of such
events described therein, and in any event at least twenty-five (25) days prior
to the actual event. All notices to be given pursuant to subsections (b) through
(d) of this Section 8.1 shall be mailed at least thirty (30) days prior to the
record date of such events described therein.
8.2 Other Notices. (a) In the event of an Initial Public
Offering, the Company will mail by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company
pursuant to Section 8.2(b), notice of the initial filing of the registration
statement for the Initial Public Offering. Any notice to be given pursuant to
this Section 8.2(a) shall be mailed promptly after the date of such filing.
(b) All other notices and communications shall be mailed by
first class registered or certified mail, postage prepaid, addressed as follows:
(i) if to the Holder, to the address for the Holder as
shown on the Purchase Agreement; and
7
<PAGE> 62
(ii) if to the Company, to:
Intracel Corporation
1871 N.W. Gilman Blvd.
Issaquah, Washington
Attention: Chief Executive Officer
with a copy to:
Joseph W. Bartlett, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104
or at such address as may have been furnished to the Company in writing by the
Holder or vice versa.
8.3 Receipt of Notices. All notices under this Warrant shall be
deemed to have been given three (3) days after being properly addressed and
deposited in the U.S. mail.
9. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts (without giving effect
to its choice of law principles). The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof. This Warrant is being executed as an instrument under seal. All nouns
and pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
10. Expiration. This Warrant shall expire, and be without further force
and effect, at 5:00 P.M., New York time, on April 17, 2003, or such earlier date
and time as provided in Section 7 hereof.
[see attached signature page]
8
<PAGE> 63
Dated: INTRACEL CORPORATION
(Corporate Seal) By: _________________________
Simon R. McKenzie, Chief
Executive Officer
9
<PAGE> 64
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To Intracel Corporation:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _____________ shares of Common Stock of INTRACEL
CORPORATION and herewith makes payment of $________________ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to ____________________________, whose address is
Dated: ________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
________________________________________
(Address)
<PAGE> 1
EXHIBIT 10.17
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated September 30,
1997, is made by the WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY, a
public body corporate and politic with perpetual corporate succession,
constituting an instrumentality of the State of Washington, as issuer
("Issuer"), INTRACEL CORPORATION (the "Borrower"), a Delaware corporation
qualified to do business in Washington having its principal place of business
and chief executive office at 2005 Northwest Sammamish Road, Issaquah,
Washington 98027, and TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware
corporation (the "Lender"), having its principal office at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018.
WHEREAS, the Issuer is authorized under the laws of the State, including
Revised Code of Washington Chapter 43.163 (the "Act"), to issue nonrecourse
revenue bonds in the name of the Issuer and loan the proceeds of such bonds to
eligible borrowers to finance "project costs" (as defined in RCW
43.163.010(12)), which includes, among other things, the acquisition of
equipment; and
WHEREAS, the definition of "bonds" under RCW 43.163.010(2) also includes
notes, lines of credit and other financial arrangements, and, in relation
thereto, the Issuer is authorized to enter into "financing documents" (as
defined in RCW 43.163.010(9)) necessary or convenient for purposes of financing
project costs; and
WHEREAS, in accordance with the Act, Issuer proposes to issue its Economic
Development Revenue Bond, Series 1997-E (Intracel Corporation Project) (the
"Bond") to Lender, the borrowings under which shall be loaned by the Issuer to
Borrower in two installments and used by Borrower to finance all or a portion
of the Project (as hereinafter defined) pursuant to this Agreement; and
WHEREAS, Borrower proposes to borrow the proceeds of the Loan (as
hereinafter defined) upon the terms and conditions set forth herein to finance
all or a portion of the Project, which shall be located entirely within
Issaquah, Washington; and
WHEREAS, Borrower shall make Loan Payments (as hereinafter defined)
directly to the Debt Service Fund established in the name of Lender, as
assignee of Issuer and as holder of the Bond; and
WHEREAS, this Agreement shall not be deemed to constitute a debt or
liability or moral obligation of the Issuer or the State or any political
subdivision thereof, or a pledge of the faith and credit of the Issuer or the
State or any political subdivision thereof, but shall be a special obligation
payable solely from the Loan Payments payable hereunder by Borrower to Lender,
as assignee of Issuer;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and in consideration of the premises contained in this
Agreement, Lender, Issuer and Borrower agree as follows:
- --------------------------------------------------------------------------------
1 - LOAN AND SECURITY AGREEMENT
<PAGE> 2
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings, and shall be equally applicable to both the singular and
plural forms of the terms defined:
SECTION 1.1. DEFINED TERMS.
Bond means the Washington Economic Development Finance Authority
Economic Development Revenue Bond, Series 1997-E (Intracel Corporation Project),
in the form attached hereto as Exhibit B.
Bond Counsel means any nationally recognized counsel experienced in
matters for municipal law acceptable to Issuer and Lender.
Business Day shall mean any day other than a Saturday, Sunday or
public holiday or the equivalent for banks in New York City.
Code means the Internal Revenue Code of 1986, as amended, and United
States Treasury Regulations promulgated thereunder.
Collateral means the collateral pledged by Borrower to Lender to
secure the Loan, as described in Section 2 and Exhibit D hereof.
Debt Service Fund means Account No. 55-75427 ABA Routing Number
071-000-013, at The First National Bank of Chicago, into which Borrower will
make payments as required by this Agreement. The Debt Service Fund shall
constitute a special fund pursuant to RCW 43.163.130(3). Amounts deposited by
Borrower into the Debt Service Fund shall be applied towards Obligations
due hereunder.
Determination of Taxability means any determination, decision or
decree by the Commissioner of Internal Revenue, or any District Director of
Internal Revenue or any court of competent jurisdiction, or an opinion obtained
by Lender of counsel qualified in such matters, that an Event of Taxability
shall have occurred. A Determination of Taxability also shall be deemed to have
occurred on the first to occur of the following:
(a) the date when Borrower files any statement, supplemental
statement, or other tax schedule, return or document, which discloses that an
Event of Taxability shall have occurred; or
(b) the effective date of any federal legislation enacted after the
date of this Agreement or promulgation of any income tax regulation or ruling
by the Internal Revenue Service that causes an Event of Taxability after the
date of this Agreement.
Event of Default shall mean any event specified in Section 6 of this
Loan.
Event of Taxability means: (i) any act, failure to act or use of the
proceeds of the Loan, (ii) any change in the use of the Project, (iii) any
misrepresentation or inaccuracy in any of the representations, warranties or
covenants contained in this Agreement or the Tax Regulatory Agreement by Issuer
or Borrower, or (iv) the enactment of any federal legislation after the date of
this Agreement
- --------------------------------------------------------------------------------
2 - LOAN AND SECURITY AGREEMENT
<PAGE> 3
or the promulgation of any income tax regulation or ruling by the Internal
Revenue Service after the date of this Agreement, any one or more of which
causes the interest on the Bond to become includable in Lender's gross income
for federal income tax purposes.
GAAP shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time.
Gross-Up Rate means, with respect to any Interest payment (including
payments made prior to the Event of Taxability), the rate necessary to
calculate an additional payment in an amount sufficient such that the sum of
the Interest payment plus the additional payments would, after reduced by the
federal tax (including interest and penalties) actually imposed thereon, equal
the amount of the Interest payment.
Interest means the portion of any payment from Borrower designated as
and comprising interest on the Loan and on the Bond.
Issuer means the Washington Economic Development Finance Authority, a
public body corporate and politic with perpetual corporate succession,
constituting an instrumentality of the State, acting as issuer under this
Agreement.
Loan means the loan from Issuer to Borrower pursuant to this
Agreement.
Loan Documents shall mean, collectively, this Agreement, the Bond, and
each other document, agreement, certificate and instrument executed by the
Borrower and delivered to the Lender in connection herewith and therewith, as
the same may be modified, extended, restated or supplemented from time to time.
Loan Payments means the loan payments payable by Borrower pursuant to
the provisions of this Agreement as specifically set forth in Exhibit B hereto.
As provided in Section 3 hereof, Loan Payments shall be payable by Borrower
directly to Lender, as assignee of Issuer and holder of the Bond, in the amounts
of Principal and Interest due on the Loan.
Material Adverse Change shall mean, with respect to any Person, a
material adverse change in the business, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of such Person and
its subsidiaries, taken as a whole.
Material Adverse Effect shall mean, with respect to any Person, a
material adverse effect on the business, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of such Person and
its subsidiaries, taken as a whole.
Obligations shall mean all indebtedness, obligations and liabilities
of the Borrower under this Agreement, whether on account of Principal,
Interest, indemnities, fees (including, without limitation, attorneys' fees,
remarketing fees, origination fees, collection fees and all other
professionals' fees), costs, expenses, taxes or otherwise.
- --------------------------------------------------------------------------------
3 - LOAN AND SECURITY AGREEMENT
<PAGE> 4
Opinion of Bond Counsel means a written opinion of Bond Counsel
addressed to Issuer and Lender that the action proposed to be taken will not
adversely affect the validity of the Bond or the exclusion from gross income
for federal income tax purposes of Interest of the Bond.
Person shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and the successors, heirs and assigns of each.
Principal means the portion of any payment from Borrower designated as
and comprising part or all of the principal of the Loan and the Bond.
Project means the acquisition and installation of equipment to be used
in connection with Borrower's operation, which project is described in Exhibit
A hereto.
Project Costs means the costs of completing the Project, including
costs of issuance of the Bond, which Project Costs are set forth in Exhibit A
hereto.
Resolution means, collectively, Resolution No. W-96-013, dated December
10, 1996, and Resolution No. W-97-021, dated September 10, 1997, adopted by the
Issuer and pursuant to which the Bond will be issued and this Agreement will be
authorized.
Retained Rights means the Issuer's rights to receipt of fees,
reimbursement of costs, and indemnification as set forth in this Agreement.
State means the State of Washington.
Tax Regulatory Agreement means the Tax Regulatory Agreement of even
date herewith among Borrower, Issuer and Lender, as such Tax Regulatory
Agreement may be amended from time to time in accordance with its terms.
UCC means the Uniform Commercial Code as adopted and in effect in the
State.
SECTION 1.2 EXHIBITS. The following exhibits are attached hereto and
made a part hereof:
Exhibit A: Form of Schedule of Project Loan Payments describing the
Project and setting forth the Loan Payments and
Prepayment Prices.
Exhibit B: Form of Bond.
Exhibit C: Forms of Requisition.
Exhibit D: Description of Collateral Pledged to Secure Loan.
Exhibit E: Form of opinion of counsel to Borrower.
Exhibit F: Form of opinion of Bond Counsel.
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4 - LOAN AND SECURITY AGREEMENT
<PAGE> 5
2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower hereby
assigns and grants to the Lender a lien on and security interest in, all the
Borrower's right, title and interest in and to all the following collateral (the
"Collateral"), to secure the payment and performance of all the Obligations. The
Collateral consists of all equipment set forth on Exhibit D hereto (the
"Equipment"), together with all present and future additions, parts,
accessories, attachments, substitutions, repairs, improvements and repairs,
improvements and replacements thereof or thereto, and any and all proceeds
thereof, including, without limitation, proceeds of insurance. Borrower intends
that the security interest granted herein shall have first priority over all
others.
3. FINANCING OF PROJECT AND TERMS OF LOAN.
3.1 BORROWING; ISSUANCE OF BOND; AGREEMENT TO CONSTITUTE
CONTRACT. To provide funds to pay for Project Costs, Issuer hereby agrees to
borrow an amount of up to $1,500,000 from Lender and loan the proceeds of that
borrowing to Borrower. Such borrowing shall only be pursuant to requisitions
submitted by Borrower to Issuer in the form attached hereto as Exhibit C2. As
evidence of this indebtedness, Issuer will issue its Washington Economic
Development Finance Authority Economic Development Revenue Bond, Series 1997-E
(Intracel Corporation Project). This Agreement shall constitute a contract
between Issuer, Borrower and Lender, as holder of the Bond. The parties
covenant that they will abide by the terms of this Agreement and the Bond.
3.2 DESCRIPTION OF THE BOND. The Bond shall be issued as a
single bond in registered form as set forth in Exhibit B attached hereto. The
Bond shall mature, and Principal of, premium (if any) and Interest on the Bond
shall be payable as set forth herein. A single Bond will be issued to avoid the
execution of individual bonds or promissory notes for each advance by the Lender
to the Issuer for the benefit of the Borrower. The Bond and all obligations of
Issuer under or with respect to the Bond and this Agreement are limited
obligations of Issuer payable solely out of the Loan Payments made by Borrower
for deposit to the Debt Service Fund and other Collateral specifically pledged
hereunder. No recourse shall be had against any other properties, funds or
assets of Issuer for the payment of any amounts owing with respect to the Bond
or this Agreement. The Bond, this Agreement and the obligations of Issuer under
or with respect thereto do not constitute or create a charge against Issuer or
create an indebtedness of Issuer within the meaning of any constitutional debt
limitation. Holders of the Bond shall have no right to compel the payment of any
amounts owing under or with respect to the Bond or this Agreement out of any
funds or other assets of Issuer or the State. Issuer's agents, including the
person(s) executing this Agreement or the Bond, shall not be subject to any
personal liability for any reason relating to the issuance of the Bond or the
performance of any obligations under or with respect to this Agreement.
IN ACCORDANCE WITH RCW 43.163.140(1), THE BOND IS NOT A GENERAL, SPECIAL OR
MORAL OBLIGATION OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, NOR A
PLEDGE OF THE FAITH AND CREDIT OF THE STATE OR ANY POLITICAL SUBDIVISION
THEREOF. THE BOND IS A SPECIAL NONRECOURSE REVENUE OBLIGATION OF THE ISSUER,
SECURED BY AND PAYABLE SOLELY FROM THE SPECIAL FUND OR FUNDS CREATED BY THE
ISSUER FOR THEIR REPAYMENT. THE ISSUER HAS NO TAXING POWER.
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5 - LOAN AND SECURITY AGREEMENT
<PAGE> 6
3.3 ACQUISITION OF PROJECT. Borrower shall acquire the Project and
shall bear the risk with respect to any loss or claim relating to any portion of
the Project and shall be liable in respect of its duties and obligations in
accordance with any contract entered into in connection with the Project, and
neither Lender nor Issuer shall assume any such liability or risk of loss.
3.4 LOAN. Issuer hereby agrees, subject to the terms and conditions
of this Agreement and the Resolution, to borrow from Lender and loan to Borrower
an amount of $1,500,000 for the purpose of financing Project Costs. Issuer's
obligation to Lender shall be evidenced by the Bond described in Section 3.2
above. The borrowing and the Loan will be in two installments, the first of
which will be in an aggregate principal amount of $713,339.49 and will take
place on the date of execution and delivery of this Agreement. The second
installment will be for the balance and will take place on or about November 25,
1997 (but not later than December 1, 1997); provided, however, that the second
installment shall not be funded unless and until Issuer has received a written
statement from Bond Counsel that the average life of the Bond will not be
greater than 120% of the reasonably expected useful life of (1) the assets to be
financed with such installment, and (2) the assets financed with proceeds
derived from the first installment. Borrower hereby agrees, subject to the terms
and conditions of this Agreement, to borrow such amount from Issuer and to pay
all Obligations hereunder. Lender will advance funds necessary to make Loan
installments directly to Borrower pursuant to requisitions submitted by Issuer
and Borrower, which requisitions shall be in the forms of Exhibits C1 and C2
attached hereto. Issuer's obligation to issue the Bond, Lender's obligation to
provide financing for the Loan, and Borrower's obligation to repay the Loan,
shall commence on the date hereof.
3.5 INTEREST. The principal amount of the Bond and the Loan
hereunder outstanding from time to time shall bear interest (computed on the
basis of actual days elapsed in a 360-day year) as follows. Interest on the
first Loan installment and that portion of the Bond relating thereto shall
accrue from September 30, 1997 at a rate of 10.946%. Interest on the second Loan
installment and that portion of the Bond relating thereto shall accrue from the
date that funds are advanced by Lender to Issuer and loaned by Issuer to
Borrower at an interest rate to be established by Lender of not less than ten
percent (10%) and not greater than twelve percent (12%). Notwithstanding the
foregoing, upon any Determination of Taxability, Interest shall accrue at the
Gross-Up Rate.
3.6 PAYMENTS. Loan Payments and other payments shall be made by
Borrower directly to Lender, as Issuer's assignee and holder of the Bond.
Borrower shall pay Loan Payments in the amounts and on the dates set forth in
Exhibit A hereto.
As security for its obligation to pay the principal of, premium, if any, and
interest on the Bond, Issuer assigns to Lender all of Issuer's right to receive
Loan Payments from Borrower hereunder, all of Issuer's rights hereunder (except
for Retained Rights). Lender agrees to accept Loan Payments and other payments
made by Borrower hereunder (and proceeds, if any, of the Collateral) in
satisfaction of Issuer's corresponding obligations on the Bond. No provision,
covenant or agreement contained in this Agreement or any obligation herein
imposed on Issuer, or the breach thereof, shall constitute or give rise to or
impose upon Issuer a pecuniary liability, a charge upon its general credit or a
pledge of its general revenues. Issuer has no taxing power. In making the
agreements, provisions and covenants set forth in this Agreement, Issuer has not
obligated itself except with respect to its representations and warranties
herein and the application by Issuer of the Loan Payments to be paid by
Borrower. All amounts required to be paid by Borrower hereunder shall be paid in
lawful money of the United States of America by
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6 - LOAN AND SECURITY AGREEMENT
<PAGE> 7
corporate check or wire transfer to the Debt Service Fund. No recourse shall be
had by Lender or Borrower for any claim based on this Agreement or the Tax
Regulatory Agreement against Issuer or any director, officer, employee or agent
of Issuer alleging personal liability, on the part of such person, unless such
claim is based on the willful dishonesty of or intentional violation of law by
such person.
3.7 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of interest or the fees
hereunder, as the case may be.
3.8 LOAN PAYMENTS TO BE UNCONDITIONAL. The obligations of Borrower
to make the Loan Payments required hereunder and to make other payments
hereunder and to perform and observe the covenants and agreements contained
herein shall be absolute and unconditional in all events, without abatement,
diminution, deduction, setoff or defense for any reason, including (without
limitation) any failure of the Project to be completed, any defects,
malfunctions, breakdowns or infirmities in the Project or any accident,
condemnation, destruction or unforeseen circumstances. Notwithstanding any
dispute between Borrower and any of Issuer, Lender, or any other person,
Borrower shall make all Loan Payments when due and shall not withhold any Loan
Payments pending final resolution of such dispute, nor shall Borrower assert any
right of set-off or counterclaim against its obligation to make such payments
required under this Agreement.
3.9 PREPAYMENT. Borrower shall have the right to prepay the Loan
and direct Issuer to optionally redeem the Bond in full. The prepayment amount
shall be paid by Borrower to Lender in an amount equal to the present value of
all remaining unpaid Loan Payments discounted at a rate of six percent (6%) per
annum.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER. Issuer
represents, warrants and covenants for the benefit of Lender and Borrower, as
follows:
(a) Issuer is a public body corporate and politic with perpetual
corporate succession, constituting an instrumentality of the State.
(b) Issuer is authorized under the laws of the State to enter into
this Agreement, the Tax Regulatory Agreement and the transactions contemplated
hereby, to issue the Bond and to perform all of its obligations hereunder.
(c) Issuer has duly authorized the execution and delivery of this
Agreement, the Bond and the Tax Regulatory Agreement under the terms and
provisions of the resolution of its governing body or by other appropriate
official approval, and further represents, covenants and warrants that all
requirements have been met and procedures have occurred in order to ensure the
enforceability of this Agreement, the Bond and the Tax Regulatory Agreement
against Issuer.
(d) The officer of Issuer executing this Agreement and any related
documents has been duly authorized to execute and deliver this Agreement, the
Bond and the Tax Regulatory Agreement and such related documents under the terms
and provisions of a resolution of Issuer's governing body, or by other
appropriate official action.
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7 - LOAN AND SECURITY AGREEMENT
<PAGE> 8
(e) This Agreement, the Bond and the Tax Regulatory Agreement are
legal, valid and binding obligations of Issuer, enforceable in accordance with
their respective terms, except to the extent limited by bankruptcy,
reorganization or other laws of general application relating to effecting the
enforcement of creditors' rights.
(f) Issuer has assigned to Lender all of Issuer's rights in the
Project and this Agreement (except for Retained Rights) including the assignment
of all rights in the security interest granted to Issuer by Borrower.
(g) Issuer will not pledge, mortgage or assign this Agreement or its
duties and obligations hereunder to any person, firm or corporation, except as
provided under the terms hereof.
(h) Issuer will submit or cause to be submitted to the Secretary of
the Treasury a Form 8038 (or other information reporting statement) at the time
and in the form required by the Code.
(i) The financing of the Project has been approved by the
"applicable elected representative" (as defined in Section 147(f) of the Code)
of Issuer after a public hearing held upon reasonable notice.
5. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
5.1 GOOD STANDING; QUALIFIED TO DO BUSINESS. The Borrower (a) is
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (b) has the requisite power and authority to own its
properties and assets and to transact the businesses in which it is presently,
or proposes to be, engaged and (c) is duly qualified and authorized to do
business in the State and is in good standing in every jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents or (iii) the rights of the Lender hereunder.
5.2 DUE EXECUTION, ETC. The execution, delivery and performance by
the Borrower of each of the Loan Documents to which it is a party are within the
powers of the Borrower, do not contravene the original documents, if any, of the
Borrower, and do not (a) violate any law or regulation, or any order or decree
of any applicable court or governmental authority, (b) conflict with or
result in a breach of, or constitute a default under, any material indenture,
mortgage or deed of trust or any material lease, agreement or other instrument
binding on the Borrower or any of its properties, or (c) require the consent,
authorization by or approval of or notice to or filing or registration with any
governmental authority or other Person, other than those that have been obtained
or made. This Agreement is, and each of the other Loan Documents to which the
Borrower is or will be a party, when delivered hereunder or thereunder, will be,
the legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting creditors' right, generally
and by general principles of equity.
5.3 SOLVENCY; NO LIENS. The Borrower is solvent, is paying its debts
as they become due and has sufficient capital to conduct its business; the fair
saleable value of the Borrower's assets is in excess of the total amount of its
liabilities (including contingent liabilities) as they become absolute and
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8 - LOAN AND SECURITY AGREEMENT
<PAGE> 9
matured; the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral (subject to subordinated
liens therein in accordance with any subordination agreement approved by
Lender); and the Borrower is, or will be at the time additional Collateral is
acquired by it, the absolute owner of the Collateral with full right to pledge,
sell, consign, transfer and create a security interest therein, free and clear
of any and all claims or liens in favor of any other Person.
5.4 NO JUDGMENTS, LITIGATION. No judgments are outstanding against
the Borrower nor is there now pending or, to the best of the Borrower's
knowledge after diligent inquiry, threatened any litigation, contested claim, or
governmental proceeding by or against the Borrower except judgments and pending
or threatened litigation, contested claims and governmental proceedings which
would not, in the aggregate, have a Material Adverse Effect on the Borrower.
5.5 NO DEFAULTS. The Borrower is not in default under any material
contract, lease, or commitment to which it is a party or by which it is bound or
the Borrower has received duly executed waivers for any of such defaults in form
and substance satisfactory to the Issuer and Lender. The Borrower knows of no
dispute regarding any contract, lease, or commitment to which the Borrower is a
party which could have a Material Adverse Effect on the Borrower.
5.6 COLLATERAL LOCATIONS. On the date hereof, the Collateral is
located at the place or places of business specified in Exhibit D hereto.
5.7 NO EVENTS OF DEFAULT. No Event of Default has occurred and is
continuing nor has any event occurred which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.
5.8 NO LIMITATION ON LENDER'S RIGHTS. Except as permitted herein,
none of the Collateral is subject to contractual obligations that may restrict
or inhibit the Lender's rights or abilities to sell or dispose of the Collateral
or any part thereof after the occurrence of an Event of Default.
5.9 PERFECTION AND PRIORITY OF SECURITY INTEREST. This Agreement
creates a valid and, upon completion of all required filings of financing
statements, a perfected and first priority and security interest in the
Collateral, securing the payment of all the Obligations.
5.10 MODEL AND SERIAL NUMBERS. Exhibit D hereto sets forth the true
and correct model number and serial number of each item of equipment that
constitutes Collateral.
6. COVENANTS OF THE BORROWER.
6.1 EXISTENCE, ETC. The Borrower will maintain its existence and its
current yearly accounting cycle; shall maintain in full force and effect all
licenses, bonds, franchises, leases, trademarks, patents, contracts and other
rights where the failure to so maintain would have a Material Adverse Effect;
shall continue in, and limit its operations to, the same general lines of
business as those presently conducted by it; and shall comply with all
applicable laws and regulations of any federal, state or local governmental
authority, except for such laws and regulations the violations of which would
not, in the aggregate, have a Material Adverse Effect on the Borrower.
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9 - LOAN AND SECURITY AGREEMENT
<PAGE> 10
6.2 NOTICE TO THE LENDER. As soon as possible, and in any event within
five days after the Borrower learns of the following, the Borrower will give
written notice to the Lender of (a) any proceeding instituted or threatened to
be instituted by or against the Borrower in any federal, state, local or foreign
court or before any commission or other regulatory body (federal, state, local
or foreign), (b) the occurrence of any Material Adverse Change with respect to
the Borrower and (c) the occurrence of any Event of Default or event or
condition which, with notice or lapse of time or both, would constitute an Event
of Default, together with a statement of the action which the Borrower has taken
or proposes to take with respect thereto.
6.3 MAINTENANCE OF BOOKS AND RECORDS. The Borrower will maintain books and
records pertaining to the Collateral in such detail, form and scope as the
Lender shall require in its commercially reasonable judgment. The Borrower
agrees that the Lender or its agents (at Lender's cost and expense so long as no
Event of Default shall have occurred and be continuing) may enter upon the
Borrower's premises at any time and from time to time during normal business
hours, and at any time on and after the occurrence of an Event of Default, for
the purpose of inspecting the Collateral and any and all records pertaining
thereto.
6.4 INSURANCE. The Borrower will maintain insurance on the Collateral
under such policies of insurance, with such insurance companies, in such amounts
and covering such risks as are at all times reasonably satisfactory to the
Lender. All such policies shall be made payable to the Lender, in case of loss,
under a standard non-contributory "lender" or "secured party" clause and are to
contain such other provisions as the Lender may reasonably require to protect
the Lender's interests in the Collateral and to any payments to be made under
such policies. True copies of all original insurance policies are to be
delivered to the Lender, premium prepaid, with the loss payable endorsement in
the Lender's favor, and shall provide for not less than thirty days' prior
written notice to the Lender, of any material alteration, as determined in the
sole discretion of the Lender, or cancellation of coverage. If the Borrower
fails to maintain such insurance, the Lender may arrange for (at the Borrower's
expense and without any responsibility on the Lender's part for) obtaining the
insurance. Unless the Lender shall otherwise agree with the Borrower in writing,
the Lender shall have the sole right, in the name of the Lender or the Borrower,
to file claims under any insurance policies, to receive and give acquittance for
any payments that may be payable thereunder, and to execute any endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims under
any such insurance policies.
6.5 TAXES. The Borrower will pay, when due, all taxes, assessments, claims
and other charges (herein "taxes") lawfully levied or assessed against the
Borrower or the Collateral other than taxes that are being diligently contested
in good faith by the Borrower by appropriate proceedings promptly instituted and
for which an adequate reserve is being maintained by the Borrower in accordance
with GAAP. If any taxes remain unpaid after the date fixed for the payment
thereof, or if any lien shall be claimed therefor, and such taxes are not being
diligently contested in good faith by the Borrower, then, upon notice to the
Borrower, but on the Borrower's behalf, the Lender may pay such taxes, and the
amount thereof shall be included in the Obligations.
6.6 BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS; FEES ON COLLATERAL. The
Borrower will defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein. Borrower will not
permit any notice creating or otherwise relating to
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10 - LOAN AND SECURITY AGREEMENT
<PAGE> 11
liens on the Collateral or any portion thereof to exist or be on file in any
public office. The Borrower shall promptly pay, when due, all transportation,
storage and warehousing charges and license fees, registration fees,
assessments, charges, permit fees and taxes (municipal, state and federal)
which may now or hereafter be imposed upon the ownership, leasing, renting,
possession, sale or use of the Collateral, excluding, however, all taxes on or
measured by the Lender's income.
6.7 NO CHANGE OF LOCATION, STRUCTURE OR IDENTITY. The Borrower will
not (a) change the location of its chief executive office or establish any
place of business other than those specified herein or (b) move or permit the
movement of any Collateral from the location specified in Exhibit D hereto,
except that the Borrower may change its chief executive office, establish any
other place of business, and keep Collateral at other locations within the
United States provided that the Borrower has delivered to the Lender (i) prior
written notice thereof and (ii) duly executed financing statements and other
agreements and instruments (all in form and substance satisfactory to the
Lender) necessary to perfect and maintain in favor of the Lender a first
priority security interest in the Collateral. Notwithstanding anything to the
contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles or rolling stock at any location in the
United States provided that the Lender's security interest in any such
Collateral is conspicuously marked on the certificate of title thereof and the
Borrower has complied with the provisions of Section 4.9.
6.8 USE OF COLLATERAL; LICENSES. The Collateral shall be operated
by competent, qualified personnel in connection with the Borrower's business
purposes, for the purpose for which the Collateral was designed and in
accordance with applicable operating instructions, laws and government
regulations, and the Borrower shall use every reasonable precaution to prevent
loss or damage to the Collateral from fire and other hazards. The Collateral
shall not be used or operated for personal, family or household purposes. The
Borrower shall procure and maintain in effect all orders, licenses,
certificates, permits, approvals and consents required by federal, state or
local laws or by any governmental body, agency or authority in connection with
the delivery, installation, use and operation of the Collateral.
6.9 FURTHER ASSURANCES. The Borrower will, promptly upon request by
the Lender, execute and deliver any document required by the Lender (including,
without limitation, warehouseman or processor disclaimers, mortgagee waivers,
landlord disclaimers, or subordination agreements with respect to the
Obligations and the Collateral), give any notices, execute and file any
financing statements, mortgages or other documents (all in form and substance
reasonably satisfactory to the Lender), mark any chattel paper, deliver any
chattel paper or instruments to the Lender, and take any other actions that are
necessary or, in the commercially reasonable judgment of the Lender, desirable
to perfect or continue the perfection and priority of the Lender's security
interest in the Collateral, to protect the Collateral against the rights,
claims, or interests of any Persons, or to effect the purposes of this
Agreement. The Borrower hereby authorizes the Lender to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A carbon, photographic or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all reasonable costs and
expenses (including attorneys' fees) incurred in connection with any of the
foregoing.
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11-LOAN AND SECURITY AGREEMENT
<PAGE> 12
6.10 NO DISPOSITION OF COLLATERAL. The Borrower will not in any way
hypothecate or create or permit to exist any lien, security interest, charge or
encumbrance on or other interest in any of the Collateral, except for the lien
and security interest granted hereby, and the Borrower will not sell, transfer,
assign, pledge, collaterally assign, exchange or otherwise dispose of any of
the Collateral without written notice to and consent of the Lender and an
Opinion of Bond Counsel. In the event the Collateral, or any part thereof, is
sold, transferred, assigned, exchanged, or otherwise disposed of in violation
of these provisions, the security interest of the Lender shall continue in such
Collateral or part thereof notwithstanding such sale, transfer, assignment,
exchange or other disposition, and the Borrower will hold the proceeds thereof
in a separate account for the benefit of the Lender. Following such a sale, the
Borrower will transfer such proceeds to the Lender in kind.
6.11 NO LIMITATION ON LENDER'S RIGHTS. The Borrower will not enter
into any contractual obligations which may restrict or inhibit the Lender's
rights or ability to sell or otherwise dispose of the Collateral or any part
thereof.
6.12 PROTECTION OF COLLATERAL. The Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest or compromise any encumbrance, charge
or lien which, in the reasonable judgment of the Lender, appears to be prior to
or superior to the security interests granted hereunder, and appear in and
defend any action or proceeding purporting to affect its security interests in,
or the value of, any, of the Collateral. The Borrower hereby agrees to reimburse
the Lender for all reasonable payments made and reasonable expenses incurred in
connection with the enforcement of this Agreement including fees, expenses and
disbursements of attorneys and paralegals (including the allocated costs of
in-house counsel) acting for the Lender, including any of the foregoing payments
under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or reckless or willful misconduct. The Lender
shall have no obligation to make any of the foregoing payments or perform any of
the foregoing acts.
6.13 DELIVERY OF ITEMS. The Borrower will promptly (but in no event
later than one Business Day) after its receipt thereof, deliver to the Lender
any documents or certificates of title issued with respect to any property
included in the Collateral, and any promissory notes, letters of credit or
instruments related to or otherwise in connection with any property included in
the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender.
6.14 FUNDAMENTAL CHANGES. Without the prior written consent of the
Lender (which consent shall not be unreasonably withheld) and an Opinion of
Bond Counsel, the Borrower shall not merge or consolidate into any other
Person, or amend or modify its name, status or existence, or sell or otherwise
dispose of all or substantially all of its assets.
6.15 SALE OF ASSETS. Borrower will not sell, lease, assign, transfer
or otherwise dispose of any of the Collateral or any interest therein (whether
in one transaction or in a series of transactions) unless Borrower replaces
such Collateral with substitute property satisfactory to Lender in Lender's
sole discretion and such substitute property is substituted in this Agreement
and the related documents by
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12-LOAN AND SECURITY AGREEMENT
<PAGE> 13
appropriate amendment prior to the date of such proposed sale. Borrower will
not sell, lease, assign, transfer or otherwise dispose of Project components
without an Opinion of Bond Counsel.
6.16 PLACE OF BUSINESS. Borrower will not permit any of the
Project to be moved outside the limits of Issaquah, Washington. Borrower will
not permit any of the Collateral or any records pertaining to the Collateral to
be moved outside the locations of such items on the date of issuance of the
Bond.
6.17 PROJECT A "MANUFACTURING FACILITY." Borrower owns or
will own the Project and intends to operate the Project, or cause the Project to
be operated, in conformance with the Act and as a "manufacturing facility,"
within the meaning of Section 144(a)(12)(C) of the Code, until the date on which
all of the Loan Payments have been fully paid.
6.18 TAX EXEMPT BORROWINGS. The aggregate authorized face
amount of the Bond allocated to any test-period beneficiary, when increased by
the outstanding tax-exempt facility-related bonds of such test-period
beneficiary, does not exceed $40,000,000, all within the meaning of Section
144(a)(10) of the Code. The aggregate amount of capital expenditures with
respect to any facilities located within Issaquah, Washington whose principal
user is the Borrower or an entity or person related to the Borrower to be paid
or incurred during the six-year period beginning September 30, 1994 and ending
September 30, 2000 shall not exceed $10,000,000, all within the meaning of
Section 144(a)(4) of the Code.
6.19 PRESERVATION OF TAX EXEMPT STATUS. Borrower will not
take any action that would cause the Interest on the Bond to become includable
in gross income of the holder thereof for federal income tax purposes under the
Code, and Borrower will take and will cause its officers, employees and agents
to take all affirmative actions legally within its power necessary to ensure
that such Interest does not become includable in gross income of the holder
thereof for federal income tax purposes under the Code (including, without
limitation, the calculation and payment of any rebate required to preserve such
exclusion).
6.20 ASSIST ISSUER. Borrower will aid and assist Issuer in
connection with preparing and submitting to the Secretary of the Treasury a Form
8038 (or other applicable information reporting statement) at the time and in
the form required by the Code.
6.21 TAX REGULATORY AGREEMENT. Borrower will comply fully at
all times with the Tax Regulatory Agreement, and Borrower will not take any
action, or omit to take any action, which, if taken or omitted, respectively,
would violate the Tax Regulatory Agreement.
7. FINANCIAL STATEMENTS. Until the payment and satisfaction in
full of all Obligations, the Borrower shall deliver to the Lender the following
financial information:
7.1 ANNUAL FINANCIAL STATEMENTS. As soon as available, but
not later than 120 days after the end of each fiscal year of the Borrower and
its consolidated subsidiaries, the consolidated balance sheet, income statement
and statements of cash flows and shareholders equity for the Borrower and its
consolidated subsidiaries (the "Financial Statements") for such year, reported
on by independent certified public accountants without an adverse
qualification; and
- -------------------------------------------------------------------------------
13-LOAN AND SECURITY AGREEMENT
<PAGE> 14
7.2 QUARTERLY FINANCIAL STATEMENTS. As soon as available,
but not later than 60 days after the end of each of the first three fiscal
quarters in any fiscal year of the Borrower and its consolidated subsidiaries,
the Financial Statements for such fiscal quarter, together with a certification
duly executed by a responsible officer of the Borrower that such Financial
Statements have been prepared in accordance with GAAP and are fairly stated in
all material respects (subject to normal year-end audit adjustments and lack of
footnote disclosure).
8. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to make any payment with
respect to Obligations as required hereunder when payable or within three
Business Days of when payable, whether at stated maturity, by acceleration or
otherwise;
(b) any representation or warranty made or deemed made by
the Borrower under or in connection with any Loan Document shall prove to have
been false or incorrect in any material respect when made;
(c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in any Loan Document (other than as set forth
in Section 8(a)) to be performed or observed on its part, and such failure
remains unremedied for the later of thirty days from (i) the date on which the
Lender has given the Borrower written notice of such failure and (ii) the date
on which the Borrower knew or should have known of such failure;
(d) any material provision of any Loan Document to which
the Borrower is a party shall for any reason cease to be valid and binding on
the Borrower, or the Borrower shall so state in writing;
(e) dissolution, liquidation, winding up or cessation of
the Borrower's business, or the failure of the Borrower to pay its debts as
they mature; or the admission in writing by the Borrower of its inability to
pay its debts as they mature; or the calling of a meeting of the Borrower's
creditors for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
ninety days following the commencement thereof, or any action by the Borrower
is taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by
the Borrower, whether voluntary or involuntary, or the appointment of a
trustee, custodian, receiver or similar official for the Borrower authorizing
any such proceeding;
(h) the Borrower shall (i) default in the payment of
principal or interest on any indebtedness (other than the Obligations) in an
amount in excess of $100,000 beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created; or (ii)
default
- -------------------------------------------------------------------------------
14-LOAN AND SECURITY AGREEMENT
<PAGE> 15
in the observance or performance of any other agreement or condition relating
to any such indebtedness beyond any grace period or contained in any instrument
or agreement relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such indebtedness to cause, with the giving
of notice if required, such indebtedness to become due prior to its stated
maturity.
(i) the Borrower suffers or sustains a Material Adverse Change;
(j) any federal tax lien is filed of record against the Borrower and
is not bonded or discharged within three Business Days;
(k) any judgment in an amount in excess of $100,000 shall be rendered
against the Borrower which shall not be stayed, vacated, bonded or discharged
within sixty days;
(l) any material covenant, agreement or obligation made by the
Borrower and contained in or evidenced by any of the Loan Documents shall cease
to be enforceable, or shall be determined to be unenforceable, in accordance
with its terms; the Borrower shall deny or disaffirm the Obligations under any
of the Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable or invalid, or are not given the priority contemplated by this
Agreement;
(m) there is a change in the ownership of control of the Borrower; or
(n) an Event of Taxability shall occur.
9. REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) The Lender may, without prejudice to any of its other rights
under any Loan Document or applicable law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 8(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration)
without presentment, representation, demand of payment or protest, which are
hereby expressly waived.
(b) The Lender may take possession of the Collateral and, for that
purpose may enter, with the aid and assistance of any person or persons, any
premises where the Collateral or any part thereof is, or may be placed, and
remove the same.
(c) The obligation of the Lender, if any, to give additional (or to
continue) financial accommodations of any kind to the Borrower shall
immediately terminate.
(d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any other Loan
Document) or otherwise available to it, all the rights and remedies of a
secured party under the Uniform Commercial Code (the "UCC") whether or not the
UCC applies to the affected Collateral and also may (i) require the Borrower
to, and the Borrower hereby agrees that it will at its expense and upon request
of the Lender forthwith, assemble all or part of the Collateral as directed by
the Lender and make it available to the Lender at a place to be designated
- --------------------------------------------------------------------------------
15 - LOAN AND SECURITY AGREEMENT
<PAGE> 16
by the Lender that is reasonably convenient to both parties and (ii) without
notice except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of the Lender's offices
or elsewhere, for cash, on credit or for future delivery, and upon such other
terms as are commercially reasonable. The Borrower agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to the
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The Lender
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Lender may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.
(e) All cash proceeds received by the Lender in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall be applied by the Lender against the Obligations. Any surplus
of such cash or cash proceeds held by the Lender and remaining after the full
and final payment of all the Obligations shall be promptly paid over to the
Borrower or to such other Person to which the Lender may be required under
applicable law, or directed by a court of competent jurisdiction, to make
payment of such surplus.
10. MISCELLANEOUS PROVISIONS.
10.1 NOTICES. Except as otherwise provided herein, all notices,
approvals, consents, correspondence or other communications required or desired
to be given hereunder shall be given in writing and shall be delivered by
overnight courier, hand delivery or certified or registered mail, postage
prepaid, if to the Issuer, then to Washington Economic Development Finance
Authority, 2001 Sixth Avenue, Suite 2700, Seattle, WA 98121, Attn: Executive
Director, if to the Lender, then to Technology Finance Division, 406 Farmington
Avenue, Farmington, Connecticut 06032, Attention: Assistant Vice President,
Lease Administration, with a copy to the Lender at Riverway II, West Office
Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department or such other address as shall be designated by the Lender to the
Borrower in accordance herewith, and if to the Borrower, then to 2005 Northwest
Sammamish Road, Issaquah, Washington 98027, Attention: Matthew L. Root, Chief
Financial Officer, or such other address as shall be designated by the Borrower
to the Lender in accordance herewith. All such notices and correspondence shall
be effective when received.
10.2 BORROWER REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Borrower shall remain liable, under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Lender of any of
the rights hereunder shall not release the Borrower from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) the Lender shall not have any obligation or liability under the contracts
and agreements included in the Collateral by reason of this Agreement, nor
shall the Lender be obligated to perform any of the obligations or duties of
the Borrower thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
10.3 LENDER APPOINTED ATTORNEY-IN-FACT. The Borrower hereby irrevocably
appoints the Lender the Borrower's attorney-in-fact, with full authority in the
place and stead of the Borrower and in the name of the Borrower or otherwise,
from time to time in the discretion of the Lender, to take any
- --------------------------------------------------------------------------------
16 - LOAN AND SECURITY AGREEMENT
<PAGE> 17
action and to execute any instrument which the Lender may deem necessary or
advisable to accomplish the purpose of this Agreement, including, without
limitation:
(a) to obtain and adjust insurance required to be paid to the Lender
hereunder;
(b) upon the occurrence and during the continuance of an Event of
Default, to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) or (b) above; and
(d) upon the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any proceedings
which the Lender may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Lender with respect
to any of the Collateral.
10.4 HEADINGS. The headings in this Agreement are for purposes of
reference only and shall not affect the meaning or construction of any
provision of this Agreement.
10.5 ASSIGNMENTS. The Borrower shall not have the right to assign its
obligations under this Agreement or any interest therein. The Lender may not
assign its rights or delegate its obligations under the Bond or this Agreement
except as permitted by this Agreement and the Bond. The Bond may be transferred
by Lender if Lender delivers the following to Issuer: (i) an opinion of
nationally recognized bond counsel to Issuer to the effect that such transfer
and reregistration will not violate the registration requirements of federal or
State securities laws, and (ii) an investment letter in substantially the same
form as delivered to Issuer by Lender on the Closing Date executed by the
proposed new owner of the Bond. Any attempt by Lender to transfer any interest
in the Bond to any other person shall be void, and in such event Lender shall
defend, indemnify and hold harmless the Issuer against any claims relating to
any such transfer. In no event shall any transfer of the Bond result in the
Bond being owned by more than one owner. In addition to the foregoing, no such
transfer of the Bond or assignment of this Agreement by Lender shall be
effective unless and until Issuer and Borrower shall have received notice of
the transfer or assignment disclosing the name and address of the assignee or
subassignee. Upon receipt of notice of assignment, Borrower will reflect in a
book entry the assignee designated in such notice of assignment, and shall
agree to make all payments to the assignee designated in the notice of
assignment, notwithstanding any claim, defense, setoff or counterclaim
whatsoever (whether arising from a breach of this Agreement or otherwise) that
Issuer and Borrower may from time to time have against Lender or the assignee.
Borrower agrees to execute all documents, including notices of assignment and
chattel mortgages or financing statements, which may be reasonably requested by
Lender or its assignee to protect their interest in the Collateral and in this
Agreement. Notwithstanding the foregoing, Lender agrees that it will not make
any such assignment or transfer under this section to a direct competitor of
Borrower without Borrower's express written consent.
10.6 AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the Borrower
from any provision of this
- --------------------------------------------------------------------------------
17 - LOAN AND SECURITY AGREEMENT
<PAGE> 18
Agreement shall be effective only by a writing signed by the Issuer, Lender and
Borrower and shall bind and benefit the parties and their respective successors
and assigns, subject, in the case of the Borrower, to the first sentence of
Section 10.5. Acquiescence in a course of performance rendered under this
Agreement shall not be relevant in determining the meaning of this Agreement
even though the accepting or acquiescing party had knowledge of the nature of
the performance and opportunity for objection.
10.7 CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until the indefeasible payment in full of the Obligations, (b)
be binding upon the Borrower and its successors and assigns and (c) inure,
together with the rights and remedies of the Issuer and Lender hereunder, to
the benefit of the Issuer and Lender and their respective successors,
transferees and assigns.
10.8 REINSTATEMENT. To the extent permitted by law, this Agreement
and the rights and powers granted to the Issuer and Lender hereunder and under
the Loan Documents shall continue to be effective or be reinstated if at any
time any amount received by the Issuer and Lender in respect of the Obligations
is rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
10.9 SURVIVAL OF PROVISIONS. All representations, warranties and
covenants of the Borrower contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Borrower of the Obligations secured hereby.
10.10 INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Lender and its directors, officers, agents, employees and counsel
from and against any and all costs, expenses, claims, or liability incurred by
the Lender or such Person hereunder and under any other Loan Document or in
connection herewith or therewith, unless such claim or liability shall be due
to willful misconduct or gross negligence on the part of the Lender or such
Person.
10.11 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF WASHINGTON WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
10.12 VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF WASHINGTON SITUATED IN KING COUNTY, OR OF THE UNITED
STATES OF AMERICA FOR THE WESTERN DISTRICT OF WASHINGTON, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH
ANY SUCH ACTION OR PROCEEDING, (A) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN
- --------------------------------------------------------------------------------
18 - LOAN AND SECURITY AGREEMENT
<PAGE> 19
SUCH RESPECTIVE JURISDICTIONS AND (B) THE RIGHT TO INTERPOSE ANY NONCOMPULSORY
SETOFF, COUNTERCLAIM OR CROSS-CLAIM. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR IT SPECIFIED IN SECTION 10
HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION, SUBJECT IN EACH
INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND REMEDIES.
10.13 DELAYS; PARTIAL EXERCISE OF REMEDIES. No delays or omission of
the Lender to exercise any right hereunder, whether before or after the
happening of any Event of Default, shall impair any such right or shall operate
as a waiver thereof or as a waiver of any such Event of Default. No single or
partial exercise by the Lender of any right or remedy shall preclude any other
or further exercise thereof, or preclude any other right or remedy.
10.14 WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER IRREVOCABLY
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
10.15 ENTIRE AGREEMENTS. The Issuer, Borrower and Lender agree that
this Agreement and the Exhibits hereto are the complete and exclusive statement
and agreement between the parties with respect to the subject matter hereof,
superseding all proposals and prior agreements, oral or written, and all other
communications between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first set forth above and to be accepted by its duly authorized
officer.
- --------------------------------------------------------------------------------
19 - LOAN AND SECURITY AGREEMENT
<PAGE> 20
WASHINGTON ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
By: /s/ WILLIAM A. GLASSFORD
-------------------------------
William A. Glassford, Chair
INTRACEL CORPORATION
By:
Name:
Title:
(FED ID NO. ###-##-####)
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
Name:
Title:
- --------------------------------------------------------------------------------
SIGNATURE PAGE
<PAGE> 21
WASHINGTON ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
By:
-------------------------------
William A. Glassford, Chair
INTRACEL CORPORATION
By: /s/ [ILLEGIBLE]
-------------------------------
Name:
Title:
(FED ID NO. ###-##-####)
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
Name:
Title:
- --------------------------------------------------------------------------------
SIGNATURE PAGE
<PAGE> 22
WASHINGTON ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
By:
-------------------------------
William A. Glassford, Chair
INTRACEL CORPORATION
By: /s/ [ILLEGIBLE]
-------------------------------
Name:
Title:
(FED ID NO. ###-##-####)
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ GARY P. MORO
-------------------------------
Name: Gary P. Moro
Title: Vice President
- --------------------------------------------------------------------------------
SIGNATURE PAGE
<PAGE> 23
EXHIBIT A
DESCRIPTION OF PROJECT AND SCHEDULE OF LOAN PAYMENTS
Description of Project: Acquisition of equipment to be used by Borrower in
connection with the manufacture of medical diagnostic devices. The Borrower's
facilities are located in Issaquah, Washington.
Schedule of Loan Payments: Attached
<PAGE> 24
09/29/1997 Page 1
INTRACEL CORPORATION C/S# 1007-001
Compound Period.......: Monthly
Nominal Annual Rate...: 10.946 %
Effective Annual Rate.: 11.512 %
Periodic Rate.........: 0.9122 %
Daily Rate............: 0.02999%
CASH FLOW DATA
<TABLE>
<CAPTION>
Event Start Date Amount Number Period End Date
- --------- ---------- ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
1 Loan 09/30/1997 713,339.49 1
2 Payment 09/30/1997 506.85 1
3 Payment 10/01/1997 30,416.80 1
4 Payment 11/01/1997 15,208.40 58 Monthly 08/01/2002
</TABLE>
AMORTIZATION SCHEDULE - Normal Amortization
<TABLE>
<CAPTION>
Date Payment Interest Principal Balance
- --------------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Loan 09/30/1997 713,339.49
1 09/30/1997 506.95 0.00 506.95 712,832.54
2 10/01/1997 30,416.80 213.77 30,203.03 682,629.51
3 11/01/1997 15,208.40 6,226.63 8,981.77 673,647.74
4 12/01/1997 15,208.40 6,144.70 9,063.70 654,584.04
1997 Totals 61,340.55 12,585.10 48,755.45
5 01/01/1998 15,208.40 6,082.02 9,146.38 655,437.66
6 02/01/1998 15,208.40 5,978.59 9,229.81 648,207.85
7 03/01/1998 15,208.40 5,894.40 9,314.00 636,893.85
8 04/01/1998 15,208.40 5,809.45 9,398.95 627,494.90
9 05/01/1998 15,208.40 5,723.71 9,494.89 618,010.21
10 06/01/1998 15,208.40 5,637.20 9,571.20 608,439.01
11 07/01/1998 15,208.40 5,549.89 9,658.51 598,780.50
12 08/01/1998 15,208.40 5,461.79 9,746.81 589,033.89
13 09/01/1998 15,208.40 5,372.89 9,835.51 579,198.38
14 10/01/1998 15,208.40 5,283.18 9,925.22 569,273.16
15 11/01/1998 15,208.40 5,192.64 10,015.76 559,257.40
16 12/01/1998 15,208.40 5,101.28 10,107.12 548,150.28
1998 Totals 182,500.80 67,067.04 115,433.76
17 01/01/1999 15,208.40 5,009.09 10,199.31 538,950.97
18 02/01/1999 15,208.40 4,916.06 10,292.34 528,658.63
19 03/01/1999 15,208.40 4,622.18 10,386.22 518,272.41
20 04/01/1999 15,208.40 4,727.44 10,480.96 507,791.45
21 05/01/1999 15,208.40 4,631.84 10,576.56 497,214.89
22 06/01/1999 15,208.40 4,535.36 10,673.04 488,541.85
23 07/01/1999 15,208.40 4,438.01 10,770.39 475,771.46
24 08/01/1999 15,208.40 4,339.76 10,868.54 454,902.82
25 09/01/1999 15,208.40 4,240.63 10,967.77 453,935.05
</TABLE>
<PAGE> 25
09/29/997 Page 2
INTRACEL CORPORATION C/S# 1007-001
<TABLE>
- --------------------------------------------------------------------------------
Date Payment Interest Principal Balance
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
26 10/01/1999 15,208.40 4,140.58 11,067.82 442,867.23
27 11/01/1999 15,208.40 4,039.83 11,168.77 431,696.46
28 12/01/1999 15,208.40 3,937.75 11,270.65 420,427.81
1999 Totals 182,500.80 53,778.33 128,722.47
29 01/01/2000 15,208.40 3,834.94 11,373.45 409,054.35
30 02/01/2000 15,208.40 3,731.20 11,477.20 397,557.15
31 03/01/2000 15,208.40 3,626.51 11,581.89 385,995.26
32 04/01/2000 15,208.40 3,520.87 11,687.53 374,307.73
33 05/01/2000 15,208.40 3,414.26 11,794.14 362,513.59
34 06/01/2000 15,208.40 3,306.68 11,901.72 350,611.87
35 07/01/2000 15,208.40 3,198.12 12,010.28 338,601.59
36 08/01/2000 15,208.40 3,088.56 12,119.84 326,481.75
37 09/01/2000 15,208.40 2,978.01 12,230.39 314,251.36
38 10/01/2000 15,208.40 2,866.45 12,341.95 301,909.41
39 11/01/2000 15,208.40 2,753.88 12,454.52 289,454.89
40 12/01/2000 15,208.40 2,640.27 12,568.13 276,886.76
2000 Totals 182,500.80 35,959.75 143,541.05
41 01/01/2001 15,208.40 2,525.63 12,662.77 264,203.99
42 02/01/2001 15,208.40 2,409.94 12,798.46 251,405.53
43 03/01/2001 15,208.40 2,293.20 12,915.20 238,490.33
44 04/01/2001 15,208.40 2,175.40 13,033.00 225,457.33
45 05/01/2001 15,208.40 2,056.52 13,151.88 212,305.45
46 06/01/2001 15,208.40 1,936.55 13,271.85 188,033.60
47 07/01/2001 15,208.40 1,815.49 13,392.91 185,640.69
48 08/01/2001 15,208.40 1,693.33 13,516.07 172,125.62
49 09/01/2001 15,208.40 1,570.05 13,638.35 158,487.27
50 10/01/2001 15,208.40 1,445.65 13,762.75 144,724.52
51 11/01/2001 15,208.40 1,320.11 13,888.29 130,836.23
52 12/01/2000 15,208.40 1,193.43 14,014.97 116,821.26
2001 Totals 182,500.80 22,435.30 160,065.50
53 01/01/2002 15,208.40 1,065.59 14,142.81 102,878.45
54 02/01/2002 15,208.40 936.58 14,271.82 88,406.63
55 03/01/2002 15,208.40 806.50 14,402.00 74,004.63
56 04/01/2002 15,208.40 675.05 14,533.36 59,471.27
57 05/01/2002 15,208.40 642.47 14,665.93 44,805.34
58 06/01/2002 15,208.40 408.69 14,799.71 30,005.63
59 07/01/2002 15,208.40 273.70 14,934.70 15,070.93
60 08/01/2002 15,208.40 137.47 15,070.93 0.00
2002 Totals 121,667.20 4,845.94 116,821.26
Grand Totals 913,010.95 199,871.46 713,339.49
</TABLE>
<PAGE> 26
September 30, 1997
Transamerica Business Credit Corporation
Riverway II
West Office Tower
9399 West Higgins Road
Rosemont, IL 60018
Ladies and Gentlemen:
Reference is made to the Security Agreement dated as of September 30,
1997 executed by the undersigned in favor of Transamerica Business Credit
Corporation ("Lender").
The undersigned authorizes and directs Leader to disburse the proceeds
of the loan as follows:
<TABLE>
<CAPTION>
PAYEE ADDRESS AMOUNT
<S> <C> <C> <C>
Intracel Corporation 2005 NW Sammarnish Road, Suite 107 $308,335.16
Issaquah, WA 98027
Kuhlmann Technologies 10512 N.E. 68th Street $ 13,346.00
Kirkland, WA 98033
Scientek #101 - 11151 Bridgeport Road $ 50,145.00
Richmond, BC Canada V6X 173
Taylor Boller & Equipment 9943 N.E. 6th Drive $ 14,874.00
Portland, OR 97211-1117
Inova Pac-Systeme 1330 Contract Drive $126,449.70
PO Box 28173
Green Bay, WI 54324
Urania Engineering Co. 198 South Polar Street $ 71,730.40
Hazelton, PA 18201-7198 $ 18,060.00
Telenet, Inc. 22122 20th Avenue S.E. #161 $ 9,605.85
Bothell, WA 98021
Accraply, Inc. 3580 Holy Lane North $ 8,867.76
Plymouth, MN 55447-1269
VWR Scientific PO Box 7800 $ 4,176.31
San Francisco, CA 94120 $ 3,232.06
$ 2,395.00 $ 9,803.37
Bio Rad $11,808.50
$ 5,432.00 $ 17,240.50
Imeca USA, Inc. 2440 Impala Drive $ 35,958.00
Carlsbad, CA 92008
Transamerica $ 30,932.75
Total $713.339.49
</TABLE>
INTRACEL CORPORATION
By: [SIG]
------------------------------------
Name:
Title:
<PAGE> 27
EXHIBIT B
FORM OF BOND
THIS BOND HAS NOT BEEN REGISTERED UNDER FEDERAL LAW OR STATE SECURITIES LAWS.
EXCEPT AS PROVIDED HEREIN ANY ATTEMPT TO TRANSFER ANY INTEREST IN THIS BOND TO
ANY OTHER PERSON OTHER THAN THE REGISTERED OWNER NAMED BELOW SHALL BE VOID.
No. R-1 $1,500,000
UNITED STATES OF AMERICA
WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY
ECONOMIC DEVELOPMENT REVENUE BOND, SERIES 1997-E
(Intracel Corporation Project)
ORIGINAL PRINCIPAL AMOUNT: $1,500,000
MATURITY DATE: August 1, 2002
DATED DATE: September 30, 1997
REGISTERED OWNER: Transamerica Business Credit Corporation
THE WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY (the "Issuer"), a
public body corporate and politic and an instrumentality of the State of
Washington, for value received, hereby promises to pay (but only out of
amounts, if any, on deposit in the Debt Service Fund) to the Registered Owner
set forth above, on the maturity date specified above, unless this Bond shall
have been called for redemption and payment of the redemption price shall have
been duly made or provided for, upon presentation and surrender hereof, the
Principal Amount set forth above, or so much thereof as shall have been
advanced by Lender (defined below), and to pay interest thereon from the dates
that installments of such sum are advanced by the Lender (defined below) as set
forth in the Loan and Security Agreement dated September 30, 1997 (the
"Agreement") between the Issuer, Intracel Corporation, a Delaware corporation,
as Borrower (the "Borrower"), and Transamerica Business Credit Corporation, a
Delaware corporation, as Lender (the "Lender") under the Agreement and as the
Registered Owner of this Bond. Notwithstanding the foregoing, in the event of a
Determination of Taxability (as defined in the Agreement), interest on this
Bond shall accrue at the interest rate set forth in the Agreement plus a
Gross-Up Rate (as defined in the Agreement) in the manner described in the
Agreement.
This Bond is given to avoid the execution of an individual bond or
promissory note for each advance by the Lender to the Issuer for the benefit of
the Borrower.
Principal of and premium, if any, and interest on this Bond shall be
payable in lawful money of the United States of America by the Borrower to the
Debt Service Fund (as defined below) for the account of the Registered Owner
hereof, as assignee of the Issuer, as of the close of business on the dates set
forth in the Agreement. Payment shall be paid by corporate check or by wire
transfer to the Debt Service Fund, as defined in the Agreement.
IN ACCORDANCE WITH RCW 43.163.140(1), THIS BOND IS NOT A GENERAL, SPECIAL
OR MORAL OBLIGATION OF THE STATE OF WASHINGTON OR ANY POLITICAL
<PAGE> 28
SUBDIVISION THEREOF, NOR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF
WASHINGTON OR ANY POLITICAL SUBDIVISION THEREOF. THE BOND IS A SPECIAL
NONRECOURSE REVENUE OBLIGATION OF THE ISSUER, SECURED BY AND PAYABLE SOLELY
FROM THE AMOUNTS, IF ANY, ON DEPOSIT IN THE DEBT SERVICE FUND. THE ISSUER HAS
NO TAXING POWER, AND NO TAXING POWER IS PLEDGED TO PAYMENT OF THE BOND.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE
REVERSE HEREOF AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS IF SET FORTH AT THIS PLACE.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts and conditions
required to be performed precedent to and in the execution and delivery of the
Resolution and the Agreements and the issuance of this Bond have been performed
in due time, form and manner as required by law, and that the issuance of this
Bond does not exceed or violate any constitutional or statutory limitation.
IN WITNESS WHEREOF, the Washington Economic Development Finance Authority
has caused this Bond to be executed in its name by the manual or facsimile
signature of its Chair and either its Secretary or Executive Director.
Dated: September 30, 1997.
WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY
By:
---------------------------
Chair
By:
---------------------------
Secretary or Executive Director
- --------------------------------------------------------------------------------
EXHIBIT B-2
<PAGE> 29
[FORM OF REVERSE OF BOND]
This Bond of the Washington Economic Development Finance
Authority (the "Issuer") entitled Economic Development Revenue Bond, Series
1997-E (Intracel Corporation Project) in the original principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000)(the"Bond") is issued pursuant
to, under authority of and in full compliance with the Constitution and laws of
the State of Washington, particularly RCW Chapter 43.163, as amended (the"Act"),
a Resolution of the Issuer duly adopted on September 10, 1997 (the
"Resolution"), and a Loan and Security Agreement dated September 30, 1997 (the
"Agreement"), for the purpose of paying a portion of the cost of the Project (as
described in the Agreement) and for paying costs and expenses incidental thereto
and to the issuance of the Bond. The proceeds of the Bond will be loaned to the
Borrower by the Issuer pursuant to the Agreement.
THE BOND IS SUBJECT TO OPTIONAL AND MANDATORY REDEMPTION UNDER
CERTAIN CONDITIONS, AS PROVIDED BELOW AND AS MORE FULLY DESCRIBED IN THE
AGREEMENT.
This Bond is not transferable by the owner hereof except as
expressly provided in Section 10.5 of the Agreement. Any attempt by Lender to
transfer any interest in the Bond to any other person shall be void. In no event
shall any transfer of the Bond result in the Bond being owned by more than one
owner. The Bond is issuable only as a fully registered Bond in the Authorized
Denomination described in the Resolution. Interest on the Bond shall be paid as
provided in the Agreement.
No recourse shall be had for the payment of the principal of,
premium, if any, or interest on the Bond, any advance thereunder or for any
claim based thereon or upon any obligation, covenant or agreement in the
Resolution or the Agreement, against the Issuer or any past, present or future
officer, employee or agent, or member of the Issuer, or successor to the Issuer,
under any rule of law or equity, statute or constitution or by the enforcement
of any assessment or penalty or otherwise, and all such liability of any such
officer, employee or agent, or member of the Issuer or successor to the Issuer
is hereby expressly waived and released as a condition of and in consideration
for the adoption of the Resolution, the execution of the Agreement and the
issuance of the Bond.
The Resolution and the Agreement prescribe the manner in which
this Bond may be discharged and after which the Bond shall no longer be secured
by or entitled to the benefits of the Resolution or the Agreement, except for
the purposes of registration and exchange of the Bond and the payment hereof.
EXHIBIT B-3
<PAGE> 30
EXHIBIT C1
FORM OF REQUISITION
TO: Transamerica Business Credit Corporation
FROM: Washington Economic Development Finance Authority
SUBJECT: Loan and Security Agreement dated September __, 1997 (the "Agreement")
regarding Washington Economic Development Finance Authority Economic
Development Revenue Bond, Series 1997-E (Intracel Corporation Project)
(the "Bond")
This represents Requisition Certificate No. ____ in the total amount
of $________ for payment of costs of issuance of the Bond or Project Costs.
Amount of requisition:_______________________________________________
Payable to:__________________________________________________________
Account No.:_________________________________________________________
Amounts received pursuant to this requisition will be loaned by the
Washington Economic Development Finance Authority to Intracel Corporation (the
"Borrower") pursuant to Borrower's requisition, a true and complete copy of
which is attached hereto. You are instructed to transfer amounts pursuant to
this requisition directly to the Borrower in accordance with the terms of this
Agreement.
Terms capitalized herein have the meanings specified in the Agreement.
Executed this __ day of _________, 1997.
WASHINGTON ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
By:_____________________
Name:___________________
Title:__________________
<PAGE> 31
EXHIBIT C2
FORM OF REQUISITION
TO: Washington Economic Development Finance Authority
FROM: Intracel Corporation
SUBJECT: Loan and Security Agreement dated September __, 1997 (the "Agreement")
regarding Washington Economic Development Finance Authority Economic
Development Revenue Bond, Series 1997-E (Intracel Corporation
Project)(the "Bond")
This represents Requisition Certificate No. __ in the total amount of
$________ for payment of costs of issuance of the Bond or Project Costs.
Amount of requisition: ____________________________
Payable to: _______________________________________
Account No.: ______________________________________
The undersigned does hereby represent, warrant and certify under the
Agreement that:
1. The expenditures for which funds are requested hereby represent
proper costs of issuance of the Bond or Project Costs, have not been included
in a previous Requisition Certificate and have been properly recorded on the
Company's books. Attached hereto is a list of equipment, together with copies
of supplier's invoices and, if payment is not to be made directly to the
equipment supplier, copies of canceled checks relating to the purchase of the
equipment.
2. The funds requested hereby are not greater than those necessary to
meet obligations due and payable or to reimburse the Company for funds actually
advanced for Project Costs. The money requested does not include retention or
other money not yet due or earned under construction contracts.
3. No more than 2% of the proceeds of the Bond have been, or will be
upon payment under this requisition, used to pay costs of issuance of the Bond,
and substantially all (at lease 95%) of the sum of the payment herein requested
and all other payments from the proceeds of the Bond heretofore made have been
used, as required under Section 144(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and applicable regulations and rulings issued thereunder,
to finance the acquisition and installation of machinery and equipment for the
Project, all of which property is of a character subject to the allowance for
depreciation under Section 167 of the Code, and no substantial part of the sum
of the payment herein requested and all other payments from the proceeds of the
Bond heretofore made has been or will be used, directly or indirectly, as
working capital or to finance inventory.
4. The Company is not in default under the Agreement and nothing has
occurred to the knowledge of the Company that would prevent the performance of
its obligations under the Agreement.
Terms capitalized herein have the meanings specified in the agreement.
<PAGE> 32
Executed this __ day of _____________, 19__.
INTRACEL CORPORATION
By ____________________________
Name __________________________
Title _________________________
<PAGE> 33
Page 1 of 1
EXHIBIT D
________________________________________________________________________________
EXHIBIT D
<PAGE> 34
INTRACEL CORPORATION
EQUIPMENT LIST
<TABLE>
<CAPTION>
VENDOR EQUIPMENT DESCRIPTION TOTAL COST AMOUNT PAID BALANCE DOCUMENTATION
<S> <C> <C> <C> <C> <C>
Carnorsca, Inc. Steam Generator $ 48,670.00 $ 48,670.00 $ Attached
PS VSG-500/50T1
Kunimann Technologies, Inc. Pharmegra Sterilizer $133,400.00 $120,114.00 $ 13,348.00 Attached,
PS2636480 cancelled check
to follow
Lesse Crutcher Lewis Sterilizer Installation $ ? $ $211,771.00 Attached proposal work
not yet complete
Scientek Glassware Washer $ 61,136.00 $ 10,000.00 % 50,145.00 Attached
Taylor Boiler & Equipment Parker Steam Boiler $ 22,310.00 $ 7,436.00 $ 14,874.00 Attached
Serial # 45270
Inova Pac-Systems Aliso Folding, Inserting $180,671.00 $ 54,221.30 $126,448.70 Attached
& Screw Capping Machine
VFVM 4031 ?
Uranus Engineering Co. Pouch Pro System with $102,472.00 $ 30,741.60 $ 71,730.40 Attached
Dessiccant Dispenser
Telenet, Inc. Phone System $ 72,264.82 $ 82,058.77 $ 9,805.85 Attached, cancelled
check to follow
Accraphy, Inc. Infeed/Outfeed $ 13,295.00 $ ? $ 8,857.76 Attached
Turretable
Uranca Engineering Co. Rotary Band Heat $ 16,080.00 $ 16,080.00 Attached
Sealer with Ink Jet
Printer Interface
Model 3500P
VWR Scientific Masterpro Balance $ 4,176.31 $ 4,176.31 Attached
with 2 Stat Data
Printers
Model 620G X .001G
VWR Scientific Branston ? with $ 3,232.06 $ 3,232.06 To be faxed Tues. 9/23
1/4" micro tip
Model 450
Bio Rad Prep Cell with $ 11,808.50 $ 11,808.50 To be faxed Tues. 9/23
Power Pac
Model 491
Bio Rad Mark Protein II $ ? $ 5,423.00 To be faxed Tues. 9/23
Cell/?
Pac 3000 system
VWR Eppendorf Micro- $ 2,395.00 $ 2,395.00 To be faxed Tues. 9/23
centrifuge
Model 5417C
Ismeca USA, Inc. Bio-Line Dispensing $ 36,858.00 $ 35,953.00 Attached
System
Totals $924,601.49 $339,258.91 $586,342.58
</TABLE>
<PAGE> 35
EXHIBIT E
[Form of Borrower's Counsel Opinion]
<PAGE> 36
[MORRISON & FOERSTER LLP LETTERHEAD]
September 30, 1997
Washington Economic Development
Finance Authority
2001 6th Avenue
Suite 2700
Seattle, Washington 98121
Transamerica Business Credit Corporation
76 Batterson Park Road
Farmington, Connecticut 06032-2571
Re: Intracel Corporation
Mesdames and Gentlemen:
We have acted as counsel for Intracel Corporation (the "Company") in
connection with the transaction contemplated by the Loan and Security
Agreement, dated September 30, 1997 (the "Loan Agreement"), among the
Washington Economic Development Finance Authority (the "Issuer"), the Company
and Transamerica Business Credit Corporation (the "Lender"). This opinion is
furnished to you at the request of the Company. Unless otherwise defined
herein, terms defined in the Loan Agreement shall have the same meanings
herein.
We have examined an original copy of the Loan Agreement and the Tax
Certificate and Regulatory Agreement, dated as of the date hereof, between the
Company and the Issuer (the "Tax Regulatory Agreement"). In addition, we have
examined such records, documents, certificates of public officials and of the
Company, made such inquiries of officials of the Company, and considered such
questions of law as we have deemed necessary for the purpose of rendering the
opinions set forth herein.
We have assumed the genuineness of all signatures and the authenticity of
all items submitted to us as originals and the conformity with originals of all
items submitted to us as copies. In making our examination of the Loan
Agreement, we have assumed that each party to the Loan Agreement other than the
Company has the power and authority to execute and deliver, and to perform and
observe the provisions of the Loan Agreement, and has duly authorized, executed
and delivered the Loan Agreement, and that the Loan Agreement constitutes the
legal, valid and binding obligations of such party.
<PAGE> 37
Washington Economic Development
Finance Authority
Transamerica Business Credit Corporation
September 30, 1997
Page Two
Our opinion in paragraph (a) below as to the qualification and good
standing of the Company is based solely upon certificates of public officials
in the states named in those paragraphs.
The opinions hereafter expressed are subject to the following further
qualifications and exceptions;
(1) The effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, including, without limitation, laws relating to fraudulent
transfers or conveyances, preferences and equitable subordination.
(2) Limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of provisions of the Loan
Agreement; and the effect of judicial decisions which have held that certain
provisions are unenforceable where their enforcement would violate the implied
covenant of good faith and fair dealing, or would be commercially unreasonable.
(3) We express no opinion as to the effect on the opinions expressed
herein of (i) the compliance or non-compliance of any party to the Loan
Agreement (other than the Company) with any laws or regulations applicable to
it, or (ii) the legal or regulatory status or the nature of the business of any
such party.
(4) We express no opinion herein as to the creation, perfection or
priority of any liens or security interests created or purported to be created
by the Loan Agreement.
(5) The enforceability of provisions of the Loan Agreement providing for
indemnification, to the extent such indemnification is against public policy.
(6) The enforceability of provisions of the Loan Agreement which purport
to establish evidentiary standards or to make determinations conclusive.
(7) The circumstances under which rights of setoff may be exercised.
(8) The enforceability of any provision of the Loan Agreement which
purports to establish particular courts as the forum for the adjudication of
any controversy relating to the Loan Agreement.
<PAGE> 38
Washington Economic Development
Finance Authority
Transamerica Business Credit Corporation
September 30, 1997
Page Three
(9) Certain remedial provisions of the Loan Agreement may be
unenforceable in whole or in part under the laws of the State of New York, but
the inclusion of such provisions does not render invalid the Loan Agreement,
and the Loan Agreement contains, in our judgment, adequate provisions for the
practical realization of the benefits afforded thereby.
(10) We have assumed that the current Board of Directors of the Company
was validly elected.
Based upon and subject to the foregoing, we are of the opinion that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified and
in good standing in the State of Washington, and has the corporate power and
authority to conduct its business as presently conducted.
(b) The Company has the corporate power and authority to execute and
deliver, and to perform and observe the provisions of, the Loan Agreement.
(c) Each of the Loan Agreement and the Tax Regulatory Agreement has been
duly authorized, executed and delivered by the Company. The Loan Agreement
constitutes valid and binding obligations of the Company enforceable against
the Company in accordance with its terms.
(d) The execution, delivery and performance of the Loan Agreement by the
Company are not in violation of its certificate of incorporation or bylaws.
We express no opinion as to matters governed by any laws other than the
substantive laws of the State of New York (without reference to its
choice-of-law rules), the General Corporation Law of the State of Delaware, and
the federal laws of the United States of America, which are in effect on the
date hereof. We note that the Loan Agreement is governed by the laws of the
State of Washington. In this regard, with respect to the opinions set forth
herein, we have assumed with your permission that the Loan Agreement is
governed by the laws of the State of New York. We express no opinion as to any
choice-of-law provision contained in the Loan Agreement.
<PAGE> 39
Washington Economic Development
Finance Authority
Transamerica Business Credit Corporation
September 30, 1997
Page Three
(9) Certain remedial provisions of the Loan Agreement may be
unenforceable in whole or in part under the laws of the State of New York, but
the inclusion of such provisions does not render invalid the Loan Agreement,
and the Loan Agreement contains, in our judgment, adequate provisions for the
practical realization of the benefits afforded thereby.
Based upon and subject to the foregoing, we are of the opinion that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified and
in good standing in the State of Washington, and has the corporate power and
authority to conduct its business as presently conducted.
(b) The Company has the corporate power and authority to execute and
deliver, and to perform and observe the provisions of, the Loan Agreement.
(c) Each of the Loan Agreement and the Tax Regulatory Agreement has been
duly authorized, executed and delivered by the Company. The Loan Agreement
constitutes valid and binding obligations of the Company enforceable against
the Company in accordance with its terms.
(d) The execution, delivery and performance of the Loan Agreement by the
Company are not in violation of its certificate of incorporation or bylaws.
We express no opinion as to matters governed by any laws other than the
substantive laws of the State of New York (without reference to its
choice-of-law rules), the General Corporation Law of the State of Delaware, and
the federal laws of the United States of America, which are in effect on the
date hereof. We note that the Loan Agreement is governed by the laws of the
State of Washington. In this regard, with respect to the opinions set forth
herein, we have assumed with your permission that the Loan Agreement is
governed by the laws of the State of New York. We express no opinion as to any
choice-of-law provision contained in the Loan Agreement.
<PAGE> 40
Washington Economic Development
Finance Authority
Transamerica Business Credit Corporation
September 30, 1997
Page Four
This opinion is solely for your benefit and may not be relied upon by, nor
may copies be delivered to, any other person without our prior written consent.
In this regard, we acknowledge and agree that a copy of this opinion may be
delivered to Ater Wynne Hewitt Dodson & Skerrill LLP, bond counsel in respect
of the transactions contemplated by the Loan Agreement, and may be included in
the transcript of the proceedings in connection with such transactions.
Very truly yours,
/s/ [SIG]
------------------------------------
<PAGE> 1
EXHIBIT 10.18
WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY
ECONOMIC DEVELOPMENT REVENUE BOND
SERIES 1997-E
(INTRACEL CORPORATION PROJECT)
TAX CERTIFICATE AND REGULATORY AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Recitals and Covenants................................................. 1
SECTION 1. DEFINITIONS............................................... 2
SECTION 2. REPRESENTATIONS........................................... 2
(a) Authorization............................................. 2
(b) Purposes of the Bonds..................................... 2
(c) Purpose of Tax Certificates............................... 2
(d) Statement as to Facts, Estimates and Circumstances........ 3
(e) Responsible Person........................................ 3
SECTION 3. REASONABLE EXPECTATIONS OF THE AUTHORITY AND COMPANY AS
TO FACTS, ESTIMATES AND CIRCUMSTANCES............................ 4
(a) Application of Total Sale Proceeds........................ 4
(1) General.............................................. 4
(2) Costs of Issuance.................................... 4
(3) Project Amount....................................... 4
(b) No Replacement............................................ 4
(c) No Negative Pledges....................................... 4
(d) No Other Funds............................................ 4
(e) Debt Service Fund......................................... 4
(f) Rebate.................................................... 5
(g) No Overissuance........................................... 5
(h) Bond Yield................................................ 5
(i) Representations Establishing Eligibility for Temporary
Period.................................................. 6
(1) Completion Date...................................... 6
(2) Binding Obligations.................................. 6
(3) Due Diligence........................................ 6
(j) Yield Restrictions........................................ 6
(1) Costs of Issuance.................................... 6
(2) Debt Service Fund.................................... 6
(3) Project Amount....................................... 6
(4) Yield Reduction Payments............................. 6
(k) The Loan Agreement........................................ 7
(l) No Hedge Bonds............................................ 7
(m) Single Issue.............................................. 7
(n) Reimbursement of Prior Expenditures....................... 7
(1) Timing of Prior Expenditures......................... 7
(2) Reimbursable Expenditures............................ 8
(3) Anti-Abuse Rules..................................... 8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4. REBATE REQUIREMENT CALCULATIONS AND PAYMENT.............. 8
(a) General.................................................. 8
(b) Eighteen Month Exception................................. 8
(c) Rebate Requirement....................................... 9
(d) Future Value............................................. 10
(e) Allocation and Accounting Rules.......................... 10
(f) Relationship to Yield Restriction........................ 10
(g) Bond Debt Service Fund................................... 10
(h) Computation and Payment Dates............................ 10
(i) Procedure for Remittance................................. 11
(j) Recordkeeping Obligation................................. 11
(1) In General.......................................... 11
(2) Retention of Records................................ 12
SECTION 5. SEGREGATION OF PROCEEDS.................................. 12
SECTION 6. SURVIVAL ON DEFEASANCE OR OTHER PAYMENT.................. 12
SECTION 7. PRIVATE ACTIVITY BOND REQUIREMENTS....................... 12
(a) Notice................................................... 12
(d) Official Action.......................................... 13
(e) Volume Cap............................................... 13
(f) Costs of Issuance........................................ 13
(g) Prohibited Facilities.................................... 13
(h) No Refunding Bonds....................................... 13
(i) Economic Life of the Project............................. 13
(j) Acquisition of Land...................................... 14
(k) Acquisition of Existing Property......................... 14
(l) Ownership................................................ 14
(m) Qualifying Facilities.................................... 14
(n) Election of $10,000,000 Limit on Capital Expenditures.... 14
(o) Limitation on Capital Expenditures....................... 14
(p) $40,000,000 Limitation................................... 15
(q) Contiguous or Integrated Facilities...................... 15
(r) Principal Users.......................................... 15
SECTION 8. AMENDMENTS............................................... 15
SECTION 9. SUPPLEMENTATION OF THIS CERTIFICATE...................... 15
EXHIBIT A - OFFERING PRICE CERTIFICATE............................... 21
EXHIBIT B - THE PROJECT.............................................. 22
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
EXHIBIT C............................................................. 23
EXHIBIT D............................................................. 24
EXHIBIT E
</TABLE>
<PAGE> 5
TAX CERTIFICATE AND REGULATORY AGREEMENT
WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY
(THE "AUTHORITY")
INTRACEL CORPORATION (THE "COMPANY")
$1,500,000
ECONOMIC DEVELOPMENT REVENUE BOND
SERIES 1997-E
(INTRACEL CORPORATION)
In connection with the issuance by the Authority of its Revenue Bond,
Series 1997-E (Intracel Corporation ) (the "BONDS" or the "BOND"), in the
maximum aggregate principal amount of $1,500,000 authorized pursuant to its
Resolution No. 96-013 adopted by the Authority on December 10, 1996, and
Resolution No. W-97-021 adopted on September 10, 1997 (collectively, the
"RESOLUTIONS"), a Loan and Security Agreement (the"LOAN AGREEMENT") by and
between the Authority and Intracel Corporation (the "COMPANY"), dated as of
September 11, 1997, and in furtherance of the tax-related covenants and
representations of the Authority and the Company contained in the Loan
Agreement, the Authority and the Company and enter into the following tax
certificate and regulatory agreement (the "TAX CERTIFICATE").
RECITALS AND COVENANTS
WHEREAS, the Authority and the Company have covenanted that they will not
take any action or omit any action if it would cause the Bonds to become
"arbitrage bonds" within the meaning of Section 148 of the Internal Revenue
Code of 1986 as amended (the "CODE").
WHEREAS, the Authority and the Company hereby covenant that they will
comply with the provisions of this Tax Certificate.
WHEREAS, the Company has covenanted in the Loan Agreement to cause to be
paid to the United States all amounts required to be so paid pursuant to
Section 148(f) of the Code.
- --------------------------------------------------------------------------------
1 - TAX CERTIFICATE
<PAGE> 6
WHEREAS the Company has covenanted to operate the facilities financed with
the proceeds of the Bond so that the Bond is and remains a "qualified small
issue bond" under Section 144 of the Code.
WHEREAS, the Authority and the Company understand and acknowledge that the
opinion of Bond Counsel (as defined below) regarding the exclusion of the
interest on the Bonds from gross income for Federal income tax purposes is
rendered in reliance upon the representations and statements of fact, estimates
and expectations contained herein and assumes the Authority's and the Company's
continued compliance with the provisions of this Tax Certificate.
NOW, THEREFORE, pursuant to Section 1.148-2(b)(2) of the Treasury
Regulations, the Authority and the Company certify, covenant and agree as
follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein shall have the
meanings set forth herein or in Appendix One, attached hereto, or where not so
defined, shall have the meanings set forth in the Indenture and the Loan
Agreement.
SECTION 2. REPRESENTATIONS.
(a) AUTHORIZATION. The Bonds are being issued pursuant to the Constitution
and statutes of the State of Washington, specifically Washington Revised
Statutes Chapter 43.163, the Resolutions, the Indenture and the Loan Agreement.
(b) PURPOSES OF THE BONDS. The Bonds are being issued for the purposes of
(i) making a loan to the Company to finance a portion of the costs of the
acquisition, and equipping of new equipment for the manufacture of medical
diagnostic devices located in Issaquah, Washington (the "PROJECT") and (ii)
paying the costs of issuance of the Bonds. Interest will accrue on the Bonds
only with respect to the outstanding principal amount of the amount previously
drawn down, and the interest rate will be independently established for each
draw. The Company will draw down an amount of $1,500,000 in two installments of
$750,000 each.
(c) PURPOSE OF TAX CERTIFICATE. This Tax Certificate is made in part for
the purpose of establishing the Authority's reasonable expectations as to the
amount and use of proceeds of the Bonds. It is intended to be and may be relied
on for the purposes of Sections 103, and 141 through 150 of the Code and as a
certificate described in Treasury Regulations Section 1.148-2(b)(2). The Tax
Certificate is being executed and delivered as part of the record of proceedings
in connection with the issuance of the Bonds. The Authority and the Company
understand that, despite the representations and statements of expectation made
in this Tax Certificate, that the taking of any deliberate, intentional action
by the Authority, the Company, or the Lessee after the Delivery Date in order to
earn arbitrage will cause the Bond to be "arbitrage bonds" within the meaning of
Section 148 of the Code if such action, had it been expected on the Delivery
Date, would have caused the Bond to be arbitrage bonds and that an intent to
violate the
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2 - Tax Certificate
<PAGE> 7
requirements of Section 141 or 148 of the Code is not necessary for an action
to be considered deliberate within the meaning of the Code. In addition, the
Authority and the Company understand that, despite the representations and
statements of expectation made in this Tax Certificate, the failure of the
Bonds to satisfy the requirements of Section 144 and 147 of the Code may cause
the bonds to fail to be "qualified small issue bonds," regardless of whether
the events giving rise to such failure are deliberate.
(d) STATEMENTS AS TO FACTS, ESTIMATES AND CIRCUMSTANCES. The facts
and estimates set forth in Section 3 of this Tax Certificate, on which the
Authority's and the Company's expectations as to the Bonds are based, are true
to the best of the knowledge and belief of the undersigned officers of the
Authority and the Company, and the Authority's and the Company's expectations
are reasonable. The Authority and the Company, understand that, for the purposes
of the Code, the statements of facts, estimates, representations and
expectations contained herein constitute evidence of the Authority's and the
Company's expectations but do not establish any conclusions of law or any
presumptions regarding either the Authority's or the Company's actual
expectations or their reasonableness.
The expectations of the Authority concerning the use of proceeds
derived from the sale of the Bond and other matters are based in whole or in
part upon representations of the Company and other parties set forth in this Tax
Certificate and in the exhibits hereto. The Authority is not aware of any facts
and circumstances that would cause it to question the accuracy or reasonableness
of any representation made in this Tax Certificate or in the exhibits hereto,
including those representations made by the Company. The expectations of the
Company concerning certain uses of proceeds derived from the sale of the Bonds
and other matters are based in whole or in part on representations of the
Authority and other parties set forth in this Tax Certificate and in the
exhibits hereto. The Company is not aware of any facts or circumstances that
would cause it to question the accuracy or reasonableness of any representation
made in this Tax Certificate or in the exhibits hereto, including those
representations made by the Authority.
(e) RESPONSIBLE PERSON. The undersigned are the persons charged with
the responsibility for executing the documents related to the issuance of the
Bonds, and have made due inquiry with respect to and are fully informed as to
the matters set forth in Section 3 of this Tax Certificate.
(f) SECURITY. The Bonds are special obligations payable solely from
loan payments pledged under the Loan Agreement between the Company and the
Authority. The Bonds do not constitute an indebtedness or lending of credit of
the Authority within the meaning of any constitutional or statutory limitation
and do not constitute nor give rise to a pecuniary liability of the Authority
or a charge against its general credit, but are payable solely out of Loan
Payments under the Loan Agreement.
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3 - Tax Certificate
<PAGE> 8
SECTION 3. REASONABLE EXPECTATIONS OF THE AUTHORITY AND COMPANY AS TO
FACTS, ESTIMATES AND CIRCUMSTANCES. The Authority, the Company makes the
following representations and statements of fact, estimate and expectation on
the basis of which it is not expected that the proceeds of the Bonds will be
used in a manner that will cause the Bond to be "arbitrage bonds" within the
meaning of Section 148 of the Code.
(a) APPLICATION OF TOTAL SALE PROCEEDS.
(1) GENERAL. The maximum amount of Sale Proceeds to be received by
the Authority from the sale of the Bond is $1,500,000.
(2) COSTS OF ISSUANCE. The amount of the Sale Proceeds and the
investment earnings thereon from each draw to be used to pay costs of issuance
will not exceed 2% of the amount of such draw.
(3) PROJECT AMOUNT. A minimum amount of Sale Proceeds equal to 98%
of each draw will be used to pay Project Costs.
(b) NO REPLACEMENT. No portion of the amounts received from the sale of
the Bond will be used as a substitute for any other funds that would otherwise
be used as a source of financing for any portion of the cost of the Project or
that will be used to acquire, directly or indirectly, obligations producing a
yield in excess of the Bond Yield.
(c) NO NEGATIVE PLEDGES. There are no amounts held under any agreement to
maintain funds at a particular level for the direct or indirect benefit of the
holders of the Bonds, excluding for this purpose (i) amounts in which the
Authority, the Company, the Lessee (or a substantial beneficiary of the Bonds)
may grant rights that are superior to the rights of the holders of the Bonds
and (ii) amounts that do not exceed the reasonable needs for which they are
maintained and that may be spent without any substantial restriction other
than a requirement to replenish the amount by a testing date that may occur no
more frequently than every six (6) months.
(d) NO OTHER FUNDS. Other than the funds and accounts specifically
described in this Tax Certificate, no fund or account which secures or
otherwise relates to the Bonds have been established, nor are any such funds
or accounts expected to be established, pursuant to any instrument.
(e) DEBT SERVICE FUND. The Debt Service Fund is intended to achieve a
proper matching of revenues under the Loan Agreement and the scheduled annual
debt service on the Bonds (the "DEBT SERVICE FUND").
All amounts on deposit in the Debt Service Fund will be expended to pay
debt service on the Bonds within thirteen months of the date such amounts are
first received by the Authority.
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4 - Tax Certificate
<PAGE> 9
The Debt Service Fund will be depleted at least once each year except for any
carryover amounts which will not exceed the greater of (i) the earnings in the
Debt Service Fund for the immediately preceding Bond Year or (ii) one-twelfth
of the principal and interest payments on the Bonds for the immediately
preceding Bond Year. The schedule of payment of interest on and principal of
the Bonds has been established on the basis of, and is intended to achieve, a
proper matching of revenues with debt service on the Bonds.
Neither the Authority nor the Company has created or established, or
expects to create or establish, any fund in connection with the Bonds that is
reasonably expected to be used to pay debt service on the Bonds other than Debt
Service Fund.
(f) REBATE. The Company shall be responsible for the calculation and
payment of the Rebate Requirement and any related penalties under Section
148(f) of the Code.
(g) NO OVERISSUANCE. The amount of the proceeds and the anticipated
investment earnings thereon, together with other amounts available for and
expected to be used for such purposes, do not exceed the amounts necessary to
accomplish the governmental purposes of the Bonds set forth in Section 2(b).
The Bonds will not remain outstanding longer than is otherwise reasonably
necessary to accomplish the governmental purposes of the Bonds, based on all
facts and circumstances. As reflected in Exhibit B, the Bonds have a weighted
average maturity that does not exceed 120 percent of the average reasonably
expected economic life of the Project.
(h) BOND YIELD. The yield on the Bonds will be computed separately for
each Computation Period. The yield on the Bonds for a Computation Period (the
"BOND YIELD") generally means that discount rate that, when used in computing
the present value on the first day of the Computation Period of all payments of
principal, interest and fees for qualified guarantees on the Bonds attributable
to the Computation Period produces an amount equal to the present value, using
the same discount rate on the first day of the Computation Period of the
aggregate issue prices of the Bonds (defined as the initial offering prices or
yields to the public, excluding bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters or wholesalers, at which
price or yield a substantial amount of such Bonds and maturity was sold), or the
deemed issue prices of the Bonds within the meaning of Treasury Regulations
Section 1.148-4(c)(2)(iv). For this purpose, any mandatory sinking fund payments
required to be made with respect to the Bonds shall be taken into account. The
present value of the aggregate issue prices of the Bonds cannot be determined
until the last draw by the Company of Proceeds of the Bonds. The Bond Yield for
a Computation Period will be affected if the Issuer or the Company either enters
into a hedging transaction with respect to the Bonds, within the meaning of
Treasury Regulations Section 1.148-4(h)(3) or, transfers, waives, modifies or
enters into any similar transaction affecting any right that is part of the
terms of a Bond. Prior to entering into any transaction described in the
immediately preceding sentence, the Authority and the Company, as the case may
be, shall inform Bond Counsel of its intent and
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5 - Tax Certificate
<PAGE> 10
shall not enter into such transaction without receiving a prior written opinion
from Bond Counsel that such transaction will not adversely affect the exclusion
from gross income of interest on the Bonds.
(i) REPRESENTATIONS ESTABLISHING ELIGIBILITY FOR TEMPORARY PERIOD.
(1) COMPLETION DATE. The Company reasonably expects that Sale
Proceeds of the Bonds deposited in the Project Fund will be used to pay the
costs of the Project no later than September 11, 2000.
(2) BINDING OBLIGATIONS. The Company reasonably expects that,
within 6 months of the Delivery Date, it will spend (or enter into binding
obligations with third parties obligating the Company to spend) an amount equal
to at least 5 percent of the Sale Proceeds of the Bonds with respect to the
Project.
(3) DUE DILIGENCE. It is reasonably expected that work on the
Project and the allocation of the Sale Proceeds of the Bonds to expenditures
with respect thereto will proceed with due diligence.
(j) YIELD RESTRICTIONS. Any amounts on deposit in any account
established for the Bond will not be invested at a yield which exceeds the Bond
Yield, except as follows:
(1) COST OF ISSUANCE. Sale Proceeds of the Bonds to pay costs
of issuance and the investment earnings thereon may be invested without regard
to yield restriction for a three-year period beginning on the date hereof, and
are subject to the Rebate Requirement.
(2) DEBT SERVICE FUND. Amounts deposited in the Debt Service
Fund may be invested at an unrestricted yield for a period of 13 months from
the date of deposit of such amounts in the Debt Service Fund. Earnings on such
amounts that are retained in such fund may be invested at an unrestricted yield
for a period of 13 months from the date of receipt of the amount earned. Such
amounts are subject to the Rebate Requirement under the circumstances set forth
in Section 4(h) hereof.
(3) PROJECT AMOUNT. Sale Proceeds to be used to pay the costs
of the Project, and the investment earnings thereon, may be invested without
regard to yield restriction for a three-year period commencing on the date
hereof, and are subject to the Rebate Requirement.
(4) YIELD REDUCTION PAYMENTS. Notwithstanding any of the
provisions of this section 3(m) that require the investment of proceeds derived
from the sale of the Bonds and investment earnings thereon at a yield not in
excess of the Bond Yield, the yield on certain Nonpurpose Investments acquired
with proceeds of the Bonds will not be considered to be higher than the
applicable yield limitation described in this Section 3(m), if the Authority or
the Company makes "yield reduction payments" to the United States Treasury at
the times and in
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6 - Tax Certificate
<PAGE> 11
the amounts described in section 1.148-5(c) of the Treasury Regulations. The
Company and the Authority covenant to retain and consult with Bond Counsel prior
to making any "yield reduction payments" pursuant to Section 1.148-5(c) of the
Treasury Regulations.
(k) THE LOAN AGREEMENT. The yield on the Loan Agreement, computed
without regard to qualified administrative costs incurred by the Authority and
paid by the Company, may not exceed the Bond Yield by more than .125%. For this
purpose, qualified administrative costs include costs or expenses paid, directly
or indirectly, to purchase, carry, sell or retire the Loan Agreement and costs
of issuing, carrying, or repaying the Bonds. Although actual payments by the
Company with respect to qualified administrative costs, such as, for instance
fees paid to the Authority, may be made at any time, for purposes of calculating
the yield on the Loan Agreement, a pro rata portion of each payment made by the
Company is treated as a reimbursement of reasonable administrative costs, such
that the present value of such payments does not exceed the present value of the
reasonable administrative costs paid by the Authority, using the yield on the
Bonds as the discount rate.
(l) NO HEDGE BONDS. The Authority and the Company expect that more
than 85% of the Net Sale Proceeds of the Bonds will be expended for the purposes
of the Resolution and the Bonds no later than September 11, 2000. In addition,
not more than 50% of the proceeds of the Bond will be invested in Nonpurpose
Investments having a substantially guaranteed yield for 4 years or more.
(m) SINGLE ISSUE. No other obligations of the Authority (i) are
reasonably expected to be paid from substantially the same source of funds as
the Bonds (determined without regard to guarantees from unrelated parties), (ii)
are being sold at substantially the same time as the Bonds (i.e., within
fourteen days of September 11, 1997, the delivery date of the Bonds.
(n) REIMBURSEMENT OF PRIOR EXPENDITURES. A portion of the proceeds
of the Bond to be applied to the cost of the Project may be used to reimburse
the Company for expenditures on the Project, previously incurred and paid, in
anticipation of the issuance of the Bond (the "PRIOR EXPENDITURES"). The Company
represents the following with respect to such reimbursement.
(1) TIMING OF PRIOR EXPENDITURES. All of the Prior Expenditures
either (A) were incurred no earlier than sixty (60) days prior to December 10,
1996, (B) constitute preliminary expenditures in an amount not exceeding 20% of
the $1,500,000.00 of maximum Sale Proceeds identified in Section 3(a)(1), above
(or $300,000), or (C) do not exceed an amount in excess of the lesser of
$100,000 or 5 percent of the Sale Proceeds. For this purpose, "preliminary
expenditures" include architectural, engineering, surveying, soil testing and
similar costs incurred prior to commencement of acquisition and construction of
the Project, other than land acquisition, site preparation and similar costs
incident to commencement of construction.
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7 - Tax Certificate
<PAGE> 12
(2) REIMBURSABLE EXPENDITURES. The Prior Expenditures are either (i)
capital expenditures (within the meaning of Section 1.150-1(b) of the Treasury
Regulations), (ii) costs of issuance of the Bond, or (iii) working capital
expenditures for extraordinary, nonrecurring items that are not customarily
payable from current revenues. None of the Prior Expenditures were incurred for
day-to-day operating expenses of the Company.
(3) ANTI-ABUSE RULES. None of the proceeds of the Bond being used to
reimburse the Company for Prior Expenditures will be used, directly or
indirectly, within one year of the Delivery Date, in a manner that result in
the creation of Replacement Proceeds, other than amounts deposited in a bona
fide debt service fund.
SECTION 4. REBATE REQUIREMENT CALCULATIONS AND PAYMENT. The Authority and
the Company have been advised by Bond Counsel that the following provisions and
procedures also apply to the proceeds of the Bonds.
(a) GENERAL. Certain Gross Proceeds of the Bonds will be exempt from the
Rebate Requirement described in Section 4(c) hereof if the Bonds satisfy the
requirements of Section 4(b) hereof.
(b) EIGHTEEN MONTH EXCEPTION. The Rebate Requirement described in Section
4(d) hereof shall not apply to the Gross Proceeds of the Bonds if the following
percentages (the "QUALIFYING EXPENDITURES") of such Gross Proceeds are expended
for the governmental purposes of the Bonds by the last day of each of the
periods identified below (the "QUALIFYING DATES"). The governmental purposes of
the Bonds includes (A) payments of interest on but no payments of principal of
the Bonds, (B) payments of interest on other obligations of the Authority issued
for the benefit of the Company, which interest either (i) accrues on such other
obligations during a one-year period including the Delivery Date, (ii) is a
capital expenditure as defined in Treasury Regulations Section 1.150-1(b), or
(iii) is a de minimis Working Capital Expenditure, and (C) payments of costs of
issuance made from earnings on Gross Proceeds. For this purpose, Gross Proceeds
has the meaning set forth in Appendix One to this Certificate, except that it
does not include (i) amounts held in a bona fide debt service fund, (ii) amounts
held in a reasonably required reserve or replacement fund, and (iii) amounts
that, as of the Delivery Date, are not reasonably expected to be Gross Proceeds,
but that become Gross Proceeds after the end of the eighteen-month period.
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8 - Tax Certificate
<PAGE> 13
Required Percentage Expenditure
of Gross Proceeds Qualifying Date
----------------- ---------------
15% March __, 1998
60% September __, 1998
100% March __, 1999
The Qualifying Expenditures as of the last of the Qualifying Dates set forth
above will be treated as made if, as of the third such date, all such Gross
Proceeds have been spent for the governmental purposes of the Bonds, except for
a Reasonable Retainage not exceeding 5 percent of the Gross Proceeds as of such
date, and 100% of the Gross Proceeds are actually spent for the governmental
purposes of the Bonds within the 30-month period beginning on the Delivery Date.
A failure to satisfy the final spending requirements will be disregarded if the
Authority and the Company exercise due diligence to complete the Project and the
amount of the failure does not exceed the lesser of 3 percent of the issue price
of the Bonds or $250,000. For purposes of determining whether the above
Qualifying Expenditures have been made as of the first two Qualifying Dates, the
Authority and Company shall include any earnings reasonably expected by the
Authority and the Company as of the Delivery Date to be generated for the entire
18-month spending period. For purposes of determining whether the Qualifying
Expenditures have been made as of the third and any subsequent Qualifying Dates,
the Authority and the Company shall include only actual investment earnings
generated as of such date. In the event any of the Qualifying Expenditures are
not made as and when required, all Gross Proceeds of the Bonds shall be subject
to the Rebate Requirement set forth in Section 4(c) of this Tax Certificate. In
the event the Bonds satisfy all requirements described in this Section 4(b)
necessary to qualify for the exemption from the Rebate Requirement, the
Authority, at the request of the Company, may nevertheless subsequently elect to
disregard the available exemption from the Rebate Requirement provided in this
Section 4(b) and to satisfy the Rebate Requirement with respect to all Gross
Proceeds of the Bonds. Notwithstanding the above, Gross Proceeds of the Bonds
shall not be eligible for the exemption from the Rebate Requirement described in
this Section 4(b) unless the Rebate Requirement set forth in Section 4(d) is met
for Gross Proceeds of such issue not required to be spent within the 18-month
spending period (other than earnings on amounts in the Debt Service Fund).
(c) REBATE REQUIREMENT. The Rebate Requirement as of any Computation
Date, subject to such modifications as may be made by Treasury Regulations or
rulings, is an amount equal to the excess (if any) of the future value of all
Nonpurpose Receipts over the future value of all Nonpurpose Payments. All
future values are computed as of the Computation Date using an interest rate
equal to the Bond Yield.
_______________________________________________________________________________
9 - Tax Certificate
<PAGE> 14
(d) FUTURE VALUE. The future value of a Nonpurpose Receipt or Payment is
calculated using the following formula:
FV = PV (1 + i)(n)
where FV = The future value of the Nonpurpose Receipt or
Payment;
PV = The amount of the Nonpurpose Receipt or Payment;
i = Bond Yield for the Computation Period divided by
the number of compounding intervals in a Bond Year;
and
n = The number of compounding intervals from the date
of the Nonpurpose Receipt or Payment through the
Computation Date.
(e) ALLOCATION AND ACCOUNTING RULES. Generally, investments are
allocated to the Bond for the period that (1) begins on the date Gross Proceeds
are allocated to the Bond and to the investment, and (2) ends on the date such
Gross Proceeds cease to be allocated to the Bond or to the investment.
(f) RELATIONSHIP TO YIELD RESTRICTION. Subject to Section 4(g) hereof,
the requirements of this Section 4 relating to the Rebate Requirement of the
Code apply to all Gross Proceeds, regardless of whether such amounts are
subject to yield restriction or are unrestricted as to yield. Thus, an amount
of Gross Proceeds may be "unrestricted as to yield" but will, notwithstanding
that characterization, be subject to the Rebate Requirement of the Code.
Similarly, an amount of Gross Proceeds may be "restricted as to yield" but
will, notwithstanding that characterization, also be subject to the Rebate
Requirement of the Code.
(g) BOND DEBT SERVICE FUND. Earnings on amounts in the Debt Service Fund
will be exempt from rebate in any calendar year in which the aggregate
investment earnings on amounts in such fund are less than $100,000. In the
event that the aggregate earnings on amounts in such fund for a calendar year
exceed $100,000, pursuant to Treasury Regulations Section 1.148-3(k) earnings
on amounts in the Debt Service Fund for such year either may or may not be
included in the calculation of the Rebate Requirement, at the election of the
Authority.
(h) COMPUTATION AND PAYMENT DATES. The Rebate Requirement, net of the
Computation Date Credit, must be computed by the Company as of each Installment
Computation Date and as of the Final Computation Date. Rebate installments of
an amount which, when added to the future value of all previous rebate payments
made with respect to the Bond, equals at least 90 percent of the Rebate
Requirement, must be paid by the Company on behalf of the Authority no later
than the date 60 days after each Installment Computation Date.
_______________________________________________________________________________
10 - Tax Certificate
<PAGE> 15
The final rebate payment of an amount which, when added to the future value of
all previous rebate payments made with respect to the Bond, equals 100 percent
of the Rebate Requirement as of the Final Computation Date, must be paid by the
Company to the Department of Treasury no later than the date 60 days after the
Final Computation Date.
(i) PROCEDURE FOR REMITTANCE. Each payment to be made by the Company
pursuant to this Section shall be filed with the Internal Revenue Service
Center, Philadelphia, Pennsylvania 19255 on or before the date payment is due,
and shall be accompanied by Internal Revenue Service Form 8038-T, executed by
the Authority.
(j) RECORDKEEPING OBLIGATION.
(1) IN GENERAL. The Issuer shall maintain, or cause to be
maintained, records adequate to determine the Rebate Requirement with respect
to any Gross Proceeds under their control. Such records will include, but are
not necessarily limited to, information regarding the following with respect to
each and every investment acquired with Gross Proceeds:
(i) the purchase price;
(ii) nominal rate of interest;
(iii) amount of accrued interest purchased
(included in purchase price);
(iv) par or face amount;
(v) purchase date;
(vi) maturity date;
(vii) amount of original issue discount or premium
(if any);
(viii) type of Investment Property;
(ix) frequency of periodic payments;
(x) period of compounding;
(xi) date of disposition;
(xii) amount realized on the disposition
(including accrued interest);
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11 - Tax Certificate
<PAGE> 16
(xiii) market price data sufficient to establish
that the purchase price was equal to the fair
market value on the date of acquisition or,
if earlier, on the date of a binding contract
to acquire such Investment Property; and
(xiv) market price data sufficient to establish the
fair market value of any Nonpurpose
Investment as of any Computation Date, and as
of the date such Nonpurpose Investment
becomes allocable to, or ceases to be
allocable to, Gross Proceeds.
(2) RETENTION OF RECORDS. The Company agrees to retain records of
the determinations and the manner in which the Rebate Requirement was
calculated required by this Section 4 until six years after the retirement of
the last obligation of the Bonds or for such other period as the Treasury
Department may, by regulations or rulings, provide.
SECTION 5. SEGREGATION OF PROCEEDS. In order to perform the calculations
required by the Code, it is necessary to separately account for all of the
Gross Proceeds and each specific investment acquired therewith. To that end,
the Authority, the Company and the Lessee agree to establish separate
sub-accounts or to take other accounting measures in order to account fully and
with specificity for all Gross Proceeds and each investment acquired therewith.
SECTION 6. SURVIVAL ON DEFEASANCE OR OTHER PAYMENT. Notwithstanding
anything in this Tax Certificate or the Resolutions to the contrary, the
obligation of the Company to remit the Rebate Requirement to the United States
Department of Treasury and to comply with all other requirements contained in
this Tax Certificate shall survive the defeasance or payment in full of the
Bonds.
SECTION 7. PRIVATE ACTIVITY BOND REQUIREMENTS
(a) NOTICE. On July 29, 1997, and July 30, 1997, respectively, the
Authority caused to be published in the Daily Journal of Commerce and the
Eastside Journal, notices of a public hearing to be held by the Authority
regarding issuance of the Bonds to finance the costs of the Project and
certain related expenses.
(b) HEARING. On August 13, 1997, the Authority held the
aforementioned public hearing. At this hearing, all interested persons were
invited and given an opportunity to comment upon the nature and location of
the facilities comprising the Project and the financing thereof with the
proceeds derived from the sale of the Bonds.
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12 - Tax Certificate
<PAGE> 17
(c) APPROVAL BY APPLICABLE ELECTED REPRESENTATIVE. Following the
hearing, and pursuant to Section 147(f) of the Code, the Governor of the State,
being the "applicable elected representative" of the Authority within the
meaning of Section 147(f)(2)(E) of the Code, approved the issuance of
$1,500,000.00 aggregate principal amount of Bonds for the purpose of financing
the costs of the Project and certain related costs.
(d) OFFICIAL ACTION. The Authority represents that on December 10,
1996 and September 10, 1997, the Authority adopted its resolutions (the
"INDUCEMENT RESOLUTIONS") stating its findings as to the public benefits of the
Project and its intention to issue its industrial development revenue bonds to
assist in the financing of the Project. The Inducement Resolutions state the
Authority's intent to issue revenue bonds for the purpose of financing the
Project. The Inducement Resolutions were intended to constitute a declaration
of official intent by the Authority within the meaning of Sections 1.1150-2 and
1.103-8(a)(5) of the Treasury Regulations.
(e) VOLUME CAP. The Authority and the Company represent that the
Bond is subject to the private activity bond volume cap requirements of Section
146 of the Code. The Lieutenant Governor of the State of Washington has
confirmed allocation of the 1997 private activity volume cap in the amount of
$1,500,000.00 for the Project.
(f) COSTS OF ISSUANCE. The Authority and the Company represent that
no more than 2% of each draw of Sale Proceeds of the Bonds of the proceeds of
the Bond will be used directly or indirectly to pay Costs of Issuance.
(g) PROHIBITED FACILITIES. The Authority and the Company represent
that none of the proceeds of the Bond will be used to finance any airplane,
skybox or other private luxury box, health club facility, facility primarily
used for gambling, store the principal business of which is the sale of
alcoholic beverages for consumption off premises, private or commercial golf
course, country club, massage parlor, tennis club, skating facility (including
roller skating, skate board and ice skating), racquet sports facility
(including any handball or racquet ball court), hot tub facility, suntan
facility, race track, automobile sales or service facility, retail food or
beverage facility or entertainment facility.
(h) NO REFUNDING BONDS. The Authority and the Company represent that
none of the proceeds of the Bond will be used (directly or indirectly) to pay
any principal on, interest of or call premium on any bonds or obligations of
the Authority or the Company.
(i) ECONOMIC LIFE OF THE PROJECT. The Company represents that the
average reasonably expected economic life of the Project is at least _____
years. The weighted average maturity of the Bonds is _____ years. The weighted
average maturity of the Bonds therefore does not exceed 120% of the average
reasonably expected economic life of the Project. For this purpose, land
represents less than twenty-five percent (25%) of the proceeds of the Bond
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13 - Tax Certificate
<PAGE> 18
and, therefore, was not taken into account in determining the average economic
life of the Project financed with the proceeds of the Bonds.
(j) ACQUISITION OF LAND. The Authority and the Company represent
that no more than 25% of the Sale Proceeds of the Bonds and the investment
earnings thereon will be used, directly or indirectly, to finance the
acquisition of land or any interest therein.
(k) ACQUISITION OF EXISTING PROPERTY. The Company represents that no
property (or any interest therein) will be acquired by the Company with
proceeds of the Bonds unless the first use of such property was pursuant to
such acquisition.
(l) OWNERSHIP. The Company represents, warrants and covenants that
the Project is and will be owned for federal tax purposes exclusively by the
Company. The portion of the Project financed with proceeds of the Bond is not
expected to be sold or otherwise disposed of, in whole or in part, other than
as permitted pursuant to the Loan Agreement and except due to normal wear, tear
and obsolescence, before payment in full of the Bonds.
(m) QUALIFYING FACILITIES. Substantially all (95%) of the proceeds
of the Bonds will be used to provide qualifying manufacturing facilities within
the meaning of Section 144(a) of the Code and Treasury Regulations promulgated
thereunder. All of the costs of the Project, as set forth in Exhibit C attached
hereto, were paid or incurred after December 10, 1996 and were or will be
charged to the capital accounts of land or property subject to the allowance
for depreciation for federal income tax purposes. No more than 25% of the Sale
Proceeds of the Bonds and the investment earnings thereon will be spent on
"ancillary facilities" within the meaning of Section 144(a)(12)(C) of the Code.
(n) ELECTION OF $10,000,000 LIMIT ON CAPITAL EXPENDITURES. The
Authority hereby elects to have the provisions of Section 144(a)(4) of the Code
apply to the Bond. There are no outstanding issues the proceeds of which have
been or will be used primarily with respect to facilities (i) the principal
user or users of which are or will be the same or related persons and (ii)
which are located in the incorporated municipality of Issaquah, in King County,
Washington.
(o) LIMITATION ON CAPITAL EXPENDITURES. The aggregate amount of
capital expenditures (other than those paid or reimbursed out of the proceeds
of the Bond) paid or incurred during the six-year period beginning on
September __, 1994, with respect to (a) the Project, and (b) any other property
located within the corporate limits of Issaquah, Washington (including property
moved to another location), with respect to which the Company, the Lessee or
any "related person" to the Company has been a "principal user" at any time
during the six-year period beginning on September __, 1994, will not exceed
$10,000,000. The total capital expenditures to date made within this period in
the city of Issaquah is $_______, as set forth on Exhibit , D, attached hereto.
- --------------------------------------------------------------------------------
14 - Tax Certificate
<PAGE> 19
(p) $40,000,000 LIMITATION. As set forth in Exhibit E, attached hereto,
the Company and any "related person" to the Company (within the meaning of
Section 147(b)(3) of the Code) are not the beneficiaries of outstanding
tax-exempt governmental obligations in an amount which, together with the
face amount of the Bonds allocated to such persons, would exceed $40,000,000.
The Company will not allow any person to become a beneficiary of the Bonds if
the amount allocated to such person, together with other outstanding tax-exempt
governmental obligations allocated to such person, would exceed $40,000,000.
The Company will not become a beneficiary of other outstanding tax-exempt
governmental obligations if the amount allocated to it thereunder would cause
it to exceed such $40,000,000 limitation with respect to the Bonds.
(q) CONTIGUOUS OR INTEGRATED FACILITIES. Neither the Company nor any
"related person" to the Company (within the meaning of Section 147(b)(3) of the
Code) will be a "principal user" of any facilities that (i) are located outside
of the corporate limits of Bellevue, Washington and (ii) would be considered
"contiguous or integrated" (within the meaning of Section
1.103-10(b)(2)(ii)(e) of the Treasury Regulations) with the Project.
(r) PRINCIPAL USERS. The Company will be the exclusive owner and operator
of the Project. Accordingly the Company will be the only "principal users" of
the Project. For purposes of this Tax Certificate, the term "principal user"
has the meaning ascribed thereto for purposes of Section 103(b)(6)(C) of the
Internal Revenue Code of 1954, as amended (the "1954 CODE") and the final and
proposed Treasury Regulations promulgated thereunder.
SECTION 8. AMENDMENTS. Notwithstanding any other provision herein, the
covenants and obligations contained herein may be and shall be deemed modified
to the extent the Authority secures a written opinion of Bond Counsel that any
action required hereunder is no longer required or that some further action is
required in order to maintain the exclusion of the interest component payable on
the Bond from gross income for purposed of Federal income taxation.
SECTION 9. SUPPLEMENTATION OF THIS CERTIFICATE. The Authority understands
the need to supplement this Tax Certificate periodically to reflect further
developments in the Federal income tax laws governing the exclusion from gross
income for
- --------------------------------------------------------------------------------
15 - Tax Certificate
<PAGE> 20
Federal income tax purposes of the interest component payable on the Bond and
will periodically seek the advice of Bond Counsel as to the propriety of
seeking the review of and supplements to this Tax Certificate from Bond
Counsel.
Date: September __, 1997 WASHINGTON ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
By:
-------------------------------
William A. Glassford, Chair
INTRACEL CORPORATION
By:
--------------------------------
Title:
-----------------------------
- --------------------------------------------------------------------------------
16 - Tax Certificate
<PAGE> 21
EXHIBIT A
EXHIBIT A - OFFERING PRICE CERTIFICATE
$1,500,000
Washington Economic Development Finance Authority
Economic Development Revenue Bond
Series 1997-B
(Intracel Corporation Project)
Transamerica Business Credit Corporation, the purchaser of the captioned
Bond ("Transamerica"), hereby acknowledged that:
We have purchased the Bond from the Washington Economic Development
Finance Authority for our own account and with no present intention of selling
or remarketing the Bond.
We understand that Bond Counsel may rely upon this certificate, among
other things, in providing an opinion with respect to the exclusion from
federal gross income of interest on the Bonds pursuant to Section 103 of the
Internal Revenue Code of 1986, as amended.
IN WITNESS WHEREOF, the undersigned has set his signature as of this 13th
day of September __, 1997.
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
-------------------------------------
Authorized Officer
<PAGE> 22
EXHIBIT B - THE PROJECT
<TABLE>
<CAPTION>
Economic
Facility(1) Life(2) Cost(3) Lives Aggregate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equipment 5 _______________
</TABLE>
AVE. LIFE (Agg. Lives/Cost): ____________ years
(1) All facilities are facilities described under SIC Code ____. Land has been
excluded from the calculations.
(2) The weighted average economic life of the facilities as of their
placed-in-service date is approximately __ years. The average life of the Bonds
is __ years. The Economic Life of an Asset is the longer of the reasonably
expected economic life of the Asset or the "midpoint life" under the Asset
Depreciation Range ("ADR") system, as set forth in Revenue Procedure 87-56,
1987-2 C.B. 674, where applicable, and the "guideline lives" under Revenue
Procedure 62-21, 1962-2 C.B. 418, in the case of structures.
(3) The cost of the facilities that will be financed with proceeds received
from the sale of the Bond.
<PAGE> 23
EXHIBIT C
USE OF PROCEEDS
EXHIBIT C
<PAGE> 24
EXHIBIT D
PRIOR CAPITAL EXPENDITURES
EXHIBIT C
<PAGE> 25
EXHIBIT E
OUTSTANDING BONDS
<PAGE> 26
Appendix One
Definitions
(a) Bond Counsel shall mean Ater Wynne Hewi Dodson & Skerrill, LLP.
(b) Bond Year shall mean the one year period (or shorter period)
ending on ______________, or such other date as the Authority shall elect prior
to the first Installment Computation Date.
(c) Code shall mean the Internal Revenue Code of 1986, as amended.
(d) Computation Date shall mean an Installment Computation Date or the
Final Computation Date.
(e) Computation Date Credit shall mean, with respect to the Bond on an
eligible Computation Date, a credit of $1,000 on the last day of each Bond Year
during which there are amounts allocated to Gross Proceeds of the Bond that are
subject to the Rebate Requirement, and on final maturity date.
(f) Computation Period shall mean the period between Computation
Dates. The first Computation Period begins on the Delivery date and ends on the
first Computation Date. Each succeeding Computation Period begins on the date
immediately following the Computation Dates and ends on the next Computation
Date.
(g) Credit Provider shall mean U.S. Bank of Washington, National
Association.
(h) Delivery Date shall mean the date on which there is a physical
delivery of the Bond in exchange for the amount of issue price, which exchange
is occurring this date, September 11, 1997.
(i) Department of the Treasury shall mean the Department of the
Treasury of the United States.
(j) Fair Market Value, with respect to a Nonpurpose Investment, shall
mean, except where otherwise indicated in the Tax Certificate, the following:
(1) General. Except with respect to Investment Property that is
an obligation of the United States Treasury, the fair market value of an
investment shall be the price at which a willing buyer would purchase the
investment from a willing seller in a bona fide, arm's length
transaction. The fair market value of an Investment consisting of an
EXHIBIT C
<PAGE> 27
obligation of the United States Treasury that is purchased directly from the
United States Treasury shall be its purchase price.
(2) Certificates of Deposit. The market price of a certificate of
deposit issued by a commercial bank that has a fixed interest rate, a fixed
principal payment schedule, a fixed maturity, and a substantial penalty for
early withdrawal shall be its purchase price if the certificate of deposit has a
yield not less than (A) the yield on reasonably comparable direct obligations of
the United States, and (B) the highest yield that is published or posed by the
provider to be currently available from the provider on comparable certificates
of deposit offered to the public.
(3) Guaranteed Investment Contracts. Except as provided in the
definitions of Nonpurpose Payments and Nonpurpose Receipts, in the case of a
guaranteed investment contract, the obligations acquired thereunder shall be
considered acquired or disposed of for an amount equal to the fair market value
of such obligations if:
(i) the purchaser makes a bona fide solicitation for a
specified guaranteed investment contract and receives at least three
bids on the guaranteed investment contract from providers that have no
material financial interest in the Bond (e.g., underwriters or brokers);
(ii) the purchaser purchases the highest yielding investment
contract for which a qualified bid is made (determined net of brokers'
fees, however denominated);
(iii) the determination of the terms of the guaranteed
investment contract takes into account as a significant factor, the
purchaser's reasonably expected draw-down schedule for the funds to be
invested, exclusive of amounts deposited in debt service funds and
reasonably required reserve or replacement funds;
(iv) the terms of the guaranteed investment contract,
including the collateral security requirements, are reasonable;
(v) the provider of the guaranteed investment contract
certifies those administrative costs that are reasonably expected to be
paid to third parties in connection with the guaranteed investment
contract; and
(vi) the yield on the guaranteed investment contract is not
less than the yield then available from the provider on reasonably
comparable guaranteed investment contracts, if any, to other persons
from a source of funds other than gross proceeds of tax-exempt bonds.
Page 2 - Appendix One
<PAGE> 28
(k) Final Computation Date shall mean the date the last Bond that is part
of the Bond is discharged.
(l) Gross Proceeds shall have the meaning contained in Treasury
Regulations Section 1.148-1(b), and shall generally include amounts which are:
(1) actually or constructively received from the sale of the Bond,
including amounts used to pay underwriters' discount or compensation and
accrued interest other than Pre-Issuance Accrued Interest;
(2) investment proceeds (defined in Treasury Regulations Section
1.148-1(b) to include amounts actually or constructively received at any
time by the Authority, such as interest and dividends, from the investment
of proceeds of the Bond).
(3) treated as proceeds under Treasury Regulations Section
1.148-1(c) (which treats amounts in invested sinking funds and pledged
funds for an issue as proceeds of an issue), including amounts in the Bond
Debt Service Fund;
(4) invested in a reasonably required reserve or replacement fund
(as defined in Treasury Regulations Section 1.148-2(f);
(5) pledged by the Authority as security for payment of debt service
on the Bond;
(6) used to pay debt service on the Bond;
(7) treated as Transferred Proceeds of the Bond.
Such term shall not include amounts that are not otherwise Gross Proceeds but
that are deposited in the Rebate Fund or allocated to the Rebate Requirement.
The determination of whether an amount is included within this definition shall
be made without regard to whether the amount is credited to any fund or account
established by the Authority or (except in the case of an amount described in
(3), (4), (5), or (6) above) is subject to the pledge of the Resolution. For
purposes of (5) above, an amount is pledged to pay principal component of or
the interest component payable on the Bond if there is reasonable assurance
that the amount will be available to be used for such purposes in the event that
the Authority encounters financial difficulties.
(m) Installment Computation Date shall mean the last day of the fifth
Bond Year and each succeeding fifth Bond Year.
(n) Investment Property shall mean any security or obligation (other than
tax-exempt obligations that are not "specified private activity bonds" within
the meaning of Section 57(a)(5)(C) of the Code or a tax-exempt mutual fund that
invests in tax-exempt bonds other than specified private activity bonds), any
annuity contract or any other Investment type Property.
Page 3 - Appendix One
<PAGE> 29
(o) Investment-type Property shall mean any property, other than property
described in section 148(b)(2)(A), (B), (C), or (E) of the Code, that is held
principally as a passive vehicle for the production of income. Except as
otherwise provided, a prepayment for property or services is investment-type
property if a principal purpose for prepaying is to receive an investment return
from the time the prepayment is made until the time payment otherwise would be
made. A prepayment is not investment-type property if -
(1) The prepayment is made for a substantial business purpose other
than investment return and the Authority has no commercially reasonable
alternative to the prepayment, or
(2) Prepayments on substantially the same terms are made by a
substantial percentage of persons who are similarly situated to the
Authority but who are not beneficiaries of tax-exempt financing.
(p) Letter of Credit shall mean the irrevocable direct-pay Letter of
Credit issued by the Credit Provider.
(q) Net Sale Proceeds shall mean Sale Proceeds, less the portion of those
Sale Proceeds invested in a reasonably required reserve or replacement fund
under Section 148(d) of the Code.
(r) Nonpurpose Investment shall mean any Investment Property in which
Gross Proceeds are invested or to which Gross Proceeds are allocated other than
purpose investments, such as a loan agreement. Nonpurpose Investments shall not
include:
(1) United States Treasury Demand Deposit Securities -- Authority and
Local Government Series; and
(2) Tax-Exempt Obligations.
For purposes of this Tax Certificate, the term "Tax-Exempt Obligations" shall
include only obligations the interest on which is (i) excluded from gross income
for Federal income tax purposes, and (ii) not treated as an item of tax
preference under Section 57(a)(5) of the Code. The term "Tax-Exempt Obligation"
shall, however, include an interest in a regulated investment company (within
the meaning of Section 851(a) of the Code) to the extent that at least
ninety-five percent (95%) of the income to the holder is interest that is
excluded from gross income by Section 103(a) of the Code.
(s) Nonpurpose Payments are: (i) amounts actually or constructively paid
to acquire a Nonpurpose Investment (or treated as paid to acquire a Nonpurpose
Investment in a Commingled Fund), (ii) for a Nonpurpose Investment that is first
allocated to the Bond on a date after it is actually acquired (e.g., an
investment that becomes allocable to Transferred Proceeds or to Replacement
Proceeds) or that become subject to the Rebate Requirement on a date after
Page 4 - Appendix One
<PAGE> 30
it is actually acquired (e.g., an Investment allocable to the Debt Service Fund
at the end of the two-year spending period), the Value of that investment on
that date, (iii) for a Nonpurpose Investment that was allocated to the Bond at
the end of the preceding computation period, the Value of that investment at
the beginning of the computation period, (iv) the Computation Date Credit, and
(v) Yield Reduction Payments made pursuant to Section 3(t)(9) hereof.
(t) Nonpurpose Receipts are: (i) amounts actually or constructively
received from a Nonpurpose Investment, (including amounts treated as received
from Nonpurpose Investments held by a Commingled Fund), such as earnings and
return of principal, (ii) or a Nonpurpose Investment that ceases to be allocated
to an issue before its disposition or redemption date (e.g., an investment that
becomes allocable to Transferred Proceeds of another issue) or that ceases to be
subject to the Rebate Requirement on a date earlier than its disposition or
redemption date (e.g., an Investment allocated to a fund initially subject to
the Rebate Requirement but that subsequently qualifies as a bona fide debt
service fund), the Value of that Nonpurpose Investment on that date, and (iii)
for a Nonpurpose Investment that is held at the end of a computation period, the
Value of that investment at the end of that period. Treasury Regulations Section
1.148-6(e) provides special rules for any fund containing both Gross Proceeds of
the Bond in amounts in excess of $25,000 that are not Gross Proceeds of the Bond
if the amounts in such fund are invested and accounted for collectively, without
regard to the source of funds deposited in the fund (a "Commingled Fund").
(u) Plain Par Bond shall mean a bond (1) issued with not more than a de
minimis amount of original issue discount or premium, (2) issued for a price
that does not include accrued interest other than Pre-Issuance Accrued
Interest, (3) that bears interest from the issue date at a single, stated,
fixed rate or that is a variable rate debt instrument within the meaning of
Section 1275 of the Code, in each case with interest unconditionally payable at
lease annually, and (4) that has a lowest stated redemption price that is not
less than its outstanding stated principal amount. For this purpose, a "de
minimis" amount means, with reference to original issue discount or premium, an
amount that does not exceed 2 percent multiplied by the stated redemption price
at maturity, plus any original issue premium that is attributable exclusively
to reasonable underwriters' compensation.
(v) Plain Par Investment shall mean an investment that is (1) issued
with not more than a de minimis amount of original issue discount or premium
or, if acquired on a date other than its issue date, acquired with no more than
a de minimis amount of market discount or premium, (2) issued for a price that
does not include accrued interest other than Pre-Issuance Accrued Interest, (3)
bears interest from its issue date at a single stated, fixed rate or that is a
variable rate debt instrument, in each case with interest unconditionally
payable at least annually and, (4) has a lowest stated redemption price that is
not less than its outstanding stated principal amount. For this purpose, de
minimis shall mean, with reference to original issue discount or premium, an
amount that does not exceed 2 percent multiplied by the stated redemption price
at maturity plus any original issue premium that is attributable exclusively to
reasonable underwriters' compensation and, in reference to market discount or
market premium, an amount that does not exceed 2 percent multiplied by the
stated redemption price at maturity.
Page 5-Appendix One
<PAGE> 31
(w) Pre-Issuance Accrued Interest shall mean amounts representing interest
that accrued on the Bond for a period not greater than one year before their
Delivery Date, but only if these amounts are paid within one year after the
Delivery Date.
(x) Present Value shall mean, with respect to an investment, an amount
equal to the present value of all unconditionally payable receipts to be
received from and payments to be paid for the investment after that date using
the yield on the investment as the discount rate, computed under the economic
accrual method, using the same compounding interval and financial conventions
used to compute the Bond Yield.
(y) Rebate Fund shall mean the account established to provide for
satisfaction of the Rebate Requirement.
(z) Rebate Requirement shall have the meaning ascribed thereto in Section
4(d) of this Tax Certificate.
(aa) Replacement Proceeds shall mean amounts that have a sufficiently
direct nexus to the Bond or to the governmental purpose of the Bond to conclude
that the amounts would have been used for that governmental purpose if the
proceeds of the Bond were not used or to be used for that governmental purpose.
For this purpose, governmental purposes include the use of amounts for the
payment of debt service on a particular date. Replacement proceeds include, but
are not limited to, sinking funds, pledge funds, and certain other amounts to
the extent these funds or amounts are held by or derived from a substantial
beneficiary of the Bond.
(ab) Sale Proceeds shall mean any amounts actually or constructively
received from the sale of the Bond, excluding amounts used to pay Pre-Issuance
Accrued Interest.
(ac) SLGs shall mean United States Treasury Time Deposit Securities --
Authority and Local Government Series.
(ad) Tax Certificate shall mean this Tax Certificate as to Arbitrage and
Instructions as to Compliance with Provisions of Section 103(a) of the Internal
Revenue Code of 1986, as such Tax Certificate may be amended from time to time.
(ae) Treasury Regulations shall mean regulations issued by the United
States Treasury pursuant to Sections 103 and 141 through 150 of the Code.
(af) Value shall mean, with respect to an investment (including a payment
or receipt on an investment) on a date, an amount determined consistently using
one of the following methods with respect to such investment for all purposes of
Section 148 of the Code:
(i) with respect to a Plain Par Investment, its outstanding stated
principal amount, plus any accrued interest unpaid on that date, (ii) any
fixed rate investment may be valued at its Present Value on that date, and
(iii) any investment may be valued at its
Page 6 - Appendix One
<PAGE> 32
Fair Market value on that date. Any yield restricted investment must be valued
at its Present Value. Except with regard to (i) yield-restricted investments,
and (ii) investments allocated or de-allocated as a result of application of the
Universal Cap, Transferred Proceeds or (iii) amounts in a Commingled Fund, an
investment must be valued at its Fair Market Value on the date that it is first
allocated to the Bond or first ceases to be allocated to the Bond as a
consequence of a deemed acquisition or deemed disposition. The Value of
Nonpurpose Investments allocated to Transferred Proceeds of the Bond on a
Transfer Date may not exceed the Value of that Nonpurpose Investment on such
Transfer Date used for purposes of applying any of the rules under Section 148
of the Code to the refunded bonds.
Page 7 - Appendix One
<PAGE> 1
EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
By and Between
ORGANON
TEKNIKA CORPORATION
and
PERIMMUNE HOLDINGS, INC.
<PAGE> 2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of this 1st day
of July, 1996 by and between Organon Teknika Corporation, a Delaware
corporation ("Shareholder"), and PerImmune Holdings, Inc., a Delaware
corporation ("Purchaser");
WITNESSETH
WHEREAS, Shareholder owns all of the issued and outstanding shares of the
capital stock of PerImmune, Inc., a Delaware corporation (the "Company");
WHEREAS, Shareholder desires to sell, and the Purchaser desires to
purchase, all of the issued and outstanding shares of the capital stock of the
Company pursuant to this Agreement; and
WHEREAS, in connection with the transactions contemplated herein,
Shareholder has agreed to transfer to the Company certain assets held in the
name of Shareholder or its Affiliates and currently used in the PerImmune
Business (as defined herein).
WHEREAS, in connection with transactions contemplated herein, the parties
intend for Shareholder and the Company to enter into certain agreements
governing the relationship between the Company and Shareholder and their
respective Affiliates (as defined herein) subsequent to the consummation of the
transactions contemplated herein.
NOW, THEREFORE, in consideration of the respective covenants and
representations and warranties contained herein, the parties hereto hereby
agree as follows:
1. DEFINITIONS
As used in this Agreement, the terms defined below shall have the
respective meanings hereinafter specified (such meanings to be equally
applicable to the singular and plural forms thereof).
"Action" means any action, suit, arbitration, proceeding or investigation
by or before any Governmental Authority.
"Affiliate" means, with respect to any entity, any other entity which
directly or indirectly controls, is controlled by, or is under common control
with such entity, where the term "control" means the ownership, directly or
indirectly, of more than fifty percent (50%) of the equity capital or the right
or power in fact to direct the management of such entity.
"Affiliated Group" means an affiliated group of corporations within the
meaning of Code Section 1504(a) or, for purposes of any state, local or foreign
Tax matters, any consolidated, combined, or unitary group of corporations
within the meaning of the corresponding provisions of tax law for the state or
other jurisdiction in question.
1
<PAGE> 3
"Ancillary Agreements" means the Services Agreement and the Letter
Agreement.
"ANRP" has the meaning set forth in Section 6.8 of the Agreement.
"Bank Accounts" means all bank and similar accounts, lock boxes and safe
deposit boxes holding cash generated by the Company ordinarily used in
connection with the PerImmune Business.
"Cessation Date" has the meaning set forth in Section 6.8 of the Agreement.
"Claim" has the meaning set forth in Section 9.4(d) of the Agreement.
"Claim Notice" has the meaning set forth in Section 9.4(d) of the
Agreement.
"Closing" has the meaning set forth in Section 3.1 of the Agreement.
"Closing Agreements" means the Credit Facility, the Working Capital
Facility, the Intellectual Property Security Agreement, the Fixed Asset
Security Agreement and the Ancillary Agreements.
"Closing Balance Sheet" means the balance sheet of the Company as of June
30, 1996 attached hereto as Exhibit G.
"Closing Book Value" means an amount equal to $9,234,935.
"Closing Date" has the meaning set forth in Section 3.1 of this Agreement.
"COBRA continuation coverage" has the meaning set forth in Section 6.8 of
the Agreement.
"Code" means the Internal Revenue Code of 1986, as amended. All citations
to the Code or to the regulations promulgated thereunder shall include any
amendments or any substitute or successor provisions thereto.
"Continuation Period" has the meaning set forth in Section 6.8 of the
Agreement.
Continuation Plans" has the meaning set forth in Section 6.8 of the
Agreement.
"CPR" has the meaning set forth in Section 10.11 of the Agreement.
"Credit Facility" has the meaning set forth in Section 6.10 of the
Agreement.
"Damages" has the meaning set forth in Section 9.4(a) of the Agreement.
"Effective Date" means July 1, 1996.
2
<PAGE> 4
"Employee Plan" means any plan, program, agreement, policy or arrangement
(a "plan") maintained or contributed to by Shareholder, the Company or any
ERISA Affiliate, or any successor thereto, whether or not reduced to writing,
for the benefit of, or pursuant to which the Company, or any Successor thereto,
has any liability with respect to, current or former employees, that is (i) an
"employee benefit plan" (within the meaning of Section 3(3) of ERISA), or (ii)
any other benefit arrangement providing for pension or retirement benefits,
profit sharing, deferred compensation, severance pay, medical, dental,
hospitalization, disability benefits, death benefits, life insurance, stock
bonus, stock purchase, stock option, restricted stock, stock appreciation
rights, fringe benefits, or similar benefits, including, without limitation,
the Akzo Nobel, Inc., Incentive Savings Plan (401k).
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment,
building or use restriction, conditional sales agreement, encumbrance or
other right of third parties, whether voluntarily incurred or arising by
operation of law, and includes, without limitation, any agreement to give any
of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Pension Plan" has the meaning set forth in Section 4.7.
"ERISA Affiliates" means any entity which is (or at any relevant time was)
a member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, the Company as
defined in Section 414(b), (c), (m) or (o) of the Code.
"Excluded Liability" means any liability arising out of DCAA audits of
periods ending on or prior to December 31, 1994.
"Fixed Asset Security Agreement" means the Fixed Asset Security Agreement
by and between the Company and Shareholder substantially in the form attached
hereto at Exhibit F.
"GAAP" means United States generally accepted accounting principles
applied consistently with the principles used to prepare the historical
financial statement of the Company.
"Government Contracts" shall mean any bid, quotation, proposal, contract,
agreement, work authorization, lease, commitment or sale or purchase order of
the Company that is with the United States Government, or any state, local or
foreign government, including, among other things, all contracts and work
authorizations to supply goods and services to the United States Government.
"Governmental Authority" means any government or political subdivision or
department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court, in each case whether domestic
or foreign, federal, state or local.
3
<PAGE> 5
"Indemnitees" has the meaning set forth in Section 9.4(b) of the Agreement.
"Intellectual Property Agreement" means the Intellectual Property
Agreement by and between Purchaser and Akzo Nobel Pharma International, B.V.
substantially in the form attached hereto as Exhibit B.
"Intellectual Property Security Agreement" means the Intellectual Property
Security Agreement by and between Purchaser, the Company, Akzo Nobel Pharma
International, B.V. and Shareholder substantially in the form attached hereto
as Exhibit E.
"Intercompany Accounts Payment" has the meaning set forth in Section 6.11
of the Agreement.
"ISP" has the meaning set forth in Section 6.8 of the Agreement.
"Law" means any domestic or foreign, federal, state or local statute, law,
ordinance, rule or regulation.
"Letter Agreement" means the Letter Agreement by and between the Company
and Shareholder substantially in the form attached hereto as Exhibit C.
"Order" means any judgment, order, writ, injunction, decree, stipulation
or award entered or rendered by any Governmental Authority.
"Owned Assets" means all assets, interests and rights of any kind, whether
tangible or intangible, real or personal, owned by the Company prior to the
transfer of the Transferred Assets to the Company pursuant to this Agreement.
"Parent" has the meaning set forth in Section 4.8(c) of the Agreement.
"Parent Affiliated Group" has the meaning set forth in Section 4.8(d).
"Pension Plan" has the meaning set forth in Section 6.8.
"PerImmune Books and Records" means (a) all records and lists of the
Company pertaining to the PerImmune Business as it was conducted by the Company
prior to the Closing, (b) all records and lists of the Company pertaining to
the PerImmune Business, customers, suppliers, personnel of the Company as of
the Closing and (c) all books, ledgers, files, reports, plans, drawings and
operating records of every kind maintained by the Company and pertaining to the
PerImmune Business as it was conducted by the Company prior to the Closing.
"PerImmune Business" means the business of research, development and the
commercialization of clinical and therapeutic applications for vaccine-based
active specific immunotherapy and the research, development, clinical and
therapeutic application and manufacturing of human monoclonal antibodies,
non-specific immunotherapy and in-vitro diagnostics, as well as contract
research and product sales, as currently conducted and proposed to be conducted
by the Company.
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"Permitted Encumbrances" means (i) materialmen's, mechanics',
carriers', workmen's, repairmen's or other like liens arising in the ordinary
course of Shareholder's or the Company's business for amounts not yet due or
which are being contested in good faith by appropriate proceedings as to which
adequate reserves have been established; and (ii) liens for current taxes not
yet due or any taxes being contested in good faith by appropriate proceedings
as to which adequate reserves have been established.
"PerImmune Liabilities" means (i) all liabilities reflected on the
Closing Balance Sheet and (ii) all liabilities arising from the conduct of the
PerImmune Business by the Company on or after December 31, 1994 but not
including any Excluded Liability.
"Post-Closing Partial Period" has the meaning set forth in Section
9.5(a) of the Agreement.
"Pre-Closing Partial Record" has the meaning set forth in Section
9.5(a) of the Agreement.
"Purchase Price" has the meaning set forth in Section 2.1 of the
Agreement.
"Purchase Price Allocation Schedule" has the meaning set forth in
Section 9.5(e) of the Agreement.
"Purchase Price Note" has the meaning set forth in Section 2.2(a) of
the Agreement.
"Purchaser" means PerImmune Holdings, Inc.
"Purchaser Indemnitees" has the meaning set forth in Section 9.4(a)
of the Agreement.
"Returns" means all returns, declarations, reports, statements, and
other documents required to be filed in respect of Taxes by or with respect to
the Company or any Affiliated Group that includes the Company, and the term
"Return" means any one of the foregoing Returns.
"Services Agreement" means the Services Agreement by and between the
Company and Shareholder substantially in the form attached hereto as Exhibit D.
"Settlement Dividend" has the meaning set forth in Section 6.11.
"Shareholder" means Organon Teknika Corporation.
"Shareholder Indemnitees" has the meaning set forth in Section 9.4(b)
of the Agreement.
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"Shareholder's Books and Records" means all records and lists of
Shareholder and its respective Affiliates relevant to the PerImmune Business as
it was conducted prior to the Closing, (b) all records and lists of
Shareholders and its respective Affiliates relevant to the PerImmune Business,
customers, suppliers, personnel of such persons and (c) all books, ledgers,
files, reports, plans, drawings and operating records of every kind maintained
by Shareholder and its respective Affiliates relevant to the PerImmune Business
as it was conducted prior to the Closing.
"Shares" has the meaning set forth in Section 2.1 of the Agreement.
"Taxes" means all federal, state, local, foreign, and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or charges of any
kind whatever, together with any interest and any penalties, additions to tax,
or additional amounts with respect thereto, and the term "Tax" means any one of
the foregoing Taxes.
"Third Party Notice" has the meaning set forth in Section 9.4(d) of
the Agreement.
"Transferred Assets" means all assets, interests and rights of any
kind, whether tangible or intangible, real or personal, held by Shareholder or
any Affiliate of Shareholder which are used exclusively in or for the benefit
of the PerImmune Business, excluding the Owned Assets, but including, without
limitation:
(a) Shareholder's rights, title and interest in and under the License
Agreement (Lipoprotein (a) Immunoassay) dated as of July 24, 1994 by and
between Arch Development Corporation and Organon Teknika Corporation;
(b) all claims, causes of action, claim in action, rights of recovery
and rights of set off of any kind, including without limitation, any liens
or any rights to payment or to enforce payment in connection with any
transaction on or prior to the Closing Date, to the extent arising from or
relating to the PerImmune Business; and
(c) rights under insurance policies and programs covering risks
pertaining to the PerImmune Business with respect to occurrences or claims
arising on or prior to the Closing Date.
"Working Capital Facility" has the meaning set forth in Section
6.11(b) of the Agreement.
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2. PURCHASE AND SALE
2.1. Purchase and Sale of Stock. Subject to and upon the terms and
conditions contained herein, Shareholder agrees to sell, assign, transfer and
convey at the Closing to Purchaser, and Purchaser agrees to purchase at the
Closing from Shareholder, all of the issued and outstanding shares of the
capital stock of the Company (the "Shares"). The total purchase price (the
"Purchase Price") that Purchaser shall pay to Shareholder for the Shares is
equal to the Closing Book Value.
2.2. Payment of Purchase Price. On the Closing Date, Purchaser will
deliver to Shareholder in payment of the Purchase Price a promissory note which
shall have a maturity of two years from the Closing Date, subject to prepayment
as set forth therein. Such promissory note shall accrue interest from the
Closing Date at a fixed rate per annum equal to eight percent (8%) (which
interest shall be added to the principal balance semi-annually and thereafter
shall accrue interest at the stated rate) and shall have such other terms as
set forth in Exhibit A (the "Purchase Price Note").
3. CLOSING
3.1. Closing. Subject to the terms and conditions of this Agreement, the
purchase and sale of the Shares (the "Closing") shall take place at 10:00 a.m.
on the date five (5) business days following the date on which the conditions to
the Closing set forth in Articles 7 and 8 of this Agreement have been fulfilled
or waived and either Purchaser, on the one hand, or Shareholder, on the other
hand, shall have notified the other party of such fulfillment or waiver, or on
such other date as may be agreed to by Purchaser and Shareholder (the "Closing
Date") at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., 13th
Floor, Washington, D.C. or at such other place as may be agreed to by Purchaser
and Shareholder.
3.2. Deliveries by Shareholder at Closing.
At Closing, Shareholder shall deliver or cause to be delivered:
(a) to Purchaser, all certificates representing the Shares, duly
endorsed for transfer or accompanied by instruments of transfer reasonably
satisfactory in form and substance to Purchaser;
(b) to Purchaser, certified copies of resolutions of the board of
directors of Shareholder authorizing Shareholder to enter into and perform
its obligations under this Agreement;
(c) to Purchaser, evidence of the resignations described in Section
6.7;
(d) to Purchaser, all corporate minute books and stock records for
the Company;
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(e) to the Company, all documents, certificates or instruments as
are necessary to effect the transfer of the Transferred Assets to the
Company;
(f) to the Company, such documents as are necessary to transfer to
persons designated by Purchaser, authorization to draw from, and have
access to, the Bank Accounts in the name of PerImmune, and
(g) all such other documents and instruments as Purchaser or its
counsel shall reasonably request to consummate or evidence the
transactions contemplated hereby.
3.3 Deliveries by Purchaser at Closing
At Closing, Purchaser shall deliver to Shareholder:
(a) the Purchase Price Note;
(b) certified copies of resolutions of the board of directors of
Purchaser authorizing Purchaser to enter into and perform its obligations
under this Agreement; and
(c) all such other documents and instruments as Shareholder or its
counsel shall reasonably request to consummate or evidence the
transactions contemplated hereby.
3.4. Certificates. At Closing, Purchaser and Shareholder shall deliver the
certificates and other documents described in Section 7.3 and 8.3.
3.5 Consents. At Closing, Shareholder shall deliver all government
authorizations and other third party consents identified on Schedule 4.4.
3.6 Ancillary Agreements. At Closing, Shareholder and the Company shall
enter into the Ancillary Agreements.
3.7 Credit Facility; Working Capital Facility. At Closing, the Company
and Shareholder shall enter into the Credit Facility and the Working Capital
Facility as contemplated in Section 6.10 and Section 6.11, respectively.
3.8 Form of Document and Instruments. All of the documents and
instruments delivered at Closing shall be in form and substance, and shall be
executed and delivered in a manner, reasonably satisfactory to the parties'
respective counsel.
3.9 Tax Form. At Closing, Purchaser shall, and Shareholder shall cause
Parent to, execute a Form 8023-A -- "Corporate Qualified Stock Purchases."
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4. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder represents and warrants to Purchaser that:
4.1 Organization
(a) Shareholder is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite power and authority to own, lease and operate its properties, to
carry on its business as it is now being conducted and to enter into this
Agreement and the Closing Agreements to which it is a party and perform
its obligations thereunder.
(b) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has all
requisite power and authority to own, lease and operate its properties,
to carry on its business as it is now being conducted and to enter into
this Agreement and Closing Agreements to which it is a party and perform
its obligations thereunder, and is duly qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary.
4.2. Capitalization of the Company.
(a) Schedule 4.2 sets forth the number of authorized, issued and
outstanding shares of capital stock of the Company. All of the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, were
not issued in violation of any law or of the preemptive rights of any
stockholder, and are owned beneficially and of record by Shareholder free
and clear of any Encumbrance, except or Permitted Encumbrances.
(b) There are no outstanding subscriptions, options, warrants,
rights, convertible securities, calls, commitments, or agreements to
purchase, issue or sell capital stock or other securities of the Company
other than as contemplated by this Agreement.
4.3 Authorization. Shareholder has all necessary corporate power and
authority to execute and deliver this Agreement and the Closing Agreements to
which it is a party and to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Shareholder of this Agreement and the Closing
Agreements to which it is a party have been duly authorized by the board of
directors of Shareholder. This Agreement has been duly executed and delivered by
Shareholder and, on the Closing Date, the Closing Agreements to which it is a
party will have been duly executed and delivered by Shareholder, and do not
require any approval of the stockholders of Shareholder. This Agreement
constitutes, and on the Closing Date, each Closing Agreement to which
Shareholder is a party will constitute, the legal, valid and binding obligation
of Shareholder enforceable against Shareholder in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar
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<PAGE> 11
laws affecting the rights and remedies of creditors generally and general
principles of equity, regardless of whether applied in equity or at law.
4.4. No Conflict; Approvals. Except as set forth on Schedule 4.4 hereto,
the execution, delivery and performance by Shareholder of this Agreement and
the Closing Agreements to which Shareholder is a party and the consummation of
the transactions contemplated hereby and thereby will not result in any
material violation of or conflict with, constitute a material default (with or
without notice of the lapse of time) under, or give rise to a right of
termination, cancellation, or acceleration of, or result in the imposition of
any Encumbrance under, or require any consent or authorization under, (i) the
Certificate of Incorporation or Bylaws of Shareholder or the Company or (ii)
any note, bond, debt instrument, mortgage, indenture or other material
contract, agreement, instrument or other document to which Shareholder or the
Company is a party or any Law or Order by which Shareholder or the Company may
be bound.
4.5 Litigation. Except as set forth on Schedule 4.5 hereto, there are no
Actions pending or, to the knowledge of Shareholder, threatened by or before
any Governmental Authority, and there are no Orders outstanding against
Shareholder, the Company or their respective Affiliates that (a) relate to the
ownership of the Shares by Shareholder, or (b) may reasonably be expected to
restrain, enjoin or otherwise prevent consummation of the transactions
contemplated by this Agreement or permit such consummation only subject to any
material condition or restriction applicable to Purchaser, or (c) may
reasonably be expected to materially and adversely affect the Company.
4.6 Material Properties; Title to Assets.
(a) Except as indicated on Schedule 4.6, upon consummation of the
transfer of the Transferred Assets pursuant to Section 6.6, the Company will
hold (i) good title to all Owned Assets and Transferred Assets of a type that
would be recorded on a balance sheet prepared in accordance with GAAP; and (ii)
valid leases under which it enjoys peaceful and undisturbed possession of real
or tangible personal property leased by it, in each case free and clear of all
Encumbrances except Permitted Encumbrances. There are no pending or, to the
Shareholder's knowledge, threatened condemnation proceedings relating to any
real property occupied by the Company.
(b) The Transferred Assets, the Owned Assets and the assets
transferred to Purchaser pursuant to the Intellectual Property Agreement
constitute all of the assets necessary to conduct the PerImmune Business
substantially as it has been conducted prior to Closing.
4.7 ERISA and Employee Plans.
(a) Schedule 4.7 contains a list of each Employee Plan and each
trust (including trusts intended to qualify under Section 501(a) of the Code
and trusts intended to qualify under Section 501(c)(9) of the Code) related
thereto.
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(b) The Company has no liability, present or future, actual or
contingent, by reason of any contribution or obligation to contribute of the
Company or any ERISA Affiliate to any multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA).
(c) Each Employee Benefit Plan has been established, maintained and
administered, in all material respects, in compliance with its terms and with
all applicable laws and regulations, including without limitation, ERISA and
the Code.
(d) the Company has provided, or will have provided, to individuals
entitled thereto, all required notices within the applicable time period and
coverage pursuant to Section 4908B of the Code with respect to any "qualifying
event" (as defined Section 4980B(f)(3) of the Code) occurring prior to and
including the Closing Date with respect to any employee or former employee of
the Company.
(e) With respect to each Employee Plan which is an "employee pension
benefit plan" as defined in Section 3(2) of ERISA (each an "ERISA Pension
Plan"): (i) neither any ERISA Pension Plan nor any fiduciary with respect
thereto has engaged in any prohibited transaction in violation of Sections 404
or 406 of ERISA or any "prohibited transaction," as defined in Section
4975(c)(1) of the Code, or has otherwise violated the provisions of Part 4 of
Title I, Subtitle B of ERISA; (ii) the Company has not knowingly participated in
a violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of
any Employee Plan and has not been assessed any civil penalty under Section
502(1) of ERISA; (iii) all filings, disclosure and reports as to each ERISA
Pension Plan required to be made to any governmental agency or ERISA Pension
Plan participant or beneficiary have been timely made; (iv) as of the last day
of the last plan year of each such ERISA Pension Plan and as of the Closing
Date, the fair market value of the assets of the ERISA Pension Plan is not less
than the present value of the accrued benefits (vested and unvested and
including ancillary benefits) of such ERISA Pension Plan; (v) no "accumulated
funding deficiency" (for which an excise tax is due or would be due in the
absence of a waiver) as defined in Section 412 of the Code or as defined in
Section 302(a)(2) of ERISA, whichever may apply, has been incurred with respect
to any ERISA Pension Plan with respect to any plan year, whether or not waived;
and (vi) neither the Company nor any ERISA Affiliate has any liability, present
or future, actual or contingent, under Title IV of ERISA (other than
contributions and PBGC premiums due in the ordinary course); and (vii) no filing
has been made by the Company or any ERISA Affiliate to, and no proceeding has
been commenced by the Pension Benefit Guaranty Corporation to, terminate any
ERISA Pension Plan.
(f) None of the Company, any ERISA Affiliate or any Employee Plan has any
present or future obligation to make any payment to, or with respect to any
present or former employee of the Company or any ERISA Affiliate pursuant to,
any retiree medical benefit plan, or other retiree Employee Plan, and no
condition exists which would prevent the Company from amending or terminating
any such benefit plan or Employee Plan.
(g) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company (with respect to its relationship
with such
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entity) that, individually or collectively, provides for the payment by the
Company of any amount (i) that is not deductible under Section 162(a)(1) or 404
of the Code or (ii) that is an "excess parachute payment" pursuant to Section
280G of the Code.
(h) No event has occurred in connection with which the Company or any
ERISA Affiliate or any Employee Plan, directly or indirectly, could be subject
to any material liability (A) under any statute, regulation or governmental
order relating to any Employee Plans or (B) pursuant to any obligation of the
Company to indemnify any person against liability incurred under any such
statute, regulation or order as they relate to the Employee Plans.
(i) Neither the execution and delivery of this Agreement by the Company
nor the consummation of the transactions contemplated hereby will result in the
acceleration or creation of any rights of any person to benefits under any
Employee Plan (including, without limitation, the acceleration of the vesting
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any ERISA Pension Plan or the acceleration or creation of any rights
under any severance, parachute or change in control agreement).
4.8 Taxes.
Except as set forth on Schedule 4.8:
(a) Filing of Returns. There have been properly completed and filed on a
timely basis and in correct form all Returns required to be filed on or prior to
the date hereof. As of the time of filing, the foregoing Returns correctly
reflected the facts regarding the income, business, assets, operations,
activities, status, or other matters of or affecting the Company or any other
information required to be shown thereon.
(b) Payment of Taxes. With respect to all amounts in respect of Taxes
imposed on the Company or for which the Company is or could be liable, whether
to taxing authorities (as, for example, under law) or to other persons or
entities (as, for example, under tax allocation agreements), with respect to
all taxable periods or portions of periods ending on or before the Closing
Date, all applicable tax laws and agreements have been fully complied with, and
all such amounts required to be paid to taxing authorities or others on or
before the date hereof have been or will be timely paid by Shareholder or its
Affiliates.
(c) Tax History.
(i) Since its incorporation on December 20, 1994, the Company has
been a member of an affiliated group filing a consolidated federal U.S. tax
return. The common parent of this affiliated group is and has been Akzo
Nobel Inc. ("Parent"). The Company was first active and first joined in the
consolidated Return for all of tax year 1995. Because of the election
described in section
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9.5(e), the Company will join in the consolidated return of Parent
for a short tax year ending on the Closing Date. The Parent
Affiliated Group is currently under audit by the Internal Revenue
Service for tax years 1990 to 1993. Years prior to 1990 are closed
under the federal statute of limitations.
(ii) The Company will file an income tax Return in the State of
Maryland for tax year 1995 and will file a short period Return in the
State of Maryland for the short tax year ending on the Closing Date
as the result of the election described in Section 9.5(e). The
Maryland statute of limitations has not expired for tax year 1995.
Neither the Company nor Parent has been contacted by the State of
Maryland regarding an audit examination. The Company has not filed
(or been required to file) income tax Returns in any other state.
(d) Section 338(h)(10) Qualification. Parent is the common parent of
the affiliated group within the meaning of Section 1504(a) of the Code
that includes Shareholder and the Company (the "Parent Affiliated Group");
Parent will file a consolidated federal income tax Return that includes
Shareholder and the Company for the tax period that includes the Closing
Date; Parent will not be a target corporation within the meaning of
Section 338 of the Code for the Taxable Year that includes the Closing
Date; and Parent is eligible to make an election under Section 338(h)(10)
of the Code with respect to the Company.
4.9. Accounts. Schedule 4.9 sets forth an accurate and complete list of
each Bank Account, together with the names of all persons authorized to draw
from or to have access to Bank Accounts in the name of PerImmune.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Shareholder that:
5.1. Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and authority to own, lease and operate its properties, to
carry on its business as it is now being conducted and to enter into this
Agreement and the Closing Agreements to which it is a party and perform its
obligations thereunder.
5.2. Authorization. Purchaser has all necessary corporate power and
authority to execute and deliver this Agreement and the Closing Agreements to
which it is a party and to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Purchaser of this Agreement and the Closing
Agreements to which it is a party have been duly authorized by the board of
directors of Purchaser. This Agreement has been duly executed and delivered by
Purchaser, and, on the Closing Date, the Closing Agreements to which it is a
party will have been duly executed by Purchaser and do not require any approval
of the stockholders of Purchaser. This Agreement constitutes, and on the
Closing Date each Closing Agreement to which Purchaser
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is a party will constitute, the legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights and remedies of creditors
generally and general principles of equity, regardless of whether applied in
equity or at law.
5.3. No Conflicts; Approvals. Except as forth on Schedule 5.3 hereto, the
execution, delivery and performance by Purchaser of this Agreement and the
Closing Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby will not result in any material
violation of or conflict with, constitute a material default (with or without
notice or the lapse of time) under, or give rise to a right of termination,
cancellation, or acceleration of, or result in the imposition of any
Encumbrance under, or require any consent or authorization under, (i) the
Certificate of Incorporation or Bylaws of Purchaser, or (ii) any note, bond,
debt instrument, mortgage, indenture or other material contract, agreement,
instrument or other document to which the Purchaser is a party or any Law or
Order by which Purchaser may be bound.
5.4. Litigation. Except as set forth on Schedule 5.4 hereto, there are no
Actions pending or, to the knowledge of Purchaser, threatened by or before any
Governmental Authority, and there are no Orders outstanding against Purchaser
that may reasonably be expected to restrain, enjoin or otherwise prevent
consummation of the transactions contemplated by this Agreement or permit such
consummation only subject to any material condition or restriction applicable
to the Shareholder.
6. COVENANTS
Shareholder and Purchaser each covenants as follows:
6.1. Further Assurances. Each of the parties hereto agrees, both
before and after the Closing, (i) to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, (ii) to execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder, and
(iii) to cooperate with each other in connection with the foregoing, including
using their respective reasonable efforts (A) to obtain all necessary waivers,
consents and approvals from Governmental Authorities and from third parties,
including, without limitation, consents to the transfer to the Company of the
Transferred Assets, (B) to obtain all necessary permits as are required to be
obtained under any federal, state, local or foreign law or regulations, (C) to
effect all necessary registrations and filings, including, without limitation,
submissions of information requested by Governmental Authorities and (D) to
fulfill all conditions to this Agreement.
6.2. No Solicitation. From the date hereof through the Closing or the
earlier termination of this Agreement, Shareholder shall not, and shall use all
reasonable efforts to cause its Affiliates and representatives (including,
without limitation, investment bankers, attorneys and
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accountants) not to, directly or indirectly, enter into, solicit, initiate or
continue any discussions or negotiations with, or encourage or agree to any
inquiries or proposals by, or participate in any negotiations with, or provide
any information to, or otherwise cooperate in any other way with, any person,
other than Purchaser and its representatives, concerning any sale of all or any
substantial portion of the Company's assets or the PerImmune Business
(including the Transferred Assets), or of any shares of capital stock of the
Company, or any merger, consolidation, liquidation, dissolution or similar
transaction involving the Company.
6.3. Notification of Certain Matters. From the date hereof through the
Closing, Shareholder shall give prompt notice to Purchaser and Purchaser shall
give prompt notice to Shareholder of (a) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any of
Shareholder's and Purchaser's respective representations or warranties
contained in this Agreement to be untrue or inaccurate in any material respect
and (b) any material failure of Shareholder and Purchaser to comply with or
satisfy any of its respective covenants, conditions or agreements to be
complied with or satisfied by it under this Agreement; provided, however, that
such disclosure shall not be deemed to cure any breach of a representation,
warranty, covenant or agreement, or to satisfy any condition.
6.4. Conduct of the Company Prior to the Closing. Prior to the Closing,
Shareholder shall cause the Company to conduct its business only in the
ordinary and regular course (that is, reasonably consistent with past custom
and practice), except as otherwise approved in writing by Purchaser. Without
limiting the generality of the preceding sentence, except as otherwise approved
in writing by Purchaser, Shareholder shall not permit the Company to:
(a) Amend the Company's charter documents;
(b) Issue or purchase any shares of its capital stock or grant any
options, warrants, subscriptions, commitments or other rights of any character
to acquire any of its capital stock;
(c) Declare or pay any dividend, or make any other distribution or
payment, with respect to its capital stock, other than the Settlement Dividend;
(d) Amend or terminate any of the Company's agreements, except in
the ordinary course of business or as provided for in the Letter Agreement;
(e) Make any capital expenditure or guarantee or incur any
indebtedness or other liabilities, except in the ordinary course of business;
(f) Enter into any agreement, except in the ordinary course of
business;
(g) Sell, lease, license, transfer, pledge or assign any of the
Owned Assets or the Transferred Assets, except in the ordinary course of
business; or
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(h) Alter the manner of keeping the Company's books, accounts or
records except for alterations mutually agreed to by Shareholder and
Purchaser made in connection with the settlement of intercompany accounts
as provided in Section 6.11(a).
6.5. Tax Matters.
(a) Termination of Existing Tax-Sharing Agreements. All tax-sharing
agreements or similar agreements with respect to or involving the Company
shall be terminated prior to the Closing Date, and, after the Closing
Date, the Company shall not be bound thereby or have liability thereunder
for amounts due in respect of period prior to the Closing Date.
(b) Tax Elections. No new elections with respect to Taxes or any
changes in current elections with respect to Taxes affecting the Company
shall be made after the date of this Agreement without prior written
consent of Purchaser.
(c) Clearance Certificate. As a condition precedent to the
consummation of the transactions contemplated by this Agreement,
Shareholder shall provide Purchaser with a clearance certificate or
similar document(s) that may be required by any state taxing authority
in order to relieve Purchaser of any obligation to withhold any portion of
the Purchase Price.
(d) FIRPTA Certificate. As a condition precedent to the consummation
of the transactions contemplated by this Agreement, Shareholder shall
furnish Purchaser an affidavit, stating, under penalty of perjury, that
the indicated number is the transferor's United States taxpayer
identification number and that the transferor is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
(e) Cooperation and Records Retention.
(i) Shareholder shall, at the expense of Shareholder, prepare
all Returns in respect of Taxes for the Company for taxable years or
periods ending on or before the Closing Date. Such Returns shall
include Returns for the short taxable period ending on or before the
Closing Date which may arise as the result of the election described
in Section 9.5(e). The Company and Purchaser shall cooperate with
Shareholder to supply any and all information reasonably requested to
complete such Returns. Information necessary to complete Returns for
the short period ending on or before the Closing Date will be supplied
by March 15, 1997. Such short period Return information shall be based
upon an actual closing of the Company's financial books and records as
of the Closing Date, rather than a pro ration of financial data for
the period which straddles the Closing Date. When requested by
Shareholder, the Company and/or Purchaser (as appropriate) shall sign
any such Returns, which will then be filed by Shareholder in a timely
manner. Shareholder shall provide Purchaser a reasonable opportunity
to review any such Return prior to signing such Return.
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(ii) The Company shall, at the expense of the Company, prepare
all Returns in respect of Taxes for the Company for taxable years or
periods ending after the Closing Date. Such Returns shall include
Returns for the short taxable period beginning after the Closing Date
which may arise as the result of the election described in Section
9.5(e). Shareholder shall cooperate with the Company to supply any and
all information reasonably requested by the Company to complete such
Returns.
(iii) Shareholder and Purchaser shall (i) each provide the other,
and Purchaser shall cause the Company to provide Shareholder, with
such assistance as may reasonably be requested by any of them in
connection with the preparation of any Return, audit, or other
examination by any taxing authority or judicial or administrative
proceedings relating to liability for Taxes, (ii) each retain and
provide the other, and Purchaser shall cause the Company to retain
and provide the other, and Purchaser shall cause the Company to retain
and provide Shareholder with, any records or other information that
may be relevant to such Return, audit or examination, proceeding, or
determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any
Return of the other for any period. Without limiting the generality of
the foregoing, Purchaser shall retain, and shall cause the Company to
retain, and Shareholder shall retain, until the applicable statutes of
limitation (including any extensions) have expired, copies of all
Returns, supporting work schedules, and other records or information
relating to Taxes in respect of the Company or the PerImmune Business
that may be relevant to such returns for all tax periods or portions
thereof ending before or including the Closing Date and shall not
destroy or otherwise dispose of any such records without first
providing the other party with a reasonable opportunity to review and
copy the same.
6.6 Transfer of Assets. Immediately prior to the Closing, Shareholder
shall assign, transfer and convey to the Company all the Transferred Assets.
6.7 Resignation of Directors. Shareholder shall cause all members of the
Board of Directors of the Company to resign, effective immediately upon the
Closing.
6.8 Employee Benefit Matters.
(a) Continuation of Participation in Employee Plans and Transition
(i) Effective on and as of the Closing Date, Shareholder shall
permit Company to continue participation in, the Akzo Nobel Incentive
Savings Plan (the "ISP"); the Akzo Nobel Retirement Plan (the "ANRP");
and all other welfare plans (medical, dental, disability, etc.), in
which Company participated prior to the Closing Date (collective, the
"Continuation Plans") through November 30, 1996 (the "Continuation
Period"). During the Continuation Period, all employees of
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Company shall be permitted to participate in the Continuation Plans as
if Company remained a subsidiary of Shareholder. Participation of
Company in each Continuation Plan shall, however, end prior to
November 30, 1996 upon Company's providing notice to Shareholder of
Company's desire to cease its participation in any one or all of the
Continuation Plans.
(ii) Company shall reimburse Shareholder for any costs
advanced on Company's behalf with respect to its continuation in the
Continuation Plans; actual third party expenses; and out-of-pocket
costs incurred by Shareholder as the result of Company's continuation
in the Continuation Plans. Such reimbursement shall be made within 30
days of receipt by Company of Shareholder's detailed invoice.
(iii) Shareholder shall cooperate with Company in its
establishment of benefit plans for Company employees by providing
Company with such employee census, benefit calculations, service data,
claims experience and other similar data as Company shall reasonably
request.
(b) COBRA
Company shall be responsible and liable for continuation coverage to
Company employees and their qualified beneficiaries in compliance with the
provisions of Code Section 49808 and ERISA Section 601 et seq. (herein referred
to as "COBRA continuation coverage") with respect to whom a qualifying event
occurs after the Closing Date, and Company agrees to indemnify and hold
Shareholder harmless from any claims for COBRA continuation coverage made by or
on behalf of such employees and their qualified beneficiaries. Shareholder
shall retain all obligations and liabilities to provide COBRA continuation
coverage to employees and former employees of Shareholder and Company and their
qualified beneficiaries (i) who are receiving COBRA continuation coverage at
the Closing or (ii) with respect to whom a qualifying event occurred on or
prior to the Closing and for which the applicable election period for COBRA
continuation coverage has not expired as of the Closing Date, and Shareholder
agrees to indemnify and hold Company harmless from any claims for COBRA
continuation coverage made by or on behalf of such employees and their
qualified beneficiaries.
(c) Pension Plan
(i) As soon as practical after the Closing Date and prior
to November 30, 1996, Company shall determine if it will adopt a
defined benefit plan for its employees. If no such plan is adopted,
following the date of Company's cessation of participation in the ANRP
(the "Cessation Date"), Shareholder will freeze past accrued benefits
as of the Cessation Date for Company's employee members under the
terms of the ANRP.
(ii) If Company establishes a defined benefit plan (the
Company's "Pension Plan"), Shareholder shall transfer or cause to be
transferred from the ANRP to the trustee of the Pension Plan cash or
marketable securities in an
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amount equal to the present value of the benefits accrued, through the
Cessation Date under the ANRP, using the ANRP' regular actuarial
assumptions for ERISA funding purposes, except substituting 7% as the
interest rate to be used as part of such assumptions; subject to
meeting the requirements of Code Section 4.14(l). Such amount shall be
further adjusted by Shareholder's actuary, taking into account benefit
payments made subsequent to the Cessation Date; actual return on trust
assets from the Cessation Date to the date assets are actually
transferred. The transfer shall be made on the latest of (A) 120 days
after being notified of Company's decision to establish a defined
benefit plan; (B) 30 days after the filing of notification with the
Internal Revenue Service of such transfer; (C) the receipt by
Shareholder of an opinion by Company's legal counsel verifying that
the Pension Plan meets the requirements of Code Section 401(a), and
that the Pension Plan's related trust is exempt from taxes under Code
Section 501(a); or (D) the completion of Company's actuary review and
acceptance of the calculations performed by Shareholder's actuary in
determining asset transfer amount.
(d) Savings Plan Asset Transfer or Distribution
Shareholder shall transfer or cause to be transferred to the trustee of
any Company qualified defined contribution plan cash or marketable securities
in an amount equal to the account balances as of the date of such transfer of
Company employees in the ISP within the latest of 60 days following the Closing
Date; 30 days after the filing of notification with the IRS of such transfer;
or the receipt by Shareholder of an opinion by Company's legal counsel
verifying that such plan meets the requirements of Code Section 401(a) or
401(k), and that the Plan's related trust is exempt from taxes under Code
Section 501(a).
(e) Nothing contained in this Agreement shall confer upon any
Company employee any rights with respect to continuance of employment by
Company, nor shall anything herein restrict Company in the exercise of its
independent business judgment in modifying any of the terms and conditions
of the employment of the Company employees. No provision of this Agreement
shall create any third party beneficiary rights in any Company employee,
any beneficiary or dependents thereof, or any collective bargaining
representative thereof, with respect to the compensation, terms and
conditions of employment of benefits that may be provided to any Company
employee by Company or under any benefit plan which Company may maintain.
(f) Purchaser recognizes and acknowledges that Company has assumed
and is responsible for payment of all benefits accrued or claimed by its
employees under any of the Employee Plans, including benefits attributable
to any prior employment with Shareholder, (and specifically including any
severance and accrued vacation) and that, except for the transfer of funds
from the ANRP and ISP as provided in (c) and (d) above, Shareholder shall
have no responsibility or liability with respect to any such benefits or
payments to any Company employee.
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6.9 Government Contracts; Novation. Schedule 6.9 sets forth all
Government Contracts used in the PerImmune Business. As promptly as
practicable, the Company will enter into a novation agreement or agreements
with the United States Government with respect to the Government Contracts, to
the extent so required. Shareholder and Purchaser will cooperate fully with the
Company in obtaining the novation of all such Government Contracts, to the
extent required.
6.10 Purchase Price Note. At or prior to the Closing, Shareholder will
enter into a credit facility (the "Credit Facility") pursuant to which
Shareholder agrees to loan to the Company up to $3,600,000 (at a rate of
$720,000 per month for five months). The initial advance shall be made on the
later of August 1, 1996 or the Closing Date, and each advance thereafter shall
be made on the first day of the month. Borrowings under the Credit Facility
shall accrue interest from the date of advance at a fixed rate per annum equal
to eight percent (8%). The outstanding principal balance under the Credit
Facility (including all accrued and unpaid interest) shall be due and payable
on December 31, 1996, provided that (i) in the event that, prior to such date,
the Company has procured a commitment for financing to be used, in part, to
repay the amounts due under the Credit Facility, then the final maturity date
shall be extended for a period of time necessary to consummate such financing,
such period not to extend beyond January 31, 1997, and (ii) in the sole
discretion of Shareholder, the final maturity may be extended for up to three
additional months during which time Shareholder will loan to the Company up to
an additional $1,800,000 pursuant to advances not to exceed $600,000 per month,
which advances will be evidenced by a promissory note. The outstanding
principal balance outstanding under the Credit Facility (including all accrued
and unpaid interest) is subject to prepayment under the terms set forth in the
Credit Facility and shall be secured by a pledge of certain assets of the
Company.
6.11 Current Accounts of PerImmune.
(a) Settlement of Intercompany Accounts. Prior to the Closing Date,
Shareholder shall cause the Company to declare and pay to Shareholder a
dividend (the "Settlement Dividend") in the amount of $2,871,532
representing the sum of (i) the balance of cash reflected on the Closing
Balance Sheet, and (ii) the balance of the intercompany account receivable
account on the Closing Balance Sheet less (iii) the Company's intercompany
accounts payable to OTC and its Affiliate. Upon payment of the Settlement
Dividend, the balance of the Company's intercompany account(s) receivable
from, and intercompany accounts payable to, Shareholder and its Affiliate
shall be deemed paid in full and reduced to zero.
(b) Working Capital Facility. On the Closing Date, Shareholder and
the Company shall enter into a working capital facility (the "Working
Capital Facility") pursuant to which Shareholder agrees to loan to the
Company up to $2,871,532. Borrowings under the Working Capital Facility
shall be at the request of the Company and subject to the approval of
Shareholder. The parties agree that the purpose of the Working Capital
Facility is to provide for the Company's working capital needs during the
period of time covered by the Working Capital Facility, and that the
approval of Shareholder shall not unreasonably be withheld. Borrowings
under the Working Capital Facility shall accrue
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interest from the date of advance at a fixed rate per annum equal to eight
percent (8%). The outstanding principal balance under the Working Capital
Facility (including all accrued and unpaid interest) shall be due and
payable on the date twelve (12) months following the Closing Date and
shall be secured by a pledge of certain assets of Purchaser. On the
Closing Date, Shareholder shall transfer to the Company $2,000,000 in
immediately available funds as an advance on the Closing Date under the
Working Capital Facility.
(c) July Current Accounts. On the Closing Date, Shareholder shall
transfer to the Company, in immediately available funds, an amount equal
to all cash received by Shareholder and its Affiliates from or on behalf
of the Company or in respect of the PerImmune Business from and after the
Effective Date but on or prior to the Closing Date (net of amounts paid
by Shareholder and its Affiliates during such period to or on behalf of the
Company or in respect of the PerImmune Business in the ordinary course of
business consistent with past practices). In the event that the amount
calculated pursuant to this paragraph shall be less than zero, then the
Company shall be deemed to have made a request for, and Shareholder shall
be deemed to have approved, effective the Closing Date, borrowing under
the Working Capital Facility in the amount necessary to reduce such
negative balance to zero, but not to exceed the total amount of permitted
borrowing thereunder. Any borrowings under the Working Capital Facility
pursuant to this Section 6.11(c) shall be in addition to amounts advanced
on the Closing Date pursuant to the last sentence of Section 6.11(b).
(d) Further Assurances. From and after the Closing Date, Shareholder
shall, and shall cause its Affiliates to, promptly transfer to the Company
all amounts received by Shareholder and such Affiliates in respect of, or
relating to the PerImmune Business (including all payments made by
PerImmune's customers). Shareholder shall, and shall cause its
Affiliates to promptly transfer to (and not pay) any request for payment
from third parties in respect of, or related to the PerImmune Business.
6.12. Property and Casualty Insurance. Shareholder shall cause the
liabilities and obligations of the Company of a type currently covered by the
master casualty insurance program of Shareholder or its Affiliate which are
incurred prior to Closing to be administered by Shareholder, or such Affiliate,
consistent with past practice.
7. CONDITIONS TO SHAREHOLDER'S OBLIGATIONS
The obligations of Shareholder to effect the Closing are subject to
the satisfaction, on or prior to the Closing, of each of the following
conditions, any of which may be waived by Shareholder.
7.1 Representations, Warranties and Covenants. All representations and
warranties of Purchaser contained in this Agreement shall be true and correct
in all material respects at and as
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of the date of this Agreement and at and as of the Closing, except as and to
the extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms hereto; and Purchaser shall have performed and satisfied all material
agreements and covenants required hereby to be performed by it prior to the
Closing.
7.2. No Proceeding or Litigation. No Action by any Governmental Authority
or other Person shall have been instituted which would reasonably be expected
to materially damage Shareholder if the transactions contemplated hereunder are
consummated.
7.3. Certificates. Purchaser shall furnish Shareholder with such
certification of its duly authorized officers and others to evidence compliance
with the conditions set forth in this Article 7 as may be reasonably requested
by Shareholder.
7.4. Corporate Documents. Shareholder shall have received from Purchaser
resolutions adopted by the board of directors of Purchaser, approving this
Agreement, the Purchase Price Note, the Closing Agreements to which it is a
party and the transactions contemplated hereby and thereby, certified by
Purchaser's corporate secretary, as applicable.
7.5. Consents. All governmental consents necessary to effect the Closing,
and all third party consents to the transactions contemplated hereby (including
with respect to the conveyance of the Transferred Assets) shall have been
obtained (it being understood that pursuant to Section 6.9 hereof the necessary
consent or approval for the novation of certain of the Government Contracts
need not be obtained prior to the Closing).
7.6. Other Agreements. Purchaser shall have executed and delivered the
Closing Agreements in the forms attached as exhibits hereto.
8. CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to consummate the transactions provided
for hereby are subject to the satisfaction, on or prior to the Closing, of each
of the following conditions, any of which may be waived by Purchaser:
8.1. Representations, Warranties and Covenants. All representations and
warranties of Shareholder contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing except as and to the extent that the facts and conditions
upon which such representations and warranties are based are expressly required
or permitted to be changed by the terms hereof; and Shareholder shall have
performed and satisfied all material agreements and covenants required hereby
to be performed by it prior to the Closing.
8.2. No Proceedings or Litigation. No Action by any Governmental Authority
or other Person shall have been instituted which would reasonably be expected
to materially damage Purchaser if the transactions contemplated hereby are
consummated.
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8.3. Certificates. Shareholder shall furnish Purchaser with such
certificates of its duly authorized officers and others to evidence compliance
with the conditions set forth in this Article 8 as may be reasonably requested
by Purchaser.
8.4. Corporate Documents. Purchaser shall have received from Shareholder
resolutions adopted by the board of directors of Shareholder, approving this
Agreement, the Closing Agreements to which it is a party, and the transactions
contemplated hereby and thereby, certified by Shareholder's corporate
secretary, as applicable.
8.5. Consents. All governmental consents necessary to effect the Closing,
and all third party consents to the transactions contemplated hereby (including
with respect to the conveyance of the Transferred Assets) shall have been
obtained (it being understood that pursuant to Section 6.9 hereof the necessary
consent or approval for the novation of certain of the Government Contracts
need not be obtained prior to the Closing).
8.6. Other Agreements. Shareholder shall have executed and delivered the
Closing Agreements in the forms attached as exhibits hereto.
9. ACTIONS BY SHAREHOLDER AND PURCHASER AFTER THE CLOSING
9.1. Further Actions. On and after the Closing Date, Purchaser and
Shareholder will take all appropriate actions and execute all documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to confirm or effect Purchaser's ownership, possession and control
(in accordance with this Agreement) of the shares and the Company's ownership,
possession and control (in accordance with this Agreement) of the Transferred
Assets, including but not limited to the novation of Government Contracts used
in the PerImmune Business, if required, and transfer of monies received by
Shareholder and its Affiliates after the Closing Date from PerImmune customers
and intended for PerImmune.
9.1. Survival of Representations and Warranties. The representations and
warranties of Shareholder, on the one hand, and Purchaser, on the other hand,
contained herein, and all claims and causes of action with respect thereto,
shall survive the Closing Date, to the extent herein set forth: (a) with
respect to the representations and warranties in Sections 4.2 and 4.6(a) hereof
for an indefinite period, (b) with respect to the representations and
warranties in Section 4.7 and 4.8 hereof until 60 days after the expiration of
the applicable statute of limitations (with extensions); (c) with respect to
all other representations and warranties until the date two years from the
Closing Date. The termination of the representations and warranties provided
herein shall not affect the rights of a party in respect of any Claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
9.3. Books and Records.
(a) Purchaser agrees that it will cooperate with and make available
to Shareholder, during normal business hours, all PerImmune Books and
Records, and PerImmune employees (without substantial disruption of
employment) which are
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necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other
matter requiring any such PerImmune Books and Records (including such
employees) for any reasonable business purpose; it being understood that
all PerImmune Books and Records shall be maintained by Purchaser for
three (3) years following the Closing. Except as otherwise required in
Section 9.4, Shareholder shall bear all of the out-of-pocket costs and
expenses (including, without limitation, attorney's fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such PerImmune Books and Records.
Notwithstanding the foregoing, Purchaser shall retain all PerImmune Books
and Records relevant to any Return until sixty (60) days following the
expiration of the relevant statute of limitations.
(b) Shareholder agrees that it will cooperate with and make
available to Purchaser, during normal business hours, all Shareholder's
Books and Records, and employees of Shareholders or the Affiliates
(without substantial disruption of employment) which are necessary or
useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any
such Shareholder's Books and Records, (including such) employees for any
reasonable business purpose; it being understood that all Shareholder's
Books and Records shall be maintained by Shareholder for three (3) years
following the Closing. Except as otherwise required in Section 9.4,
Purchaser shall bear all of the out-of-pocket costs and expenses
(including, without limitation, attorney's fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such Shareholder's Books and Records.
Notwithstanding the foregoing, Shareholder shall retain all Shareholder's
Books and Records relevant to any Return until sixty (60) days following
the expiration of the relevant statute of limitations.
9.4. Indemnification
(a) By Shareholder. Shareholder shall indemnify, save and hold
harmless Purchaser, the Company, their respective Affiliates and
subsidiaries, and their respective directors, officers, shareholders and
employees (the "Purchaser Indemnitees") from and against any and all costs,
losses, Taxes, liabilities, damages, lawsuits, deficiencies, claims,
demands, and expenses (whether or not arising out of third-party claims),
including, without limitation, reasonable attorneys' fees and all
reasonable amounts paid in investigation, defense or settlement of any of
the foregoing herein (collectively, "Damages") incurred in connection
with, arising out of or resulting from (i) any breach of any
representation, warranty, covenant or agreement made by Shareholder in
this Agreement; (ii) any Excluded Liability and any liability or
obligation of Shareholder or its Affiliate that does not relate to
operations of the Company or the PerImmune Business; and (iii) any
liability arising from Shareholder's responsibility for Taxes pursuant to
Section 9.5, provided, however, that Shareholder shall not be liable to
the Purchaser Indemnitees in respect of a breach of a representation or
warranty made by Shareholder in this Agreement which was true as of the
date of this Agreement but which is rendered inaccurate by events beyond
the control of Shareholder occurring between the date of this
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<PAGE> 26
Agreement and the Closing, to the extent that Shareholder has notified
Purchaser of such breach in writing prior to the Closing and Purchaser has
effected the Closing with knowledge of such breach.
(b) By Purchaser. Purchaser shall indemnify, save and hold harmless
Shareholder, Affiliates and subsidiaries, and their respective directors,
officers, shareholders and employees (the "Shareholder Indemnitees") and,
together with the Purchaser Indemnitees, the "Indemnitees") from and
against any and all Damages incurred in connection with, arising out of or
resulting from (i) any breach of any representation, warranty, covenant or
agreement made by Purchaser in this Agreement; and (ii) any PerImmune
Liabilities and (iii) any liability arising from Purchaser's
responsibility for Taxes pursuant to Section 9.5.
(c) Damages. The term "Damages" as used in this Section 9.4 is not
limited to matters asserted by third parties, but includes Damages
incurred or sustained by an Indemnitee in the absence of third party
claims. Payments by an Indemnitee or amounts for which such Indemnitee is
indemnified hereunder shall not necessarily be a condition precedent to
recovery.
(d) Defense of Claims. If a claim for Damages (a "Claim") is to be
made by an Indemnitee, such Indemnitee shall, subject to Section 9.2, give
written notice (a "Claim Notice) to the indemnifying party as soon as
practicable after such Indemnitee becomes aware of any fact, condition or
event which may give rise to Damages or which indemnification may be
sought under this Section 9.4. If any lawsuit or enforcement action is
filed against any Indemnitee hereunder, notice thereof (a "Third Party
Notice") shall be given to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) calendar days after the
service of the citation or summons). The failure of any indemnified party
to give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the indemnifying party demonstrates
actual damage caused by such failure. After receipt of a Third Party
Notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the
terms of its indemnity hereunder in connection with such lawsuit or
action, then the indemnifying party shall be entitled, if it so elects,
(i) to take control of the defense and investigation of such lawsuit or
action, (ii) to employ and engage attorneys of its own choice to handle
and defend the same, at the indemnifying party's cost, risk and expense
unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has
been advised in writing by counsel that there may be one or more legal
defenses available to such indemnified party that are different from or
additional to those available to the indemnifying party, and (iii) to
compromise or settle such claim, which compromise or settlement shall be
made only with the written consent of the indemnified party, such consent
not to be unreasonably withheld. The indemnified party shall cooperate in
all reasonable respects with the indemnifying party and such attorneys in
the investigation, trial and defense of such lawsuit or action and any
appeal arising therefrom; and the indemnified party may, at its own cost,
participate in the investigation, trial and defense of
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<PAGE> 27
such lawsuit or action and any appeal arising therefrom and appoint its
own counsel therefor, at its own cost. The parties shall also cooperate
with each other in any notifications to insurers. If the indemnifying
party fails to assume the defense of such claim within fifteen (15)
calendar days after receipt of the Third Party Notice, the indemnified
party against which such claim has been asserted will (upon delivering
notice to such effect to the indemnifying party) have the right to
undertake the defense, compromise or settlement of such claim and the
indemnifying party shall have the right to participate therein at its own
cost; provided, however, that such claim shall not be compromised or
settled without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld. In the event the indemnified
party assumes the defense of the claim the indemnified party will keep the
indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement.
(e) Limitation on Indemnities. (i) No claim may be made against an
indemnifying party for indemnification pursuant to either Section 9.4(a)(i)
or Section 9.4(b)(i) with respect to any individual item of Damage, or any
series of related items of Damage not exceeding $15,000, until the
aggregate dollar amount of all Damages indemnifiable pursuant to this
Section 9.4 exceeds $50,000. The indemnification of obligations of
Shareholders pursuant to Section 9.4(a)(i) and the indemnification of
obligations of Purchaser pursuant to Section 9 .4(b)(i), shall each be
effective only until the dollar amount paid in respect of the Damages
indemnified against under such clause of this Agreement aggregates to an
amount equal to $8,500,000; and (ii) Purchaser shall not be entitled to
indemnification based upon the breach of any representation or warranty of
Shareholder if, as of the Closing, Purchaser had actual knowledge of facts
that cause such representation or warranty to be untrue. For purposes of
the foregoing, the parties intend only that the actual knowledge of Michael
G. Hanna, Jr., and of senior management and laboratory directors of
PerImmune on the Closing Date shall be imputed to Purchaser. Such persons
shall not be personally liable to Shareholder under the provisions of the
preceding sentence. Shareholder shall not be entitled to indemnification
based upon the breach of any representation or warranty of Purchaser if, as
of Closing, Shareholder or any of its senior management personnel had
actual knowledge of facts that cause such representation and warranty to be
untrue.
(f) Brokers and Finders. Pursuant to the provisions of this Section
9.4, each of Purchaser and Shareholder shall indemnify, hold harmless and
defend the other party from the payment of any and all broker's and
finder's expenses, commissions, fees or other forms of compensation which
may be due or payable from or by the indemnifying party, or may have been
earned by any third party acting on behalf of the indemnifying party in
connection with the negotiation and execution hereof and the consummation
of the transactions contemplated hereby.
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9.5. Responsibility for Taxes.
(a) Division of Responsibility. Shareholder shall be responsible for
(and shall indemnify and hold harmless Purchaser, the Company, and each
of their respective Affiliates, successors and assigns from and against)
all Taxes (i) with respect to all tax periods of the Company ending on or
prior to the Closing Date, (ii) with respect to any tax period of the
Company beginning before the Closing Date and ending after the Closing
Date, but only with respect to the portion of such period up to and
including the Closing Date (such portion, a "Pre-Closing Partial
Period"), or (iii) payable as a result of a material breach of any
representation or warranty set forth in Section 4.8 of this Agreement,
except in each case to the extent that the liability for such Taxes is
reflected on the Closing Balance Sheet. Purchaser and the Company shall be
responsible for (and shall jointly and severally indemnify and hold
harmless Shareholder, and its Affiliates, successors and assigns from and
against) all Taxes (i) with respect to all tax periods of the Company
beginning after the Closing Date, and (ii) with respect to any tax period
of the Company beginning before the Closing Date and ending after the
Closing Date, but only with respect to the portion of such period
commencing after the Closing Date (such portion, a "Post-Closing Partial
Period").
(b) Effect of Carryovers and Carrybacks. For purposes of this
Section 9.5, Tax or Taxes shall include the amount of Taxes which would
have been paid but for the application of any credit or net operating or
capital loss deduction attributable to periods beginning after the Closing
Date or to any Post-Closing Partial Period, but shall not include amounts
which would have been paid but for the application of any credit or net
operating or capital loss deductions attributable to periods ending on
or prior to the Closing Date or to any Pre-Closing Partial Period.
(c) Allocation Between Partial Periods. With respect to any tax
period of the Company beginning before the Closing Date and ending after
the Closing Date, any Taxes for such period shall be apportioned between
the Pre-Closing Partial Period and the Post-Closing Partial Period based,
in the case of real and personal property Taxes, on a per diem basis and,
in the case of other Taxes, on the actual activities, taxable income or
taxable loss of the Company and its subsidiaries, if any, during such
Pre-Closing Partial Period and such Post-Closing Partial Period.
(d) Post-Closing Audits and Other Proceedings. Shareholder, on the
one hand, and Purchaser, on the other hand, agree to give prompt notice to
each other of any proposed adjustment to Taxes for periods ending on or
prior to the Closing Date or any Pre-Closing Partial Period. Shareholder
and Purchaser shall cooperate with each other in the conduct of any audit
or other proceedings involving Company for such periods and each may
participate at its own expense, provided each party hereto shall have the
right to control the conduct of any such audit or proceeding for which
such party (i) agrees that any resulting Tax is covered by the indemnity
provided in Section 9.5(a) of this Agreement, and (ii) demonstrates its
ability to make such indemnity payment. Notwithstanding the foregoing,
Shareholder may not settle or otherwise resolve any such
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<PAGE> 29
claim, suit or proceeding without the consent of Purchaser, such consent
not to be unreasonably withheld and Purchaser may not settle or otherwise
resolve any such claim, suit or proceeding without the consent of
Shareholder, such consent not to be unnecessarily withheld.
(e) Section 338(h)(10) Election. Shareholder shall cause Parent to
join with Purchaser in making and Purchaser agrees to join Parent in
making an election under Section 338(h)(10) of the Code and any
corresponding elections permitted under state, local or foreign law with
respect to the acquisition of the Company and, if no election may be made
pursuant to such state, local or foreign law under an election
corresponding to Code Section 338(h)(10), elections corresponding to
Section 338(a) and 338(g) of the Code, provided as to such jurisdiction
Shareholder is not also subject to tax on the gain realized upon the sale
of the capital stock of the Company. Purchaser and Parent shall exchange
completed and executed copies of Internal Revenue Service Form 8023-A,
required Schedules thereto, and any similar state, local and foreign
forms at or prior to the Closing. Shareholder and Purchaser agree that as
soon as practicable after Closing, they shall allocate the Purchase Price
and all other capitalized costs among the Company's assets for income tax
purposes in accordance with an allocation schedule (the "Purchase Price
Allocation Schedule") proposed by Purchaser and reasonably acceptable to
Shareholder, which shall be delivered by Purchaser to Shareholder. In
connection therewith, Shareholder and Purchaser shall discuss the
allocation of the Purchase Price and other capitalized costs among the
Company's assets and attempt in good faith to reach agreement with respect
thereto. Shareholder and Purchaser acknowledge that for United States
federal income tax purposes (and for purposes of state, local or foreign
taxes in jurisdictions which permit elections analogous to the election
permitted under Section 338(h)(10) of the Code) the acquisition of the
stock will be treated by the parties as if it is a sale of the assets of
the Company to a new corporation owned by Purchaser, followed by a
complete liquidation of the Company to a new corporation owned by
Purchaser, followed by a complete liquidation of the Company. The parties
agree to report the transaction in a manner consistent with this treatment.
9.6 Confidentiality.
(a) Shareholder and its Affiliates have obtained confidential
information relating to the business, operations and assets (including
the Transferred Assets) of the Company. Following the Closing, Shareholder
and its Affiliates shall treat such information as confidential and shall
preserve the confidentiality thereof, not duplicate or use such
information and instruct their employees who have had access to such
information to keep confidential and not to use any such information
unless such information (i) is now or is hereafter disclosed, through no
act or omission of Shareholder or its Affiliates, in a manner making it
available to the general public or (ii) is required by law to be disclosed.
(b) Purchaser, the Company and their respective Affiliates have
obtained confidential information relating to the business operations and
assets of Shareholder. Following the Closing, Purchaser, the Company and
their respective Affiliates shall treat
28
<PAGE> 30
such information as confidential and shall preserve and confidentiality
thereof, not duplicate or use such information and instruct their
employees who have had access to such information to keep confidential and
not to use any such information unless such information (i) is now or is
hereafter disclosed through no act or omission of Purchaser, the Company
or their Affiliates, in a manner making it available to the general public
or (ii) is required by law to be disclosed.
10. MISCELLANEOUS
10.1. Termination.
(a) This Agreement may be terminated at any time prior to Closing;
(i) By mutual written consent of Shareholder and Purchaser;
(ii) By Purchaser, or Shareholder if the Closing shall not have
occurred on or before August 31, 1996; provided however, that this
provision shall not be available to Purchaser, if Shareholder has the
right to terminate this Agreement under clause (iv) of this Section
10.1(a); and this provision shall not be available to Shareholder if
Purchaser has the right to terminate this Agreement under clause
(iii) of this Section 10.1;
(iii) By Purchaser if there is a material breach of any
representation or warranty set forth in Article 4 hereof or any
covenant or agreement to be complied with or performed by Shareholder
pursuant to the terms of this Agreement, provided that Purchaser may
not terminate this Agreement prior to the Closing if Shareholder has
not had an adequate opportunity to cure such failure;
(iv) By Shareholder if there is a material breach of any
representation or warranty set forth in Article 5 hereof or of any
covenant or agreement to be complied with or performed by Purchaser
pursuant to the terms of this Agreement; provided that Shareholder
may not terminate this Agreement prior to the Closing if Purchaser
has not had an adequate opportunity to cure such failure.
(b) In the Event of Termination. In the event of termination of this
Agreement;
(i) Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the
execution hereof to the party furnishing the same;
(ii) The provisions of Section 9.6 shall continue in full force
and effect; and
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<PAGE> 31
(iii) No party hereto shall have any liability or further
obligation to any other party relating to the transactions contemplated hereby,
provided that no such termination shall relieve any party from liability for a
willful breach of this Agreement.
10.2. Assignment. Neither this Agreement, the Closing Agreements nor any
of the rights or obligations hereunder or thereunder may be assigned by any
party without the prior written consent of the other parties thereto, which
consent will not unreasonably be withheld; except that either party may assign
all such rights and obligations to an Affiliate or to a successor in interest
which shall assume all obligations and liabilities of such party under this
Agreement (provided that no assignment shall release the assigning party from
responsibility for its obligations hereunder) and Purchaser may, without such
consent, assign all such rights to any lender as collateral security. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns, and no
other Person shall have any right benefit or obligation under this Agreement as
a third party beneficiary or otherwise.
10.3. Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered,
when transmitted if transmitted by telecopy, electronic or digital transmission
method provided that such transmission is confirmed by telephone; the day after
it is sent, if sent for next day delivery to a domestic address by overnight
mail; and upon receipt, if sent by certified or registered mail return receipt
requested. In each case notice shall be sent to:
If to Shareholder, addressed to:
Organon Teknika Corporation
100 Akzo Avenue
Durham N.C. 27712
Attention: President
With a copy to:
Organon Teknika N.V.
Veedijk 58
2300 Turnhout
Belgium
Attention: General Counsel
30
<PAGE> 32
If to Purchaser or the Company, addressed to:
Perlmmune, Inc.
1330 Piccard Drive
Rockville, ND 20850-4396
Attention: Michael G. Hanna, Ph.D.
With a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
Attention: Bruce E. Rosenblum
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.4. Choice of Law. This Agreement shall be construed, interpreted and
the right of the parties determined in accordance with the internal law, and
not the law of conflicts, of the State of Maryland.
10.5. Entire Agreement; Amendments and Waivers. This Agreement, the
Closing Agreements, together with all exhibits and schedules hereto and
thereto, and the Purchase Price Note constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. This Agreement may not be amended or supplemented
except by an instrument in writing signed on behalf of each of the parties
hereto. No modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
10.6. Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.7. Expenses. Except as otherwise specified in this Agreement, each
party hereto shall pay its own legal accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.
10.8. Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such
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<PAGE> 33
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
10.9. Titles. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
10.10. Publicity. Any party issuing a press release regarding the
transactions contemplated hereby must have the prior written consent of the
other party.
10.11. Arbitration.
(a) Notwithstanding anything herein to the contrary, in the
event that there shall be a dispute among the parties after the Closing arising
out of or relating to this Agreement, including, without limitation, the
indemnities provided in Article 9 the parties agree to attempt to settle any
such disputes in a amicable manner. Should the parties fail to resolve such a
dispute within three (3) months following written notice thereof, such dispute
shall, upon request of the contesting party, be submitted to an arbitrator
jointly agreed to by the parties. If a single arbitrator cannot be agreed upon
within thirty (30) days, each party shall elect one arbitrator and the two
arbitrators will select a third arbitrator.
(b) Arbitration shall be conducted in accordance with rules
and procedures of the Center for Public Resources ("CPR"), subject to the
following terms:
(i) the arbitration shall be held at a mutually
agreeable location in the vicinity of Washington, D.C.
(ii) the arbitrator(s) shall be independent, impartial
third parties, having no direct or indirect personal or financial relationship
to any of the parties of the dispute, each of whom has agreed to accept an
appointment as arbitrator(s) on the terms set forth in this Section.
(iii) within thirty (30) days after the selection of the
arbitrator(s), each party shall submit a description of the matter to be
arbitrated to said arbitrator(s).
(iv) from the date the arbitrator(s) is/are in
possession of both parties' submitted material, the arbitrator(s) shall have
sixty (60) days in which to hear the parties and fifteen (15) days thereafter
to render a decision.
(v) time periods set forth in this Section 10.11 may be
altered only mutual consent of the parties.
(vi) the arbitrator(s) shall announce the award in
writing accompanied by written findings of facts in support of the award and
any relevant conclusions of law. Any award issued as a result of such
arbitration shall be final and binding
32
<PAGE> 34
between the parties thereto, and shall be enforceable by any court
having jurisdiction over the party against whom enforcement is sought.
(vii) the fees of the arbitrator(s) and any other costs and fees
associated with the arbitration shall be paid in accordance with the
decision of the arbitrator(s), except that the prevailing party shall
pay no more than one-half of such costs.
10.12. Assets Held for Shareholder and Affiliates. Purchaser hereby
acknowledges and agrees that all biological materials, products, technology,
files, records and documentation, including but not limited to data for
regulatory purposes, relating to (i) the TICE(R)BCG product line (including but
not limited to the master seed lot) (ii) any and all food diagnostics and HIV
diagnostics in the possession of the Company at the Closing Date and (iii) any
and all cell lines/antibodies set forth on Schedule 1.1(a) are the property of
Shareholders and/or its Affiliates and will not be deemed included in the Owned
Assets or the Transferred Assets.
10.13. Non-Competition. Taking into consideration that prior to the
Closing, the Company has been engaged in the manufacture and development of
food diagnostics and HIV diagnostics on behalf and for the account of
Shareholder and its Affiliates, and will under the Services Agreement continue
to provide services to the Shareholder and its Affiliates relating thereto,
Purchaser hereby covenants and agrees that Purchaser either directly or through
an Affiliate including the Company, will for the longer of (i) a period of five
(5) years from the Closing Date or (ii) as long as the Company continues to
provide services to the Shareholder or its Affiliates in the field of food
diagnostics or HIV diagnostics, not compete with Shareholder or its Affiliates
in the field of food diagnostics and/or HIV diagnostics, as appropriate.
33
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first written above.
PERIMMUNE HOLDINGS, INC.
By:/s/ MICHAEL G. HANNA JR.
---------------------------
Name: Michael G. Hanna Jr.
Title: President
ORGANON TEKNIKA CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first written above.
PERIMMUNE HOLDINGS, INC.
By:
---------------------------
Name:
Title:
ORGANON TEKNIKA CORPORATION
By: /s/ ROBERT S. TIMMONS
-----------------------------
Name: R.S. Timmons
Title: President
<PAGE> 37
Exhibit A
Form of Promissory Note
<PAGE> 38
EXHIBIT A
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. IT MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
Date: August ___, 1996 $9,234,935
_________________________
PROMISSORY NOTE
For value received, PerImmune Holdings, Inc., a Delaware corporation
("Holdings") hereby promises to pay to the order of Organon Teknika Corporation,
a corporation formed under the laws of Delaware (the "Payee"), at the office of
PerImmune, Inc., ("PerImmune") 1330 Piccard Drive, Rockville, MD 20850, or at
such other place in the United States as the Payee may from time to time
designate in writing, in lawful money of the United States, the principal amount
of Nine Million Two Hundred Thirty-four Thousand Nine Hundred Thirty-five
Dollars ($9,234,935), together with accrued interest thereon, calculated and
payable as set forth below in this Promissory Note.
This Promissory Note is made pursuant to that certain Stock Purchase
Agreement (the "Stock Purchase Agreement") dated as of July __, 1996 by and
among Holdings and Payee, and is the Purchase Price Note referred to therein.
Capitalized terms used herein shall have the meanings set forth in the Stock
Purchase Agreement.
Interest on the principal balance of this Promissory Note
outstanding from time to time until paid in full shall accrue at the rate of
eight percent (8%) per annum, computed on the basis of a 365-day year for the
actual number of days elapsed, commencing on the date hereof. Interest shall
compound semi-annually on January 31 and July 31 of each year, commencing on
January 31, 1997, and the amount of such interest shall be added to the
principal of this Promissory Note as of such date. If this Promissory Note is
prepaid prior to July 31, 1998, all accrued interest shall be due and payable on
the date of prepayment.
Final maturity of this Promissory Note is July __, 1998 ("Final
Maturity") subject to Payee's right to accelerate final maturity as set forth
herein. Holdings shall be required to prepay this Promissory Note in full in the
event that PerImmune, Inc., a Delaware corporation, consummates an initial
public offering of common stock ("Common Stock") prior to the Final Maturity. In
such event, this Promissory Note is subject to prepayment, at the election of
Payee, on the date such public offering is consummated, either in cash or in
Common Stock with a value equal to the price per share to the investors in the
public offering. In the event of a failure of (a) PerImmune to pay when due and
payable any amounts due to Payee under the Credit Facility or the Working
Capital Facility or (b) Holdings to pay to amounts due to Akzo Nobel Pharma
<PAGE> 39
International, B.V. ("Pharma") under Section 2.2 of the Intellectual Property
Agreement, and the continuation of such failure for a period of forty-five (45)
days, then, upon notice in writing to Payee, Payee may declare all amounts owed
hereunder to be due and payable immediately.
Payment of principal and interest under this Promissory Note is secured
pursuant to that certain Intellectual Property Security Agreement by and among
Holdings, PerImmune, Pharma and Payee dated August ____, 1996 by a pledge of all
of PerImmune's right, title and interest in the Collateral, as that term is
defined in the Intellectual Property Security Agreement.
IN WITNESS WHEREOF, Holdings has caused this Promissory note to be
executed and delivered by its duly authorized officer, as of the date first
written above.
PERIMMUNE HOLDINGS, INC.
By: _________________________________________
Title
2
<PAGE> 40
Exibit B
Form of Intellectual Property Agreement
<PAGE> 41
INTELLECTUAL PROPERTY AGREEMENT
By and Among
AZKO NOBEL PHARMA INTERNATIONAL, B.V.
and
PERIMMUNE HOLDINGS, INC.
<PAGE> 42
INTELLECTUAL PROPERTY AGREEMENT
This Intellectual Property Agreement (the "Agreement") is made this
second day of August, 1996 by and between Akzo Nobel Pharma International, B.V.
(a corporation formed under the laws of the Netherlands) ("Pharma") and
PerImmune Holdings, Inc., a Delaware corporation ("Holdings");
WITNESSETH
WHEREAS, Pharma is the beneficial owner of the Patents and Patent
Applications (each as defined herein), and is the legal and beneficial owner of
the Trademarks and Technical Information (each as defined herein);
WHEREAS, Akzo Nobel, N.V. a corporation formed under the Laws of the
Netherlands and the direct parent corporation of Pharma ("Patent"), holds title,
as legal owner, to the Patents and Patent Applications for the benefit of
Pharma;
WHEREAS, Pharma and Patent each wishes to sell, transfer and convey to
Holdings their respective rights in the Patents, Patent Applications, the
Trademarks and other technology rights and intellectual property owned by such
parties in exchange for the consideration set forth in this Agreement and used
and useful in the PerImmune Business (as defined herein);
NOW THEREFORE, in consideration of the respective covenants and
representations and warranties hereafter specified it is hereby agreed between
the parties as follows:
1. Definitions
As used in this Agreement, the terms defined below shall have the
respective meanings hereinafter specified, it is hereby agreed between the
parties as follows:
"Affiliates" means, with respect to any entity, any other entity which
directly or indirectly controls, is controlled by, or is under common control
with such entity, where the term "control" means the ownership, directly or
indirectly, of more than fifty percent (50%) of the equity capital or the right
or power in fact to direct the management of such entity.
"Claim" has the meaning set forth in Section 5.3.
"Claim Notice" has the meaning set forth in Section 5.3.
"Damages" has the meaning set forth in Section 5.1.
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<PAGE> 43
"Excluded Intellectual Property" means all biological materials, products,
technology, files, records and documentation, including but not limited to data
for regulatory processes, relating to (i) the TICE(R)BCG product line
(including but not limited to the master seed lot), (ii) any and all food
diagnostics and HIV diagnostics in the possession of PerImmune at the Closing
Date, and (iii) any and all cell lines/antibodies set forth on Schedule 1.1.
"Fair Market Value" means as of a given date, (i) the closing price of a
share of common stock on the principal exchange on which the common stock then
trades, if any, on the day previous to such date, or, if shares were not traded
on the day previous to such date, then on the next preceding trading day during
which a sale occurred; or (ii) if such common stock is not traded on an exchange
but is quoted on Nasdaq or a successor quotation system, (1) the last sales
price (if the common stock is then listed as a National Market Issue under the
Nasdaq National Market system) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the common stock
on the day previous to such date as reported by Nasdaq or such successor
quotation systems.
"Indemnitees" has the meaning set forth in Section 5.1.
"License Revenues" means consideration received by Holdings and its
Affiliates (including PerImmune) from third parties as a result of the
licensing by Holdings and its Affiliates (including PerImmune) of Patents,
Patent Applications and/or Technical Information with respect to a specified
Product or Products, including all license fees, royalties and milestone
payments, but excluding payments to fund research or other product development
expenses and costs ("R&D Payments").
"Net Sales" means the amounts invoiced or charged purchasers for Products
sold by Holdings or an Affiliate (including PerImmune) to a third party, less
costs of insurance incident to transportation; transportation and shipping
costs; excise, sales, luxury, gross receipt, turnover or similar taxes and
customs duties; trade and cash discounts; sales commissions; and allowances for
returns and uncollectible accounts. Neither License Revenues nor R&D Payments
shall be considered Net Sales for purposes of this Agreement.
"Patents" means those patents listed on Schedule 1.2(a) hereto and all
divisionals, continuations, continuations-in-part, reissues, renewals,
extensions or additives to any such patents, both U.S. and worldwide.
"Patent Applications" means the patent applications listed on Schedule
1.2(a) hereto, as well as any continuations, continuations-in-part, divisional
or reissue applications, reexamination certificates, or any corresponding
foreign patent applications based on such patent applications and on any
patents issuing worldwide from any of the foregoing.
"PerImmune Business" means the business of research, development and the
commercialization of clinical and therapeutic applications for vaccine-based
active specific immunotherapy and the research, development, clinical and
therapeutic application and manufacturing of human monoclonal antibodies,
non-specific immunotherapy and in-vitro
2
<PAGE> 44
diagnostics, as well as contract research and product sales, as currently
conducted and proposed to be conducted by PerImmune.
"Perimmune Indemnitees" has the meaning set forth in Section 5.1.
"Products" means individually or collectively, as the context
indicates (i) OncoSPECT (Colorectal), (ii) OncoSPECT (non-colorectal), (iii)
active specific immunotherapy (ASI), (iv) Apo-Tek cardiovascular tests and
products, (v) KLH and non-specific immunotherapy products, and (vi) other
products produced by Holdings and its Affiliates (including PerImmune) which
are covered by Patents, Patent Applications or patents or patent applications
underlying the Retained Patents License or make use of Technical Information
transferred hereunder to Holdings.
"Quarterly Payments Report" has the meaning set forth in Section
2.3(a).
"Retained Patents" means the patents list on Section 1.4.
"Retained Patents License" has the meaning set forth in Section
3(b).
"Taxes" means all federal, state, local, foreign, and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or charges of any
kind whatever, together with any interest and any penalties, additions to tax,
or additional amounts with respect thereto, and the term "Tax" means any one of
the foregoing Taxes.
"Technical Information" means all technical and commercial
information, specifications, processes, inventions, trade secrets, know how,
methods and techniques, and other materials primarily used in the PerImmune
Business, including models, designs and plans and including the underlying
copyrights in works of authorship embodying the foregoing, all of
which primarily relate to the PerImmune Business as conducted by PerImmune on
the date hereof, but not including the Patents, Patent Applications, Trademarks
or Excluded Intellectual Property.
"Third Party Notice" has the meaning set forth in Section 5.3.
"Trademarks" means those trademarks and common law marks listed
on Schedule 1.5 hereto.
<PAGE> 45
2. Assignment of Intellectual Property Rights to Perimmune
2.1. Transfer
(a) Assignment of Patents and Patent Applications. Pharma
shall, and shall cause Parent to, sell, assign, convey and deliver to Holdings,
its successors, assigns and legal representatives, such party's entire right,
title and interest in and to the Patents, the Patent Applications and all
rights and privileges relating thereto including but not limited to the right
to recover and take all such proceedings as may be necessary for the recovery
of damages or otherwise in respect of past, present or future infringement of
any Patent or patents(s) issuing from any Patent Application;
(b) Assignment of Trademarks. Pharma hereby sells, assigns,
conveys and delivers to Holdings all of its individual rights, title and
interest in and to the Trademarks, including the goodwill of the business
represented by the scheduled trademarks, any registrations and applications of
the scheduled marks and any common law rights in the scheduled marks;
(c) Assignment of Technical Information. Pharma hereby sells,
assigns, conveys and delivers to Holdings Pharma's right, title and interest in
and to all Technical Information held by Pharma.
2.2 Consideration.
(a) In consideration of the transfers, assignments and
conveyances provided for in Section 2.1, and subject to the limitations
included herein, Holdings agrees to make the following payments to Pharma:
(i) in respect of the Products listed on Schedule
2.2(a)(i), the payments in each case in the amount set forth next to such
Product on Schedule 2.2(a)(i);
(ii) in respect of the Products listed on Schedule
2.2(a)(ii), the payments in each case in the amount set forth next to such
Product on Schedule 2.2(a)(ii);
(iii) in respect of other Products covered by the Patents,
the Patent Applications, or patents issued to, or patent applications filed by,
Holdings subsequent to the date hereof, which are the direct result of the
technology owned by Holdings as of the date hereof or transferred to Holdings
hereunder but excluding the Products set forth in Schedule 2.2(a)(i) and
Schedule 2.2(a)(ii), payments equal to 7.5% of Net Sales and 50% of License
Revenue for such Products, as applicable; and
(iv) in respect of all other Products of Holdings which
are a direct result of the technology owned by Holdings as of the date hereof,
but not otherwise
4
<PAGE> 46
covered by the provisions of 2.2(a)(i) through 2.2(a)(iii),
payments equal to 5% of Net Sales or 50% of License Revenue, as applicable.
(b) Each Lump sum payment for a Product to be made by
Holdings pursuant to Section 2.2(a)(i) is payable in two equal installments:
one-half upon written notification to Holdings by the U.S. Food and Drug
Administration of its approval of such Product for commercial use and one-half
upon written notice of approval of such Product for commercial use in at least
two of the following four countries: France, Germany, United Kingdom and Italy.
In the event that PerImmune's common stock is publicly traded on a U.S.
national securities exchange or quoted on an automated quotation system, each
milestone payment may, at the election of Pharma, be satisfied in shares of
common stock of PerImmune based upon the Fair Market Value of such common
shares on the day such payment is made.
(c) Holdings' obligation to make the payments referenced in
Section 2.2(a)(ii) and Section 2.2(a)(iii) with respect to a particular Product
remains in effect with respect to any sale of that particular Product until the
expiration or termination of the last patent to expire or terminate directly
covering that particular product in any country of manufacture or sale.
Holdings' obligation to make payments contemplated in Section 2.2(a)(iv) with
respect to any Product expires on the earlier of: (i) ten years from the first
commercial introduction of any such Product or (ii) December 31, 2011.
(d) For purposes of this Section 2.2, Products shall be
considered sold upon the date invoiced.
(e) Payments made pursuant to Section 2.2(a)(ii) through
2.2(a)(iv) in respect of Products returned to Holdings, may be credited against
future payments due and owing pursuant to such sections and credits for
returned Products shall be made in accordance with the Quarterly Payments
Report.
(f) Holdings hereby agrees to diligently pursue development,
regulatory approval and commercialization of the Products listed on Schedule
2.2(a)(i).
2.3 QUARTERLY PAYMENTS REPORT; AUDIT
(a) Holdings shall, on or before the last day of February,
May, August and November of each year in which payments are payable thereunder,
furnish to Pharma a statement (the "QUARTERLY PAYMENTS REPORT"), certified by a
financial officer of Holdings, concerning the Net Sales and License Revenue of
Products by Licensee during the preceding calendar quarter in sufficient detail
to permit the computation of the payments due pursuant to Section 2.2(a)(i)
through 2.2(a)(iv) and shall accompany such statement by payment of the amount
of the payment due in the form of a check or confirmation of a wire transfer.
On or before the 30th day of April of each year, Holdings shall furnish to
Pharma at Pharma's request and expense, a comparable statement certified by
Holdings' firm of certified public accountants of the sales of Products during
the term of this
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<PAGE> 47
Agreement for the calendar year ending on the preceding December 31, and
shall accompany such statement by payment of an amount equal to the
excess, if any, of the amount of payments shown to be due on such
statement over the aggregate amount of the four quarterly payments made
in respect of such calendar year pursuant to this Article, or, if the
aggregate amount of such payments shall be in excess of the amount of
payment shown to be due on such statement, shall take appropriate credit
of the amount of such over-payment against payments accruing after such
December 31.
(b) Upon thirty (30) days notice to Holdings, Pharma shall have
the right to examine the applicable books and records of Holdings in
order to verify the Net Sales and License Revenue of Products for which
payments are made by Holdings to Pharma pursuant to Section 2.2(a). In
the event that any such examination reveals that the amount of such Net
Sales or License Revenue for any calendar quarter exceeded the amount
certified to Pharma herein, the actual amount of the Net Sales and
License Revenue in respect of such calendar quarter shall be increased
for purposes of determining the Payments pursuant to Section 2.2(c), and
the shortfall shall immediately be paid to Pharma by Holdings. Holdings
shall be entitled to examine the work papers relating to any such
examination, and if any such examination reveals an overpayment to Pharma
by Holdings, the overpaid amount shall be refunded to Holdings, without
interest.
2.4 Withholding. Holdings and Pharma recognize that payments by Holdings
to Pharma of amounts described in this Agreement are not royalties, but rather
payments for the purchase of Patents and Patent Applications, Trademarks and
Technical Information. However, Pharma recognizes that Holdings may be obligated
under Section 881(a)(4) of the Internal Revenue Code of 1986, as amended, or
under another provision of law to withhold and pay over, or otherwise pay, Taxes
as a result of the payment by Holdings to Pharma of amounts described in this
Agreement. In connection with such withholding obligations, Pharma shall be
treated as if it were subject to such law and shall not be accorded the benefit
of any exemption or reduction in tax rate permitted by such law unless Holdings
shall have received such evidence, forms or certificates satisfying Holdings
that Pharma is not subject to such law or is entitled to an exemption or
reduction in tax rate. Specifically, Pharma shall provide Holdings with a duly
executed Form 1001 - Ownership, Exemption, or Reduced Rate Certificate
evidencing Pharma's qualification for treaty exemption prior to the due date for
any payments hereunder. Any amounts withheld by Holdings and remitted to a
taxing authority shall be deemed for all purposes of this Agreement to have been
paid by Holdings to Pharma.
2.5. For purposes of this Article 2, all references to "Holdings" shall
refer to either or both of Holdings and PerImmune, as the context requires.
3. (a) License Back to Pharma. Holdings hereby grants to Pharma a
retained, transferable, non-exclusive, irrevocable, world-wide and royalty-free
license under the assigned Patents and Patent Applications set forth on
Schedule 1.2(b).
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<PAGE> 48
(b) License to Retained Patents. Pharma hereby grants to Holdings a
non-transferable, non-exclusive, irrevocable, worldwide and royalty-free
license under the Retained Patents for use with PerImmune's human monoclonal
antibodies (the "Retained Patents License").
4. Representations and Warranties.
Pharma hereby represents and warrants to Holdings that:
4.1. Pharma is the beneficial owner of all Patents and Patent
Applications and the legal and beneficial owner of all Trademarks and Technical
Information with the authority to transfer to Holdings its interests in such
Patents, Patent Applications, Trademarks and Technical Information as provided
on Section 2.1.
4.2. Parent is the legal owner of all Patents and Patent Applications,
with the authority to transfer to PerImmune its interests in such Patents and
Patent Applications as provided in Section 2.1.
4.3. Pharma has full authority to cause Parent to assign to Holdings
Parent's interests in the Patents and the Patent Applications pursuant to
Section 2.1(a) and to grant the Retained Patents License. Neither Pharma nor
Parent has acted in any way that would interfere with Holdings' rights as
granted herein.
4.4. Excepts as set forth on Schedule 4.4, the Patents, Patent
Applications, and the Technological Information being transferred to Holdings by
Parent and Pharma under this Agreement and the Retained Patents License
together convey to Holdings legal and beneficial ownership of intellectual
property rights sufficient to permit Holdings to conduct the PerImmune Business,
substantially in the same manner as such business was conducted prior to the
date hereof.
4.5. Except as set forth on Schedule 4.5, no other person or entity has
or is asserting an ownership interest in any of the Products, and neither Parent
nor Pharma has had to pay or been requested to pay any royalty or license fee
which would be an obligation of Holdings after the date hereof to any third
party to make, use, sell or distribute, any of the Products.
4.6. Except as set forth on Schedule 4.6, the Trademarks represent all
marks registered in any jurisdiction worldwide which were used primarily by or
for the PerImmune Business prior to the date hereof.
4.7. Except as otherwise disclosed in Schedule 4.7, there has been no
claim against either Parent or Pharma or any of their Affiliates of any
infringement of any patent, trademark, patent application, trade name, trade
secret, copyright or other intellectual property rights of any third party
occurring from the operation of the PerImmune Business; provided, however, that
nothing in this Agreement shall constitute or be deemed a representation or
warranty that the manufacture, use or sale of any product under the Patents or
Patent Applications, the use of the
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<PAGE> 49
Technical Information or the use of the Trademarks are, or will be, free from
infringement of any intellectual property rights, including patents or
trademarks, of third parties.
5. Indemnification.
5.1. By Pharma. Pharma shall indemnify, save and hold harmless Holdings
and its respective Affiliates and subsidiaries, and their respective directors,
officers, shareholders and employees (the "Perimmune Indemnitees") from and
against any and all costs, losses, Taxes, liabilities, damages, lawsuits,
deficiencies, claims, demands, and expenses (whether or not arising out of
third-party claims), including, without limitation, reasonable attorneys' fees
and all reasonable amounts paid in investigation, defense or settlement of any
of the foregoing herein (collectively, "Damages") incurred in connection with,
arising out of or resulting from any breach of any representation, warranty,
covenant or agreement made by Pharma in, or in connection with, this Agreement
provide, however, that Pharma shall not be liable to the PerImmune Indemnitees
in respect of a breach of a representation or warranty made by Pharma in this
Agreement which was true as of the date of this Agreement but which is rendered
inaccurate by events beyond the control of Pharma occurring between the date of
this Agreement and the Closing, to the extent that Pharma has notified Holdings
of such breach in writing prior to the Closing and Holdings has effected the
Closing with knowledge of such breach.
5.2. Damages. The term "Damages" as used in this Section 5 is not
limited to matters asserted by third parties, but includes Damages incurred or
sustained by an Indemnitee in the absence of third party claims. Payments by an
Indemnitee or amounts for which such Indemnitee is indemnified hereunder shall
not necessarily be a condition precedent to recovery.
5.3. Defense of Claims. If a claim for Damages (a "Claim") is to be made
by an Indemnitee, such Indemnitee shall give written notice (a "Claim Notice")
to the indemnifying party as soon as practicable after such Indemnitee becomes
aware of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 5. If any lawsuit or
enforcement action is filed against any Indemnitee hereunder, notice thereof (a
"Third Party Notice") shall be given to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) calendar days after the
service of the citation or summons). The failure of any indemnified party to
give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the indemnifying party demonstrates actual
damage caused by such failure. After receipt of a Third Party Notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying
party shall be entitled, if it so elects, (i) to take control of the defense
and investigation of such lawsuit or action, (ii) to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's costs, risk and expense unless the named parties to such action or
proceeding include both the indemnifying party and the indemnified party and
the indemnified party has been advised in writing by counsel that there may be
one or more legal defenses available to such indemnified party that are
different from or additional to those available to the indemnifying party, and
(iii) to compromise or settle such claim, which
8
<PAGE> 50
compromise or settlement shall be made only with the written consent of the
indemnified party, such consent not to be unreasonably withheld. The indemnified
party shall cooperate in all reasonable respects with the indemnifying party and
such attorneys in the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom; and the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom and appoint its own counsel therefor, at
its own cost. The parties shall also cooperate with each other in any
notifications to insurers. If the indemnifying party fails to assume the defense
of such claim within fifteen (15) calendar days after receipt of the Third Party
Notice, the indemnified party against which such claim has been asserted will
(upon delivering notice to such effect to the indemnifying party) have the right
to undertake the defense, compromise or settlement of such claim and the
indemnifying party shall have the right to participate therein at its own cost;
provided, however, that such claim shall not be compromised or settled without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld. In the event the indemnified party assumes the defense of
the claim the indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or settlement.
5.4 Limitation on Indemnity. Holdings shall not be entitled to
indemnification based upon the breach of any representation or warranty of
Pharma if, as of the Closing, Holdings has actual knowledge of facts that cause
such representation or warranty to be untrue. For purposes of the foregoing,
the parties intend only that the actual knowledge of Michael G. Hanna, Jr. and
of senior management and laboratory directors of PerImmune on the Closing Date
shall be imputed to Holdings. Such persons shall not be personally liable to
Pharma under the provisions of the preceding sentence.
6. Miscellaneous
6.1 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder or thereunder may be assigned by any party without the
prior written consent of the other parties thereto, which consent will not
unreasonably be withheld; except that either party may, without such consent,
assign this Agreement and all such rights and obligations to an Affiliate or to
a successor in interest which shall assume all obligations and liabilities of
the assigning party under this Agreement and Holdings may (i) assign all such
rights to any lender as collateral security (provided that no assignment shall
release the assigning party from responsibility for its obligations hereunder)
or (ii) novate its rights and obligations hereunder to PerImmune and shall
thereafter be released from responsibility for its obligations thereunder. Upon
effecting such a novation, all references herein to Holdings shall be deemed to
refer to PerImmune, unless the context otherwise requires. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, and no
other Person shall have any right benefit or obligation under this Agreement
as a third party beneficiary or otherwise.
6.2 Further Assurances. Pharma shall, and shall cause Parent to,
execute, sign and deliver to Holdings all documents, and to perform all acts as
are reasonably required for the
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<PAGE> 51
assignment of the Patents, Patent Applications, Trademarks and Technical
Information to PerImmune as contemplated hereunder, including the timely filing
of all documents necessary to reflect Holdings' ownership of the Patents, the
Patent Applications and the Trademarks in any jurisdiction where such Patents,
Patent Applications and Trademarks are currently registered or filed.
6.3 Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered,
when transmitted if transmitted by telecopy, electronic or digital transmission
method provided that such transmission is confirmed by telephone; the day after
it is sent, if sent for next day delivery to a domestic address by overnight
mail or via private delivery service; and upon receipt, if sent by international
air courier service, certified or registered mail return receipt requested. In
each case notice shall be sent to:
If to Pharma, addressed to:
Akzo Nobel Pharma International B.V.
P.O. Box 20 5345 BH
Oss, The Netherlands
Attention: General Counsel
With a copy to:
Organon Teknika N.V.
Veedijk 58,2300 Turnhout
Belgium
Attention: President
If to Holdings, addressed to:
PerImmune Holdings, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attention: Michael G. Hanna, Ph.D.
With a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
Attention: Bruce E. Rosenblum
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
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6.4. Choice of Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the internal law,
and not the law of conflicts, of the State of Maryland.
6.5. Jurisdiction. Pharma hereto irrevocably submits for the benefit
of PerImmune to the jurisdiction of the federal district courts located in the
State of Maryland in connection with any controversy, suit, action or proceeding
which may arise out of or in connection with this Agreement or the transactions
contemplated hereby. Pharma hereto irrevocably waives any objection which it
might now or hereafter have to the courts referred to in the preceding sentence
being nominated as the forum to hear and determine any controversy, suit, action
or proceeding which may arise out of or in connection with this Agreement or the
transaction contemplated hereby, on the basis of improper venue, inconvenient
forum or otherwise, and agrees not to claim that any such court is not a
convenient or appropriate forum. The parties agree hereby confirm that nothing
in this Section 6.5 is intended to alter the agreement in Section 6.9.
6.6. Agent for Service of Process.
(a) In connection with this Agreement, Pharma hereto agrees
that the process by which any suit, action or proceeding is begun in the
federal district courts located in the State of Maryland may be served
on it by being delivered to Organon Teknika Corporation, 100 Akzo
Avenue, Durham, North Carolina 27712, and hereby irrevocably appoints
such person as its agent for the service of process in connection
therewith. If the appointment of the person mentioned in this Section
6.6 ceases to be effective, Pharma shall immediately appoint a further
person to accept service of process on its behalf in Maryland and,
failing such appointment within five (5) days after notice thereof to
Pharma, Holdings shall be entitled to appoint such a person by notice to
Pharma. Pharma further irrevocably consents to the service of process
out of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to Pharma, at its address identified in Section 6.3, such
service to become effective ten (10) days after such mailing. Nothing
contained herein shall affect the right to serve process in any other
manner permitted by law.
(b) The submission to the jurisdiction of the courts
referred to above shall not (and shall not be construed so as to) limit
the right of Holdings hereto to take proceedings against Pharma with
respect to this Agreement in any other court of competent jurisdiction
nor shall the taking of proceedings in any one or more jurisdictions
preclude the taking of proceedings in any other jurisdiction (whether
concurrently or not) if and to the extent permitted by applicable law.
6.7. Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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6.8. Severability. The Parties hereto agree that the invalidity or
unenforceability of any of the provisions hereof shall not in any way affect
the validity or enforceability of any other provisions of this Intellectual
Property Agreement except those of which the invalidated or unenforceable
provisions comprise an integral part of or are otherwise clearly inseparable
from such other provisions.
6.9. Arbitration.
(a) Notwithstanding anything herein to the contrary, in the event
that there shall be a dispute among the parties after the Closing arising out
of or relating to this Agreement, including, without limitation, the
indemnities provided in Article 5 the parties agree to attempt to settle any
such disputes in a amicable manner. Should the parties fail to resolve such a
dispute within three (3) months following written notice thereof, such dispute
shall, upon request of the contesting party, be submitted to an arbitrator
jointly agreed to by the parties. If a single arbitrator cannot be agreed upon
within thirty (30) days, each party shall select one arbitrator and the two
arbitrators will select a third arbitrator.
(b) Arbitration shall be conducted in accordance with rules and
procedures of the Center for Public Resources ("CPR"), subject to the following
terms:
(i) the arbitration shall be held at a mutually agreeable
location in the vicinity of Washington, D.C.
(ii) the arbitrator(s) shall be independent, impartial third
parties, having no direct or indirect personal or financial relationship to any
of the parties of the dispute, each of whom has agreed to accept an appointment
as arbitrator(s) on the terms set forth in this Section.
(iii) Within thirty (30) days after selection of the
arbitrator(s), each party shall submit a description of the matter to be
arbitrated to said arbitrator(s).
(iv) from the date the arbitrator(s) is/are in possession of both
parties' submitted material, the arbitrator(s) shall have sixty (60) days in
which to hear the parties and fifteen (15) days thereafter to render a decision.
(v) time periods set forth in this Section 6.9 may be altered
only mutual consent of the parties.
(vi) the arbitrator(s) shall announce the award in writing
accompanied by written findings of facts in support of the award and any
relevant conclusions
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<PAGE> 54
of law. Any award issued as a result of such arbitration shall be
final and binding between the parties thereto, and shall be
enforceable by any court having jurisdiction over the party against
whom enforcement is sought.
the fees of the arbitrator(s) and any other costs and fees associated
with the arbitration shall be paid in accordance with the decision of the
arbitrator(s), except that the prevailing party shall pay no more than one-half
of such costs.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
PERIMMUNE HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
AKZO NOBEL PHARMA INTERNATIONAL, B.V.
By:
------------------------------------
Name:
Title:
<PAGE> 56
Exhibit C
Form of Letter Agreement
<PAGE> 57
LETTER AGREEMENT
Organon Teknika Corporation
100 Akzo Avenue
Durham, NC 27712
August 8, 1996
Re: Termination of certain intercompany agreements
Gentlemen:
This letter is to confirm our agreement that the agreements by and between
PerImmune, Inc., on the one hand, and Organon Teknika Corporation ("OTC")
and/or its affiliated companies on the other hand, as listed on Schedule A
hereto (the "Agreements"), shall be terminated in connection with the
anticipated transactions under the Stock Purchase Agreement by and between OTC
and PerImmune Holdings, Inc., and the Intellectual Property Agreement by and
between OTC's affiliate, Akzo Nobel Pharma International B.V. and PerImmune
Holdings, Inc., both of which are effective as of July 1, 1996.
The Agreements and all rights and obligations thereunder shall be terminated
effective as of June 30, 1996; provided, however, such terminations shall not
affect, nor release any party from, any obligation of confidentiality
thereunder with respect to the confidential information of the other parties
thereto.
It is our understanding that OTC shall agree to termination of all Agreements
to which it is a party and shall obtain the consent and agreement for
termination from all other parties to the Agreements. If this correctly states
our agreement with respect to termination of the Agreements, please so indicate
by signing where indicated below.
Sincerely,
Michael G. Hanna, Jr.
President
PerImmune, Inc.
Agreed: Organon Teknika Corporation
By:__________________________ Date: _________________________
<PAGE> 58
Exhibit D
Services Agreement
<PAGE> 59
SERVICES AGREEMENT
This Agreement, entered into effective as of the 1st day of July, 1996 by and
between PerImmune, Inc., a Delaware corporation ("PerImmune"). PerImmune
Holdings, Inc. ("Holdings") and Organon Teknika Corporation, a Delaware
corporation ("OTC").
WHEREAS, each party desires to obtain services which the other party is willing
to provide in order to assist each party in conducting its business;
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, the parties hereby agree as follows:
1. DEFINITIONS
1.1 "Service Provider" shall mean and refer to a party or its Affiliate(s)
hereunder which provides or is to provide services.
1.2 "Receiving Party" shall mean and refer to a party or its designated
Affiliate(s) to or for whom the services called for hereunder are provided,
or are to be provided.
1.3 "Affiliate" shall mean any company which, by means of ownership or voting
shares, or otherwise, controls, is controlled by or is under common control
with either party. For purposes hereof, on and after the effective date,
PerImmune shall not be deemed an Affiliate of OTC; not shall OTC be deemed
an Affiliate of PerImmune.
1.4 "Standard Cost" shall mean the cost to the Service Provider to provide the
requested service (other than Product Supply Services, as defined below),
including wages, salaries, benefits, materials, supplies, overhead
(including facilities expenses) and "G&A" expense, as calculated by the
Service Provider in accordance with its normal accounting practices applied
on a consistent basis.
1.5 "Product Cost" shall mean the cost to produce or supply a product
hereunder, as calculated in accordance with the normal practice of the
parties in compliance with Chapter 6 of the Administrative Directives of
the Organon Teknika Group of Companies in effect as of the date hereof,
copy of which is attached as Schedule C hereto.
1.6 "Master Services Agreement" shall mean this Agreement without reference to
any Supplement hereto.
2. PROVISION OF SERVICES
2.1 OTC, either directly or through one or more of its Affiliates, shall
perform those services described on the attached Schedule A and supplements
thereto.
<PAGE> 60
2.2. PerImmune shall perform for OTC and/or its designated Affiliates those
services described on the attached Schedule B and any supplements thereto.
2.3. Such services shall be performed in accordance with the terms and
conditions of this Agreement, including those contained in the Schedules
hereto and any supplements to the Schedules ("Supplements").
2.4. Each party hereby agrees that with respect to the services to be provided
by it or its Affiliates hereunder as a Service Provider, it will use its
best efforts to provide (or have its Affiliates provide, if applicable)
the personnel, equipment and materials necessary for carrying out the
services requested by the other party on a regular and timely basis and in
a manner which satisfies its obligations hereunder.
2.5. The services to be performed hereunder shall at all times be subject to the
direction and control of the respective Service Provider thereof.
3. PAYMENT FOR SERVICES
3.1. Product Production/Supply Services. Unless otherwise agreed in writing,
any products to be manufactured and/or supplied hereunder (hereinafter
referred to as "Product Supply Services") shall be provided at Product
Cost plus a fee of 25% unless otherwise agreed and the Receiving Party
shall be responsible for all costs of transportation and insurance from
the Service Provider's facility. The parties shall mutually agree in
advance upon other terms and conditions, including product requirements,
and order and delivery terms prior to the production or supply of such
products. Unless otherwise agreed in writing, orders must be submitted at
least 60 days in advance of requested delivery date.
3.2. Non-Product Service. Unless otherwise agreed in writing, the Service
Provider shall be compensated for services other than Product Supply
Services at Standard Cost plus a fee of 7%.
3.3. Notwithstanding the definitions of Standard Cost and Product Cost in
Sections 1.4 and 1.5 respectively (the "Costs"), the parties agree that
the Costs shall be subject to adjustment on an annual fiscal year basis
for the increase in the cost of living index as published by the U.S.
Department of Commerce, provided that any annual increase to the Costs
shall not exceed six percent (6%), except this limitation shall be subject
to increase with respect to Product Cost for (i) any costs of changes in
manufacturing processes mandated by governmental agencies, and (ii)
increases in cost of raw materials or supplies in excess of ten percent
(10%), where the Service Supplier is unable to find acceptable substitute
materials or supplies at a lower price, in which case the excess above 10%
may be added to the materials or supplies portion of the Product Cost
(provided however, if such increase exceeds twenty percent (20%), the
excess over 20% shall not be added without the Receiving Party's written
consent).
3.4. Expenses for external services shall be incurred by the Service Provider
only with the prior consent of the Receiving Party and shall be billed at
actual invoice cost without addition of fees described in Section 3.1 or
3.2.
<PAGE> 61
3.5 The services provided, and the related charges for such services, shall be
set forth in writing by the Service Provider in such detail as the
Receiving Party may reasonably require and shall be billed to the Receiving
Party on a monthly basis. Payments for such services shall be made by the
Receiving Party within thirty (30) days after receipt of invoice.
3.6 Additional Services. Other services not specified in Schedules A or B may
be agreed upon and covered under this Agreement as the parties from time to
time may mutually agree in writing and added as a Supplement hereto.
4. RIGHTS TO RESULTS
4.1 Unless otherwise agreed in any Supplement hereto, all results, inventions,
improvements, discoveries and innovations (whether or not patentable)
conceived or first actually reduced to practice in the performance of
services under this Agreement by a Service Provider shall be deemed to be,
and shall be, the property of the Receiving Party. The Service Provider
shall disclose promptly to the Receiving Party or such persons as it may
designate, all such inventions, improvements or discoveries; and without
additional compensation, assign all rights to such inventions,
improvements, discoveries and innovations and any and all patents and
patent applications thereon, to the Receiving Party or its designee as and
when requested, and to cooperate in the prosecution and enforcement of such
patents and patent applications, it being understood however that the costs
of prosecuting patent and preparing assignments thereof shall be paid by
the Receiving Party.
4.2 No information, data or results developed in the performance of the
services under this Agreement shall be published or divulged in any thesis,
writing, public lecture, patent application or the like, without the prior
written approval of the Receiving Party.
5. WARRANTY
5.1 Non-Product Supply Services Each party agrees that when acting as a
Service Provider it will use its best efforts to provide the services called
for under this Agreement in the manner specified in Section 2.4, above.
NO WARRANTIES OR REMEDIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL
EXPRESSED OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, OR USAGE SHALL APPLY TO NON-PRODUCT SERVICES RENDERED
HEREUNDER unless otherwise agreed to by the Service Provider in a separate
writing.
5.2 Supply of Products Notwithstanding Section 5.1, above, any products to be
manufactured and supplied hereunder shall be manufactured in accordance
with applicable FDA Good Laboratory Practices and Good Manufacturing
Practices and shall be warranted to meet, for any applicable shelf life of
the product, the product specifications agreed upon in writing by the
parties (the "Specifications").
<PAGE> 62
NO OTHER WARRANTY, EXPRESS OR IMPLIED, WHETHER STATUTORY, WRITTEN OR
ORAL, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR USAGE SHALL APPLY TO PRODUCTS SUPPLIED HEREUNDER, unless
otherwise specifically agreed to in writing by the Service Provider.
6. LIMITATION OF LIABILITY
In performing services not involving manufacture or supply of products
hereunder, a Service Provider shall have no liability except for its wilful
misconduct or negligence. With respect to products manufactured and/or supplied
hereunder, the Service Provider's liability to the Receiving Party shall be
limited, at the Service Provider's option, to replacement of the product or
refund of price paid. In no event shall the Service Provider, its agents or
employees have any liability arising out of performance or non-performance of
any services under this Agreement or in connection with the services hereunder
for loss of profits or revenue, loss by reason of non-operation or increased
expense or operation of equipment, or incidental, special, or consequential
damages of any nature. Each party agrees to maintain comprehensive general
liability insurance coverages sufficient to cover its liabilities hereunder.
7. CONFIDENTIALITY
The parties recognise and agree that in the performance of services pursuant to
this Agreement, that the parties may receive and/or have access to proprietary
materials and confidential and proprietary information of another party hereto,
including but not limited to technical, financial, administrative and product
information. Therefore, each party hereto agrees that it will hold all
confidential and proprietary information of the other party in confidence and
not disclose or transfer such information or any material to third parties or
use such information or material for any purpose other than in connection with
the performance of services hereunder.
A party shall have no such obligation with respect to any information which is
generally known by the public or which it has received from a third party who
has no obligation of confidentiality to the disclosing party or which is known
to such party at the time of receipt from the disclosing party. The obligations
hereunder shall continue for a period of three (3) years after termination or
expiration this Agreement.
Upon completion of any services to be rendered hereunder, the Service Provider
shall promptly return any materials and any confidential information to the
Receiving Party.
8. DURATION AND TERMINATION OF AGREEMENT
8.1. Unless otherwise agreed in writing (including in any Supplement hereto)
this Agreement shall continue with respect to a particular non-Product
Supply Service for such period of time as the parties shall mutually
agree in writing, including in a Supplement hereto.
<PAGE> 63
8.2. This Agreement shall continue in effect with respect to the Product
Supply Services of a particular product for such period of time as the
parties shall mutually agree in writing, including in a Supplement
hereto.
8.3. This Agreement shall expire in its entirety at such time as there are no
further services to be provided hereunder.
8.4. The provisions of Sections 4, 5, 6, 7 and 10 shall survive termination
or expiration of this Agreement.
8.5. Notwithstanding anything to the contrary contained herein or in a
Supplement hereof, this Agreement (including the Supplements) or any
Supplement hereof may be terminated by either party in the event the
other party has breached a material term of this Agreement or such
Supplement and such default remains unremedied for a period of
forty-five (45) days after written notice of such default has been
received. The termination of a Supplement pursuant to this Section does
not affect this Agreement or any other Supplement hereof, which shall
remain in full force and effect, nor shall any material breach of any
such Supplement give cause for termination of this Agreement or any
Supplement to this Agreement.
9. ASSIGNMENT
This Agreement is not assignable by either party without the prior written
consent of the other party or parties, as applicable, such consent not to be
unreasonably withheld; provided, however no consent shall be needed for
assignment of this Agreement by OTC to an Affiliate (provided that OTC shall
not be relieved of responsibility for fulfilment of its obligations hereunder).
10. APPLICABLE LAW/DISPUTES
10.1. The rights and obligations of the parties under this Agreement shall
be interpreted in accordance with and governed in all respects by the
laws of the State of Maryland.
10.2. The parties agree to attempt to settle any dispute or controversy
related to their rights, obligations or performances under this
Agreement in any amicable manner. Should the parties fail to resolve
such dispute or controversy within three (3) months following written
notice thereof, such disputed matter shall, upon request of the
contesting party, be submitted to an arbitrator mutually acceptable to
the parties. If a single arbitrator cannot be agreed upon within thirty
(30) days, each party shall select one arbitrator and the two
arbitrators will select a third arbitrator. The decision of the
arbitrator(s) shall be final and binding in all parties.
10.3 Arbitration shall be conducted in accordance with rules and procedures
of the Center for Public Resources (CPR), subject to the following
terms:
a) The arbitration shall be held at a mutually agreeable location in the
vicinity of Washington D.C.
<PAGE> 64
b) The arbitrator(s) shall be independent, impartial third parties,
having no direct or indirect personal or financial relationship to any
of the parties of the dispute, each of whom has agreed to accept an
appointment as arbitrator(s) on the terms set forth in this Article.
c) Within thirty (30) days after selection of the arbitrator(s), each
party shall submit a description of the matter to be arbitrated to
said arbitrator(s).
d) From the date the arbitrator(s) is/are in possession of both parties'
submitted material, the arbitrator(s) shall have sixty (60) days in
which to hear the parties and fifteen (15) days thereafter to render a
decision.
e) Time periods set forth in this Article 10 may be altered only by
mutual consent of the parties.
f) The arbitrator(s) shall announce the award in writing accompanied by
written findings of facts in support of the award and any relevant
conclusions of law.
g) The fees of the arbitrator(s) and any other costs and fees associated
with the arbitration shall be paid in accordance with the decision of
the arbitrator(s), except that the prevailing party shall pay no more
than one-half of such costs.
11. COMMUNICATIONS, NOTICES
Notices required to be provided by one party to the other pursuant to this
Agreement shall be furnished in writing to the other party at the address
listed below or at such other address as designated in writing in accordance
with this Article.
If to OTC: Organon Teknika Corporation
100 Akzo Avenue
Durham, North Carolina 27712
Attn.: President
If to PerImmune or Holdings: PerImmune, Inc.
1330 Piccard Drive
Rockville, Maryland
Attn.: President
Such notice, if mailed certified or registered, postage prepaid with return
receipt requested shall be deemed to be effective when mailed. Notice may also
be given by personal delivery or by courier and shall be effective upon
delivery thereof. Alternatively, such notice may be given by telex, telegram or
telecopy and shall be deemed effective when sent, provided such written copy
thereof is confirmed by first-class, prepaid mail within 24 hours thereafter.
Otherwise any notice shall be effective upon receipt.
<PAGE> 65
12. FORCE MAJEURE
No failure or omission by a Service Provider in the performance of any
obligation imposed by this Agreement (except payments due hereunder) shall be
deemed a breach of this Agreement or create any liability if the same shall
arise from any cause or causes beyond the control of the Service Provider,
including, but not restricted to, the following, which, for the purpose of this
Agreement, shall be regarded as beyond the control of the party in question:
Acts of God, acts or omissions of any government or any agency thereof;
compliance with any governmental authority or any officer, department, agency
or instrumentality thereof; fire; storm; flood; earthquake; accident; acts of
the public enemy; war declared or undeclared; rebellion; insurrection, riot;
sabotage; invasion; quarantine restrictions; strike; lockout; or labor disputes.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the date first above written.
<TABLE>
<S> <C>
ORGANON TEKNIKA CORPORATION PERIMMUNE, INC.
By: _________________________________ By: ____________________________________
Dr. R. S. Timmins
President
PERIMMUNE HOLDINGS, INC.
By: ____________________________________
</TABLE>
<PAGE> 66
EXHIBIT E
Intellectual Property Security Agreement
<PAGE> 67
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement (the "Security
Agreement") is made and entered into as of this __ day of August, 1996, by and
among PerImmune Holdings, Inc., whose address is 1330 Piccard Drive, Rockville,
Maryland 20850-4396 ("Holdings"), PerImmune, Inc. ("PerImmune"), Akzo Nobel
Pharma International, B.V., a corporation formed under the laws of the
Netherlands ("Pharma"), Organon Teknika Corporation ("OTC" together with Pharma,
the "Secured Parties") and Pharma, in its capacity as Collateral Agent hereunder
("Collateral Agent").
RECITAL
WHEREAS, pursuant to that certain Promissory Note (the "Purchase
Price Note") dated as of August __, 1996 made by Holdings pursuant to Section
2.2 of the Stock Purchase Agreement, dated as of the date hereof (as amended,
modified or supplemented from time to time)(the "Stock Purchase Agreement"),
Holdings has promised to pay to OTC an amount equal to Nine Million Two Hundred
Thirty-four Thousand Nine Hundred Thirty-five Dollars ($9,234,935).
WHEREAS, pursuant to a certain credit agreement, dated as of the
date hereof (as amended, modified or supplemented from time to time)(the "Credit
Agreement") between PerImmune and OTC, OTC has agreed to make to or for the
account of PerImmune certain loans up to Three Million Six Hundred Thousand
Dollars ($3,600,000) as may be increased by One Million Eight Hundred Thousand
Dollars ($1,800,000) in accordance with such Credit Agreement, to be evidenced
by PerImmune's Secured Promissory Note (the "Secured Note").
WHEREAS, pursuant to a certain working capital facility, dated as
of the date hereof (as amended, modified or supplemented from time to time) (the
"Working Capital Facility") between PerImmune and OTC, OTC has agreed to make to
or for the account of PerImmune certain loans up to Two Million Eight Hundred
Seventy-one Thousand Five Hundred Thirty-two Dollars ($2,871,532) to be
evidenced by PerImmune's Working Capital Secured Note (the "Working Capital
Note").
WHEREAS, pursuant to a certain intellectual property agreement by
and between Holdings and Pharma dated as of the date hereof (the "Intellectual
Property Agreement") whereby, in consideration of the transfer to Holdings of
certain patents and patent applications and other intellectual property,
Holdings has agreed to make to Pharma certain future payments.
WHEREAS, the parties hereto intend that the respective
obligations of Holdings under the Purchase Price Note and under the
Intellectual Property Agreement, and of PerImmune under the Credit Agreement
and the Working Capital Facility shall be secured by a pledge of Holdings'
right, title and interest in the Collateral (as defined herein).
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WHEREAS, the parties hereto intend that Pharma act as Collateral Agent for
the equal and ratable benefit of the Secured Parties.
AGREEMENT
Now therefore, in consideration of the above recitals and the agreement
hereinafter set forth, the parties hereto agree as follows:
1. Creation of Security Interest. In order to secure the payment and
performances of all Obligations, Holdings hereby grants to the Collateral
Agent, for the equal and ratable benefit of the Secured Parties, a security
interest in all of Holdings' right, title and interest in and to the collateral
described in Section 2 below (the "Collateral") in order to secure the payment
and performance of the respective obligations of PerImmune and Holdings to
Secured Parties described in Section 3 below.
2. Collateral
(a) The Collateral under this Security Agreement shall mean (i)
those certain patents and patent applications set forth in Schedule A attached
hereto (including, without limitation, all divisions, continuations,
continuations-in-part, reissues, renewals or extensions thereof) (the "Patents")
and (ii) those certain trademarks set forth on Schedule B attached hereto
(including all goodwill of Holdings' business connected with the use of, and
symbolized by, any and all such trademarks) (the "Trademarks").
(b) If, before the termination of this Agreement, Holdings
shall become entitled to the benefit of any patent or patent application for
any division, continuation, continuation-in-part, reissues, renewal or
extension of a Patent, the provisions of Section 1 shall automatically apply
thereto and Holdings shall give to the Collateral Agent prompt notice thereof in
writing. Holdings authorizes the Collateral Agent to modify this Agreement by
amending Schedule A to reflect the addition of such patents or patent
applications.
3. Secured Obligations of Debtor. The Collateral secures and shall
hereafter secure (i) the payment by PerImmune to OTC of all indebtedness now or
hereafter owed to OTC by PerImmune under the Credit Facility, the Secured Note,
the Working Capital Facility, the Working Capital Note and this Security
Agreement together with any interest thereon and extensions, modifications and
renewals thereof, and (ii) the payment by Holdings (a) to OTC of all
indebtedness owed to OTC under the Purchase Price Note, and (b) to Pharma of
all amounts due pursuant to Section 2.2 of the Intellectual Property Agreement
prior to the termination of this Agreement and (iii) performance by Holdings of
all other obligations and the discharge of all other liabilities to Secured
Parties of every kind and character, direct and indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, joint,
several and joint and several, created under this Security Agreement (together,
the "Obligations"). All payments and performance shall be in accordance with the
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<PAGE> 69
terms under which said indebtedness, obligations and liabilities were or are
hereafter incurred or created.
4. The Collateral Agent. Pharma is hereby appointed as the
Collateral Agent to serve in such capacity until a successor is duly appointed.
The Collateral Agent hereby accepts such appointment and acknowledges that it
is acting in such capacity for the benefit of the Secured Parties.
5. Restrictions on Future Agreements. Holdings agrees that,
except as set forth in Section 8 hereof, until the Obligations shall have been
satisfied in full and this Agreement shall have been terminated, Holdings will
not, without the Collateral Agent's prior written consent, (a) enter into any
agreement that is inconsistent with Holding's obligations under this Agreement
or (b) sell, pledge, license or assign its interest in any of the Collateral.
6. Defaults and Remedies
Holdings shall be in default under this Agreement upon the
happening of any of the following events:
(a) PerImmune fails to pay or perform any of the
obligations owed to OTC in accordance with the terms upon which such
obligations were incurred or created under the Secured Note or the
Working Capital Note and such failure continues thereafter for a period
of thirty (30) days after such sum becomes due and owing.
(b) Holdings fails to pay or perform any of the
obligations owed to OTC under the Purchase Price Note or to Pharma under
Section 2.2(a)(i) and Section 2.2(b) of the Intellectual Property
Agreement in accordance with the respective terms upon which such
obligation was incurred or created and such failure continues thereafter,
in the case of the Purchase Price Note, for a period of thirty (30) days
after such sum becomes due and owing, and in the case of payments under
Section 2.2(a)(i) and Section 2.2(b) of the Intellectual Property
Agreement, for a period of thirty (30) days after written notice to
Holdings that such sums are due and owing.
(c) All or any portion of the Collateral is seized or
levied by writ of attachment, garnishment, execution or otherwise and
such seizure or levy is not released within fifteen (15) days thereof.
(d) PerImmune executes a general assignment for the
benefit of its creditors, ceases to conduct its business in the ordinary
course as it is now conducted, convenes any meeting of its creditors,
becomes insolvent, admits in writing its insolvency or inability to pay
its debts, or is unable to pay or is generally not paying its debts as
they become due.
(e) Holdings executes a general assignment for the
benefit of its creditors, ceases to conduct its business in the ordinary
course as it is now conducted, convenes any meeting of its creditors,
becomes insolvent, admits in writing
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<PAGE> 70
its insolvency or inability to pay its debts, or is unable to pay or is
generally not paying its debts as they become due.
(f) A receiver, trustee, custodian or agent is
appointed to take possession of all or any substantial portion of
PerImmune's assets.
(g) A receiver, trustee, custodian or agent is
appointed to take possession of all or any portion of the Collateral or
all of any substantial portion of Holdings' assets.
(h) Any case or proceeding is voluntarily commenced by
PerImmune under any provision of the Federal Bankruptcy Code or any
other federal or state law relating to debtor rehabilitation,
insolvency, bankruptcy, liquidation or reorganization, or any such case
or proceeding is involuntarily commenced against PerImmune.
(i) Any case or proceeding is voluntarily commenced by
Holdings under any provision of the Federal Bankruptcy Code or any
other federal or state law relating to debtor rehabilitation,
insolvency, bankruptcy, liquidation or reorganization, or any such case
or proceeding is involuntarily commenced against Holdings.
Upon such default hereunder, Collateral Agent, acting for the benefit of the
Secured Parties, shall have the remedies of a secured party under the
applicable Uniform Commercial Code and as set forth in Section 10. PerImmune or
Holdings, as appropriate, shall reimburse the Collateral Agent for all
reasonable costs and reasonable attorney's fees incurred by Collateral Agent in
pursuing any remedies, which costs and fees are also Obligations secured
hereunder.
7. Use and Pledge of Pledged Collateral. Unless an event of default
shall have occurred, Collateral Agent, on behalf of Secured Parties, shall from
time to time execute and deliver, upon written request of Holdings, any and all
instruments, certificates or other documents, in the form so requested,
necessary or appropriate in the reasonable judgment of Holdings to enable
PerImmune to continue to exploit, license, use, enjoy and protect the
Collateral throughout the world provided such instrument, certificate or
document does not conflict with nor diminish the rights of the Collateral Agent
or the Secured Parties hereunder and provided that Holdings gives adequate
assurance that the proceeds of the proposed transaction will be applied toward
any payment obligations that will be due and owing to Pharma under the
Intellectual Property Agreement as a result of such transaction. The parties
hereto each acknowledges that this Agreement is intended for the benefit of the
Collateral Agent on behalf of the Secured Parties and to grant a security
interest in and lien upon the Collateral and that, notwithstanding the
provisions of Section 10 hereof, shall not constitute or create a present
assignment of the Collateral.
8. Transfer of Collateral. The parties hereto each recognize
and acknowledge the right of Holdings under the Intellectual Property Agreement
to transfer and assign to PerImmune all of Holdings, rights, title and interest
in the Collateral, and the
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<PAGE> 71
Collateral Agent and the Secured Parties agree to promptly execute and deliver
all further documents and instruments, and to take all further actions that may
be necessary or that Holdings or PerImmune may request, in order to reflect or
acknowledge such transfer. Upon consummation of the transfer of the Collateral,
PerImmune shall be bound by all terms of this Agreement.
9. Termination of Agreement. This Security Agreement shall
terminate upon the earlier of (i) full and final payment and performance of all
indebtedness and obligations secured hereunder, and (ii) in the absence of a
default hereunder, two (2) years from the date of this Security Agreement
(provided that such term shall be extended for the length of any cure period if
an event has occurred which would constitute a default if not for the
additional time allowed for the cure period). At such time, Collateral Agent
shall promptly execute and deliver to Holdings all deeds, assignments and other
instruments (including termination statements on Form UCC-3 and documents
suitable for recordation in the United States Patent and Trademark Office, the
United States Copyright Office or similar domestic or foreign authority)
acknowledging the termination of this Agreement and the release of the security
interest in the Collateral created hereunder.
10. Conditional Assignment.
10.1 In order to induce the Secured Parties to provide funds
and credit as set forth above, Holdings has agreed to make the conditional
assignment described in this Section 10 to the Collateral Agent of the Patents
and the Trademarks to secure Holdings' and PerImmune's performance of their
Obligations pursuant to this Agreement.
10.2 Holdings hereby conditionally grants, assigns and conveys
to the Collateral Agent the entire right, title and interest in and to the
Patents and the Trademarks. The parties hereto acknowledge that the conditional
assignment pursuant to this Section 10.2 shall have no effect, and the
Collateral Agent shall have no ownership interest in the Patents and the
Trademarks pursuant to this Section 10.2, unless and until there shall have
occurred an event of default under Section 6 above. Upon termination of this
Agreement pursuant to Section 9 above, the conditional assignment pursuant to
this Section 10.2 shall be terminated, and thereafter shall not be given any
effect. Upon the occurrence of an event of default hereunder, any and all
rights, residual, inchoate, by license or of any kind, that Holdings may have
in the Patents and the Trademarks shall be deemed assigned to Collateral Agent,
which shall then have the entire right, title and interest in and to the
Patents and the Trademarks, free of any obligations to Holdings, by effect of
this conditional assignment.
10.3 If, before the Obligations shall have been satisfied in
full, Holdings shall become entitled to the benefit of any patent application
or patent for any reissue, division, continuation, renewal, extension, or
continuation-in-part of any Patent or any improvement on any Patent, the
provisions of Section 10.2 shall automatically apply thereto and Holdings shall
give to Collateral Agent prompt notice thereof in writing. Holdings authorizes
Collateral Agent to modify this Agreement by amending Schedule A to include any
such future patents and patent applications.
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11. Miscellaneous Provisions
11.1 Notices. Notices, requests and other communications hereunder
shall be in writing and may be delivered personally or sent by telegram, telex
or first class mail to the parties addressed as follows:
To PerImmune:
PerImmune, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attention: Michael G. Hanna, Jr.
To Holdings:
PerImmune Holdings, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attention: Michael G. Hanna, Jr.
To Pharma:
Akzo Nobel Pharma International, B.V.
P.O. Box 20 5345 BH
Oss, The Netherlands
Attn: General Counsel
To OTC:
Organon Teknika Corporation
100 Akzo Avenue
Durham, NC 27712
Attn: President
Such notices, requests and other communications sent as provided above shall be
effective when received by the addressee thereof, but if sent by registered or
certified mail, postage prepaid, shall be effective three (3) business days
after being deposited in the United States mail. The parties hereto may change
their addresses by giving notice thereof to the other parties hereto in
conformity with this section.
11.2 Headings. All headings have been inserted for convenience only and
shall not affect the meaning or interpretation of this Security Agreement or any
provision hereof.
11.3 Governing Law. This Security Agreement shall be construed in
accordance with and all disputes hereunder shall be governed by the laws of the
State of Maryland.
<PAGE> 73
11.4 Binding Agreement. All rights of Secured Parties
hereunder shall inure to the benefit of each of its successors and assigns.
PerImmune shall not assign any of its interest under this Security Agreement
without the prior written consent of Secured Parties.
11.5 Definitions. All terms not defined herein shall
have the meaning set forth in the applicable Uniform Commercial Code, except
where the context otherwise requires.
11.6 Entire Agreement. This Security Agreement, the
Credit Agreement, the Working Capital Agreement, the Purchase Price Note, the
Secured Note and the Working Capital Note executed in connection herewith, are
intended by the parties as a final expression of their agreement and are
intended as a complete and exclusive statement of the terms and conditions
thereof.
11.7 Severability. If any provision of this Security
Agreement should be found to be invalid or unenforceable, all of the other
provisions shall nonetheless remain in full force and effect to the maximum
extent permitted by law.
11.8 Jurisdiction. Pharma (including in its capacity as
Collateral Agent) hereby irrevocably submits for the benefit of PerImmune and
Holdings to the jurisdiction of the federal district courts located in the State
of Maryland in connection with any controversy, suit, action or proceeding which
may arise out of or in connection with this Security Agreement and the
transactions contemplated hereby. Pharma (including in its capacity as
Collateral Agent) hereby irrevocably waives any objection which it might now or
hereafter have to the courts referred to in the preceding sentence being
nominated as the forum to hear and determine any controversy, suit, action or
proceeding which may arise out of or in connection with this Security Agreement
and the transactions contemplated hereby, on the basis of improper venue,
inconvenient forum or otherwise, and agrees not to claim that any such court is
not a convenient or appropriate forum.
11.9 Agent for Service of Process.
(a) In connection with this Security Agreement
and the transactions contemplated hereby, Pharma (including in its
capacity as Collateral Agent) hereby agrees that the process by which
any suit, action or proceeding is begun in the federal district courts
located in the State of Maryland may be served on it by being delivered
to Organon Teknika Corporation, 100 Akzo Avenue, Durham, N.C. 27712,
Attn: President, and hereby irrevocably appoints such person as it agent
for the service of process in connection therewith. If the appointment
of the person mentioned in this Section 11.9 ceases to be effective,
Pharma shall immediately appoint a further person to accept service of
process on its behalf in Maryland and, failing such appointment within
five (5) days after notice thereof to Pharma, Holdings or PerImmune
shall be entitled to appoint such a person by notice to Pharma. Pharma
(including in its capacity as Collateral Agent) further irrevocably
consents to the service of process out of the aforementioned courts in
any such action or proceeding by
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<PAGE> 74
the mailing of copies thereof by registered or certified mail, postage
prepaid, to Pharma, at the address identified for it in Section 11.1, such
service to become effective ten (10) days after such mailing. Nothing
contained herein shall affect the right to serve process in any other
manner permitted by law.
(b) The submission to the jurisdiction of the courts referred to
above shall not (and shall not be construed so as to) limit the right of
Holdings or PerImmune hereby to take proceedings against Pharma (including
its capacity as Collateral Agent) with respect to this Security Agreement
and the transactions contemplated hereby in any other court of competent
jurisdiction nor shall the taking of proceedings in any one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction
(whether concurrently or not) if and to the extent permitted by applicable
law.
Counterparts. This Security Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same agreement.
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<PAGE> 75
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed as of the day and year first above written.
PerImmune, Inc.
By _____________________________________
Title __________________________________
PerImmune Holdings, Inc.
By _____________________________________
Title __________________________________
Akzo Nobel Pharma International, B.V.
By _____________________________________
Title __________________________________
Organon Teknika Corporation
By _____________________________________
Title __________________________________
Akzo Nobel Pharma International, B.V.
as Collateral Agent
By _____________________________________
Title __________________________________
<PAGE> 76
EXHIBIT F
Fixed Asset Security Agreement
<PAGE> 77
FIXED ASSET SECURITY AGREEMENT
This Fixed Asset Security Agreement (the "Security Agreement") is made
and entered into as of this ___ day of August, 1996, between PerImmune, Inc.
("Debtor") and Organon Teknika Corporation ("Secured Party").
RECITAL
WHEREAS, pursuant to a certain credit agreement, dated as of the date
hereof (as amended, modified or supplemented from time to time) (the "Credit
Facility") between Debtor and Secured Party, Secured Party has agreed to make to
or for the account of Debtor certain loans up to Three Million Six Hundred
Thousand Dollars ($3,600,000) as may be increased by One Million Eight Hundred
Thousand Dollars ($1,800,000) in accordance with such Credit Facility to be
evidenced by the Debtor's Secured Promissory Note (the "Note").
AGREEMENT
Now therefore, in consideration of the above recital and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Creation of Security Interest. Debtor hereby grants to Secured Party
a security interest in all of Debtor's right, title and interest in and to the
collateral described in Section 2 below (the "Collateral") in order to secure
the payment and performance of the obligations of Debtor to Secured Party
described in Section 3 below.
2. Collateral. The Collateral under this Security Agreement shall mean
all of the machinery, equipment, office equipment and supplies, furniture,
furnishings and fixtures owned by Debtor on or prior to the date of this
Security Agreement.
3. Secured Obligations of Debtor. The Collateral secures and shall
hereafter secure (i) the payment by Debtor to Secured Party of all indebtedness
now or hereafter owed to Secured Party by Debtor under the Credit Facility, the
Note and this Security Agreement, together with any interest thereon and
extensions, modifications and renewals thereof, and (ii) the performance by
Debtor of all other obligations and the discharge of all other liabilities to
Secured Party of every kind and character, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, joint,
several and joint and several, created under the Credit Facility, the Note or
this Security Agreement (together, the "Obligations"). All payments and
performance shall be in accordance with the terms under which said indebtedness,
obligations and liabilities were or are hereafter incurred or created.
<PAGE> 78
4. Use of Collateral. Debtor represents and warrants that its chief
executive is located at 1330 Piccard Drive, Rockville, Maryland 20850-4396 and
that unless Debtor gives notice to Secured Party as set forth in the next
sentence, this Collateral will at all times be located at such address. Debtor
shall not move the Collateral or relocate its chief executive office without
thirty (30) days prior written notice to Secured Party.
5. Sale and Exchange. The Debtor may not sell, encumber or otherwise
transfer or dispose of the Collateral, or any portion thereof (each, a
"Disposition") without the written consent of Secured Party, except for
Dispositions (i) in amounts of less than $25,000, (ii) in the ordinary course
of business and, (iii) the proceeds of which are substantially
contemporaneously applied to reduce or repay in full amounts due under the Note
and the Credit Facility.
6. Defaults and Remedies
6.1 Debtor shall be in default under this Security Agreement upon the
happening of any of the following events:
(a) Debtor fails to pay or perform any of the obligations when
due to Secured Party in accordance with the terms upon which such
obligations were incurred or created under this Security Agreement or under
the Credit Facility and such failure continues thereafter for a period of
thirty (30) days after such obligation becomes due and owing.
(b) All or any portion of the Collateral is seized or levied
upon by writ of attachment, garnishment, execution or otherwise and such
seizure or levy is not released within fifteen (15) days thereof.
(c) Debtor executes a general assignment for the benefit of its
creditors, ceases to conduct its business in the ordinary course as it is
now conducted, convenes any meeting of its creditors, becomes insolvent,
admits in writing its insolvency or inability to pay its debts, or is
unable to pay or is generally not paying its debts as they become due.
(d) A receiver, trustee, custodian or agent is appointed to take
possession of all or any portion of the Collateral or all or any
substantial portion of Debtor's assets.
(c) Any case or proceeding is voluntarily commenced by Debtor
under any provision of the Federal Bankruptcy Code or any other federal or
state law relating to debtor rehabilitation, insolvency, bankruptcy,
liquidation or reorganization, or any such case or proceeding is
involuntarily commenced against Debtor.
Upon such default, Secured Party shall have the remedies of a secured party
under the applicable Uniform Commercial Code. Debtor shall reimburse Secured
Party for all costs and
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<PAGE> 79
reasonable attorney's fees incurred by Secured Party in pursuing any remedies,
which costs and fees are also Obligations secured hereunder.
6.2 Upon the occurrence of a default hereunder, Secured Party may, at
its option, with ten days prior notice to or demand upon Debtor, declare all
advances made by Secured Party to Debtor hereunder to be immediately due and
payable, whereupon all unpaid principal and interest on said advances and other
indebtedness shall become and be immediately due and payable, except that upon
occurrence of an event of default under Sections 6.1(c), (d) or (e) shall
become due and payable immediately without notice.
7. Termination. This Security Agreement shall terminate upon full and
final payment and performance of all indebtedness and obligations secured
hereunder. At such time, Secured Party shall reassign and redeliver to Debtor
all of the Collateral hereunder which has not been sold, disposed of, retained
or applied by Secured Party in accordance with the terms hereof, including
filing termination statements on Form UCC-3 with the appropriate domestic or
foreign authority acknowledging the termination of this Security Agreement or
the release of the Collateral, as the case may be.
8. Miscellaneous Provisions
8.1 Notices. Notices, requests and other communications hereunder shall
be in writing and may be delivered personally or sent by telegram, telex or
first class mail to the parties addressed as follows:
To Debtor: PerImmune, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attention: Michael G. Hanna
To Secured Party: Organon Teknika Corporation
100 Akzo Avenue
Durham, N.C. 27712
Attn: President
Such notices, requests and other communications sent as provided above shall be
effective when received by the addressee thereof, but if sent by registered or
certified mail, postage prepaid, shall be effective three (3) business days
after being deposited in the United States mail. The parties hereto may change
their addresses by giving notice thereof to the other parties hereto in
conformity with this section.
8.2 Headings. All headings have been inserted for convenience only and
shall not affect the meaning or interpretation of this Security Agreement or
any provision hereof.
3
<PAGE> 80
8.3 Governing Law. This Security Agreement shall be construed in
accordance with and all disputes hereunder shall be governed by the laws of the
State of Maryland.
8.4 Binding Agreement. All rights of Secured Party hereunder shall
inure to the benefit of its successors and assigns. Debtor shall not assign any
of its interest under this Security Agreement without the prior written consent
of Secured Party.
8.5 Definitions. All terms not defined herein shall have the meaning
set forth in the applicable Uniform Commercial Code, except where the context
otherwise requires.
8.6 Entire Agreement. This Security Agreement, together with the
Credit Facility and the Note executed in connection herewith, is intended by
the parties as a final expression of their agreement and is intended as a
complete and exclusive statement of the terms and conditions thereof.
8.7 Severability. If any provision of this Security Agreement should
be found to be invalid or unenforceable, all of the other provisions shall
nonetheless remain in full force and effect to the maximum extent permitted by
law.
8.8 Counterparts. This Security Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same agreement.
4
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IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed as of the day and year first above written.
Debtor: PerImmune, Inc.
By _________________________
Title:
Secured Party: Organon Teknika Corporation
By _________________________
Title:
<PAGE> 1
EXHIBIT 10.20
LICENSE AGREEMENT
THIS AGREEMENT, effective as of June 1, 1994, ("Effective Date"), by and between
THOMAS JEFFERSON UNIVERSITY ("TJU"), a not-for-profit corporation, formed under
the laws of the Commonwealth of Pennsylvania, and having its principal place of
business at 11th and Walnut Streets, Philadelphia, Pennsylvania 19107, and
INTRACEL Corporation ("INTRACEL"), a corporation organized under the laws of the
Commonwealth of Massachusetts, and having its principal place of business at 359
Allston Street, Cambridge, MA 02139.
WITNESSETH
WHEREAS, TJU is engaged in programs of research in the medical and
health fields, and its personnel have invented methods of intracellular
immunization ("the Invention");
WHEREAS, INTRACEL has filed U.S. Patent Application Serial No.
08/099,870, filed on July 30, 1993, entitled "Intracellular Immunization" ("the
Basic Application");
WHEREAS, INTRACEL is willing to transfer rights in the Basic Application
to TJU, pursuant to the terms of this Agreement;
WHEREAS, TJU has the right to grant the licenses set forth herein below;
WHEREAS, INTRACEL and TJU are parties to a research agreement dated
April 9, 1993, which is being extended concurrently with the execution of this
Agreement, under which INTRACEL is funding research at TJU in the laboratory of
Dr. Roger Pomerantz related to the Invention ("the Research Agreement");
WHEREAS, INTRACEL does not now make or sell any products which embody
the Invention, but desires to do so;
WHEREAS, INTRACEL plans to have the capability to manufacture, market,
and distribute products embodying the Invention;
WHEREAS, INTRACEL desires to receive from TJU licenses to commercially
manufacture and sell products embodying the Invention and TJU is willing to
grant INTRACEL and its affiliates (as hereinafter defined) such licenses.
<PAGE> 2
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
1.01. The term "Patent Rights" shall mean the Basic Application and any
patent application filed on any invention made in the course of the Research
Agreement, and any divisions, continuations, continuations-in-part, or foreign
counterparts thereof, or any Letters Patent issuing thereon or reissue,
extension or reexamination thereof
1.02. The term "Valid Claim" shall mean a claim of an issued patent or
pending patent application within Patent Rights so long as such claim shall not
have been disclaimed by TJU or shall not have been held invalid in an unappealed
or unappealable decision rendered by a tribunal of proper jurisdiction. Any such
claim finally held invalid shall be considered canceled from the Patent Rights,
effective as of the date such claim is finally held invalid by a tribunal of
proper jurisdiction in an unappealable decision.
1.03. The term "Product(s)" shall mean products covered by a Valid Claim
in the country of use or sale, or any other products, the normal and customary
use of which, or the use of which pursuant to the associated labeling, are
employed in the performance of processes covered by a Valid Claim in the country
of use or sale, or as one or more claimed elements or claimed components in a
product covered by a Valid Claim in the country of use or sale.
1.04. The term "Affiliate(s)" as applied to INTRACEL shall mean any
individual or company, in whatever country organized, directly or indirectly,
controlling, controlled by, or under common control with INTRACEL. The term
control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract or otherwise .
1.05. The term "Net Sales Price" shall mean the gross billing price of
any Product, as invoiced to the customer, less:
a. invoice price credited or rebates on returns and allowances,
b. transportation and delivery charges or allowances,
c. customs, duties, and charges,
d. sales, use, excise, value-added and other taxes or other
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governmental charges measured by sales.
Transfer of a Product to an Affiliate for sale by the Affiliate to a customer
shall not be considered a sale; in the case of such a transfer, the Net Sales
Price shall be based on the gross billing price of the Product by the Affiliate
as invoiced to its customer.
1.06. The term "Agreement Year" shall mean the yearly period beginning
on the Effective Date and each succeeding year thereafter for the term of the
Agreement.
ARTICLE II - GRANT OF LICENSES
2.01. ABT hereby irrevocably transfers all rights, title, and interest
in the Basic Application to TJU, and agrees to execute all documents necessary
to perfect this transfer, including an assignment document to be recorded in the
U.S. Patent and Trademark Office. This paragraph shall survive termination of
this Agreement.
2.02. TJU hereby grants to INTRACEL an exclusive worldwide right and
license under Patent Rights to make, have made, use, and sell Products, and to
grant to the purchaser of Products the right to use such purchased Products in
accordance with Patent Rights. TJU retains the right to practice under Patent
Rights for its own research purposes.
2.03. TJU hereby grants to INTRACEL, subject to TJU's approval, the
right to grant sublicenses under Patent Rights to any parties, provided however
that such sublicenses are reduced to writing, contain provisions at least as
favorable to TJU as those contained in this Agreement, and are submitted to TJU
at least thirty (30) days in advance of signing for TJU's review and approval,
which shall not be unreasonably withheld. Regardless of the terms of such
sublicense, INTRACEL shall remain jointly and separately liable to TJU under the
present Agreement for all obligations, including royalties, under this Agreement
as if the sales of Products were made directly by INTRACEL under this Agreement.
2.04. The rights granted to INTRACEL hereunder are subject to any prior
rights which the U.S. Government (or any of its agencies) may have in or to the
Patent Rights, as a result of 35 U.S.C. 200 et seq. or otherwise.
<PAGE> 4
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ARTICLE III - PAYMENTS
3.01. In consideration of the rights and licenses herein granted to it,
INTRACEL shall pay to TJU a royalty of two percent (2%) on the Net Sales Price
of Products sold by INTRACEL, its affiliates, or its sublicensees. Royalties on
sales of Products are payable by INTRACEL until the last patent under Patent
Rights, embodying a Valid Claim, expires in all jurisdictions where the Products
are made, used, or sold.
3.02. INTRACEL shall pay to TJU license fee payments of one hundred
thousand dollars ($100,000) per year, upon receiving from the Food and Drug
Administration ("FDA") a New Drug Approval ("NDA") to market a Product, and at
the beginning of each Agreement Year following such NDA, which shall be
creditable in full against running royalties payable pursuant to paragraph 3.01
for the respective Agreement Year.
ARTICLE IV - BOOKS OF ACCOUNTS AND REPORTS
4.01. INTRACEL shall keep and shall require its Affiliates and
sublicensees to keep complete and accurate records of the sales of each Product
and all data necessary for the computation of payments to be made to TJU
hereunder. TJU shall have the right to nominate an independent Certified Public
Accountant who shall have access to INTRACEL's records and those of its
Affiliates and sublicensees during reasonable business hours for the purpose of
verifying the payments made under this Agreement, but this right may not be
exercised more than once in any year, and the accountant shall disclose to TJU
only information relating to the accuracy of the payment report and the payments
made in accordance with this Agreement, and the reasons for any discrepancy.
4.02. Payments hereunder, when due, shall be made within thirty (30)
days of the end of each Agreement Year quarter for the sales of each Product
sold during that quarter. Such payments to TJU shall be accompanied by a
statement showing all sales of Products, including the total Net Sales Price of
the Products sold by INTRACEL, its Affiliates and its sublicensees, and such
other particulars as are necessary for the account of the payments to be made
pursuant to this Agreement. Payment of the amount due shall accompany such
statement.
4.03. All royalties hereunder shall be payable by INTRACEL to TJU in
United States dollars by check or checks to the order of "Thomas Jefferson
University".
<PAGE> 5
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4.04. To the extent sales may have been made by INTRACEL in a foreign
country, such royalty payment shall be made in United States dollars on the
basis of conversion, from the currency of such foreign country, at the rate of
exchange quoted by New York Clearing House Banks for outbound telegraphic
transfers, on the last business day of the Agreement Year quarter when the sales
occurred, and shall be paid at the time and in the manner set forth above,
provided however, that royalties based on sales in any foreign country shall be
payable to TJU subject to the exchange rate and only after deducting for
exchange and all other charges due foreign governments, including withholding
taxes, arising from the origin and transmittal of such royalties, and further
provided that the foregoing is subject to the right of INTRACEL to make payment
of royalties in any country where the currency is blocked and where legal
conversions of the currency billed cannot be made into United States dollars by
depositing such royalty payments in TJU's name in a bank designated by TJU
within such country.
4.05. INTRACEL shall pay interest to TJU on overdue payments at the rate
of twelve percent (12%) per year.
ARTICLE V - FDA CLEARANCE
5.01. INTRACEL shall, at its own expense, obtain all necessary
clearances from governmental agencies to market each Product. Said request for
market clearance shall be filed with the necessary governmental agencies by
INTRACEL as soon as reasonably practical after a commercial embodiment of such
Product is developed by or for INTRACEL. TJU agrees to cooperate with INTRACEL
and to provide reasonable assistance where appropriate in obtaining any such
clearance. INTRACEL shall indemnify, defend, and hold harmless TJU, its
trustees, officers, staff and agents from any and all liability, judgments or
expenses arising from failure to obtain any such clearance or violation of any
governmental regulation related to the Product(s).
ARTICLE VI - PERFORMANCE
6.01. INTRACEL shall use its best efforts to develop and market
Products. At the end of each Agreement Year, INTRACEL shall provide TJU with a
written report detailing INTRACEL's efforts to develop and market Products
during that year.
<PAGE> 6
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6.02. Concurrent with execution of this Agreement, INTRACEL and TJU
shall extend the Research Agreement for an additional two year period covering
the first two Agreement Years of this Agreement, under which INTRACEL shall
fund research at TJU in the laboratory of Dr. Roger Pomerantz, related to the
Invention, at levels of at least four hundred thousand dollars ($400,000) per
year. Should the Research Agreement be terminated prior to the end of the second
Agreement Year of this Agreement, then INTRACEL shall pay to TJU a license fee
payment upon termination of the Research Agreement of fifty thousand dollars
($50,000), which shall be creditable in full against future royalties payable
pursuant to paragraph 3.01.
6.03. During each Agreement Year, beginning with the third, until an NDA
is received from the FDA approval to market a Product, if INTRACEL is not
conducting clinical trials of a Product during that Agreement Year, INTRACEL
shall either fund research at TJU in the laboratory of Dr. Roger Pomerantz,
related to the Invention, at funding levels mutually agreeable to the parties,
or shall pay to TJU a license fee payment at the beginning of that Agreement
Year of fifty thousand dollars ($50,000) per year, which shall be creditable in
full against future royalties payable pursuant to paragraph 3.01.
ARTICLE VII - PATENT PROSECUTION AND LITIGATION
7.01. All reasonable costs, incurred prior to and after the Effective
Date of this Agreement relating to Patent Rights, including all costs incurred
by TJU relating to the preparation, filing and prosecution, issuance,
reissuance, reexamination, interference and maintenance shall be reimbursed by
INTRACEL. TJU shall endeavor to insure that all patent applications, office
actions, and responses to office actions concerning such Patent Rights shall be
provided to INTRACEL. TJU shall endeavor not to irrevocably alter the scope of
patent coverage within such Patent Rights without prior review by INTRACEL; any
such modification shall not, however, require the approval of INTRACEL and
INTRACEL shall not control the prosecution of the Patent Rights. In the event
INTRACEL wishes to relieve itself of any obligation to pay for the future
reasonable expenses of preparation, filing, prosecution, issuance, reissuance,
reexamination, interference or maintenance of any Patent Rights submitted to
INTRACEL by TJU under this paragraph, it may provide TJU with one-hundred and
twenty (120) days notice of such decision, whereupon TJU may assume such costs
and thereafter those Patent Rights for which INTRACEL elects not to cover patent
costs shall be the sole property of TJU and not be subject to the right and
licenses provided for in ARTICLE II. INTRACEL shall be responsible for all
<PAGE> 7
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reasonable expenses incurred prior to, or as a result of irrevocable action
taken prior to, the effective date of such decision.
7.02. INTRACEL shall take all appropriate steps to ensure that, if
eligible, TJU will be able to obtain patent term extensions) pursuant to 35
U.S.C.156 et seq., as appropriate. INTRACEL shall keep TJU fully informed with
respect to its submissions to governmental authorities for regulatory review for
Products which may be eligible for patent term extension. INTRACEL acknowledges
that time is of the essence with respect to submission of the application for
patent term extension. INTRACEL shall send written notice to TJU within three
(3) business days of the date a Product receives permission under the provision
of the law under which the applicable regulatory review period occurred for
commercial marketing or use ("Approval Date"). INTRACEL shall provide all
necessary information in its possession and reasonable assistance in preparing
an application, if TJU is eligible, for patent term extension in compliance with
35 U.S.C. 156 et. seq. and any applicable governmental regulations within thirty
(30) days after Approval Date. INTRACEL agrees to cooperate fully with TJU in
preparing such application for patent term extension. If eligible, TJU shall
file, in their own name, such application for patent term extension. INTRACEL,
if requested, agrees to join in such application for patent term extension.
INTRACEL shall fully support such application and shall provide such information
as may reasonably be requested in support of the application by TJU or by the
government.
7.03. In the event either party becomes aware of a suspected
infringement of any patent under which INTRACEL is licensed hereunder, it shall
promptly notify the other party of such suspected infringement. The parties
shall commence discussions within ninety (90) days of said notification for the
purpose of jointly evaluating said suspected infringement and for the purpose of
determining what action shall be taken by the parties or either of them with
respect thereto. If no agreement is reached as to the existence or non-existence
of an infringement concerning any patent licensed to INTRACEL hereunder, the
question of the existence of a sufficient degree of infringement to justify the
institution of legal action shall be decided by an arbitrator who is an
independent patent attorney selected by mutual agreement who shall hear and
decide the question based only on oral argument lasting less than one day. The
parties shall equally share the arbitrator's expenses. If the arbitrator
concludes that the information and evidence then available are insufficient to
conclude that there is such infringement sufficient to justify institution of
legal action, no action shall be brought by either party unless and until newly
discovered evidence resulting in
<PAGE> 8
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agreement between the parties or a contrary arbitrator's decision, is obtained.
7.04. In the event there is agreement as to the existence of an
infringement, or such is decided by the arbitrator, INTRACEL, in the first
instance, shall have the first right to take such actions, including
sublicensing or the institution of litigation, which it deems necessary in order
to abate the infringement, and shall have the right to name TJU as a party
plaintiff, if necessary, to the maintenance of such action.
7.05. The parties recognize that the scope and/or validity of any TJU
patent under the Patent Rights involved in litigation is likely to be raised as
an issue by any actual or alleged infringer, and that an adverse decision
relating to that patent might significantly reduce the royalties due and payable
by INTRACEL under this Agreement. The parties further recognize that any
litigation enforcing that subject patent is likely to involve document
production, deposition testimony, discovery responses, and trial appearances by
TJU and/or its inventors and other personnel. Accordingly, in the event that
INTRACEL initiates and controls any litigation where the scope or validity of
any TJU patent licensed hereunder is in issue, INTRACEL agrees to reimburse TJU
for its reasonable expenses of every kind and character necessarily incurred by
TJU and its personnel in connection with the litigation, including reasonable
consultation fees for TJU's inventors and other personnel who are called to
provide deposition and/or trial testimony in connection with the litigation and
including TJU's reasonable legal expenses necessarily incurred in connection
with that litigation. In connection with such litigation, TJU may select their
own counsel to consult with lead trial counsel of INTRACEL's choice, to advise
TJU concerning the progress of the ongoing litigation and to otherwise represent
TJU and its personnel in connection with the litigation. INTRACEL shall also
reimburse TJU for such other reasonable expenses, including out-of-pocket
disbursements for travel, stenographers fees, photocopying, etc. as may be
necessarily incurred by TJU in connection with the litigation. In the event
INTRACEL institutes and controls any litigation involving any TJU patent
licensed hereunder, INTRACEL shall also hold TJU free, clear and harmless from
any and all damages which may be assessed against TJU on account of any
provision of the patent or antitrust laws, or otherwise, unless such damages
arise out of acts or omissions attributed solely to TJU, and in which INTRACEL
has not been found to be a joint tortfeasor, or if TJU has intentionally,
willfully or wantonly caused or contributed to the events on which said damages
are based.
7.06. If INTRACEL does not bring suit against the alleged infringer,
<PAGE> 9
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according to the provisions of Paragraph 7.04, within one hundred twenty (120)
days after agreement concerning infringement is reached or the arbitrator so
decides, TJU shall have the right, but not the obligation, to take such action
as it deems appropriate to abate the infringement, including bringing suit for
such infringement, joining INTRACEL as a party plaintiff, if necessary, to
maintain such action. Provided that TJU has first brought a lawsuit against the
alleged infringer to abate the infringement, TJU shall be permitted to settle
the lawsuit by licensing the alleged infringer. In the event TJU licenses the
infringer, TJU shall share any amounts received from that license equally with
INTRACEL, after deductions of TJU's expenses in connection with such action.
a. In the event litigation is instituted by TJU, INTRACEL shall have the
right to be represented by counsel of its own selection, at its own expense and
shall be provided an opportunity to consult on all matters of significance
relating to the preparation and prosecution of the case for trial.
7.07. In any event, the party bringing or controlling the litigation
shall diligently prosecute the litigation. In the event either party is
dissatisfied with such litigation, consultation shall be had to determine
whether the control and/or costs of the litigation should be shared with or
transferred to the other party.
7.08. In the event that any such litigation is successful, and amounts
collected is a consequence thereof, such amounts shall be divided between TJU
and INTRACEL in accordance with the relative percentage of cost disbursed by
each party in connection therewith, except that if INTRACEL shall have expended
more than ninety-three (93%) of the litigation costs, INTRACEL shall first
receive full credit for all unreimbursed costs which it has expended, then and
thereafter TJU shall receive seven percent (7%) of the proceeds, if any, in
excess of such costs. In the event the litigation is settled, an amount shall be
deducted from the proceeds of that settlement sufficient to reimburse the
parties for all legal expenses and costs incurred and paid by the parties in
connection with such litigation, whereupon the remainder shall be divided
equally between the parties. If the settlement is insufficient to permit full
reimbursement of both parties' costs and expenses, the settlement shall be
divided between TJU and INTRACEL in accordance with the relative percentage of
costs and expenses disbursed by each party in connection with the litigation.
ARTICLE VIII - INDEMNIFICATION AND INSURANCE
8.01. INTRACEL hereby waives any claim against TJU and agrees to
<PAGE> 10
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indemnify, defend, and hold harmless, TJU, its trustees, officers, staff and
agents from all liabilities, demands, damages, expenses and losses (including
attorneys' fees) arising out of, or in connection with this Agreement
(collectively the "Indemnified Losses"), including without limitation
Indemnified Losses resulting from any use, sale, or other disposition of
Products, and any claim that INTRACEL's use, sale, or other disposition of
Products infringes or violates any patent or other intellectual property rights.
The indemnification rights contained herein are in addition to all rights which
TJU may have at law, in equity, or otherwise.
8.02. Prior to the first human use of any Product, INTRACEL shall obtain
and maintain commercial general liability insurance, including commercial
liability, products liability, and completed operations insurance coverage in
the minimum amounts of five million dollars ($5,000,000) per loss, including
coverage for any and all prior acts arising from the sale of Products and
contractual liability coverage which, by virtue of the aforementioned
indemnification clause, makes the above identified indemnities named as
additional insureds under this coverage. Evidence of extended reporting period
coverage at original policy limits, if applicable, in the event either the
insured or insurer cancels must also be provided. A certificate of insurance
evidencing such coverage will be provided to TJU prior to the first human use of
Products.
<PAGE> 11
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ARTICLE IX - DURATION AND TERMINATION
9.01. Unless sooner terminated as herein provided, this Agreement shall
continue in effect until the expiration of the last to expire patent of the
Patent Rights.
9.02. This Agreement and all rights and licenses granted hereunder to
INTRACEL may sooner be terminated, as follows:
a. By INTRACEL, at any time giving TJU one hundred twenty (120) days
advance written notice thereof, by paying all amounts due, including unpaid
license fees and minimum and earned royalties on the Products sold, prior to the
effective date of termination, and by thereafter ceasing to sell Products.
b. By TJU effective immediately on written notice to INTRACEL if
INTRACEL:
i. files or has filed against it a petition under the Federal Bankruptcy
Act, or
ii. makes an assignment for the benefit of creditors or has a receiver
appointed for it, or otherwise takes advantage of laws designed for the relief
of debtors, all to the extent permitted by the Bankruptcy Reform Act of 1978.
c. BY TJU upon written notice in the event INTRACEL shall fail to make
any royalty or other payment due hereunder, including any minimum royalty
payment, provided however that INTRACEL shall have sixty (60) days from said
notice to cure such default by making all such payments.
d. Should a party hereto fail to perform any material covenant of this
Agreement on its part to be performed, then upon written notice of such failure
from the other party, the party in breach or default shall have ninety (90) days
from the date of notice to correct the breach or default, and upon failure to do
so, the party not in breach or default may cancel and terminate this Agreement
upon written notice, unless this Agreement shall require other remedies.
ARTICLE X - MISCELLANEOUS
10.01. This Agreement constitutes the entire understanding between the
parties with respect to the obligations of the parties hereto, and supersedes
and
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replaces all prior agreements, understandings, writings and discussions between
the parties relating to the subject matter of this Agreement.
10.02. This Agreement may be amended and any of its terms or conditions
may be waived only by a written instrument executed by the parties or, in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect its right at a later time to enforce the same. No waiver by either
party of any condition or term in any one or more instances shall be construed
as a further or continuing waiver of such condition or term or of any other
condition or term.
10.03. This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assignees. The term INTRACEL as used herein shall be deemed to include
its Affiliates unless the context clearly requires otherwise.
10.04. Any delays in or failure of performance by either party under
this Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God; acts, regulations or laws of
any government; strikes or other concerted acts of workers; fires; floods;
explosions; riots; illness; death; incapacity; disability; wars; rebellion and
sabotage; and any time for performance hereunder shall be extended by the actual
time of delay caused by such occurrence.
10.05. INTRACEL and TJU shall not use the name of the other or the
names of any of the other's staff members, employees or students or any
adaptation thereof in any advertising, promotional or sales literature to the
extent such use might imply a relationship between the parties or approval or
endorsement by TJU of any Product or method described in any such literature
without the prior written approval of the other party, which will not be
unreasonably withheld.
10.06. Any notice required or permitted to be given hereunder shall be
deemed sufficient if mailed by registered or certified mail (return receipt
requested) or delivered by hand to the party to whom such notice is required or
permitted to be given.
All notices to TJU shall be addressed as follows:
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THOMAS JEFFERSON UNIVERSITY
OFFICE OF TECHNOLOGY TRANSFER
1020 LOCUST ST.
PHILADELPHIA, PA 19107
ATTENTION: DIRECTOR
AU notices to INTRACEL shall be addressed as follows:
INTRACEL CORPORATION
359 ALLSTON STREET
CAMBRIDGE, MA 02139
ATTENTION: PRESIDENT
10.07. INTRACEL and its sublicensees, if any, shall comply with all
Federal and foreign jurisdiction laws in respect of patent marking, if any, but
the selection, location and particulars of such marking shall be at INTRACEL's
discretion.
10.08. In the event of any unresolvable dispute, difference, or question
arising between the parties in connection with this Agreement or any clause or
the construction thereof, or the rights, duties or liabilities of either party,
or the scope or validity of any patent licensed hereunder, the matter shall be
submitted for arbitration in accordance with the Patent Arbitration Rules of the
American Arbitration Association. A single arbitrator shall be appointed by
agreement of the parties to resolve all such disputes, differences or questions.
The arbitrator shall be guided by the contents of this Agreement in arriving at
a decision to resolve the dispute, but may rely on extrinsic evidence where
appropriate and/or necessary. The parties shall share the cost of the
arbitration unless, in the arbitrator's opinion, the position advanced by one of
the parties, or the nature or manner of presenting it, is such that it would be
unfair to so apportion such expenses, in which case the arbitrator may apportion
such expenses differently. In cases where validity or scope of a patent is in
issue, either party shall have the right to elect to have the arbitration
conducted by three arbitrators, each party selecting one and those arbitrators
selecting the third.
10.09. This Agreement shall not be assignable by any party without the
others' written consent.
10.10. If any provisions of this Agreement are or become invalid, are
<PAGE> 14
-14-
ruled illegal by any court of competent jurisdiction or unenforceable under
current applicable law from time to time in effect during the term hereof, then
in that event, it is the intention of the parties that the remainder of this
Agreement shall not be affected thereby.
10.11. This Agreement shall be governed by and construed and interpreted
in accordance with the laws of the Commonwealth of Pennsylvania.
THE PARTIES have duly executed this Agreement as of the date first above
written.
FOR TJU: FOR INTRACEL:
/s/ JUSSI J. SAUKKONEN /s/ SIMON R. McKENZIE
- ------------------------------- ------------------------------------
JUSSI J. SAUKKONEN, M.D. SIMON R. McKENZIE
DEAN, COLLEGE OF GRADUATE STUDIES & PRESIDENT & CEO
VICE PRESIDENT FOR SPECIAL PROGRAMS
June 29, 1994 July 1, 1994
- ------------------------------- ------------------------------------
DATE DATE
<PAGE> 15
[INTRACEL LETTERHEAD]
January 24,1997
Dr. Roger Pomerantz
Thomas Jefferson University
Jefferson Medical College
329 D Jefferson Alumni Hall
1020 Locust Street
Philadelphia, PA 19107-6799
Dear Dr. Pomerantz:
We would like to extend our April 9, 1993 Research Agreement (as amended by our
July 1, 1994 Letter Agreement) for a further period of two (2) years from July
15, 1996. The following terms and conditions apply to the current extension:
1. Within thirty (30) days of the date of this letter, Thomas Jefferson
University ("the University") and Intracel Corporation ("the Company")
will agree upon a written research protocol ("the Protocol") for the
period of this extended Agreement.
The work described in the Protocol shall be carried out by the University for
the Company, under your scientific control, provided the Protocol is given prior
approval and that on-going reviews by all appropriate and necessary authorities
are in accordance with all applicable laws and regulations. The University shall
obtain the aforesaid necessary or appropriate written evidence of all requisite
review and approval, including that of the Institutional Animal Care and Use
Committee (IACUC) and the Institutional Biosafety and Institutional Review Board
(IRB). The Protocol may be amended from time to time upon written agreement of
the parties hereto and with the written approval of any authority that is
required to approve the amendment.
2. In consideration of your performance of the Protocol, the Company shall
pay the University $800,000 in accordance with Appendix B attached to
this Letter Agreement. Payments are subject to the submission of
satisfactory progress reports as specified in the following Paragraph 3.
3. The University shall submit to the Company written progress reports at
the end of each quarter detailing the progress made during the quarter
and any resulting amendments or alterations required to the Protocol.
<PAGE> 16
4. All inventions made by the University in performing the Protocol shall
be subject to the License Agreement between the University and the
Company dated June 1, 1994.
5. Subject to Paragraph 6 hereof, results of the Protocol may be published
to the scientific community provided that the Company's patent rights
and/or patenting opportunities set forth in Paragraph 4 are not
compromised and the Company is allowed to review and suggest revisions
to any proposed publication for sixty (60) days prior to submission for
publication.
6. The University and the Company agree to maintain in confidence for a
period of three (3) years from the date of termination of this Agreement
all confidential information received from the other party. Such
obligation of confidentiality shall not apply to any information which,
at the time of disclosure, was in the possession of the receiving party,
was generally available to the public or thereafter becomes generally
available to the public through a source other than the receiving party,
was rightfully obtained from a third party, or was developed by or for
the receiving party independent of any disclosure under this Agreement.
In addition to the above exclusions, the receiving party shall have the
right to disclose the disclosing party's confidential information, if
the receiving party is required to do so by the order of any
governmental authority or by final judicial order.
7. The Company agrees to indemnify, defend, and hold harmless, the
University, its trustees, officers, staff and agents from all
liabilities, demands, damages, expenses and losses which do not arise
from the negligence of the University in the performance of the
Protocol. This paragraph shall apply with the proviso that the
University promptly notifies the Company in writing after the University
receives notice of any claim and the University fully cooperates with
the Company in the defense of any such claim.
8. Neither party will employ or use the name of the other party or its
employees in any form for public distribution without the prior written
consent of the other party.
9. The University shall at all times during the performance of this
Agreement be and remain an independent contractor and not an employee,
agent or joint venturer of or with the Company.
10. This Agreement is not assignable by either party except that the Company
may assign this Agreement to its affiliates without the prior consent of
the University.
2
<PAGE> 17
11. Either party may terminate this Agreement upon ninety (90) days written
notice to the other party if:
(a) Dr. Roger Pomerantz is unable or unwilling to continue as the
Principal Investigator; or
(b) In the opinion of either party, based upon a reasonable
interpretation of results of studies performed in carrying out
the Protocol, a clinically effective anti-HIV product cannot be
developed in a timely fashion.
In the event of cancellation of this Agreement pursuant to Paragraph 11, the
University shall be paid for uncancellable obligations properly incurred in
accordance with the Budget and Payment Schedule prior to the date of any notice
of termination. In the event of cancellation, the University shall promptly
transfer to the Company all ongoing experiments data and copies of data
generated under this Agreement.
12. The validity and interpretation of this Agreement shall be governed by
the laws of the State of Washington.
13. This Agreement constitutes the entire understanding between the parties
with respect to their obligations hereto. This Agreement supersedes all
prior understandings among the parties, written and oral, and may not be
modified except by written amendment executed by the parties.
14. Any and all notices required to be provided under this Agreement shall
be sent to the addresses below, unless otherwise previously indicated in
writing by either of the parties:
To the University: Associate Dean of Scientific Affairs
Jefferson Medical College
1020 Locust Street, M-5 JAH
Philadelphia, PA 19107
To the Company: Simon R. McKenzie
Chairman & CEO
Intracel Corporation
1871 N.W. Gilman Boulevard
Issaquah, WA 98027
3
<PAGE> 18
If the terms are satisfactory, please sign both copies and return them at your
earliest convenience. A fully executed copy will be returned to you.
Sincerely,
[SIG]
Matthew L. Root
Chief Financial Officer
On Behalf of:
Simon R. McKenzie
Chairman & CEO
ACCEPTED FOR THE COMPANY ACCEPTED FOR THE UNIVERSITY
By /s/ MATTHEW L. ROOT By /s/ THOMAS WUDARSKI
------------------------------- -------------------------------
Matthew L. Root
Title: Chief Financial Officer
On Behalf of:
Simon R. McKenzie Thomas Wudarski
Title: Chairman & CEO Title: MANAGER, RESEARCH ADM
---------------------------
Dated: January 24, 1997 Dated: 2/10/97
------------------------------- ---------------------------
[SIG]
4
<PAGE> 19
[INTRACEL LETTERHEAD]
January 31, 1997
Mr. Al Bono
Laboratory Coordinator
Division of Infectious Diseases
Thomas Jefferson University
329D Jefferson Alumni Hall
1020 Locust Street
Philadelphia, PA 19107
Dear Mr. Bono:
Pursuant to our discussions, and in the interest of continuing our mutually
beneficial arrangements, Intracel Corporation herein proposes an arrangement to
supplement the Letter Agreement dated January 27,1997.
Specifically, in order to cover certain outside expenses associated with the
joint programs currently underway, Intracel agrees to assume the liability of
currently outstanding invoices due to Magenta Corporation by Thomas Jefferson
University for an amount not to exceed $156,025.
While this commitment by Intracel to the Magenta Corporation work is herein
limited, all three of the parties referenced recognize that the reasonable
cooperation of the parties is required. Further commitments can be reached by
additional Letter Agreements.
Sincerely yours,
/s/ SIMON R. McKENZIE
- -----------------------------
Simon R. McKenzie
Chairman & CEO
Accepted & Agreed by Accepted & Agreed by
Intracel Corporation Thomas Jefferson University
By: SIMON R. McKENZIE By: /s/ ROGER J. POMERANTE
- ------------------------------- -------------------------------
Simon R. McKenzie
Chairman & CEO
Dated: January 31, 1997 Dated: 1/31/97
<PAGE> 20
[INTRACEL LETTERHEAD]
July 15, 1996
Dr. Roger Pomerantz
Thomas Jefferson University
Jefferson Medical College
329 D Jefferson Alumni Hall
1020 Locust Street
Philadelphia, PA 19107-6799
Dear Dr. Pomerantz:
We would like to extend our April 9, 1993 Research Agreement (as amended by our
July 1, 1994 letter agreement) for a further period of two (2) years from July
15, 1996 on the following terms and conditions:
1. Within thirty (30) days of the date of this letter, Thomas Jefferson
University ("the University") and Intracel Corporation ("the Company") will
agree upon a written research protocol ("the Protocol") for the period of this
extended agreement.
The work described in the Protocol shall be carried out by the University for
the Company, under your scientific control, provided the Protocol is given prior
approval and that on-going reviews by all appropriate and necessary authorities
are in accordance with all applicable laws and regulations. The University shall
obtain the aforesaid necessary or appropriate written evidence of all requisite
review and approval, including that of the Institutional Animal Care and Use
Committee (IACUC) and the Institutional Biosafety and Institutional Review Board
(IRB). The Protocol may be amended from time to time upon written agreement of
the parties hereto and with the written approval of any authority that is
required to approve the amendment.
2. In consideration of your performance of the Protocol, the Company shall pay
the University $800,000 in accordance with Appendix B attached to this letter
agreement. Payments are subject to the submission of satisfactory progress
reports as specified in the following Paragraph 3.
3. The University shall submit to the Company written progress reports at the
end of each quarter detailing the progress made during the quarter and any
resulting amendments or alterations required to the Protocol.
4. All inventions made by the University in performing the Protocol shall be
subject to the License Agreement between the University and the Company dated
June 1, 1994.
5. Subject to Paragraph 6 hereof, results of the Protocol may be published to
the scientific community provided that the Company's patent rights and/or
patenting opportunities set forth in Paragraph 4 are not compromised and the
Company is allowed to review and suggest revisions to any proposed publication
for sixty days (60) prior to submission for publication.
<PAGE> 21
6. The University and the Company agree to maintain in confidence for a period
of three (3) years from the date of termination of this Agreement all
confidential information received from the other party. Such obligation of
confidentiality shall not apply to any information which, at the time of
disclosure, was in the possession of the receiving party, was generally
available to the public or thereafter becomes generally available to the public
through a source other than the receiving party, was rightfully obtained from a
third party, or was developed by or for the receiving party independent of any
disclosure under this Agreement. In addition to the above exclusions, the
receiving party shall have the right to disclose the disclosing party's
confidential information, if the receiving party is required to do so by the
order of any governmental authority or by final judicial order.
7. The Company agrees to indemnify, defend, and hold harmless, the University,
its trustees, officers, staff and agents from all liabilities, demands, damages,
expenses and losses which do not arise from the negligence of the University in
the performance of the Protocol. This paragraph shall apply with the proviso
that the University promptly notifies the Company in writing after the
University receives notice of any claim and the University fully cooperates with
the Company in the defense of any such claim.
8. Neither party will employ or use the name of the other party or its employees
in any form for public distribution without the prior written consent of the
other party.
9. The University shall at all times during the performance of this Agreement be
and remain an independent contractor and not an employee, agent or joint
venturer of or with the Company.
10. This Agreement is not assignable by either party except that the Company may
assign this agreement to its affiliates without the prior consent of the
University.
11. Either party may terminate this Agreement upon ninety (90) days written
notice to the other party if:
(a) Dr. Roger Pomerantz is unable or unwilling to continue as the
Principal Investigator; or
(b) In the opinion of either party, based upon a reasonable
interpretation of results of studies performed in carrying out
the Protocol, a clinically effective anti-HIV product cannot be
developed in a timely fashion.
In the event of a cancellation of this Agreement pursuant to Paragraph 11, the
University shall be paid for uncancellable obligations properly incurred in
accordance with the Budget and Payment Schedule prior to the date of any notice
of termination. In the event of cancellation, the University shall promptly
transfer to the Company all ongoing experiments data and copies of data
generated under this Agreement.
12. The validity and interpretation of this Agreement shall be governed by the
laws of the Commonwealth of Massachusetts.
<PAGE> 22
13. This Agreement constitutes the entire understanding between the parties
with respect to their obligations hereto. This Agreement supersedes all prior
understandings among the parties, written and oral, and may not be modified
except by written amendment executed by the parties.
14. Any and all notices required to be provided under this Agreement shall be
sent to the addresses below, unless otherwise previously indicated in writing
by either of the parties:
To the University: Joseph R. Sherwin, Ph.D.
Associate Dean of Scientific Affairs
Jefferson Medical College
1020 Locust Street, M-5 JAH
Philadelphia, PA 19107
To the Company: Simon R. McKenzie
President and Chief Executive Officer
Intracel Corporation
359 Allston Street
Cambridge, MA 02139
If the terms are satisfactory, please sign both copies and return them at your
earliest convenience. A fully executed copy will be returned to you.
Sincerely,
Simon R. McKenzie
President & CEO
ACCEPTED FOR THE COMPANY ACCEPTED FOR THE UNIVERSITY
By: /s/ SIMON R. MCKENZIE By:
--------------------------- -------------------------
Simon R. McKenzie
Title: President & CEO Title:
----------------------
Date: July 15, 1996 Date:
------------------------ ----------------------
<PAGE> 23
[INTRACEL LETTERHEAD]
July 1, 1994
Dr. Roger Pomerantz
Thomas Jefferson University
Jefferson Medical College
329 D Jefferson Alumni Hall
1020 Locust Street
Philadelphia, PA 19107-6799
Dear Dr. Pomerantz:
We would like to extend our April 9, 1993 Research Agreement for a period of
two (2) years from July 15, 1994 on the following terms and conditions:
1. Within thirty (30) days of the date of this letter, Thomas Jefferson
University ("the University") and Intracel Corporation ("the Company") will
agree upon a written research protocol ("the Protocol") for the period of this
extended agreement.
The work described in the Protocol shall be carried out by the University for
the Company, under your scientific control, provided the Protocol is given prior
approval and that on-going reviews by all appropriate and necessary authorities
are in accordance with all applicable laws and regulations. The University
shall obtain the aforesaid necessary or appropriate written evidence of all
requisite review and approval, including that of the Institutional Animal Care
and Use Committee (IACUC) and the Institutional Biosafety and Institutional
Review Board (IRB). The Protocol may be amended from time to time upon written
agreement of the parties hereto and with the written approval of any authority
that is required to approve the amendment.
2. In consideration of your performance of the Protocol, the Company shall
pay the University $800,000 in accordance with Appendix B attached to this
letter agreement. Payments are subject to the submission of satisfactory
progress reports as specified in the following Paragraph 3.
3. The University shall submit to the Company written progress reports at the
end of each quarter detailing the progress made during the quarter and any
resulting amendments or alterations required to the Protocol.
4. All inventions made by the University in performing the Protocol shall be
subject to the License Agreement between the University and the Company dated
June 1, 1994.
5. Subject to Paragraph 6 hereof, results of the Protocol may be published
to the scientific community provided that the Company's patent rights and/or
patenting opportunities set forth in Paragraph 4 are not compromised and the
Company is allowed to review and suggest revisions to any proposed publication
for sixty days (60) prior to submission for publication.
<PAGE> 24
6. The University and Company agrees to maintain in confidence for a period of
three (3) years from the date of termination of this Agreement all confidential
information received from the other party of this Agreement. Such obligation of
confidentiality shall not apply to any information which, at the time of
disclosure, was in the possession of the receiving party, was generally
available to the public or thereafter becomes generally available to the public
through a source other than the receiving party, was rightfully obtained from a
third party, or was developed by or for the receiving party independent of any
disclosure under this Agreement. In addition to the above exclusions, the
receiving party shall have the right to disclose the disclosing party's
confidential information, if the receiving party is required to do so by the
order of any governmental authority or by final judicial order.
7. The Company agrees to indemnify, defend, and hold harmless, the University,
its trustees, officers, staff and agents from all liabilities, demands, damages,
expenses and losses which do not arise from the negligence of the University in
the performance of the Protocol. This paragraph shall apply with the proviso
that the University promptly notifies the Company in writing after the
University receives notice of any claim and the University fully cooperates with
the Company in the defense of any such claim.
8. Neither party will employ or use the name of the other party or its
employees in any form for public distribution without the prior written consent
of the other party.
9. The University shall at all times during the performance of this Agreement
be and remain an independent contractor and not an employee, agent or joint
venturer of or with the Company.
10. This Agreement is not assignable by either party except that the Company
may assign this agreement to its affiliates without the prior consent of the
University.
11. Either party may terminate this Agreement upon ninety (90) days written
notice to the other party if:
(a) Dr. Roger Pomerantz is unable or unwilling to continue as the
Principal Investigator; or
(b) In the opinion of either party, based upon a reasonable
interpretation of results performed in carrying out the Protocol, a
clinically effective anti-HIV product cannot be developed in a timely
fashion.
In the event of a cancellation of this Agreement pursuant to Paragraph 11, the
University shall be paid for uncancellable obligations properly incurred in
accordance with the Budget and Payment Schedule prior to the date of any notice
of termination. In the event of cancellation, the University shall promptly
transfer to the Company all ongoing experiments data and copies of data
generated under this Agreement.
12. The validity and interpretation of this Agreement shall be governed by the
laws of the Commonwealth of Massachusetts.
13. This Agreement constitutes the entire understanding between the parties
with respect to their obligations hereto. This Agreement supersedes all prior
2
<PAGE> 25
understandings among the parties, written and oral, and may not be modified
except by written amendment executed by the parties.
14. Any and all notices required to be provided under this Agreement shall be
sent to the addresses below, unless otherwise previously indicated in writing
by either of the parties:
To the University: Joseph R. Sherwin, Ph.D.
Associate Dean of Scientific Affairs
Jefferson Medical College
1020 Locust Street, M-5 JAH
Philadelphia, PA 19107
To the Company: Simon R. McKenzie
President and Chief Executive Officer
Intracel Corporation
359 Allston Street
Cambridge, MA 02139
If the terms are satisfactory, please sign both copies and return them at your
earliest convenience. A fully executed copy will be returned to you.
Sincerely,
/s/ SIMON R. MCKENZIE
- ---------------------
Simon R. McKenzie
President & CEO
ACCEPTED FOR THE COMPANY ACCEPTED FOR THE UNIVERSITY
By: /s/ SIMON R. MCKENZIE By: /s/ JOSEPH R. SHERWIN
--------------------- ----------------------------
Title: Simon R. McKenzie Title: Joseph R. Sherwin, Ph.D.
Associate Dean of Scientific Affairs
Date: 7/6/1994 Date: 7/25/94
3
<PAGE> 26
[AMERICAN BIO-TECHNOLOGIES, INC. LETTERHEAD]
April 9, 1993
Dr. Roger Pomerantz
Thomas Jefferson University
Jefferson Medical College
329 D Jefferson Alumni Hall
1020 Locust Street
Philadelphia, PA 19107-6799
Dear Dr. Pomerantz,
This letter of Agreement confirms our mutual interests and understandings with
respect to a research project initiated by American Bio-Technologies, Inc. and
entitled INTRACEL, the scope of which is outlined in the attached research
protocol ("the Protocol").
1. The work described in the Protocol (the Study) shall be carried out by Thomas
Jefferson University (University) for American Bio-Technologies, Inc. (Company),
under your scientific control, provided the Protocol is given prior approval and
that on-going reviews by all appropriate and necessary authorities are in
accordance with all applicable laws and regulations. The University shall obtain
the aforesaid necessary or appropriate written evidence of all requisite review
and approval, including that of the Institutional Animal Care and Use Committee
(IACUC), Institutional Biosafety and Institutional Review Board (IRB). The
Protocol may be amended from time to time upon written agreement of the parties
hereto and with the written approval of the authority that is required to
approve the amendment.
2. This study shall begin upon receipt by ABT of satisfactory in vitro data from
your laboratory and shall not extend beyond 12 months unless agreed to in
writing by the parties hereto.
5. In consideration of performance of the Study, the Company shall pay the
University in accordance with the attached Budget (Appendix A) an amount not to
exceed $222,750. Payments are subject to the submission of satisfactory reports
as specified in Paragraph 4 and should be made payable to Thomas Jefferson
University.
4. The University shall furnish the Company reports resulting from the Study as
specified in the Protocol. The University shall also provide the Company
periodic reports concerning the Study.
5. Should any invention be made arising out of the Study by an employee of the
University beyond the immediate scope of this Agreement and the Protocol, the
University as assignee pursuant to its Patent Policy, will offer the Company
first opportunity to enter into an exclusive license agreement to practice such
invention. The terms of the license shall be established by negotiation, but in
any case shall be royalty bearing and shall be for the life of the patent and
shall be on terms no less favorable to the Company than terms offered then or
thereafter to other licensees for other comparable technologies.
<PAGE> 27
2
6. Subject to Section 7 hereof, results of the Study may be published to the
scientific community provided that the Company's patent rights and/or patenting
opportunities set forth in Paragraph 5 are not compromised and the Company is
allowed to review and suggest revisions to any proposed publication for sixty
days (60) prior to submission for publication.
7. The University agrees to maintain in confidence for a period of three (3)
years from the date of termination of this Agreement all confidential
information received from the company or developed under the terms of this
Agreement. Such obligation of confidentiality shall not apply to any information
which, at the time of disclosure, was in the possession of the University, was
generally available to the public or thereafter becomes generally available to
the public through a source other than the University, was rightfully obtained
from a third party, or was developed by or for the University independent of any
disclosure under this Agreement. In addition to the above exclusions, the
University shall have the right to disclose the Company's confidential
information, if the University is required to do so by the order of any
governmental authority or by final judicial order.
8. The Company agrees to indemnify, defend, and hold harmless, the University,
its trustees, officers, staff and agents from all liabilities, demands, damages,
expenses and losses arising out of, or in connection with Study except to the
extent that such liabilities, demands, damages, expenses and losses arise from
the negligence of the University. This paragraph shall apply with the proviso
that (a) the University promptly notifies the Company in writing after the
University receives notice of any claim and (b) the University fully cooperates
with the Company in the defense of any such claim.
9. Neither party shall employ or use the name of the other party or its
employees in any form for public distribution without prior written consent.
10. The University shall at all times during the performance of this Agreement
be and remain as an independent contractor and not as an employee, agent, or
joint venturer of or with the Company.
11. This Agreement is not assignable by either party except that the Company may
assign this agreement to its affiliates without prior consent of the University.
12. The party may terminate this Agreement upon ninety (90) days written notice
to the other party. The University shall be paid for uncancellable obligations
properly incurred in accordance with the Budget and Payment Schedule prior to
the date of notice of termination. In the event of cancellation, the University
shall promptly transfer to the Company all ongoing experiments data and copies
of data generated under this Agreement.
13. The validity and interpretation of this Agreement shall be governed by the
laws of the Commonwealth of Massachusetts.
14. This Agreement constitutes the entire understanding between the parties with
respect to their obligations hereto. This Agreement supersedes all prior
understandings among the parties, written and oral, and may not be modified
except by written amendment executed by the parties.
15. Any and all notices required to be provided under this Agreement shall be
sent to the addresses below, unless otherwise previously indicated in writing by
either of the parties:
To the University,: Joseph R. Sherwin, Ph.D.
Associate Dean of Scientific Affairs
Jefferson Medical College
1020 Locust Street, M-5 JAH
Philadelphia, PA 19107
<PAGE> 28
To the Company: American Bio-Technologies, Inc.
359 Allston Street
Cambridge, MA 02139
If the terms are satisfactory, please sign both copies and return them at your
earliest convenience. A fully executed copy will be returned to you.
Sincerely
/s/ SIMON R. MC KENZIE
Simon R. McKenzie
President
ACCEPTED FOR THE COMPANY ACCEPTED FOR THE UNIVERSITY
By:/s/ SIMON R. MC KENZIE By: /s/ JOSEPH R. SHERWIN
------------------------------- ------------------------------------
JOSEPH R. SHERWIN, PH.D.
ASSOCIATE DEAN OF SCIENTIFIC AFFAIRS
Title: Simon R. McKenzie Title:
------------------------------- ---------------------------------
Date: April 9, 1993 Date: 4/12/93
----------------------------------
<PAGE> 29
REVISED February 7, 1997
APPENDIX B: PAYMENT SCHEDULE, YEARS 3-4
YEAR 3 (JULY 15, 1996-JULY 14, 1997)
<TABLE>
<S> <C> <C> <C>
Date Quarter Direct Costs Indirect Costs
9/30/96 Quarter 1 $ 67,340.00 $ 0.00*
12/31/96 Quarter 2 $ 67,340.00 $ 0.00**
3/31/97 Quarter 3 $ 67,340.00 $ 65,320.00
6/30/97 Quarter 4 $ 67,340.00 $ 65,320.00
----------- -------------
TOTAL $269,360.00 $130,640.00
</TABLE>
* Paid
** $16,150 Paid
YEAR 4 (JULY 15, 1997-JULY 14, 1998)
<TABLE>
<S> <C> <C> <C>
Date Quarter Direct Costs Indirect Costs
9/30/96 Quarter 1 $ 67,340.00 $ 0.00*
12/31/98 Quarter 2 $ 67,340.00 $ 0.00**
3/31/98 Quarter 3 $ 67,340.00 $ 65,320.00
6/30/98 Quarter 4 $ 67,340.00 $ 65,320.00
----------- -------------
TOTAL $269,360.00 $130,640.00
</TABLE>
For Intracel Corporation For Thomas Jefferson University
/s/ MATTHEW L. ROOT /s/ ROGER J. POMERANTZ
- --------------------------------- ------------------------------------------
Name: Matthew L. Root Name: Roger J. Pomerantz, M.D.
Title: Chief Financial Officer Title: Professor of Medicine, Chief,
Division of Infectious Diseases,
Director, Center for Human Virology
<PAGE> 30
APPENDIX B
BUDGET AND PAYMENT SCHEDULE
Year 2 (July 15, 1994 - July 14, 1995)
<TABLE>
<CAPTION>
Direct Costs Indirect Costs
<S> <C> <C>
Quarter 1 $67,350 $ 0
Quarter 2 $67,350 $ 0
Quarter 3 $67,350 $65,300
Quarter 4 $67,350 $65,300
</TABLE>
Year 3 (July 15, 1995 - July 14, 1996)
<TABLE>
<CAPTION>
Direct Costs Indirect Costs
<S> <C> <C>
Quarter 1 $67,350 $ 0
Quarter 2 $67,350 $ 0
Quarter 3 $67,350 $65,300
Quarter 4 $67,350 $65,300
</TABLE>
<PAGE> 31
APPENDIX A
INTRACEL BUDGET AND PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Direct Indirect
<S> <C> <C>
Quarter 1 $37,500 $ 0
Quarter 2 $37,500 $ 0
Quarter 3 $37,500 $36,375
Quarter 4 $37,500 $36,375
</TABLE>
Above-mentioned quarterly payments shall be made in advance on or about
the first day of each quarter with the first payment being made on the
initiation of the study as provided in Section 2 of the letter of Agreement.
<PAGE> 1
Exhibit 10.21
PRODUCT DEVELOPMENT AND LICENSE AGREEMENT
This Agreement is made and entered into as of the day of , 1997, by
and between the PERIMMUNE, a Delaware Corporation ("PERIMMUNE"), maintaining an
office at 1330 Piccard Drive, Rockville, Maryland 20850-4396 and SIGMA
DIAGNOSTICS, INC. "SIGMA", a Missouri corporation maintaining an office at 545
South Ewing Avenue, St. Louis, Missouri 63103.
WHEREAS, SIGMA desires to develop diagnostic assays useful for detecting
lipoprotein(a), Lp(a), and PERIMMUNE represents that it has the technical
expertise to develop hybridoma cell lines that produce antibodies for use in
such assay;
WHEREAS, SIGMA desires to grow such cell lines and harvest monoclonal
antibodies from said cell lines and to make, use and sell products manufactured
using such antibodies and desires to obtain the exclusive, worldwide rights to
harvest such antibodies and make, use and sell such products; and
WHEREAS, PERIMMUNE is willing to grant SIGMA such rights and license on
the terms and conditions set forth herein.
NOW THEREFORE, for and in consideration of the foregoing and the mutual
covenants and agreements contained herein, and certain other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following defined terms shall have the
meaning set forth in this Article 1.
1.1 "Affiliate" means any entity directly or indirectly controlling,
controlled by, or under common control with SIGMA. "Control" as used in this
Section 1.1 means the ownership of fifty percent (50%) or more of the entity in
question.
1.2 "Agreement" means this Agreement including all Exhibits attached to
this Agreement together with any written amendments of any of the foregoing.
1.3 "Approvals" means any or all approvals, registrations, licenses,
authorizations, visas or permits required by any governmental authority or
agency in order to import, offer for sale, sell, market, manufacture, have made
or use each Licensed Product.
1.4 "Cell Line Growth Information" means all information necessary to
establish a Licensed Cell Line in SIGMA'S possession which is growing and
producing Licensed Antibody in the quantity and with the properties reasonably
required by SIGMA. Cell Line Growth Information is not included in PERIMMUNE
Information.
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1.5 "Date Of This Agreement" means the date first set forth above and is
the Effective Date of this Agreement.
1.6 "Improvements" means all modifications, variations and revisions and
new models of the Licensed Product and/or the Licensed Antibodies, Licensed
Biologicals or Licensed Cell Lines licensed under this Agreement developed by
the parties hereto which relates or has consequence with respect to the Licensed
Product in any of the following ways: (1) improves the Licensed Products
performance; (2) reduces the cost of materials or components for the Licensed
Products; (3) reduces production, manufacturing or associated costs of the
Licensed Products; (4) increases the durability or continuous performance
characteristics of the Licensed Products; (5) expands the applications to which
the Licensed Product may be put; (6) increases or enhances the marketability or
commercial aspect of the Licensed Product; or (7) would, if implemented, replace
or displace the Licensed Product in one or more material commercial markets for
Licensed Products. Improvements may be patentable or unpatentable, and if
patentable, need not be patented.
1.7 "Licensed Antibody" means any antibody, fragment, derivative, or
conjugate thereof developed or discovered by PERIMMUNE or jointly by PERIMMUNE
and SIGMA during the Research and Development Period of this Agreement,
including without limitation, any glycosylated antibody specifically
immunoreactive with non-repetitive apolipoprotein(a) domains and not
immunoreactive with LDL or plasminogen with an affinity sufficient to be used in
a homogeneous turbidimetric assay having not more than a ten (10) minute
incubation period.
1.8 "Licensed Biological" means any biomaterial other than Licensed
Antibodies developed or discovered by PERIMMUNE or jointly by PERIMMUNE and
SIGMA during the Research and Development Period of this Agreement including,
without limitation, peptides and other biomaterial useful as a calibrator,
reference material or control.
1.9 "Licensed Cell Line" means the hybridoma cell line which will
produce the Licensed Antibody in the quantity reasonably required by SIGMA.
1.10"Licensed Patent" means any and all United States patents and patent
applications, all divisionals, continuations, continuations-in-part, reissues,
extensions or foreign counterparts thereof, now or hereafter owned or controlled
("controlled" being used in the sense of having the right to grant licensees
thereunder) by PERIMMUNE, covering the manufacture, use, sale, offer for sale
and/or importation of Licensed Antibodies, Licensed Biologicals, Licensed Cell
Lines, Licensed Products and/or Improvements.
1.11 "Licensed Product" means any product, including kits, which
comprises a Licensed Antibody.
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1.12 "Net Sales" means gross sales less, to the extent including in
gross sales, taxes, including sales taxes, duties, outward freight, insurance,
special handling and shipping charges, and to the extent actually allowed and
taken, discounts, non-affiliated brokers agents' commissions, returns and
allowances.
1.13 "Project Development" means research pertaining to the development
of Licensed Antibodies, Licensed Biologicals, Licensed Cell Lines and/or
Licensed Products performed during the Research and Development Period of this
Agreement.
1.14 "Project Funds" means those funds paid by SIGMA to PERIMMUNE for
the Project Development in accordance with this contract.
1.15 "Research and Development Period" shall mean the period commencing
on the Effective Date of this Agreement and terminating on the second
anniversary thereof.
1.16 "Project Team" means the individuals listed on Exhibit A attached
hereto and the research technicians under each of their direction and control
who are supported in whole or in part by the Project Funds.
1.18 "Information" means either PERIMMUNE Information, SIGMA
Information, Joint Project Information or Cell Line Information or any
combination of PERIMMUNE Information, SIGMA Information, Joint Information or
Cell Line Information, as the case may be.
1.19 "Joint Project Information" means, individually and collectively,
all manufacturing, analytical, and marketing information and technical know-how,
trade secrets and inventions conceived and/or reduced to practice and/or
acquired jointly by the parties during the Research Period of this Agreement and
for one (1) year thereafter and directed to the Licensed Antibodies, Licensed
Biologicals, Licensed Cell Lines, Licensed Patents and Licensed Products
including, but not limited to, specifications for ingredients and formulations,
information relating to regulatory and clinical work, testing or studies,
manufacturing methods and procedures.
1.20 "PERIMMUNE Information" means "PERIMMUNE Project Information" and
PERIMMUNE Ancillary Information."
(a) "PERIMMUNE Project Information" means, individually and
collectively, all manufacturing, analytical, and marketing information and
technical know-how, trade secrets and inventions conceived and/or reduced to
practice and/or acquired by PERIMMUNE during the Research Period of this
Agreement and for one (1) year thereafter and directed to the Licensed
Antibodies, Licensed Biologicals, Licensed Cell Lines, Licensed Patents and
Licensed Products including, but not limited to, specifications for ingredients
and formulations, information relating to regulatory and clinical work, testing
or studies, manufacturing methods and procedures.
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(b) "PERIMMUNE Ancillary Information" means, individually and
collectively, all manufacturing, analytical, and marketing information and
technical know-how, trade secrets and inventions directed to the Licensed
Antibodies, Licensed Biologicals, Licensed Cell Lines, Licensed Patents and
Licensed Products including, but not limited to, specifications for ingredients
and formulations, information relating to regulatory and clinical work, testing
or studies, manufacturing methods and procedures owned, controlled, conceived
and/or reduced to practice and/or acquired by PERIMMUNE before the date of this
Agreement.
1.21 "SIGMA Information" shall mean "SIGMA Project Information" and
"SIGMA Ancillary Information.
(a) "SIGMA Project Information" means, individually and collectively,
all manufacturing, analytical, and marketing information and technical know-how,
trade secrets and inventions conceived and/or reduced to practice and/or
acquired by SIGMA during the Research Period of this Agreement and for one (1)
year thereafter and directed to the Licensed Antibodies, Licensed Biologicals,
Licensed Cell Lines, Licensed Patents and Licensed Products including, but not
limited to, specifications for ingredients and formulations, information
relating to regulatory and clinical work, testing or studies, manufacturing
methods and procedures.
(b) "SIGMA Ancillary Information" means, individually and collectively,
all manufacturing, analytical, and marketing information and technical know-how,
trade secrets and inventions directed to the Licensed Antibodies, Licensed
Biologicals, Licensed Cell Lines, Licensed Patents and Licensed Products
including, but not limited to, specifications for ingredients and formulations,
information relating to regulatory and clinical work, testing or studies,
manufacturing methods and procedures owned, controlled, conceived and/or reduced
to practice and/or acquired by SIGMA before the date of this Agreement.
1.22 "SIGMA Patents" means any and all United States patents and patent
applications, all divisionals, continuations, continuations-in-part, reissues,
extensions or foreign counterparts thereof, now or hereafter owned or controlled
("controlled" being used in the sense of having the right to grant licensees
thereunder) by SIGMA, claiming an invention or inventions discovered or
developed solely by SIGMA or covering the manufacture, use, sale, offer for sale
and/or importation of Licensed Products and/or Improvements.
ARTICLE 11
RESEARCH AND DEVELOPMENT OF LICENSED CELL LINES
2.1 PROJECT DEVELOPMENT SCHEDULE. During the Research and Development
Period, the Project Team shall conduct Project Development on behalf of SIGMA in
accordance with the plan and schedule mutually agreed to by the parties hereto
and attached hereto as Exhibit B.
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2.2. PROJECT DEVELOPMENT REPORTING. A representative of the Project Team
shall advise SIGMA of the results of the Project Development and, at least once
every quarter during the Research Period, provide SIGMA with a written progress
report concerning the Research Project, provided however, PERIMMUNE shall notify
SIGMA as soon as reasonably possible of the reduction to practice of inventions
developed during Project Development and for a period of one (1) year
thereafter. At SIGMA'S request, a representative of the Project Team shall meet
with SIGMA from time to time to discuss the progress of the Project Development.
2.3 COMPLIANCE WITH REGULATIONS. All studies done in connection with the
Project Development shall be carried out in strict compliance with any
applicable Federal, state, or local laws, regulations or guidelines governing
the conduct of such research.
2.4 CHANGE IN PROJECT TEAM. PERIMMUNE shall promptly notify SIGMA of any
changes in the personnel comprising the Project Team.
ARTICLE III
PAYMENTS
3.1 PAYMENT SCHEDULE. SIGMA shall pay PERIMMUNE the Project Funds amount
of Three Hundred Forty Eight Thousand Dollars ($348,000) in the following
manner:
(a) on or before the Effective Date, SIGMA shall pay the sum of Eighty
Seven Thousand Dollars ($87,000);
(b) SIGMA shall make a second payment of Eighty Seven Thousand Dollars
$87,000 after PERIMMUNE provides SIGMA with proof that it has isolated
glycosylated monoclonal antibodies specifically immunoreactive with
non-repetitive apolipoprotein(a) domains and not immunoreactive with LDL
or plasminogen with an affinity consistent with a homogeneous
turbidimetric assay having not more than a ten (10) minute incubation
period;
(c) SIGMA shall make a third payment of Eighty Seven Thousand Dollars
$87,000 after PERIMMUNE has delivered to SIGMA ascites derived purified
monoclonal antibodies to SIGMA; and
(d) SIGMA shall make a final payment of Eighty Seven Thousand Dollars
$87,000 upon the delivery of a Licensed Cell Line. A Licensed Cell Line
will be considered delivered when it is in SIGMA'S possession and
growing and producing Licensed Antibody in the quantity and with the
properties reasonably required by SIGMA.
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3.2 RECOUPMENT OF PROJECT FUNDS. SIGMA shall recoup One Hundred Twenty
Four Thousand Dollars ($124,000) of the Project Funds paid to PERIMMUNE pursuant
to Section 3.1 hereof by withholding royalties due to PERIMMUNE pursuant to
Section 5.1 hereof. At PERIMMUNE's election, such election to be made prior to
the first royalty becoming due, SIGMA shall either: (a) retain one-third of the
total annual royalty due under Section 5.1 hereof until SIGMA has retained a
total of One Hundred Twenty Four Thousand Dollars $124,000; or (b) retain the
entire annual royalty due under Section 5.1 hereof, until SIGMA has retained a
total of One Hundred Twenty Four Thousand Dollars $124,000.
3.3 DIRECTION OF PAYMENTS. Payments under the terms of this Agreement
shall be made by check payable to:
PERIMMUNE, INC.
1350 Piccard Drive
Rockville, Maryland 20850-4396
Attn: Dr. Bryan Butman
ARTICLE IV
RIGHTS AND LICENSES
4.1 GRANT OF LICENSE. PERIMMUNE grants to SIGMA the exclusive worldwide,
right to use all Technical Information and Cell Line Growth Information which
PERIMMUNE furnishes SIGMA under this Agreement together with an exclusive right
to use Licensed Antibodies, Licensed Biologicals, Licensed Cell Lines and
Improvements thereto (such Improvements includes Improvements made or developed
solely by PERIMMUNE or jointly by PERIMMUNE and SIGMA) and an exclusive
worldwide license under Licensed Patents to: (a) use, possess and culture
Licensed Cell Lines to obtain Licensed Antibodies, or have Licensed Cell Lines
used, possessed and cultured to obtain Licensed Antibodies for SIGMA; (b) to
manufacture Licensed Products or have Licensed Products manufactured for SIGMA;
(c) to use and possess Licensed Antibodies, Licensed Biologicals, and Licensed
Products for all purposes; and (d) to distribute, market, import, sell and offer
for sale such Licensed Antibodies, Licensed Biologicals and/or Licensed Products
for all purposes to Affiliates and third parties together with the right to
extend to purchasers of Licensed Antibodies, Licensed Biologicals and/or
Licensed Products from SIGMA rights of the same scope as granted to SIGMA herein
to use, possess, distribute, market and sell such Licensed Antibodies, Licensed
Biologicals and/or Licensed Products.
4.2 RIGHT TO SUBLICENSE. SIGMA shall have the right to grant sublicenses
under this Agreement.
4.3 COMMERCIALIZATION. SIGMA shall commence marketing of a Licensed
Product as soon as reasonably feasible after establishing the Licensed Cell Line
from which said Licensed Antibody is obtained and obtaining the necessary
Approvals for Licensed Product in any country.
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4.4 SUPPLY AND TRANSFER OF MAB 2D1. If SIGMA desires to use anti-apo(a)
Mab 2D1 in a Licensed Product, PERIMMUNE agrees to sell and transfer Mab 2D1 to
SIGMA at a transfer price equal to the actual manufacturing cost of producing
Mab 2D1 plus ten percent (10%). PERIMMUNE shall keep true and accurate books and
records in such detail as to enable the transfer price of Mab 2D1 to be readily
computed. PERIMMUNE agrees, upon the request of SIGMA, to permit an independent
certified public accountant retained by SIGMA and to whom PERIMMUNE has no
reasonable objection, to have access during normal business hours to such books
and records relating to the transfer price of Mab 2D1 as may be necessary to
determine in respect of the transfer price for the most previous calendar year,
the correctness of such transfer price or to obtain information as to the
transfer price. Any such accountant shall agree in writing not to disclose any
information relating to the business of PERIMMUNE except that which should
properly be contained in any report to SIGMA due hereunder.
4.5 CELL LINE TRANSFER. If SIGMA demonstrates to PERIMMUNE at any time
during the term of this Agreement that SIGMA can manufacture Mab 2D1 for less
than the transfer price provided for in Section 4.4 hereof, PERIMMUNE shall
transfer the Mab 2D1 cell line together with any necessary licenses to SIGMA
and shall allow SIGMA to manufacture of Mab 2D1 for use in Licensed Products.
ARTICLE V
ROYALTIES/BOOKS AND RECORDS
5.1 ROYALTIES. SIGMA agrees to pay PERIMMUNE in United States dollars, a
royalty equal to seven percent (7%) of the Net Selling Price of the Licensed
Products covered by a claim in a Licensed Patent sold to third parties by or for
SIGMA or its Affiliates and its sublicensees. If a competing product equivalent
to a Licensed Product or a competing product comprising an antibody equivalent
to, or which competes with the epitope recognized by, a Licensed Antibody is
offered for sale by a third party, then the royalty rate payable on Licensed
Products shall be equal to three and one-half percent (3.5%) of the Net Selling
Price.
5.2 ROYALTY REPORTS AND PAYMENTS. SIGMA shall render an annual report to
PERIMMUNE within ninety (90) days after the end of each calendar year setting
forth the total of the Net Sales of Licensed Products sold by SIGMA during the
preceding calendar year and the amount of royalty due pursuant to Sections 5.1
hereof. SIGMA shall include with each report payment of the amount of royalty
shown by the report to be due minus the recoupment amount, if any, as provided
for in Section 3.2 hereof. All such reports, and all reports by accountants as
provided under Section 5.6 hereof, shall be maintained in confidence by
PERIMMUNE.
5.3 TIMING OF ROYALTIES ON SUBLICENSEE SALES. Royalties shall be payable
by SIGMA with respect to all of its sublicensees' Net Sales. Royalties shall not
become payable at the time of the sale, transfer or disposal among SIGMA and its
Affiliates or sublicensee, but shall become payable only when SIGMA or its
sublicensee sells such products to a third party.
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5.4 NO MULTIPLE ROYALTIES. No multiple royalties shall be payable
because any Licensed Product is covered by more than one patent or patent claim
of the Licensed Patents.
5.5 WITHHOLDINGS. Any income or other tax which SIGMA is required to
withhold and pay on behalf of PERIMMUNE with respect to the royalties payable
under this Agreement shall be deducted from such royalties prior to remittance
to PERIMMUNE.
5.6 INSPECTION OF RECORDS. SIGMA shall keep true and accurate books and
records in such detail as to enable the royalties payable hereunder to be
readily computed. SIGMA agrees, upon the request of PERIMMUNE, within one
hundred-twenty (120) days following the receipt by PERIMMUNE of the report
required by Section 5.2 hereof, to permit an independent certified public
accountant retained by PERIMMUNE and to whom SIGMA has no reasonable objection,
to have access during normal business hours to such books and records relating
to the Net Sales of Licensed Products as may be necessary to determine in
respect of the report for the most previous calendar year, the correctness of
such report or payment or to obtain information as to the amount payable to
PERIMMUNE in case of the failure of SIGMA to report. Any such accountant shall
agree in writing not to disclose any information relating to the business of
SIGMA except that which should properly be contained in any report to PERIMMUNE
due hereunder.
5.7 TERMINATION OF ROYALTY OBLIGATION. In the event that any Licensed
Cell Line furnished to SIGMA pursuant to Section 3.1 becomes available to third
parties for commercial purposes through an act of or failure to act by
PERIMMUNE, the obligations of SIGMA set forth in this Article V shall terminate.
ARTICLE VI
SUPPLY OF TECHNICAL INFORMATION AND PUBLICATION
6.1 REQUEST FOR CELL LINE INFORMATION. PERIMMUNE agrees to furnish to
SIGMA, within fifteen (15) days from the date of a notice of request for
Technical Information by SIGMA, all requested Cell Line Information. Requests
for Cell Line Information by SIGMA shall be made by notice of compliance with
Section 13.1 below.
6.2 CONFIDENTIALITY. With respect to any Information, as defined in 1.8
hereof, that is designated by the parties as its confidential information by a
written notice to the non-owning party within thirty (30) days after the first
written disclosure of that Information by either party to the other, the
non-owning party shall, until five (5) years from the date of the expiration or
termination of this Agreement: (a) take all reasonable steps to prevent
disclosure of such Information to any third party and (b) not utilize any of
such Information for any purpose other than the purposes of this Research
Project as provided herein; provided, however, that the foregoing obligations of
confidentiality and non-use shall not preclude disclosure of such information in
a patent application or in the prosecution of a patent application pursuant to
Section 7.6 hereof, or extend to any of such Information which a non-owing party
can show:
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(i) by the non-owning party's prior written records was already in the
non-owning party's possession prior to (confidentiality agreement date);
(ii) such Information became generally available to the public through
issuance or publication of a patent application in which the information
is disclosed pursuant to Section 7.6 hereof;
(iii) such Information otherwise is or becomes generally available to
public through non fault of the non-owning party;
(iv) such Information is received by the non-owning party in good faith
from a third party on a non-confidential basis without violating any
obligation of secrecy to the owner party relating to the Information
disclosed; or
(v) written consent to disclose such Information was given by the owning
party.
6.3 DISCLOSURE OF CONFIDENTIAL INFORMATION. All PERIMMUNE confidential
disclosures shall be sent to SIGMA to the attention of Vice President of
Administration. All SIGMA confidential disclosure shall be sent to PERIMMUNE to
the attention of Dr. Bryan Butman. The parties agree that Information designated
confidential shall be disclosed to a restricted number of employees and such
employees shall be made aware of the confidential nature of the Information. The
parties shall use efforts fully commensurate with those employed for the
protection of its own confidential information to protect the Information
disclosed pursuant to Section 6.2 hereof and this Section 6.3.
6.4 Ownership of PERIMMUNE Ancillary Information. PERIMMUNE Ancillary
Information is owned solely by PERIMMUNE.
6.5 Ownership of PERIMMUNE Project Information. PERIMMUNE Project
Information shall be owned by SIGMA.
6.6 Ownership of SIGMA Information. SIGMA Information is, or shall be,
owned solely by SIGMA.
6.7 Ownership of Joint Project Information. Joint Project Information
shall be owned by SIGMA.
ARTICLE VII
OWNERSHIP OF INVENTIONS AND PATENTS
7.1 Ownership of Licensed Patents. PERIMMUNE shall have sole and
exclusive ownership of the Licensed Patents subject to SIGMA'S exclusive
worldwide license as provided in Article IV hereof.
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7.2 Ownership of SIGMA Patents. SIGMA shall have sole and exclusive
ownership of all SIGMA Patents.
7.3 Ownership of PERIMMUNE Improvements. PERIMMUNE shall have sole and
exclusive ownership rights to any Improvements made solely by PERIMMUNE whether
patentable or unpatentable subject to SIGMA's exclusive worldwide license as
provided in Article IV hereof.
7.4 Ownership of SIGMA Improvements. SIGMA shall have sole and exclusive
ownership rights to any Improvements made solely by SIGMA whether patentable or
unpatentable.
7.5 Ownership of Joint Improvements. Any Improvements made jointly by
SIGMA and PERIMMUNE shall be jointly owned by the parties hereto, subject to
SIGMA'S exclusive worldwide license as provided in Article IV hereof.
7.6 Filing Patents. PERIMMUNE shall be responsible for the preparation,
filing and prosecution of Licensed Patents as well as all costs and fees
associated therewith. PERIMMUNE shall apply for, seek prompt issuance of and
maintain during the term of this Agreement the patents and patent applications
in all jurisdiction where patent protection is available. The preparation,
prosecution and maintenance of all Licensed Patents shall be the primary
responsibility of PERIMMUNE; provided however, that SIGMA shall be afforded
reasonable opportunities to advise PERIMMUNE and shall cooperate with PERIMMUNE
in such preparation, prosecution and maintenance. PERIMMUNE shall promptly
advise SIGMA of the grant, lapse, revocation, surrender, or any threatened
invalidation or of its intention to abandon any such patent, application or
foreign counterpart. If PERIMMUNE chooses not to seek patent protection covering
an invention relating to the Project Research or chooses not to pay maintenance
fees due on a Licensed Patent it shall notify SIGMA immediately of such
decision. Upon request by SIGMA after receiving such notice, PERIMMUNE shall
assign ownership of such invention or Licensed Patent to SIGMA and execute the
necessary documents to enable SIGMA to seek patent protection of such invention
or maintain such Licensed Patent.
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ARTICLE VIII
REGULATORY AFFAIRS
8.1 Approvals. SIGMA shall have the responsibility to carry out, at its
own expense, all further regulatory and clinical work, testing or studies
relating to the Licensed Products as required or advisable for obtaining
Approvals. Sigma shall hold the 510(k) approval for all Licensed Products.
8.2 Assistance in Gaining Approvals. PERIMMUNE agrees to provide
reasonable assistance to SIGMA in making such applications, submissions or
filings as may be required or advisable in obtaining the Approvals required for
any Licensed Product to enable SIGMA to make, have made, import, use, market and
sell such Licensed Product in any country. Such assistance shall be provided at
not charge to SIGMA.
8.3 Notice of Reports to Government Authorities. Each party shall
promptly notify the other party of any information coming to its attention
concerning experience with any Licensed Product for which records and reports
are filed with any governmental authority, but shall not be liable for any
unintentional failure to do so.
ARTICLE IX
INFRINGEMENT
9.1 Suits Against SIGMA. In the event that any suit, action or other
proceeding shall be brought or threatened against SIGMA and/or any of its
Affiliates involving any claim of patent infringement or other violation of
intellectual property rights relating to the manufacture, use or sale of a
Licensed Product:
(a) SIGMA shall promptly send to PERIMMUNE copies of all papers which
shall have been served in such suit, action, or other proceeding.
PERIMMUNE shall, at its cost, indemnify, defend and hold SIGMA, its
officers, employees and Affiliates, harmless against any such claim,
including legal expenses and reasonable attorney fees. SIGMA and its
Affiliates agree to cooperate fully with PERIMMUNE, and will on
reasonable notice make available any of its employees, officers,
managers, trustees, agents, and other representatives to testify when
requested by PERIMMUNE, and will, on reasonable notice, make available
to the attorneys for PERIMMUNE all relevant records, papers,
information, samples, specimens and the like under an agreed upon
protective order effective to protect SIGMA's proprietary information
against public disclosure and/or disclosure to competition of SIGMA. If,
as a result of any such threatened or actual suit, action or other
proceeding, SIGMA is obligated to pay royalties and/or damages to a
third party, PERIMMUNE shall pay such royalty or damages on behalf of
SIGMA.
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(b) SIGMA'S obligation to pay royalties under Article IV shall be
suspended pending resolution of such suit, action or other proceeding.
SIGMA'S obligations under Article IV shall remain suspended until such
suit, action or other proceeding is resolved by dismissal thereof
together with: (i) a release of SIGMA from any past liability for the
manufacture, use or sale of Licensed Products; and (ii) a release or
license of SIGMA for the future manufacture, use and sale of Licensed
Products.
9.2(a) Notice and Prosecution of Infringement. PERIMMUNE will promptly
notify SIGMA of any counterfeiting, imitation or passing off of any
Licensed Product or suspected infringement of any Licensed Patents by a
third party of which PERIMMUNE becomes aware. PERIMMUNE and SIGMA shall
discuss and attempt to mutually agree as to any action, legal or
otherwise, which should be taken with respect to such suspected
infringement. PERIMMUNE shall have the right to bring any action for
infringement of the Licensed Patents, but if it chooses not to do so, or
fails to do so within a reasonable period of time, SIGMA may do so and
may join PERIMMUNE as a party to any such action. SIGMA shall have the
right to bring actions for counterfeiting, imitation or passing off
which do not involve patent infringement. In any such action so
instituted, each party will cooperate with the party bringing the action
in all respects, will on reasonable notice make any of its employees,
officers, directors, managers, trustees, agents, and other
representatives available to testify when appropriate and necessary and,
on reasonable notice, and will make available as necessary all relevant
records, papers, information, samples and specimens. Any and all
expenses incurred in the enforcement of Licensed Patents, (including
reasonable attorney's fees) whether by PERIMMUNE or SIGMA, and any and
all money or recoveries received in connection therewith shall be borne
or retained by the party bringing the action.
(b) In the event of any counterfeiting of any Licensed Product or
infringement of any Licensed Patents by any third party, SIGMA'S
obligation to pay royalties under Article IV shall be suspended pending
abatement of such counterfeiting or infringement, either by final
judgment of a court of competent jurisdiction from which no timely
appeal has been taken or by actual cessation of the counterfeiting or
infringement pursuant to a written agreement between Licensor and the
counterfeiter or infringer.
ARTICLE X
PRODUCT LIABILITY
10.1 Products Liability. (a) Except as otherwise provided in Article IX,
SIGMA shall defend, indemnify and hold PERIMMUNE harmless from and
against any and all loss, claims, suits, proceedings, expenses,
recoveries and damages, including costs and attorney's fees arising out
of, based on, or caused by any use and/or sale of any Licensed Product
manufactured by SIGMA, except that, SIGMA shall have no obligation to
defend or indemnify or to hold PERIMMUNE harmless with respect to any
damages, losses or liabilities arising out of a negligent act of
PERIMMUNE.
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(b) PERIMMUNE shall defend, indemnify and hold SIGMA harmless from and
against any and all loss, claims, suits, proceedings, expenses,
recoveries and damages, including costs and attorney's fees arising out
of, based on, or caused by any use of Technical Information furnished to
SIGMA by PERIMMUNE, except that, PERIMMUNE shall have no obligation to
defend or indemnify or to hold SIGMA harmless with respect to any
damages, losses or liabilities arising out of a negligent act of SIGMA.
ARTICLE XI
TERM AND TERMINATION
11.1 Term. This Agreement shall be in full force and effect for an
initial term of five (5) years from the effective date hereof and will be
automatically extended for additional one (1) year terms unless SIGMA gives
written notice to PERIMMUNE terminating the automatic extension of this
Agreement at least thirty (30) days prior to the beginning of a renewal period
or unless sooner terminated as provided for in Section 11.2 hereof.
11.2 Termination. Notwithstanding anything herein to the contrary,
either party shall have the right to terminate this Agreement by giving written
notice to be given at least ninety (90) days prior to the effective date of
termination, in the event:
(a) of any material default of this Agreement by the other party which
continues in default for more than ninety (90) days, and if, after
receiving written notice of such default from the non-defaulting party,
the default is not cured or remedied within ninety (90) days;
(b) action is taken to dissolve the other party.
11.3 Conditions Upon Termination. Upon expiration or termination of this
Agreement for any reason, SIGMA:
(a) shall, within sixty (60) days from the date thereof, destroy all
Licensed Cell Lines or return them to PERIMMUNE; and
(b) shall have the right, for a period of one (1) year from the date
thereof, to sell all Licensed Products on hand, and to produce and sell
Licensed Products from Licensed Antibodies on hand, subject to the
obligations of SIGMA to submit reports and pay royalties, as provided
for in Articles IV and V hereof.
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ARTICLE XII
WARRANTIES
12.1 Representations and Warranties of SIGMA. SIGMA hereby makes the
following representations and warranties to PERIMMUNE, which representations and
warranties, together with all other representations and warranties of SIGMA in
this Agreement, are true and correct on the date hereof:
(a) SIGMA is a corporation duly organized, validly existing and in good
standing under the laws of the State of Missouri and has all requisite
corporate power and authority to enter into this Agreement and perform
its obligations hereunder.
(b) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated herein, will: (a) violate
or conflict with any provision of the Incorporation or By-laws of SIGMA,
as each may have been amended; (b) with or without the giving of notice
or the lapse of time or both (i) result in a breach of, or violate, or
be in conflict with or constitute a default under, or result in the
termination or cancellation of, or accelerate the performance required
under, any security instrument, mortgage, note, debenture, indenture,
loan, lease, contract, agreement or other instrument, to which SIGMA is
a party or by which it or any of its properties or assets may be bound
or affected, or (ii) result in the loss or adverse modification of any
lease, franchise, license or other contractual right or other
authorization granted to or otherwise held by SIGMA; (c) require the
consent of any party to any such agreement or commitment to which SIGMA
is a party or by which any of its properties or assets are bound; (d)
result in the creation or imposition of any lien, claim or encumbrance
upon any property or assets of SIGMA; or (e) require any consent,
approval, authorization, order, filing, registration or qualification of
or with any court or governmental authority or arbitrator to which SIGMA
is subject or by which any of its properties or assets may be bound or
affected.
(c) All action to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been
duly taken, and this Agreement constitutes the valid and binding
obligation of SIGMA enforceable in accordance with its terms.
(d) There are no claims (relating to patent infringement or any other
matters), actions, suits, proceedings, arbitrations or investigations
pending or, to the best of SIGMA's knowledge, threatened, against SIGMA
which if adversely determined would adversely affect Licensed
Antibodies, Licensed Biologicals, Licensed Cell Lines, Licensed Products
or Licensed Patents (or the patentability thereof) or other technology
practiced by SIGMA, or SIGMA's ability to enter into or carry out this
Agreement or use of Licensed Antibodies, Licensed Biologicals, Licensed
Cell Lines, Licensed Products or Licensed Patents.
14
<PAGE> 15
12.2 Representations and Warranties of PERIMMUNE. PERIMMUNE hereby makes
the following representations and warranties to SIGMA, which representations and
warranties, together with all other representations and warranties of PERIMMUNE
in this Agreement, are true and correct on the date hereof:
(a) PERIMMUNE is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland and has the power
and authority to enter into this Agreement and perform its obligations
hereunder;
(b) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated herein, will: (a) violate
or conflict with any provision of the Incorporation or By-laws of SIGMA,
as each may have been amended; (b) with or without the giving of notice
or the lapse of time or both (i) result in a breach of, or violate, or
be in conflict with or constitute a default under, or result in the
termination or cancellation of, or accelerate the performance required
under, any security instrument, mortgage, note, debenture, indenture,
loan, lease, contract, agreement or other instrument, to which PERIMMUNE
is a party or by which it or any of its properties or assets may be
bound or affected, or (ii) result in the loss or adverse modification of
any lease, franchise, license or other contractual right or other
authorization granted to or otherwise held by PERIMMUNE; (c) require the
consent of any party to any such agreement or commitment to which
PERIMMUNE is a party or by which any of its properties or assets are
bound; (d) result in the creation or imposition of any lien, claim or
encumbrance upon any property or assets of PERIMMUNE; or (e) require any
consent, approval, authorization, order, filing, registration or
qualification of or with any court or governmental authority or
arbitrator to which PERIMMUNE is subject or by which any of its
properties or assets may be bound or affected.
(c) All action to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been
duly taken, and this Agreement constitutes the valid and binding
obligation of PERIMMUNE enforceable in accordance with its terms.
(d) There are no claims (relating to patent infringement or any other
matters), actions, suits, proceedings, arbitrations or investigations
pending or, to the best of PERIMMUNE's knowledge, threatened, against
PERIMMUNE which if adversely determined would adversely affect the
Licensed Antibodies, Licensed Biologicals, Licensed Cell Lines, Licensed
Products or Licensed Patents (or the patentability thereof) or other
technology practiced by PERIMMUNE, or PERIMMUNE's ability to enter into
or carry out this Agreement or use of Licensed Antibodies, Licensed
Biologicals, Licensed Cell Lines, Licensed Products or Licensed Patents.
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<PAGE> 16
(e) As of the date hereof, PERIMMUNE warrants that (i) it has no
knowledge that the manufacture, use, importation or sale of any Licensed
Antibodies, Licensed Biologicals, Licensed Cell Lines, Licensed Products
or Licensed Patents under this Agreement either alone or in combination,
nor any method of using such Licensed Antibodies, Licensed Biologicals,
Licensed Cell Lines, Licensed Products or Licensed Patents infringes any
patent or other industrial property right of a third party; and (ii) it
has not received any notification from any third party alleging or
suggesting that the manufacture, use, importation or sale of any such
Licensed Antibodies, Licensed Biologicals, Licensed Cell Lines, Licensed
Products or Licensed Patents does or would infringe any patent or other
industrial property. PERIMMUNE shall disclose to SIGMA any information
regarding adverse patent rights which it is, or becomes, aware of
relating to Licensed Antibodies, Licensed Biologicals, Licensed Cell
Lines, Licensed Products or Licensed Patents.
ARTICLE XII
MISCELLANEOUS
13.1 Notices. Any notices or report or other communication permitted or
required under this Agreement shall be in writing and sent by certified mail,
express mail, Federal Express, postage paid, return receipt requested, addressed
to the party to whom the notice is to be given. All notices, reports or other
communications made hereunder shall be deemed to have been made on the date
postmarked. Changes in address shall be accomplished by a notice in compliance
with this Section 13.1. The current address for each party is as follows:
PERIMMUNE SIGMA DIAGNOSTICS, INC.
1330 Piccard Drive 545 South Ewing Avenue
Rockville, Maryland 20850-4396 St. Louis, Missouri 63103
Attn: Dr. Bryan Butman Attn: Vice President, Administration
13.2 Marking. SIGMA agrees to refer, in it sales literature and package
materials for Licensed Products, to the numbers of representative patent(s)
licensed under Licensed Patents.
13.3 Assignability. Neither this Agreement nor any agreement
incorporated herein nor any rights or obligations hereunder or thereunder may be
assigned by PERIMMUNE without prior written consent of SIGMA, and any attempted
assignment without SIGMA's prior written consent shall be void and of no effect.
This Agreement may be assigned by SIGMA and shall be binding upon and inure to
the benefit of the successor or assign of SIGMA.
13.4 Force Majeure. Neither party shall be liable in damages for, nor
shall this Agreement be terminable or cancelable by reason of any delay or
default in such party's performance hereunder if such default or delay is caused
by events beyond such party's reasonable control including, but not limited to,
acts of God, regulation or law or other action of any government or agency
thereof, war or insurrection, civil commotion, destruction or
16
<PAGE> 17
production facilities or materials by earthquake, fire, flood or storm, labor
disturbances, epidemic, or failure of suppliers, public utilities or common
carriers. Each party shall endeavor to resume its performance hereunder if such
performance is delayed or interrupted by reason of force majeure. Each party
shall notify the other, in writing, not less often than monthly, of the nature
and progress of such endeavors.
13.5 Severability. Should any part of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provision shall be replaced
with a provision which accomplishes, to the extend possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the reminder of this Agreement shall remain binding upon the parties.
13.6 Waiver. Waiver by either party of a default or breach or a
succession of defaults or breaches, or any failure to enforce any right
hereunder shall not be deemed to constitute a waiver of any subsequent default
or breach with respect to the same or any other provision hereof, and shall not
deprive such party of any right to terminate this Agreement arising by reason of
any subsequent default or breach.
13.7 Dispute Resolution. In the event of any controversy or claim
arising under or in relation to this agreement, including any issue about
payment of amounts due, the parties shall, in good faith, attempt to resolve the
controversy or claim by negotiation. If the controversy or claim cannot be
resolved within sixty (60) days, then it shall be settled exclusively by
arbitration in accordance with the Arbitration Rules of American Arbitration
Associations (AAA) and shall be held in Washington D.C. There shall be three
arbitrators: one selected by the party who requests arbitration who shall notify
the other party of the person selected at the time that notice of arbitration is
sent; one selected by the other party within ten (10) days of receipt of notice
of arbitration and one selected by the parties jointly within ten (10) days
thereafter or, failing their agreement, selected pursuant to the rules of AAA.
No arbitrator shall be related to, employed by, or have at any time a
substantial ongoing business relationship with any party hereto or any of their
respective affiliates. The losing party in the arbitration shall reimburse the
prevailing party for all costs and expenses, including reasonable attorneys
fees, incurred in connection with the arbitration. The decision of the
arbitrators shall be final and binding on the parties and judgement upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The provisions of this arbitration clause shall not be
applied to the determination of questions affecting validity or scope of any
trademarks, patents or other intellectual property.
13.8 Entire Agreement. This Agreement represents the entire
understanding between the parties as to the Date Of This Agreement with respect
to the subject matter hereof, and supersedes all prior agreements, negotiations,
understandings, representations, statements, and writings, between the parties
relating thereto. No modification, alteration, waiver or change in any of the
terms of this Agreement shall be valid or binding upon the parties hereto unless
made in writing and specifically referring to this Agreement and duly executed
by each of the parties hereto.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized representatives as of the day and
year first written above.
PERIMMUNE SIGMA DIAGNOSTICS, INC.
By: /s/M. G. HANNA, JR. By: /S/ MICHAEL G. DOUGLAS
------------------------------- -------------------------------
Printed Name: M. G. Hanna, Jr. Printed Name: Michael G. Douglas
--------------------- ----------------------
Title: Pres & CEO Title: CEO
---------------------------- ----------------------------
18
<PAGE> 19
STATE OF Maryland )
)
COUNTY OF Montgomery )
On this 30th day of June, 1997, before me, a Notary Public, personally
appeared Michael G Hanna, Jr., to me known to be the persons described in and
who executed the foregoing assignment and acknowledged that he/she executed same
as his/her free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal the date and
year last above written.
[SIG]
-------------------------------
Notary Public
My commission expires: May 15, 1999
STATE OF Missouri )
)
COUNTY OF St. Louis )
On this 26th day of June, 1997, before me, a Notary Public, personally
appeared Michael G. Douglas to me known to be the persons described in and
executed the foregoing assignment and acknowledged that he/she executed same as
his/her free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal the date and
year last above written.
/s/ NANCY J. MEYERS
-------------------------------
Notary Public
My commission expires:
NANCY J. MEYERS
NOTARY PUBLIC- NOTARY SEAL
STATE OF MISSOURI
ST LOUIS COUNTY
MY COMMISSION EXPIRES: AUG 21, 2000
<PAGE> 20
EXHIBIT A
Bryan T. Butman, Ph.D.-Director, In Vitro Products Division
Wendy Taddei-Peters, Ph.D.-Manager, CVD Products; Apo-Tek Product Manager
Rebecca J. Durham-Senior Research Scientist/Project Manager,
Diagnostic Products
Steven Silberman, Ph.D.-Research Associates, Diagnostic Products
Sandra Butler, Ph.D.-Senior Scientist, Molecular Biology
Eddie Jeffries-Research Scientist, Diagnostics Products
Nancy Hsu-Research Specialist, Diagnostics Products
Barbara Sheatz-Animal Technician, Animal Resource Facility
19
<PAGE> 21
EXHIBIT B
PROJECT DEVELOPMENT SCHEDULE AND PLAN
Phase I (2 June 1997 - 12 July 1997)
- - Development of Lp(a) antigens and immunization of Mice
- - PerImmune provides 50mg of mAb 2DI and 4mg of purified Lp(a) to Sigma
Phase II (14 July 1997 - 31 October 1997)
- - Hybridoma fusion, characterization and cloning of 10 cell lines
- - Selection of mAbs meeting specifications described in Section 1.7 "Licensed
Antibodies"
Phase III (3 November 1997 - 6 March 1998)
- - Ascites production of 10 mAbs
- - PerImmune provides 4mg of purified Lp(a) to Sigma
Phase IV (9 March 1998 - 27 November 1998)
- - PerImmune transfers selected monoclonal bybridoma cell lines to Sigma
- - Sigma establishes conditions and GMP processes for production of mAbs in
hollow fiber bioreactors
Phase V (30 March 1998 - 11 September 1998)
- - Development of Calibrators and Controls
Phase VI (14 September 1998 - 9 October 1998)
- - Sigma demonstrates homogenous immunoturbidometric Lp(a) assay equivalent to
Apo-Tek Lp(a) product
<PAGE> 22
STATE OF MARYLAND )
)
COUNTY OF MONTGOMERY )
On this 30th day of June 1997, before me, a Notary Public, personally
appeared Michael G. Hanna, Jr. to me known to be the persons described in and
who executed the foregoing assignment and acknowledged that he/she executed same
as his/her free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal the date and
year last above written.
/s/ EVELYN BRONSON SULLIVAN
-----------------------------
Notary Public
My commission expires: May 15, 1999
STATE OF MISSOURI )
)
COUNTY OF ST. LOUIS )
On this 26 day of June 1997, before me, a Notary Public, personally
appeared Michael G. Douglas to me known to be the persons described in and who
executed the foregoing assignment and acknowledged that he/she executed same as
his/her free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal the date and
year last above written.
/s/ NANCY J. MEYERS
-----------------------------
Notary Public
My commission expires: Aug. 21, 2000
21
<PAGE> 1
EXHIBIT 10.22
RESEARCH, COLLABORATION
AND
DISTRIBUTION AGREEMENT
This Agreement is made and entered into the 22nd day of December,
1997, by and between PerImmune, Inc., a Delaware corporation ("PERIMMUNE"),
maintaining an office at 1330 Piccard Drive, Rockville, Maryland 20850-4396 and
Mentor Corporation, a Minnesota corporation ("MENTOR") maintaining an office at
5425 Hollister Avenue, Santa Barbara, CA 93111.
RECITALS
WHEREAS, PERIMMUNE has developed and refined a method of treating
urological diseases and cancer with a keyhole limpet hemocyanin composition and
is the owner of all rights to proprietary technical information and the U.S.
Patent (as defined herein) related thereto;
WHEREAS, PERIMMUNE has advised MENTOR that PERIMMUNE believes
that it can, within a period of three (3) years at a cost of approximately Three
Million Dollars ($3,000,000): (a) implement and complete a Phase III clinical
testing program for the use of the Product (as defined herein) to treat
refractory bladder cancer, as clinically defined in the PERIMMUNE Phase I/II
protocol and clinical results previously provided to MENTOR ("Refractory Bladder
Cancer"), and (b) submit an application for the use of such Product to the
United States Food and Drug Administration (the "FDA") for the treatment of
Refractory Bladder Cancer;
WHEREAS, PERIMMUNE and MENTOR desire to enter into an arrangement
pursuant to which MENTOR will fund the costs of implementing and carrying out
the program described in the preceding recital, and pay certain fees to
PERIMMUNE as agreed milestones in such program are attained, and PERIMMUNE will
grant to MENTOR on the terms and conditions set forth in this agreement the
exclusive worldwide right to market, sell and distribute the Product for the
Indicated Uses (as defined herein);
WHEREAS, PERIMMUNE and MENTOR agree that, despite the diligent
efforts of PERIMMUNE and MENTOR, there can be no assurance that the objectives
of the Project Development Activities or the Project Objective (each as defined
herein) will be attained or that the Project Development Activities will result
in commercial use of the Product for any one or more Indicated Uses.
NOW, THEREFORE, for and in consideration of the foregoing and the
mutual covenants and agreements contained herein, and certain other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1. "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by, or under common control
with, such specified Person.
1.2. "Approvals" means, with respect to any governmental authority or
agency, any or all approvals, clearances, registrations, licenses,
authorizations, visas or permits required by such governmental authority or
agency in order to import, export, offer for sale, sell, market, manufacture,
have made or use the Product.
1.3. "Competitive Product" means any product constituted from KLH (as
defined herein) that is used in the Indicated Uses.
1.4. "Effective Date" means the date of this Agreement as set forth
above.
1.5. "Indicated Uses" means the use of the Product in all uro-genital
applications, including but not limited to use as an injectable
bio-pharmaceutical to treat cancer of the bladder and prostate gland and
interstitial cystitis.
1.6. "Improvements" means all modifications, variations and revisions
and new models or versions of the Product developed by the parties hereto which
relates or has consequence with respect to the Product in any of the following
ways: (1) improves the Product's performance; (2) reduces the cost of materials
or components for the Product; (3) reduces production, manufacturing or
associated costs of the Product; (4) increases the life, durability or
continuous performance characteristics of the Product; (5) expands the
applications to which the Product may be put; (6) increases or enhances the
marketability or commercial aspect of the Product; or (7) would, if implemented,
replace or displace the Product in one or more material commercial markets for
the Product. Improvements may be patentable or unpatentable, and if patentable,
need not be patented.
1.7. "Net Sales" means the gross invoiced price for the sale of Product
to purchasers by MENTOR, its agents or Affiliates less (a) any credits and
allowances granted by MENTOR to purchasers with respect to the Product,
including, without limitation, credits and allowances on account of price
adjustments, returns, discounts and chargebacks, (b) any sales, excise,
value-added, turnover or similar taxes, and (c) transportation, insurance and
handling expenses if separately invoiced and directly chargeable to such sales.
1.8. "Person" means any individual, corporation, partnership,
association, trust, estate or other entity or organization, including any
governmental entity or authority.
1.9. "Product" means the keyhole limpet hemocyanin composition ("KLH"),
as more particularly described in the PERIMMUNE Phase I/II protocol and the U.S.
Patent (as defined herein), and any Improvements thereto.
2
<PAGE> 3
1.10. "Product Patents" means any and all United States patents and
patent applications, all divisionals, continuations, continuations-in-part,
re-issues, extensions or foreign counterparts thereof, now or hereafter owned or
controlled ("controlled" being used in the sense of having the right to grant
licenses thereunder) by PERIMMUNE, covering the manufacture, use, sale, offer
for sale and/or importation of the Product, including but not limited to, the
U.S. Patent No. 5,407,912 attached hereto as Exhibit B.
1.11. "Project Budget" means the budget attached as Exhibit A to this
Agreement, setting forth the estimated costs of carrying out the Project
Development Activities.
1.12. "Project Development Activities" means the program implemented
pursuant to the provisions of this Agreement in order to accomplish the
following objectives in the following order of priority: (a) the implementation
and completion of Phase III clinical testing of the Product for use in the
treatment of Refractory Bladder Cancer; (b) the preparation and filing of an
application with the FDA on or before June 30, 2000, for the approval by the FDA
of the use of the Product for the treatment of Refractory Bladder Cancer; (c)
obtaining FDA approval for the use of the Product for the treatment of
Refractory Bladder Cancer; and (d) identifying and establishing contractual
relationships with sources of supply for raw materials required to manufacture
the Product.
1.13. "Project Objective" means the issuance of an approval by the FDA
for the use of the Product in the treatment of Refractory Bladder Cancer.
1.14. "Product Information" means, individually and collectively, all
manufacturing, analytical and marketing information and technical know-how,
trade secrets and inventions owned, controlled, conceived and/or reduced to
practice and/or acquired (i) by PERIMMUNE before the date of this Agreement, or
(ii) by PERIMMUNE or MENTOR or jointly by the parties during the Research and
Development Period, and directed to the Product, (whether or not relating to any
Indicated Use), including, but not limited to, specifications for ingredients
and formulations, information relating to regulatory and clinical work, testing
or studies, manufacturing methods and procedures.
1.15. "Project Plan" means the research and development plan attached
hereto as Exhibit A, including the budget, time-lines and milestones reflected
in such Exhibit for carrying out the Project Development Activities.
1.16. "Quality Specifications" means the quality specifications for the
Product agreed upon by the Joint Committee, as such quality specifications shall
be modified from time to time by mutual agreement of the parties hereto.
1.17. "Research and Development Period" means the period commencing on
the Effective Date and continuing until the first to occur of either of the
following events: (a) the attainment of the Project Objective or (b) a joint
determination by the parties hereto that the Project should be discontinued.
3
<PAGE> 4
1.18. Target Period" means a period of thirty-six (36) months, measured
from the Effective Date.
1.19. "Vial" means a vial containing the quantity of the product that is
the standard dosage for a single treatment, which the parties hereto believe is
likely to be a quantity between two (2) and ten (10) mg.
1.20. "U.S. Patent" means United States Patent No. 5,407,912 attached
hereto as Exhibit B.
ARTICLE II
RESEARCH AND DEVELOPMENT
2.1. Joint Committee. Promptly upon execution of the Agreement,
PERIMMUNE and MENTOR shall form a Joint Research and Development Committee (the
"Joint Committee") comprising six (6) members for the purposes of implementing
and revising the Project Plan and coordinating the Project Development
Activities to be conducted by the Project Teams. Three members of the Joint
Committee (and their successors or replacements, if any) shall be appointed by
PERIMMUNE and three members (and their successors or replacements, if any) shall
be approved by MENTOR. All actions of the Joint Committee shall be by a majority
vote of all members.
2.2. Project Teams. In order to carry out its respective obligations
relating to the Project Development Activities, each of PERIMMUNE and MENTOR
shall assign a defined team of employees to perform the Project Development
Activities (each such team, a "Project Team" and, together, the "Project
Teams"). The initial PERIMMUNE Project Team shall comprise the individuals
listed on Exhibit C attached hereto and the research technicians under each of
their direction and control. The initial MENTOR Project Team shall comprise the
individuals listed on Exhibit D attached hereto and the research technicians
under each of their direction and control. PERIMMUNE and MENTOR each agree to
notify the other party of any change in the personnel comprising such party's
Project Team, which changes shall remain in the sole discretion of such party.
2.3. Project Development. PERIMMUNE will exercise due diligence in
carrying out the Project Development Activities at the time and in the manner
contemplated by the Project Plan, and endeavoring to achieve the Project
Objective. Each party shall furnish to the other materials, data, software,
specification, formulas or other information as may, in the sole judgment of the
Joint Committee, be reasonably necessary for the recipient of such information
to perform its Project Development Activities or other duties hereunder. Towards
this end, the PERIMMUNE Project Team shall periodically (which, in any event,
shall be at least once every calendar quarter) during the Research and
Development Period, provide to the MENTOR Project Team a written progress report
in form and substance established by the Joint Committee concerning the Project
Development Activities being conducted by the PERIMMUNE Project Team, which
report shall include a summary of the progress of the Project Development
Activities in relation to the then current Project Budget that has been approved
by the Joint Committee. Information relating to the Product provided to a party
hereunder shall be governed
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<PAGE> 5
by Section 10.1. The parties agree that, despite the diligent efforts of the
parties, there can be no assurance that the objectives of the Project
Development Activities or the Project Objective will be attained or that the
Project Development Activities will result in commercial use of the Product for
any one or more Indicated Uses.
2.4. Compliance with Regulations. All activities, studies or other
efforts in furtherance of the Project Development Activities shall be carried
out pursuant to the Project Plan in strict compliance with any applicable United
States Federal, state or local laws, regulations or guidelines governing the
conduct of such activities, studies or efforts.
2.5. Project Development Costs. The costs and expense of the Project
Development Activities shall be borne and paid by the parties as follows:
2.5.1. Costs Payable by MENTOR. MENTOR shall pay (a) all
reasonable costs associated with the Project Development Activities as
reflected in the Project Budget, to the extent that such costs do not
exceed the sum of $3,000,000, plus (b) the costs of any additional work
requested by MENTOR that is not within the scope of the Project
Development Activities (e.g., preparing applications for Approvals of
the Product for additional Indicated Uses or for jurisdictions other
than the United States) and (c) the costs of carrying out additional
clinical testing or other work required by the FDA after the submission
of the application for Approval for the use of the Product to treat
Refractory Bladder Cancer, to the extent that such additional testing or
other work was not reasonably within the scope of or contemplated by the
Project Development Activities described in the Project Plan.
2.5.2. Costs Payable by PERIMMUNE. Subject to the obligations of
MENTOR set forth in Section 2.5.1, above, PERIMMUNE shall be responsible
for and shall pay all costs of the Project Development Activities to the
extent such costs exceed $3,000,000, including the costs that would
customarily be incurred by a manufacturer in the ordinary course of
business for the purpose of submitting an application for pre-marketing
approval to the FDA and prosecuting such application to completion and
the issuance of the Approval applied for.
2.5.3. Time and Manner of Payment. All amounts payable by MENTOR
to PERIMMUNE pursuant to this Section 2.5 shall be payable in advance by
wire transfer of same day funds on a quarterly basis. MENTOR shall pay
the estimated costs of the Project Development Activities for the period
beginning on the Effective Date of this Agreement and ending on March
31, 1998 concurrently with its execution of this Agreement. Thereafter,
MENTOR shall pay the estimated costs of the Project Development
Activities for the next calendar quarter within ten (10) days after the
start of such calendar quarter unless MENTOR is entitled to delay or
suspend the next quarterly payment as provided by Section 2.5.6 of this
Agreement. Amounts not expended during any quarter or year shall be
carried forward to succeeding periods, it being intended that
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<PAGE> 6
(a) MENTOR shall be obligated to expend $3,000,000 during the Target
Period or until the Project Objective is attained, whichever occurs
first, and (b) any amounts up to $3,000,000 remaining unexpended after
the attainment of the Project Objective, shall be paid to PERIMMUNE as
an additional fee.
2.5.4. Limitation on Obligation. Except as expressly provided by
Section 2.5.1, above, MENTOR shall not be obligated to pay more than
$3,000,000 of the costs of the Project Development Activities, and
PERIMMUNE shall pay all costs and expenses in excess of such amount.
2.5.5. Use of Funds. PERIMMUNE shall use the funds paid by
MENTOR pursuant to Section 2.5.3, above, only for the payment of the
costs and expenses of the Project Development Activities. No portion of
any such funds shall be used (a) for the payment of PERIMMUNE's overhead
or general and administrative expenses, except to the extent that such
expenses have been properly allocated to the Project Development
Activities at the same rate at which such expenses are allocated to all
other projects and corporate activities of PERIMMUNE, or (b) for the
acquisition of capital equipment or other tangible personal property
having a useful life in excess of three (3) years.
2.5.6. Right of MENTOR to Suspend Payment. PERIMMUNE shall
provide to MENTOR from time to time such information as MENTOR may
reasonably request for the purpose of demonstrating that there are
sufficient funds remaining in the Project Budget and available to
PERIMMUNE to complete the Project Development Activities. MENTOR shall
be entitled to suspend payment of costs associated with the Project
Development Activities if (a) PERIMMUNE fails to submit the quarterly
report called for by Section 2.3 of this Agreement, or (b) any such
report evidences that (i) PERIMMUNE is not carrying out the Project
Development Activities in accordance with the terms and within the
period of time established by the Project Plan, or (ii) in MENTOR's
reasonable judgment, there will be insufficient funds available in the
Project Budget to attain the Project Objective within the Target Period.
Should MENTOR become entitled to suspend payments to PERIMMUNE
hereunder, then MENTOR shall not be required to resume payments until
PERIMMUNE has taken the corrective action necessary to eliminate the
cause of such suspension in payments.
ARTICLE III
DEVELOPMENT FEES PAYABLE TO PERIMMUNE
3.1. Payment Schedule. In addition to funding the cost of the Project
Development Activities provided in Section 2.5, MENTOR shall pay to PERIMMUNE as
a research and development fee, an aggregate amount equal to Three Million
Dollars ($3,000,000), payable upon the occurrence of the following events (each,
a "Milestone Event" and the payment in respect of each Milestone Event, a
"Milestone Payment"): (i) One Million Dollars ($1,000,000)
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upon the enrollment of the first patient in Phase III clinical trials under
protocols accepted by the United States Food and Drug Administration ("FDA") for
use of the Product for an Indicated Use, (ii) One Million Dollars ($1,000,000)
upon the enrollment of the last patient in such Phase III clinical trials, and
(iii) One Million Dollars ($1,000,000) upon obtaining FDA approval to market and
sell the Product for an Indicated Use.
3.2. Manner of Payment. PERIMMUNE shall provide to MENTOR written notice
of the satisfaction of each Milestone Event. Promptly upon receipt of such
written notice, and, in any event within five (5) days, thereafter, MENTOR shall
pay to PERIMMUNE, by wire transfer of same day funds, the Milestone Payment in
respect of such Milestone Event.
ARTICLE IV
OWNERSHIP OF INVENTIONS AND PATENTS
4.1. Ownership of Information. All Product Information is, or shall be,
owned solely by PERIMMUNE. Other than as may be set forth herein, MENTOR shall
have no rights in or to any Project Information.
4.2. License. PERIMMUNE hereby grants MENTOR a world-wide, royalty-free,
perpetual, non-exclusive license in the Product Information, the Product Patents
and the Approvals to make, use and sell the Product for use in the Indicated
Uses without any further duty or obligation to PERIMMUNE. MENTOR covenants that
it shall not exercise such license except upon the occurrence of one or more of
the circumstances set forth in Section 7.4(i), 7.4(ii), 7.4(iii) or 7.4(iv).
4.3. Ownership of Product Patents and Improvements. PERIMMUNE shall have
sole and exclusive ownership of the Product Patents and of any Improvements
(whether patentable or unpatentable) made or discovered by PERIMMUNE or MENTOR
separately or by the parties jointly. PERIMMUNE shall be responsible for the
preparation, filing and prosecution of Product Patents as well as all costs and
fees associated therewith. PERIMMUNE shall apply for, seek prompt issuance of
and maintain during the terms of this Agreement the Product Patents in all
jurisdictions where patent protection is available and where, in PERIMMUNE's
judgment, such patent protection is necessary or advisable given plans for
marketing the Product for one or more of the Indicated Uses. The preparation,
prosecution and maintenance of all Product Patents shall be the primary
responsibility of PERIMMUNE; provided however, that MENTOR shall be afforded
reasonable opportunities to advise PERIMMUNE and shall cooperate with PERIMMUNE
in such preparation, prosecution and maintenance. PERIMMUNE shall promptly
advise MENTOR of the grant, lapse, revocation, surrender, or any threatened
invalidation or of its intention to abandon any such patent, application or
foreign counterpart.
4.4. Infringement of Product Patents. PERIMMUNE and MENTOR shall each
promptly notify the other of any infringement of any Product Patent in any
jurisdiction which may come to its attention. PERIMMUNE shall promptly undertake
reasonable efforts to obtain a discontinuance of the aforesaid infringement or
unauthorized use. Any suit to obtain such discontinuance shall be brought by
PERIMMUNE in its name unless the law of the relevant forum requires otherwise.
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ARTICLE V
REGULATORY AFFAIRS
5.1. Approvals. PERIMMUNE shall hold the biological license application
("BLA") and all other Approvals for the Product.
5.2. Assistance in Gaining Approvals. PERIMMUNE shall exercise due
diligence in attempting to obtain and in maintaining in full force and effect
the Approval for the marketing and sale of the Product in the United States for
the treatment of Refractory Bladder Cancer. At MENTOR's request, PERIMMUNE shall
exercise due diligence in attempting to obtain and in maintaining in full force
and effect the Approvals for the marketing and sale of the Product (i) for
Indicated Uses other than Refractory Bladder Cancer in the United States and
(ii) for Indicated Uses in Canada, the member states of the European Community,
and in each other jurisdiction in which MENTOR desires to market and sell the
Product for the Indicated Uses, provided that, in each case, MENTOR shall bear
all costs, fees and other expenses required to be paid to regulatory authorities
for the purpose of applying for, obtaining or preserving such Approvals,
provided further that, in each case, if any application or submission required
to gain such Approvals requires additional clinical tests or data beyond the
clinical tests and data that are produced during the clinical tests required to
gain Approval for the marketing and sale of the Product in the United States,
MENTOR shall bear all costs of conducting additional clinical tests and
obtaining such additional clinical data, and provided further that, in each
case, MENTOR shall, at no charge to PERIMMUNE, provide reasonable assistance to
PERIMMUNE in making such applications, submissions or filings as may be required
or advisable to obtain such Approvals. Notwithstanding anything else herein to
the contrary, PERIMMUNE shall not be required to attempt to obtain any Approval
for the marketing or sale of the Product for Indicated Uses in any jurisdiction
if, in the reasonable judgment of PERIMMUNE, such efforts separably or in the
aggregate would affect PERIMMUNE's ability to attain the Project Objective.
5.3. Notice of Reports to Government Authorities. Each party shall
promptly notify the other party of any information coming to its attention
concerning experience with any Product for which records and reports are filed
with any governmental authority, but shall not be liable for any intentional
failure to do so.
ARTICLE VI
DISTRIBUTION
6.1. Appointment and Acceptance. PERIMMUNE hereby appoints MENTOR as its
exclusive worldwide distributor of the Product for the Indicated Uses during the
term of this Agreement and MENTOR agrees to act in this capacity, all subject to
the terms and conditions of this Agreement. During the term of this Agreement,
(a) neither PERIMMUNE nor any of its Affiliates shall market or distribute the
Product for use in the Indicated Uses, (b) PERIMMUNE shall not license any other
Person to market or distribute the Product for use in the Indicated Uses, (c)
PERIMMUNE shall not supply to any person other than MENTOR and its Affiliates
Product that indicates on its label or in any product information sheet or other
packaging accompanying the Product that the Product is suitable for use in the
Indicated Uses, and (d)
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PERIMMUNE shall not knowingly sell the Product to persons whom PERIMMUNE knows
or has reason to know will use the Product in the Indicated Uses or will
distribute or re-sell the Product for such uses.
6.2. Terms of Sale.
(a) MENTOR shall purchase its requirements for the Product during
the term of this Agreement solely from PERIMMUNE for a purchase price to be
calculated as set forth herein and PERIMMUNE shall use all reasonable best
efforts to supply all such requirements.
(b) Within thirty (30) days from the date of invoice for any
Product sold to MENTOR, MENTOR shall pay to PERIMMUNE an amount equal to Thirty
Dollars ($30) per Vial of the Product (such amount, the "Advance").
Additionally, within thirty (30) days of the close of each calendar quarter in
which MENTOR has purchased Product from PERIMMUNE pursuant hereto, MENTOR shall
pay to PERIMMUNE an amount equal to (i) thirty percent (30%) of MENTOR's
aggregate Net Sales (as defined herein) from the Product during the calendar
quarter (the "Percentage Sales Amount") less (ii) the aggregate amount equal to
(A) the number of Vials sold during such calendar quarter for which MENTOR has
paid to PERIMMUNE an Advance, multiplied by, (B) the Advance amount (such
aggregate amount, the "Quarterly Advance Amount"). In the event that the
Quarterly Advance Amount in respect of any calendar quarter shall exceed the
Percentage Sales Amount for such calendar quarter, then the amount payable to
PERIMMUNE pursuant to the preceding sentence shall be zero. Unless MENTOR and
PERIMMUNE otherwise agree in a writing signed by both of them, the payment and
other provisions set forth in this Agreement shall supersede those of any
subsequent purchase order, sales confirmation form or other document hereafter
sent by either party hereto to the other.
(c) Within thirty (30) days after the end of each calendar quarter
in which MENTOR has purchased any Product from PERIMMUNE, MENTOR shall submit a
report to PERIMMUNE certified by a financial officer of MENTOR and setting
forth, with respect to such calendar quarter, (i) the aggregate number of Vials
of Product purchased from PERIMMUNE, (ii) the aggregate number of Vials of
Product sold by MENTOR, (iii) 30% of MENTOR's aggregate Net Sales from the
Product and (iv) the aggregate Advances paid by MENTOR to PERIMMUNE with respect
to the Vials of the Product sold by MENTOR. Upon thirty (30) days notice to
MENTOR, PERIMMUNE shall have the right to examine the applicable books and
records of MENTOR in order to verify the payments made to PERIMMUNE pursuant to
Section 6.2(b) above. In the event that any such examination reveals that the
amount of such payments owed to PERIMMUNE for any calendar quarter shall be
different than the amount certified to PERIMMUNE with respect to such calendar
quarter and paid to PERIMMUNE pursuant to Section 6.2(b), then, any shortfall
shall promptly be paid to PERIMMUNE and, alternatively, any overpayment shall
promptly be re-paid to MENTOR, in each case, without interest on such payment.
For purposes of this Section 6.2(c), MENTOR shall maintain such books and
records for not less than three years after the relevant date.
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(d) Title and risk of loss with respect to the Product sold by
PERIMMUNE to MENTOR shall pass to MENTOR upon release of Product for shipment by
PERIMMUNE to the designated carrier. MENTOR shall specify the method of shipment
and insurance and all freight and applicable insurance charges shall be the
responsibility of MENTOR. PERIMMUNE will be responsible for contracting freight
services specified by MENTOR, for which MENTOR will be billed on a
shipment-by-shipment basis. The Product is subject to inspection and acceptance
by MENTOR upon receipt. MENTOR shall be deemed to have accepted each shipment of
the Product unless rejected for nonconformity with the Quality Specifications
(as defined herein) in accordance with Section 6.5 of this Agreement, within
twenty (20) working days after receipt of shipments from PERIMMUNE.
(e) Unless approved by MENTOR in writing, PERIMMUNE will not sell
any Product to MENTOR that has a shelf-life from the date of shipment by
PERIMMUNE that is less than the greater of (a) twelve (12) months or (b) such
longer period for which PERIMMUNE has obtained stability approval from the FDA.
6.3. MENTOR's Duties. MENTOR shall:
(a) use best commercial efforts to advertise and promote the sale
of the Product in a manner calculated by MENTOR to yield benefit to the parties
hereto. MENTOR agrees that during the term of this Agreement, it will not market
any Competitive Product.
(b) submit its purchase orders to PERIMMUNE in writing or via
facsimile, signed by an authorized representative of MENTOR.
(c) pay all PERIMMUNE invoices in United States currency by company
check or by electronic wire transfer to an account designated by PERIMMUNE.
(d) submit to PERIMMUNE a twelve (12) month forecast of purchases
of Product from PERIMMUNE and delivery dates for such Product, which forecast
shall not constitute a firm purchase commitment, in a format to be mutually
determined by the parties. Said forecast shall be submitted by MENTOR to
PERIMMUNE within thirty (30) days after gaining FDA approval for use in the
Indicated Uses, and quarterly thereafter. MENTOR shall place firm orders from
time to time for the purchase of the Product at least ninety (90) days in
advance of required delivery.
(e) obtain advance written authorization and a Returned Material
Authorization ("RMA") prior to returning any of the Product.
(f) maintain a properly trained sales force of adequate size to
represent and promote the sale of the Product and provide instructions to
customers in the use of the Product. MENTOR shall be responsible for developing
its own marketing plan and system for dispensing the Product.
(g) carry in stock an inventory of the Product sufficient to
promptly fill the orders of MENTOR's customers.
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(h) pay any import duty or like charge on the entry of the Product
into any jurisdiction and any local or other applicable taxes.
(i) maintain separate and detailed accurate and complete records of
all transactions in respect of the Product, including, but not limited to, such
records as identify all customer purchases by Product and serial and/or lot
number, and possess the capability to notify all purchasers in the event of a
Product recall or corrective action.
(j) defray all expenses of and incidental to the distribution and
sale of the Product hereunder incurred by MENTOR.
(k) make no contracts or commitments on behalf of PERIMMUNE or make
any promises or representations or give any warranties or guarantees with
respect to the Product except as herein expressly permitted or otherwise incur
any liability on behalf of PERIMMUNE without PERIMMUNE's prior written consent,
nor represent itself as agent or partner of PERIMMUNE.
(1) comply with all laws and regulations and requirements
applicable to a seller of bio-pharmaceutical products, and with all laws and
regulations and requirements of governmental agencies in any jurisdiction in
which it markets, distributes or sells the Product.
(m) except as authorized in writing by PERIMMUNE, refrain
absolutely from using the trademark or trade name and logo of PERIMMUNE in
connection with the marketing, distribution and sale of any Product.
6.4. PERIMMUNE's Duties. PERIMMUNE shall:
(a) make reasonable best efforts, in good faith, to deliver
MENTOR's firm orders for the Product within ninety (90) days from date of order
receipt, provided that if PERIMMUNE is unable to deliver such firm orders within
such ninety (90) day period, PERIMMUNE will give priority to the delivery of the
Product to MENTOR to deliver such firm order, over the delivery of the Product
to any other purchaser or distributor, until such firm orders are filled. MENTOR
shall specify the method of shipment and insurance and PERIMMUNE shall make
reasonable best efforts, in good faith, to comply with such specifications. If
no such specification is made, or if the specification cannot be reasonably
complied with after notice to MENTOR and an opportunity to resolve the issues
surrounding PERIMMUNE's alleged inability to comply, PERIMMUNE may select a
reasonable manner of shipment and insurance, the cost of which shall be the
responsibility of MENTOR as provided in Section 6.2(d).
(b) afford all purchase orders for the Product received from MENTOR
equal priority with PERIMMUNE's own supply requirements for (a) products that
PERIMMUNE distributes for its own account and (b) orders from distributors of
other products manufactured by or for PERIMMUNE. PERIMMUNE will ship all orders
for the Product and for other products manufactured by or for PERIMMUNE in the
priority in which such orders were received.
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(c) provide such amount of Product as MENTOR reasonably requests
for use by MENTOR for promotional purposes, to MENTOR, at PERIMMUNE's cost plus
shipping charges.
(d) comply with all laws and regulations and requirements
applicable to PERIMMUNE as a manufacturer of bio-pharmaceutical products.
(e) except as authorized in writing by MENTOR, refrain absolutely
from using the trademark or trade name and logo of MENTOR in connection with the
marketing, distribution and sale of any Product.
(f) supply the Product to MENTOR in Vials, pre-labeled with labels
of a design provided by MENTOR. MENTOR shall supply PERIMMUNE with camera-ready
artwork for such labels.
(g) provide reasonable technical assistance to MENTOR's personnel
necessary for the marketing of the Product.
(h) at PERIMMUNE's expense, provide MENTOR with written product
inserts relating to the Product's use, and with such amendments thereto as
subsequently become available.
(i) provide necessary documentation to assist MENTOR in meeting
requirements to register the Product in any jurisdiction where MENTOR reasonably
expects to market the product for sale, and, where possible, allow MENTOR to
utilize prior registrations by PERIMMUNE.
(j) provide MENTOR with copies of the BLA pre-market notifications
submitted for the Product, copies of current package inserts for the Product,
copies of documents describing specifications for the Product, and copies of all
current and future correspondence with the FDA pertaining to the Product for any
Indicated Use. PERIMMUNE will comply with the FDA's current good manufacturing
practices and regulations ("GMP") in the manufacture of the Product. If needed
to comply with any change in the law or FDA's GMP regulations or policies, or to
enable MENTOR to market and distribute the Product in any jurisdiction MENTOR
shall have the right to inspect PERIMMUNE's manufacturing facilities and GMP
records pertaining to the manufacture of the Product. If any action should be
taken by the FDA to restrict or prevent the distribution of the Product for any
Indicated Use for more than thirty (30) days, and such restriction is not due to
the negligence of MENTOR, then upon notice to PERIMMUNE, MENTOR shall have the
right to terminate this Agreement as to such use or uses of the Product.
PERIMMUNE shall replace any affected inventory of Product under this section or
refund to MENTOR the purchase price it paid to PERIMMUNE for such inventory if
PERIMMUNE is unable to replace the Product with comparable inventory. PERIMMUNE
shall replace or repurchase any affected inventory of Product which MENTOR
replaces or repurchases from MENTOR's customers, at the price MENTOR paid
PERIMMUNE for such inventory. IN NO CASE SHALL PERIMMUNE BE LIABLE FOR
CONSEQUENTIAL OR INCIDENTAL DAMAGES.
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(k) comply with the United States Food, Drug and Cosmetic Act. The
Product comprising each shipment or other delivery hereafter made by PERIMMUNE
to, or on the order of, MENTOR, as of the date of such shipment or delivery,
shall not, on such date be, adulterated or misbranded within the meaning of the
United States Food, Drug, and Cosmetic Act.
(l) use raw materials that comply with any applicable raw material
specification guidance documents promulgated by the FDA.
(m) use manufacturing procedures that comply with all applicable
GMP standards.
(n) provide MENTOR with Product that is suitable for use for its
intended purpose.
(o) issue an RMA to MENTOR promptly upon its receipt of a request
therefor, unless a reasonable basis exists for denying such request, it being
understood by the parties hereto that, the failure of MENTOR to reject a Product
within twenty (20) working days of receipt of the Product shall not constitute a
reasonable basis for denying such request.
(p) (i) consult with MENTOR regarding proposed changes to the
Product and/or the adaptation of the Product for additional applications within
the Indicated Uses, (ii) make such Improvements to the Product as may be
reasonably necessary to meet the needs of the market and to keep the Product
current and commercially acceptable, and (iii) make reasonable efforts
consistent with its available resources and its other contractual commitments
and business objectives to incorporate into the Product any features or
Improvements that are recommended by MENTOR as the result of its clinical
studies and its marketing and customer support activities, to the extent that
such Improvements are technically and economically feasible. MENTOR shall pay a
reasonable consulting fee and reasonable costs incurred by PERIMMUNE, in each
case, in an amount mutually agreeable to the parties, in connection with any
research or development activities that PERIMMUNE undertakes at the request of
MENTOR pursuant to this Section 6.4(p).
(q) if MENTOR exercises its right to terminate this Agreement
pursuant to Section 7.2.1, take reasonable steps, consistent with the orderly
termination of the Project, to reduce or eliminate as soon as reasonably
practicable the costs for which MENTOR will continue to be responsible under
Section 7.2 of this Agreement, to the extent that PERIMMUNE can do so without
breaching existing contractual obligations or otherwise incurring liability for
wrongful conduct.
6.5. Performance Standards.
(a) Quality Specifications and Characteristics. PERIMMUNE shall
deliver to MENTOR Product having the Quality Specifications.
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(b) Certificate of Analysis. Concurrent with shipment, PERIMMUNE
shall fax to MENTOR a Certificate of Analysis, in the form set forth in Exhibit
E hereto, of each lot of Product sold to MENTOR, confirming that the Product
meets the Quality Specifications.
(c) Product Acceptance. Within twenty (20) working days of receipt
of Product, MENTOR shall take and conduct analysis of sample of the Product
delivered by PERIMMUNE. Should the result of an analysis of such sample deviate
from the Quality Specifications, MENTOR shall notify PERIMMUNE in accordance
with Section 10.2 hereof and immediately thereafter provide PERIMMUNE with
samples of the Product tested. If, following a review of the test result and
after conducting its own tests of the sample, PERIMMUNE agrees that such sample
does not conform to the Quality Specifications, PERIMMUNE shall provide to
MENTOR, free of any additional charge, new deliveries of the same quantity of
the Product as the one from which the sample was taken, or in PERIMMUNE's
discretion and at its cost, PERIMMUNE may promptly reprocess the nonconforming
Product to meet the Quality Specifications. In either event, MENTOR shall
return, at PERIMMUNE's expense, the particular lot or shipment of the Product
which does not comply with the Quality Specifications if requested to do so by
PERIMMUNE.
6.6. Product Recall.
(a) Either party shall immediately notify the other party in
writing should it become aware of any defect or condition that renders any
lot(s) of Product supplied by PERIMMUNE to MENTOR in violation of the United
States Food, Drug and Cosmetic Act, or of a similar law of any jurisdiction or
country where the Product is sold. Should either party experience any quality
problem involving field correction or recall of any specific lot(s) of Product
supplied to MENTOR by PERIMMUNE, such party shall notify the other in writing by
facsimile within twenty-four (24) hours of the initiation of the field
correction or recall. Each party will test retained samples of lots in question
and report its findings to the other within ten (10) working days.
(b) Each party shall keep the other informed of any formal action
relating to any specific lot of Product sold to MENTOR hereunder by a regulatory
agency of any state, national government, or government agency having
jurisdiction.
(c) Should any governmental action or other circumstances require
the recall or field corrections or withholding from market of Product sold by
PERIMMUNE to MENTOR, each party retains the right and obligation to correct
field problems arising out of its fault or omission as it deems appropriate,
with or without the concurrence of the other. All information about complaints
concerning the Product shall be considered "Confidential Information" under the
terms of this Agreement. MENTOR shall bear all costs of complying or effecting
any recall or field correction, including the cost of the Product and the actual
costs of replacing the Product, that is the result of any fault or omission
attributable to MENTOR. PERIMMUNE shall bear all costs of complying or effecting
any recall or field correction, including the cost of the Product and the actual
costs of replacing the Product, that (i) is the result of any fault or omission
attributable to PERIMMUNE or (ii) results from the fault of neither party.
Should such recall or
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field correction result from the fault of both parties, the parties shall share
all costs of complying or effecting any recall or field correction, including
the costs of the Product and the actual cost of replacing the Product, in
proportion to their respective degree of fault.
6.7. Product Complaints.
(a) PERIMMUNE shall maintain an appropriate record of all claims
made or to be made regarding the Product's performance. The parties shall share
with each other all data on confirmed lot-specific Product complaints including,
but not limited to, complaints or information regarding performance and/or
allegations or reports of any negative effect from the use or misuse of such
affected lot of Product as soon as such data is available. Each party will
provide reasonable assistance to the other in resolving customer complaints to
the extent the complaint arises out of any fault or omission of the party whose
assistance is requested. However, MENTOR shall have sole responsibility and
authority to interact directly with MENTOR's customers in the resolution of such
complaints and PERIMMUNE agrees that it will only interact with MENTOR in such
matters.
(b) PERIMMUNE shall evaluate and investigate all customer
complaints in connection with the Product which may be brought to its attention,
in writing, by MENTOR, provided that such complaints (i) have been confirmed by
MENTOR's QA/QC or technical service personnel using the same standards for
confirmation which MENTOR uses for products other than the Product and (ii) are
believed in good faith by MENTOR to arise out of a fault or omission
attributable to PERIMMUNE. Within twenty (20) calendar days following receipt
from MENTOR of the original notification of each such complaint, PERIMMUNE
agrees to provide MENTOR with a written interim or final complaint investigation
report. All such Product complaints reported to PERIMMUNE by MENTOR shall be
reviewed monthly by PERIMMUNE until closure, and a summary report thereof will
be provided by PERIMMUNE to MENTOR.
(c) PERIMMUNE will report to MENTOR all data and/or information
pertaining to adverse reports on any lot of Product supplied by PERIMMUNE for
distribution by MENTOR which would have an adverse impact on performance of the
Product.
(d) Should there be a difference of opinion between PERIMMUNE and
MENTOR regarding whether a field notification or recall is necessary, MENTOR
will exercise the right to notify its customers without delay.
6.8. Packaging and Intellectual Property. MENTOR shall be responsible for
repackaging the Product in such form as is suitable and in compliance with all
applicable laws for resale in each jurisdiction in which the Product is sold.
MENTOR will distribute the Product only with all appropriate labeling, packaging
and Product literature and only under MENTOR's applicable trademarks and trade
names. MENTOR recognizes PERIMMUNE's right, title and interest in its patents
(including all Product Patents), trademarks, trade names and copyrights, trade
secrets and proprietary information in connection with the Product and MENTOR
shall not claim any ownership right thereto inconsistent with this Agreement, or
dispute the validity thereof. In the event any third party shall contest
PERIMMUNE's rights to its patents,
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trademarks, trade names or copyrights, trade secrets or proprietary rights,
MENTOR shall, at PERIMMUNE's sole expense, render reasonable assistance to
PERIMMUNE in defending such claims.
6.9. Product Modifications. PERIMMUNE reserves the right, from time to
time, to modify the Product or to make any Improvement, and shall give MENTOR at
least three (3) months prior written notice before making any Improvement or
change to its manufacturing process for the Product that would have an impact on
any of PERIMMUNE's product verifications or validations, or changes in raw
materials that would alter the use of the Product for any Indicated Use or other
change or Improvement that could impact product labeling or promotional
literature; provided, however, that PERIMMUNE shall be required to provide
MENTOR with only reasonable advance notice where such modification or
Improvement is required to comply with any applicable legal or regulatory
requirement or the unanticipated modification or unavailability of raw material.
6.10. Appointment of Sub-Distributors. MENTOR may assign, sublicense,
delegate, or otherwise transfer the performance of the rights and obligations
hereunder to qualified and reputable sub-distributors, provided, however, that:
(i) MENTOR shall be liable to PERIMMUNE for the errors, negligent acts and
omissions of its sub-distributors as if such errors, negligent acts and
omissions were its own, including any breach of any provision of this Agreement
by the sub-distributors; (ii) MENTOR shall have and retain full control of any
sub-distributor utilized, and shall be responsible for the performance by any
sub-distributor; and (iii) MENTOR shall not be relieved of the responsibility
for the proper performance and completion of the sub-distributed portions of its
obligations hereunder.
ARTICLE VII
TERM AND TERMINATION
7.1. Term. This Agreement shall be in full force and effect in each
applicable jurisdiction, and for each applicable Indication Use, for a period
commencing on the Effective Date and continuing for a period equal to ten (10)
years following the obtaining of the first Approval of the Product for such
Indicated Use in such jurisdiction, provided that, MENTOR shall have the right
to terminate this agreement with respect to any such Indicated Use in any such
jurisdiction at the expiration of five (5) years from the date of such Approval
in such jurisdiction by giving not less than one-hundred and eighty (180) days
written notice to PERIMMUNE of its intention to so terminate.
7.2. Termination.
7.2.1. Termination by MENTOR Without Cause. MENTOR shall be
entitled to terminate this Agreement without cause at any time prior to
attainment of the Project Objective by giving PERIMMUNE not less than
one-hundred and eighty (180) days prior written notice of intention to
terminate, specifying the effective date of termination, if MENTOR reasonably
concludes that the Project Objective cannot be attained within the Target
Period, for a reason other than excusable delay and events of force majeure, at
a cost that does not exceed the Project
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Budget as adjusted by the parties as described herein. Should MENTOR exercise
the termination right conferred by this Section 7.1, then:
(i) MENTOR shall remain liable for the payment of any costs or
expenses that PERIMMUNE reasonably incurs in the winding down and
terminating of the Project Development Activities, including amounts
payable pursuant to contracts and agreements entered into by PERIMMUNE
prior to receiving notice of intention to terminate, provided that
nothing in this Section 7.2.1(i) shall cause MENTOR to be liable for
obligations of PERIMMUNE under contracts with institutions acting as
investigators in the clinical trials conducted pursuant to this
Agreement, which obligations are inconsistent with current industry
practice in the conduct of clinical trials.
(ii) MENTOR shall not have the right to the return of any funds
previously expended by it pursuant to this Agreement; and
(iii) MENTOR shall have no rights in the Product or the Project
Information and PERIMMUNE shall be free to license the right to
manufacture, market and sell the Product to any other persons as
PERIMMUNE may select without further duty or obligation to MENTOR.
7.2.2. Termination by MENTOR With Cause. MENTOR shall be entitled
to terminate this Agreement for cause by giving PERIMMUNE written notice of
intention to terminate, specifying the effective date of termination not less
than ninety (90) days prior to the effective date of termination, upon the
occurrence of any of the following events:
(i) PERIMMUNE commits a material breach of its obligations under
this Agreement and such material breach remains uncured for a period of
ninety (90) days after written notice of such default, specifying the
nature thereof, has been given to PERIMMUNE, unless, prior to the
expiration of such ninety (90) day period, PERIMMUNE has commenced, and
thereafter pursues with diligence to completion, those actions necessary
to cure such default within a reasonable period of time.
(ii) PERIMMUNE becomes insolvent or has a receiver, liquidator,
trustee or assignee in bankruptcy or insolvency appointed, in each case
whether by the voluntary act or otherwise, and, in the case of any such
proceeding that is involuntary, if such proceeding is not terminated
within thirty (30) days thereafter.
(iii) An order is made or a resolution is passed for the winding
up or liquidation of PERIMMUNE.
7.2.3. Termination by PERIMMUNE With Cause. PERIMMUNE shall be
entitled to terminate this Agreement for cause by giving MENTOR written notice
of intention to
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<PAGE> 18
terminate, specifying the effective date of termination not less than ninety
(90) days prior to the effective date of termination, upon the occurrence of any
of the following events:
(i) MENTOR commits a material breach of its obligations under
this Agreement and such material breach remains uncured for a period of
ninety (90) days after written notice of such default, specifying the
nature thereof, has been given to MENTOR, unless, prior to the
expiration of such ninety (90) day period, MENTOR has commenced, and
thereafter pursues with diligence to completion, those actions necessary
to cure such default within a reasonable period of time.
(ii) MENTOR becomes insolvent or has a receiver, liquidator,
trustee or assignee in bankruptcy or insolvency appointed, in each case
whether by the voluntary act or otherwise, and, in the case of any such
proceeding that is involuntary, if such proceeding is not terminated
within thirty (30) days thereafter.
(iii) An order is made or a resolution is passed for the winding
up or liquidation of MENTOR.
7.3. Procedures on Termination. Upon termination of this Agreement:
(a) each party shall return to the other party all Confidential
Information (as defined herein) which such other party shall have supplied to
the party and which is in the party's possession.
(b) the rights and duties of each party under this Agreement in
respect of performance prior to termination shall survive and be enforceable in
accordance with the terms of this Agreement.
(c) within thirty (30) days of receipt of PERIMMUNE's invoice
therefor, MENTOR will pay PERIMMUNE for all remaining inventory of the Product
for which MENTOR has issued purchase orders to PERIMMUNE. Upon payment,
PERIMMUNE will ship such inventory to MENTOR at MENTOR's expense, and MENTOR
shall be entitled to continue to market and sell the Product until MENTOR's
inventory of the Product has been disposed of.
(d) If this Agreement has been terminated by reason of a material
breach by PERIMMUNE, adjudicated as provided by Section 7.4(iv), PERIMMUNE shall
continue to be bound by the provisions of Section 6.1 of this Agreement for the
same period of time during which PERIMMUNE would have been bound had such
termination not occurred.
7.4. Procedures on PERIMMUNE's Discontinuance of Manufacture. MENTOR shall
have the right to exercise the license granted pursuant to Section 4.2, above,
if PERIMMUNE (i) abandons the Project Development Activities without the
concurrence of MENTOR; (ii) discontinues manufacturing the product for valid
business reasons that cannot be remedied within a reasonable period of time;
(iii) is otherwise unable to supply the requirements of
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<PAGE> 19
MENTOR for the Product on forecasted delivery dates, as such requirements and
delivery dates are set forth in the twelve (12) month forecast of purchases
submitted by MENTOR to PERIMMUNE pursuant to Section 6.3(d) of this Agreement
for a period of two successive quarters; or (iv) is in material breach of this
Agreement, which material breach has been determined by a court of law, which
determination has become final and not subject to further appeal. Upon the
occurrence of any such event, PERIMMUNE shall transfer to MENTOR any necessary
technology, knowledge, know-how, and the rights to the Approvals for the Product
for use in the Indicated Uses, to the extent necessary or appropriate to enable
MENTOR or its alternate supplier to exercise the license granted under Section
4.2. MENTOR shall reimburse PERIMMUNE the reasonable out-of-pocket costs
PERIMMUNE incurs in doing so (including salary benefits for time expended by
PERIMMUNE employees) immediately upon receipt of an invoice therefor. If any
such event occurs before the issuance of an Approval for an Indicated Use, then
PERIMMUNE shall transfer to MENTOR all Project Information relating to such
Indicated Use.
ARTICLE VIII.
WARRANTIES
8.1. Representations and Warranties of MENTOR. MENTOR hereby makes the
following representations and warranties to PERIMMUNE, which representations and
warranties are true and correct on the date hereof:
(a) MENTOR is a corporation duly organized, validly existing and in
good standing under the laws of the state of Minnesota and has all requisite
corporate power and authority to enter into this Agreement and perform its
obligations hereunder.
(b) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated herein, will (a) violate or
conflict with any provision of the Certificate of Incorporation or By-laws of
MENTOR, each as in effect on the Effective Date; (b) with or without the giving
of notice or the lapse of time or both (i) result in a breach of, or violate, or
be in conflict with or constitute a default under, or result in the termination
or cancellation of, or accelerate the performance required under, any security
instrument, mortgage, note, debenture, indenture, loan, lease contract,
agreement or other instrument, to which MENTOR is a party or by which it or any
of its properties or assets may be bound or affected, or (ii) result in the loss
or adverse modification of any lease, franchise, license or other contractual
right or other authorization granted to or otherwise held by MENTOR; (c) require
the consent of any party to any such agreement or commitment to which MENTOR is
a party or by which any of its properties or assets are bound; (d) result in the
creation or imposition of any lien, claim or encumbrance upon any property or
assets of MENTOR; or (e) require any consent, approval, authorization, order,
filing, registration or qualification of or with any court or governmental
authority or arbitrator to which MENTOR is subject or by which any of its
properties or assets may be bound or affected, other than Approvals of the
Product for the Indicated Uses, as contemplated herein.
19
<PAGE> 20
(c) All action to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly taken, and this Agreement constitutes the valid and binding obligation of
MENTOR enforceable in accordance with its terms.
(d) There are no claims relating to patent infringement or any
other matters, actions, suits, proceedings, arbitrations or investigations
pending or, to the best of MENTOR's knowledge, threatened, against MENTOR which
if adversely determined would adversely affect MENTOR's ability to sell the
Product for any Indicated Use, or MENTOR's ability to conduct Product
Development or to enter into or carry out this Agreement.
8.2. Representations and Warranties of PERIMMUNE. PERIMMUNE hereby makes
the following representations and warranties to MENTOR, which representations
and warranties are true and correct on the date hereof
(a) PERIMMUNE is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware and has the power and
authority to enter into this Agreement and perform its obligations hereunder.
(b) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated herein, will (a) violate or
conflict with any provision of the Certificate of Incorporation or By-laws of
PERIMMUNE, each as in effect on the Effective Date; (b) with or without the
giving of notice or the lapse of time or both (i) result in a breach of, or
violate, or be in conflict with or constitute a default under, or result in the
termination or cancellation of, or accelerate the performance required under,
any security instrument, mortgage, note, debenture, indenture, loan, lease
contract, agreement or other instrument, to which PERIMMUNE is a party or by
which it or any of its properties or assets may be bound or affected, or (ii)
result in the loss or adverse modification of any lease, franchise, license or
other contractual right or other authorization granted to or otherwise held by
PERIMMUNE; (c) require the consent of any party to any such agreement or
commitment to which PERIMMUNE is a party or by which any of its properties or
assets are bound; (d) result in the creation or imposition of any lien, claim or
encumbrance upon any property or assets of PERIMMUNE; or (e) require any
consent, approval, authorization, order, filing, registration or qualification
of or with any court or governmental authority or arbitrator to which PERIMMUNE
is subject or by which any of its properties or assets may be bound or affected,
other than Approvals of the Product for the Indicated Uses, as contemplated
herein.
(c) All action to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly taken, and this Agreement constitutes the valid and binding obligation of
PERIMMUNE enforceable in accordance with its terms.
(d) There are no claims relating to patent infringement or any
other matters, actions, suits, proceedings, arbitrations or investigations
pending or, to the best of PERIMMUNE's knowledge, threatened, against PERIMMUNE
which if adversely determined
20
<PAGE> 21
would adversely affect the use of the Product for any Indicated Use, or
PERIMMUNE's ability to enter into or carry out this Agreement.
(e) PERIMMUNE, after having made a reasonable investigation and
obtaining the advice of its counsel, (i) has no knowledge that the manufacture,
use, importation or sale of the Product for the Indicated Uses under this
Agreement, either alone or in combination, infringes any patent or other
industrial property right of a third party; and (ii) has not received any
notification from any third party alleging or suggesting that the manufacture,
use, importation or sale of the Product does or would infringe any patent or
other industrial property. PERIMMUNE shall disclose to MENTOR any information
regarding adverse patent rights of which it is, or becomes, aware relating to
the Product.
ARTICLE IX.
INDEMNIFICATION
9.1. PERIMMUNE Indemnification. PERIMMUNE shall defend, indemnify and
hold harmless MENTOR and its directors, employees, representatives and agents
from and against all suits, claims, liabilities, damages, demands and costs
(including, but not limited to, reasonable legal expenses) ("Claims") incurred
as a result of:
(a) any claims of or on behalf of third parties for death or
personal injury resulting from the Product; provided, however, that this
indemnity shall not apply to, and PERIMMUNE shall not be liable for, any such
claim caused by or arising from:
(i) any act or failure on the part of MENTOR, its Affiliates, or
their respective employees, representatives, agents or subsidiaries (the
"MENTOR Parties") in packaging, handling, storing or otherwise
distributing the Product;
(ii) any representation or warranty concerning the Product made
by or on behalf of MENTOR or any MENTOR Party and not specifically
authorized by PERIMMUNE;
(iii) any claim resulting from the use of the Product by any
customer that was not in accordance with the use presented by PERIMMUNE;
(iv) MENTOR's failure to disseminate to purchasers or end-users
any Product information which PERIMMUNE has made available to MENTOR;
(v) any claim where PERIMMUNE has not been notified in writing
within forty five (45) days of MENTOR's first notice of this claim;
(vi) any claim where MENTOR fails to furnish evidence in its
possession or fails to fully cooperate with PERIMMUNE in preparing the
defense;
21
<PAGE> 22
(b) any claim that the Product or any activities hereunder infringe
the patent or other intellectual property rights of any third party provided
MENTOR gives PERIMMUNE notice within forty-five (45) days of MENTOR's first
notice of the claim; provided, however, that the claim is not based on (i) the
sale or use of the Product in combination with any other product which is not
specifically authorized by PERIMMUNE in writing; and
(c) PERIMMUNE's material breach of the terms of this Agreement.
9.2. MENTOR Indemnification. MENTOR shall defend, indemnify and hold
harmless PERIMMUNE and its directors, employees, representatives and agents from
and against all Claims incurred as a result of:
(a) MENTOR's material breach of the terms of this Agreement.
9.3. Indemnification Proceedings.
(a) Notice of Claims: Assumption of Defense. The party to be
indemnified ("the Indemnified Party") shall give prompt notice to the other
party ("the Indemnifying Party") of the assertion of any Claim in respect of
which indemnity may be sought hereunder (and in any event within fifteen (15)
calendar days after the service of the citation or summons). It is understood,
however, that the Indemnified Party shall be authorized and expected to take any
such prompt action as may be reasonably necessary in the circumstances of any
proceedings seeking an injunction or similar equitable relief against it. The
Indemnifying Party may, at its own expense (i) participate in the defense of any
Claim for which it is obligated to indemnify the Indemnified Party hereunder and
(ii) upon notice to the Indemnified Party at any time during the course of any
such Claim, assume the defense thereof; provided, however, that (i) the
Indemnifying Party's counsel is reasonably satisfactory to the Indemnified Party
and (ii) the Indemnifying Party shall, upon reasonable request, thereafter
consult with the Indemnified Party from time to time with respect to such Claim.
If the Indemnifying Party assumes such defense, the Indemnified Party shall have
the right (but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party. Whether or not the Indemnifying Party chooses to defend or
prosecute any such Claim, both parties hereto shall cooperate in the defense or
prosecution thereof.
(b) Settlement or Compromise. Any settlement or compromise made or
caused to be made by the Indemnified Party or the Indemnifying Party (as the
case may be) of any Claim shall be binding upon the Indemnifying Party or the
Indemnified Party (as the case may be) in the same manner as if a final judgment
or decree has been entered by a court of competent jurisdiction in the amount of
such settlement or compromise; provided however, that no obligation, restriction
or loss shall be imposed on an Indemnified Party as a result of such settlement
without its prior written consent which consent shall not be unreasonably
withheld, and such settlement shall include an unconditional release of the
Indemnified Party; and provided further, that the Indemnified Party shall not
make or cause to be made any such settlement or compromise without the prior
written consent of the Indemnifying Party, which consent shall not unreasonably
be withheld. The Indemnified Party will give the Indemnifying Party at least
thirty (30) days' prior written notice of any proposed settlement or compromise
of any Claim it itself is
22
<PAGE> 23
defending, during which time the Indemnifying Party may assume the defense of,
and responsibility for, such Claim and, if it does so, the proposed settlement
or compromise may not be made.
(c) Failure of Indemnifying Party to Act. In the event that the
Indemnifying Party does not elect to assume the defense of any claim or to cause
the same to be done, then any failure of the Indemnified Party to defend or
participate in the defense of any such claim or to cause the same to be done,
shall not relieve the Indemnifying Party of its obligations hereunder; provided
however, that the Indemnified Party shall have given the Indemnifying Party at
least thirty (30) days' notice of its proposed failure to defend or participate
and afford the Indemnifying Party the opportunity to assume defense thereof
prior to the end of such period.
(d) Procedure for Indemnification. Upon becoming aware of any claim
for indemnification, the Indemnified Party shall promptly give notice of such
claim (a "Claim Notice") to the Indemnifying Party and will provide, to the
extent possible and without prejudice to the rights of the Indemnified Party
hereunder, a good faith estimate of the amount the Indemnified Party reasonably
anticipates that it will be entitled to on account of indemnification by the
Indemnifying Party. If the Indemnifying Party does not object to such
indemnification claim within forty-five (45) days of receiving notice thereof,
the Indemnified Party shall be entitled to recover promptly the amount of such
claim (but such recovery shall not limit the amount of any additional
indemnification or other rights to which the Indemnified Party may be entitled
pursuant to this Article IX). If, however, the Indemnifying Party advises the
Indemnified Party that it disagrees with the Indemnified Party's claim, the
parties shall, for a period of forty five (45) days after the Indemnifying Party
advises the Indemnified Party of such disagreement, attempt to resolve the
difference. If the parties are unable to reach agreement within such forty five
(45) days, the disagreement shall be resolved pursuant to Section 10.8 hereof.
(e) Limitations. No claim for indemnification shall be valid unless
first made in writing within forty-five (45) days of the Indemnified Party's
first notice of such claim.
ARTICLE X
MISCELLANEOUS
10.1. Confidentiality.
(a) Confidentiality Defined. For the purposes of this Agreement,
the term "Confidential Information" shall be any information embodying concepts,
ideas, techniques, proprietary information, know-how, formulations, market data,
customer lists, product specifications and accounting data which:
(i) is disclosed by one party hereto to the other;
(ii) is claimed by the disclosing party to be secret,
confidential and proprietary to the disclosing party; and
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<PAGE> 24
(iii) if disclosed in writing, is marked by the disclosing party
to indicate its confidential nature or, if disclosed orally as
confidential, is confirmed in writing by the disclosing party to be
confidential within ten (10) days following disclosure.
(b) Non-Disclosure. During the period that this Agreement remains
in effect and for a period of three (3) years following termination hereof, each
party (except as is explicitly otherwise required hereby) shall keep
confidential, shall not use for itself or for the benefit of others and shall
not copy or allow to be copied in whole or in part any Confidential Information
disclosed to such party by the other. The obligation of confidentiality imposed
upon the parties by the foregoing paragraph shall not apply with respect to any
alleged Confidential Information which:
(i) is known to the recipient thereof, as evidenced by said
recipient's written records, prior to receipt thereof from the other
party hereto;
(ii) is disclosed to said recipient after the date hereof by the
third party who has the right to make such disclosures and who does not
violate any confidentiality agreement with the affected party hereto;
(iii) is or becomes a part of the public domain through no fault
of the said recipient; or
(iv) is required by law or judicial or administrative process to
be disclosed.
(c) Non-Disclosure of Relationship. PERIMMUNE and MENTOR shall
agree to keep confidential and not disclose to third parties, the supply and
working relationship under this Agreement.
(d) Limited Use of Confidential Information. Each party agrees to
limit access to Confidential Information to employees and agents having a need
to know and to protect Confidential Information to the same extent as it
protects its own trade secrets.
10.2. Notices. Any notices or report or other communication permitted or
required under this Agreement shall be in writing and sent by certified mail,
express mail; Federal Express, postage paid, return receipt requested, addressed
to the party to whom the notice is to be given. All notices, reports or other
communications made hereunder shall be deemed to have been made on the date
postmarked. Changes in address shall be accomplished by a notice in compliance
with this Section 10.2. The current address for each party is as follows:
PERIMMUNE MENTOR Corporation
1330 Piccard Drive 5425 Hollister Avenue
Rockville, Maryland 20850-4396 Santa Barbara, California 93111
Attn: Dr. Bryan Butman Attn: Mr. Anthony Gette
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<PAGE> 25
10.3. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of each of the parties and their respective heirs,
successors, assigns and legal representatives. Either party may freely assign
this Agreement to any Affiliate, and either party shall have the right to assign
its rights and licenses and to delegate its duties under this Agreement to any
third party who (a) purchases all or substantially all of the business assets of
the assignor or who succeeds to the business of the assignor by reason of a
merger or consolidation and (b) agrees to assume the duties and obligations of
the assignor hereunder. Except as expressly provided herein, no party hereto
shall have the right to transfer or assign its interest in this Agreement
without the prior written consent of the other party hereto, which consent may
not be unreasonably withheld. The assignment by either party of any rights under
this Agreement shall not relieve the assigning party from any of its obligations
under this Agreement.
10.4. Force Majeure. Neither party shall be liable in damages for, nor
shall this Agreement be terminable or cancelable by reason of any delay or
default in such party's performance hereunder if such default or delay is caused
by events beyond such party's reasonable control including, but not limited to,
acts of God, regulation or law or other action of any government of agency
thereof, war or insurrection, civil commotion, destruction or production
facilities or materials by earthquakes, fire, flood or storm, labor
disturbances. epidemic, or failure of supplies, public utilities or common
carriers. Each party shall endeavor to resume its performance hereunder if such
performance is delayed or interrupted by reason of force majeure. Each party
shall notify the other, in writing, not less often than monthly, of the nature
of progress of such endeavors.
10.5. Insurance. Each party shall keep in force during the term of this
Agreement, and for a period of three (3) years following its termination,
product liability insurance in such amounts as may be customary for like-sized
businesses undertaking like responsibilities to those contemplated by this
Agreement. Each party shall submit a certificate of insurance to the other
evidencing such coverage upon written request therefor.
10.6. Severability. Should any part of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provision shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties.
10.7. Waiver. Waiver by either party of a default or breach or a
succession of defaults or breaches, or any failure to enforce any right
hereunder shall not be deemed to constitute a waiver of any subsequent default
or breach with respect to the same or any other provision hereof, and shall not
deprive such party of any right to terminate this Agreement arising by reason of
any subsequent default or breach.
10.8. Mediation. Unless the relief sought requires the exercise of the
equity powers of a court of competent jurisdiction, neither party shall commence
any action or proceeding to construe or enforce the terms and conditions of this
Agreement unless such party has first given
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<PAGE> 26
written notice of its intention to do so and submitted such matter to
non-binding mediation if the other party desires to have the controversy
mediated. Any party who receives from the other party (a) a notice of default
under this Agreement, or a notice that such other party intends to submit a
controversy or dispute for adjudication, shall have a period of fifteen (15)
days after its receipt of such notice to request that the dispute or controversy
be submitted to mediation, and the failure of the recipient of any such notice
to make a written request for mediation within such fifteen (15) day period
shall be deemed to have waived its right to require that such matter be
submitted to mediation. The period during which any such matter is being
mediated shall not toll the period during which any party who is in default in
the performance of its obligations under this Agreement is obligated to remedy
or cure such default.
10.9. Venue and Jurisdiction. The parties hereto (a) mutually consent
and stipulate that any action or proceeding commenced to interpret or enforce
this Agreement or the rights and duties of the parties hereunder shall be
commenced and conducted in a state or federal court of competent jurisdiction
situated in the county or judicial district in which the defendant in such
action or proceeding has its corporate headquarters, (b) each waive any claim
that any such state or federal court is an inconvenient forum, and (c) each
irrevocably agrees that any and all actions or proceedings arising out of or
relative to this Agreement or from transactions contemplated herein shall be
exclusively heard only in such state or federal court.
10.10. Governing Law. This Agreement, the construction and enforcement
of its terms, and the interpretation of the rights and duties of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Maryland without regard to the choice of law rules utilized in that
jurisdiction.
10.11. Costs of Enforcement. Should any action or proceeding be
necessary to construe or enforce this Agreement, then the party prevailing in
any such action or proceeding shall be entitled to recover all court costs and
reasonable attorneys' fees, to be fixed by the court and taxed as part of any
judgment entered therein, and the costs and fees incurred in enforcing or
collecting any such judgment.
10.12. Entire Agreement. This Agreement represents the entire
understanding between the parties as of the Effective Date with respect to the
subject matter hereof, and supersedes all prior agreements, negotiations,
understandings, representations, statements, and writings, between the parties
relating thereto. No modification, alteration, waiver or change in any of the
terms of this Agreement shall be valid or binding upon the parties hereto unless
made in writing and specifically referring to this Agreement and duly executed
by each of the parties hereto.
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized representatives as of the day and
year first written above.
PERIMMUNE, INC. MENTOR CORPORATION
By: /s/ M. G. HANNA, JR. By: /s/ CHRISTOPHER J. CONWAY
------------------------------- ---------------------------------
Name: M. G. Hanna, Jr. Name: Christopher J. Conway
Title: Chairman and CEO Title: Chairman/CEO
27
<PAGE> 28
EXHIBIT A
PROJECT PLAN
(See Attached)
<PAGE> 29
[MILESTONE CHART]
<PAGE> 30
PERIMMUNE, INC.
Product Development: 1998-2000
Budget
<TABLE>
<CAPTION>
COST CENTER 807
ACCOUNT NO. 601204.0 1998 1999 2000 TOTAL
- -------------------------------- ---- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALARIES
(1.5) CRA/Monitor 100% 75,000 75,000 75,000 225,000
Regulatory Affairs Associate 50% 25,000 25,000 25,000 75,000
Fringe 0.42 42,000 42,000 42,000 126,000
Overhead 1 142,000 142,000 142,000 426,000
CONSULTING
Clinical data management 50,000 75,000 100,000 225,000
Statistical analysis 25,000 50,000 75,000
Medical advisor 35,000 35,000 35,000 105,000
Translations 2,000 2,000 2,000 6,000
CLINICAL TRIALS
Pre-study visits (@ $1,200/visit) 18,000 18,000
Study initiation visits 18,000 18,000
Monitoring visits 40,000 40,000 80,000
Close-out visits 20,000 20,000
Study payments (@ $3,000)/pt) 300,000 300,000 600,000
Postage/Fed Ex 3,000 3,000 3,000 9,000
Office Supplies 5,000 5,000 2,500 12,500
Printing - CRF's 30,000 30,000
Manufacturing Development 200,000 250,000 250,000 700,000
FDA Application Review Fee 256,338 256,338
G&A 0.09 90,900 89,460 90,255 270,615
---- --------- --------- --------- ---------
TOTAL 1,100,900 1,083,460 1,093,093 3,277,453
==== ========= ========= ========= =========
</TABLE>
Page 1
<PAGE> 31
EXHIBIT B
US PATENT
(See Attached)
<PAGE> 32
[BAR CODE]
US005407912A
UNITED STATES PATENT [19] [11] Patent Number: 5,407,912
Ebert et al. [45] Date of Patent: Apr. 18, 1995
- -------------------------------------------------------------------------------
[54] METHOD OF TREATING BLADDER CANCER WITH A KEYHOLE LIMPET HEMOCYANIN
COMPOSITION WITH ENHANCED ANTI-TUMOR ACTIVITY
[75] Inventors: Ray F. Ebert, Derwood; Richard D. Swordlow, Silver
Spring, both of Md.
[73] Assignee: ?????, N.V., Arnhem, Netherlands
[21] Appl. No.: 50,697
[22] Filed: Apr. 19, 1993
[51] Int. CL(6) A61K 37/10
[52] U.S. Cl. 514/8; 530/395; 424/538; 424/547
[58] Field of Search 530/395; 514/8; 424/538, 547
[56] References Cited
PUBLICATIONS
Senozan, N.M. et al. Hemocyanin of the giant keyhole limpet, Megathura
crenulata, in "Invertebrate Oxygen-Binding Proteins", J. Larny et al., eds.,
Marcel Dekker, Inc., N.Y. pp. 703-717 (1981).
Herscovits, H.B. et al., Immunochemical and Immunogenic properties of a
purified keyhole limpet Hemocyanin. Immunology 2251-61 (1972).
Curtis, J.E. et al., The human secondary immune response to keyhole limpet,
haemocyamin, Clin. Exp. Immunol. 10:171-177 (1972).
Curtis, J.E. et al., The human primary immune response to keyhole limpet
haemocyamin: Interrelationships of delayed hypersensitivity, antibody response
and in vitro blast transformation. Clin. Exp. Immunol. 6:473-491 (1970).
Herskovits, T. T. et al., Subunit structure and higher order assembly of the
hemocyanins of the malongenidac family: Melongena corona (Gmelin), Busycan
canaliculatum (Linne), B. ????? (Gmein), B. contrarbum (Conrad), and B. splratim
(Lamarck). Comp. Biochem. Physiol. [B] 94B:415-421 (1989).
Garvey, J.S. et al., High-molecular-weight hemocyanin. In: "Methods in
Immunology", Addison-Wesley Publ. Co. pp. 135-139 (1977).
Herskovits, T.T., Recent aspects of the subunit organization and dissolution of
hemocyanins. Comp. Bio chem. Physiol. 91B-597-611 (1988).
Herskovits, T.T. et al., Higher order assemblies of molluscan hemocyanins.
Comp. Bio chem. Physiol. [B] 99B:19-34 (1991).
Savel-Niemann. A. et al., Keyhole limpet hemocyanin: On the structure of a
widely used immunologic tool. In: "Invertebrate Dioxygen Carriers", G. Preaux et
al., eds., Leuven Unniversity Press, Leuven, pp. 351-356 (1990).
Madrid, J. et al., The role of two distinct subunit types in the architecture
of keyhole limpet hemocyanin (KLH). Nerurwiss. 78-512-514 (1991).
Van Holds, K.E. et al., The Hemocyanins. In: "Subunits in Biological Systems",
S.N. Timasheff et al., eds. Marcel Dekker, N.Y., pp. 1-53 (1971).
(List continued on next page)
Primary Examiner--Michael G. Wityshyn
Assistant Examiner--C. Sayal?
Attorney, Agent, or Firm--Jeffrey L. I?nen; William M. Blackstone
[57] ABSTRACT
The present invention is directed to a stabilized keyhole limpet hemocyanin
(KLH) composition in which (1) its intact non-degraded subunit is approximately
400,000 in molecular weight based on SDS-PAGE analysis; and (ii) are contained
at least about 50% didecameric or higher KLH multimers, based on
sedimentation-equilibrium and/or sedimentation-velocity ultracentrifugation
analyses. The KLH composition is enabilized at 4 degrees C. by dissolving and
storing it in an Isosomic buffer preferably containing calcium and magnesium.
It is critical that the KLH not have been frozen or Iyophilized during its
preparation or storage. The KLH composition demonstrates enhanced immunogenic
activity, particularly enhanced anti-tumor activity, which is reduced if the
KLH is frozen or lyophilized. The KLH composition of the present invention
exhibits enhanced anti-rumor activity in a marine bladder tumor model and
thereby represents a new and useful anti-tumor immunotherapeutic agent.
8 Claims, 6 Drawing Sheets
<PAGE> 33
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OTHER PUBLICATIONS
Ellerton, H. D. et al., Hemocyanin-A current perspective. Prog. Biophys. mol.
Biol. 41:143-248 (1983).
Silverman, D. T. et al., Epidemiology of Bladder Cancer. In:
"Hematology/Oncology Clinics of North America". P. W. Kantoff et al., eds., W.
B. Saunders Co., Phila. p. 1 (1992).
Itouku, K. A. et al., Superficial Bladder Cancer. In: "Hematology/Oncology
Clinics of North America". P. W. Kantoff et al., eds., W. B. Saunders Co.,
Phila. pp. 99-116 (1992).
Morales, A. et al., Intracavitary bacillus Calmentte-Guerin in the treatment of
superficial bladder tumors. J. Urol. 116:180-183 (1976).
Morales, A. et al., Immunotherapy for superficial bladder cancer. A
developmental and clinical overview. Urol. Clin. Nor. Am. 19:549-556 (1992).
Lamm, D. L., Optimal BCG treatment of superficial bladder cancer as defined by
American trials. Pur. Urol. 21 Suppl. 2:12-16 (1992).
Olsson, C. A. et al., Immunologic reduction of bladder cancer recurrence rate.
J. Urol. 111:173-176 (1974).
Jurincic, C. D. et al., Immunotherapy in bladder cancer with keyhole-limpet
hemocyanin: a randomized study. J. Urol. 139:723-726 (1988).
Flamm, J. et al., Recurrent superficial transitional cell carcinoma of the
bladder: Adjuvant topical chemotherapy vs. immunotherapy. A prospective
randomized trial. J. Urol. 144:260-263 (1990).
Kilble, T. et al., Intravesticale rezidivprophylaze benign oberflachlichen
harnblasenkarminom mit BCG und KLH. Urologic 30:118-121 (1991).
Flamm, J. et al., Adjuvent topical chemotherapy versus immunotherapy is primary
superficial transitional cell carcinoma of the bladder. Br. J. Urol. 67:70-73
(1991).
Lamm, D. L. et al., Immunotherapy of murine transitional cell carcinoma. J.
Urol. 128:1104-1108 (1982).
Lamm, D. L. et al., Keyhole-limpet haemacyanin and immune ribonucleic acid
immunotherapy of murine transitional cell carcinoma. Urol. Res. 9:237-230
(1981).
Lamm, D. L. et al., Immunotherapy of murine bladder cancer with keyhole-limpet.
hemocyanin (K.L.H). J. Urol. 149:648-652 (1993).
Laemmil, U. K., Clevage of structural proteins during the assembly of the head
of bacteriophage T4. Nasure 227:680-685 (1970).
Van Holde, K. E. et al., Boundary analysis of sedimentation-velocity experiments
with ??? and ?? solutes. Biopolyn 17:1387-1403 (1978).
Vandenbark, A. A. et al., All K.L.H. preparations are not created equal. Cell
??. 60:240-243 (1981).
Chodak, G. W. and Summerhayes, L., Detection of anglogenesis activity in
malignant bladder tissue and cells. J. Urol. 1030-1032 (1984).
Shapiro, A., Ratbil?, T. L. Oakley, D. M. and Catalona, W. J., Reduction of
bladder tumor growth in mice treated with Introcavitary bacillus
Calmentte-Guerin and in correlation with bacillus Calmentte-Guerin viability and
natural killer cell activity. Cancer Res. 43:1611 (1983).
<PAGE> 34
U.S. PATENT Apr. 18, 1995 Sheet 1 of 6 5,407,912
[GRAPH]
Figure 1
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U.S. PATENT Apr. 18, 1995 Sheet 2 of 6 5,407,912
[GRAPH]
FIG. 2A, 2B, 2C, 2D
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U.S. PATENT Apr. 18, 1995 Sheet 3 of 6 5,407,912
[GRAPH]
FIG. 3
<PAGE> 37
U.S. Patent Apr. 18, 1995 Sheet 4 of 6 5,407,912
[LINE GRAPH]
[TUMOR-BEARING MICE/TIME]
FIGURE 4
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U.S. Patent Apr. 18, 1995 Sheet 5 of 6 5,407,912
[LINE GRAPH]
[TUMOR-BEARING MICE/TIME]
FIGURE 5
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U.S. Patent Apr. 18, 1995 Sheet 6 of 6 5,407,912
[LINE GRAPH]
[TUMOR-BEARING MICE/TIME]
FIGURE 6
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5,407,912
1
METHOD OF TREATING BLADDER CANCER
WITH A KEYHOLE LIMPET HEMOCYANIN
COMPOSITION WITH ENHANCED ANTI-TUMOR
ACTIVITY
FIELD OF THE INVENTION
The present invention relates to a keyhole limpet hemocyanin (KLH)
composition that has enhanced immunogenic properties, particularly enhanced
anti-tumor activity. Specifically, the present invention relates to an
immunogenic agent comprised of KLH formulated to contain >50% didecameric or
higher KLH multimers that range in molecular weight from approximately 8-10
million. The immunogenic agent is useful as a cancer therapeutic agent and as an
adjuvant or carrier protein.
BACKGROUND OF THE INVENTION
The publications and other materials used to illuminate the background of
the invention or provide additional details respecting the practice are
incorporated herein by reference numerals in parentheses, and for convenience
are respectively grouped in the appended List of References.
For decades it has been known that hemocyanins are among the most potent of
immunogens. Keyhole limpet hemocyanin (KLH, from the primitive gastropod
molecule, Megathura crenulata) has been among the most widely used and
thoroughly studied of these (1-4). Thus, a single subcutaneous injection of KLH,
without adjuvant, will elicit a strong antibody response in virtually 100% of
animals, including humans.
There are a variety of well-known methods for purifying KLH, including
differential centrifugation (5), gel-permeation chromatography followed by
ion-exchange chromatography (2) and differential centrifugation followed by
gel-permeation chromatography (6). Purified KLH that is commercially available
typically has been either frozen or lyophilized after purification.
The solution structure of KLH and other mollusc hemocyanins has been
studied extensively (7-10). Thus, it is known that KLH contains glycogylated
polypeptide subunits with a molecular weight of 400-500,000 that assemble to
form decameric (10-mer) didecameric (20-mer), and larger particles. These
multimeric structures have been characterized by ultracentrifugation techniques
that yield sedimentation coefficients of 11-19S for the dissociated subunits and
92-107S for the didecameric multimers (1.2). It is further known that a variety
of factors may affect the size distribution of mollusc hemocyanins, including
KLH (11,12). These factors include ionic strength, pH, temperature, PO[2] and
the availability of certain divalent cations, notably calcium and magnesium.
Bladder cancer is the fourth most prevalent human malignancy, with about
49,000 new cases and 9,700 death reported annually (13). Whereas tumors in the
bladder often can be removed by surgical resection, such treatment is not always
curative. It has been reported that 50-80% of patients whose tumors have been
surgically removed will develop recurrent invasive disease (14). Thus, there is
a need for therapeutic approaches not only to treat the primary disease but also
to prevent recurrent malignancies.
Morales and associates (15) were the first to describe successful treatment
of bladder cancer by intravesicular (i.e., into the bladder) administration of
an immuno-
2
therapeutic agent, Bacillus Calmette-Guerin (BCG). Extensive additional studies
during the past 15 years have shown that both primary and recurrent bladder
tumors are responsive to immunotherapeutic treatment modalities in general, and
BCG treatment in particular (16,17).
KLH was first implicated as a potential immunotherapeutic agent for bladder
cancer in studies by Olsson and associates (18) that disclosed a statistically
significant reduction in the frequency of tumor recurrences in patients with
low-stage bladder cancer who had received intradermal injection of KLH.
Subsequently, other investigators have described human clinical trial in which
KLH administered intravesically was effective in reducing the incidence of
recurrent disease (19-21) or in treating primary tumors (22). The anti-tumor
activity of KLH also has been demonstrated in an experimental animal model: the
intralesional murine bladder tumor model of Lamm and associates (23-25). In this
experimental model it has been observed that if the animals are not immunized
subcutaneously with KLH prior to treatment, the anti-tumor activity was lost
(25). Summarizing, KLH has been shown to have immunotherapeutic activity against
bladder cancer, both in human clinical trials and in animal models.
Despite extensive literature and prior art regarding the structure and
immunogenic and anti-tumor activity of KLH, there have been no studies that
address the question of whether these two characteristics may be related or
whether the immunogenic activity of KLH could be enhanced. Thus, it is an object
of the present invention to enhance the immunogenic and anti-tumor activity of
KLH.
SUMMARY OF THE INVENTION
The present invention is directed to a stabilized KLH composition in which
(i) its intact non-degraded subunit is approximately 400,000 in molecular weight
based on SDS-PAGE analysis; and (ii) are contained at least about 50%
didecameric or higher KLH multimers, based on sedimentation-equilibrium and/or
sedimentation-velocity ultracentrifugation analyses. The KLH composition is
stabilized at 4 degrees C. by dissolving and storing it in an isotonic buffer
containing calcium and magnesium. It is critical that the KLH not have been
frozen or lyophilized during its preparation or storage, as such treatment
reduces its anti-tumor activity, presumably by altering the size distribution of
KLH multimers. The KLH composition demonstrates enhanced immunogenic activity,
particularly enhanced anti-tumor activity, which is reduced if the KLH is frozen
or lyophilized. The KLH composition of the present invention exhibit enhanced
anti-tumor activity in a murine bladder tumor model and thereby represents a new
and useful anti-tumor immunotherapeutic agent.
BRIEF DESCRIPTION OF THE DRAWINGS
FIG. 1 shows SDS-PAGE analysis of KLH [the method of Lacmmil et al. (26)
under reducing conditions; 5% to 15% polyacrylamide gradient; Coomassie blue
R-250 staining]. Lane 1, p-KLH; lane 2, d-KLH; lane 3, f-KLH; lane 4, l-KLH.
Molecular weight markers (kDa) are shown at left.
FIG. 2A shows electron microscopy of p-KLH.
FIG. 2B shows electron microscopy of d-KLH.
FIG. 2C shows electron microscopy of f-KLH.
FIG. 2D shows electron microscopy of l-KLH.
<PAGE> 41
5,407,912
3
FIG. 3 shows size distribution of KLH by sedimentation-velocity
ultracentrifugation. Samples were diluted 1:10 with PBS and centrifuged at
57,000 x g at ambient temperature in a Beckman Model E analytical
ultracentrifuge equipped with a photoelectric scanner. S values were determined
by the method of Van Holde et al. (27). The monomer is shown by
[SYMBOL](11-19S). The decamer is shown by [SYMBOL](55-70S). The didecamer is
shown by [SYMBOL](91-107S). Multimers larger than didecamers are shown by
[SYMBOL](> 107S).
FIG. 4 shows the rate of tumor outgrowth for p-KLH in a dose-response
experiment. P-KLH was given intravesically to mice inoculated on day 0 with
MB-49 bladder tumor cells. * Vehicle control; p-KLH dosages; [SYMBOL] 10
micrograms; [SYMBOL] 50 micrograms; [SYMBOL] 500 micrograms; [SYMBOL] 1000
micrograms.* Significantly different from control (p <0.01; Fisher's Exact); **
significantly different from control (p <0.001); Fisher's Exact).
FIG. 5 shows the rate of tumor outgrowth at the 10 microgram dose level.
The indicated forms of KLH were given intravesically to mice ioculated on day 0
with MB-49 bladder tumor cells. * Vehicle control; [SYMBOL] KLH control
(immunized with vehicle/treated with p-KLH); [SYMBOL] p-KLH; [SYMBOL] d-KLH;
[SYMBOL] f-KLH; [SYMBOL] l-KLH. * Significantly different from control (p <0.09;
Fisher's Exact).
FIG. 6 shows the rate of tumor outgrowth at the 100 microgram dose level.
The indicated forms of KLH were given intravesically to mice inoculated on day 0
with MB-49 bladder tumor cells. * Vehicle control; [SYMBOL] KLH control
(immunized with vehicle/treated with p-KLH); [SYMBOL] p-KLH; [SYMBOL] d-KLH;
[SYMBOL] f-KLH; [SYMBOL] l-KLH. * Significantly different from
control (p <0.09; Fisher's Exact); ** significantly different from control (p
<0.01; Fisher's Exact).
DESCRIPTION OF THE PREFERRED
EMBODIMENTS
The present invention is directed to a KLH composition which has enhanced
immunogenic activity, particularly enhanced anti-tumor activity. The composition
comprises KLH in a physiologically acceptable isotonic buffer. The isotonic
buffer preferably contains calcium and magnesium. The KLH in the composition of
the present invention comprises (i) an intact, non-degraded subunit of
approximately 400,000 in molecular weight based on SDS-PAGE analysis, and (ii)
at least about 50% didecameric or higher KLH multimers. The didecameric or
higher KLH multimers have molecular weights of approximately 8-10 million with
sedimention coefficients of about 92-107S. The amount of didecameric or higher
KLH multimers present is based on sedimentation-equilibrium and/or
sedimentation-velocity ultracentrifugation analyses. It is critical that KLH not
be frozen or lyophilized at any time during the isolation, preparation or
purification of the KLH or during preparation and storage of the KLH
composition. The KLH composition is stored at 2 degrees - 10 degrees C.,
preferably 4 degrees C. The KLH composition is highly stable under these
conditions. The concentration of KLH in the KLH composition is 0.1-20 mg/ml.
preferably 2-10 mg/l. and most preferably 5 mg/ml.
The KLH composition of the present invention demonstrates an enhanced
immunogenic activity, particularly enhanced anti-tumor activity. This enhanced
immunogenic activity is reduced if the KLH or KLH composition is frozen or
lyophilized at any time during the preparation and/or storage of KLH or the KLH
composition. The enhanced immunogenic activity is
4
seen (a) with injection of KLH (without adjuvant), (b) with KLH used as an
adjuvant, (c) with KLH used as a carrier immunogen for haptens or weakly
immunogenic antigens, and (d) with KLH used as an anti-tumor agent. The KLH
composition of the present invention exhibits enhanced anti-tumor activity for
many tumors, including but not limited to bladder tumors. The KLH composition is
administered to patients with tumors in accordance with techniques known in the
art, preferably by intravesical administration, after subcutaneous immunization
(25) using an anti-tumor effective amount of the KLH composition. That is, in
the preferred embodiment, the patient is first immunized by subcutaneous
administration of the KLH composition of the present invention and then treated
on a weekly basis by intravesical administration of the KLH composition.
The following abbreviations are used herein:
p-KLH is purified KLH in which the KLH is in an isosonic buffer, the KLH
has not been frozen or lyophilized during the purification process, and
the p-KLH is not frozen or lyophilized.
d-KLH is dissociated KLJ in which the multimers existing in p-KLH have
been dissociated.
f-KLH is frozen KLH in which the p-KLH was frozen for at least 24 hours.
l-KLH is lyophilized KLH in which p-KLH was lyophilized.
The KLH is purified from freshly collected hemolymph by conventional
procedures. It is critical that the hemolymph and/or KLH not be frozen or
lyophilized at any point during the purification of the KLH. It is also critical
that the purified KLH not be frozen or lyophilized. The purified KLH is
stabilized by storage in an isotonic buffer containing calcium and magnesium at
about 4 degrees C. One method suitable for purifying and storing KLH is
described in Example 1 below. However, it is understood that other methods can
be utilized which meets the above criteria.
EXAMPLE 1
Purification of KLH
A saturated ammonium sulfate slurry made from freshly-collected hemolymph
and containing approximately 30 mg/ml. KLH was purchased from Pacific Biomarine
Laboratories, Inc., Venice, Calif. The hemolymph was collected according to the
guidelines of Vandebark and associates (28): Limpets were cleaned, incised, and
bled at 4 degrees C. for approximately one hour. No massaging was done to
recover additional hemolymph. KLH was precipated by addition of solid ammonium
sulfate to 65% saturation (430 g/L.). The ammonium sulfate slurry was collected
by centriguation, and yielded a solution containing approximately 30-40 mg/mL.
protein. This solution was diluted to approximately 10-20 mg/ml. with a
phosphate-buffered saline (PBS) solution containing magnesium and calcium
[KH[2]PO[4] (1.5 mM), N?[2]HPO[4]7H[2]O (?.1 mM), NaCl (136.9 mM), KCl
(2.7 mM), CaCl[2]2H[2]O (0.9 mM), and MgCl[2]6H[2]O (0.5 mM); pH - 7.3-7.5].
Particulates and undissolved protein were removed by centrifugation at low
speed (approximately 1,000-3,000 x g) for 20 min.
<PAGE> 42
5,407,912
5
The supernatant, which contained dissolved KLH, was centrifuged at 41,400xg for
12-18 hours. The pellet, which consisted primarily of high-molecular-weight
KLH, was dissolved in PBS and recentrifuged at 41,400xg as above. The resultant
pellet was again dissolved in PBS, adjusted to a final concentration of 5mg/ml,
sterilized by ultrafiltration through a microporous membrane, and stored at
4 degree C. This KLH solution is hereinafter referred to as purified KLH
(p-KLH). KLH solution is hereinafter referred to as purified KLH (p-KLH).
It will be understood by practitioners having ordinary skill in the art
that the concentrations of buffer ions and chloride salts specified in the
foregoing PBS solution may be adjusted in a variety of combinations such that
the ionic strength of the resultant solution remains approximately isotonic to
mammalian cells. Thus, the PBS specification given above is not intended to
limit the scope of the present invention, but rather to serve as a guide in the
formulation of a composition that optimally preserves the immunogenicity
and anti-tumor activity of KLH. It is further understood that a non-isotonic
composition that nevertheless retains the important features of the present
invention such as the presence of stabilizing divalent cations or pH ranges
compatible with the presence of intact non-degraded KLH subunits and at least
about 50% didecameric or higher multimers would be within the intended scope of
the present invention.
It is of critical importance that p-KLH be protected from freezing and not
be lyophilized, as these phase changes cause damage to the KLH structure and
activity, as shown below.
EXAMPLE 2
Preparation of Dissociated Frozen and Lyophilized KLH
Dissociated KLH (d-KLH) was produced by addition to p-KLH of Tris-HCl (pH
8.8) and ethylenediamine tetracetic acid to final concentrations of 50 mM and 10
mM, respectively. Frozen (f-KLH) was prepared by placing p-KLH for at least 24
hrs. in a freezer maintained at -20 degree C. Lyophilized KLH (l-KLH) was
prepared by freeze-drying p-KLH in a Labconco [register mark] Model 75040 Freeze
Dryer 8 according to the manufacturer's instructions.
EXAMPLE 3
Characterization of Non-Native, Denatured Subunit Structures by SDS-PAGE
Sodium dodecylsulfate-polyacrylamide gel electrophoresis (SDS-PAGE) was
used to assess the size and purity of the KLH subunit. The results (FIG. 1)
disclosed a major protein band at approximately equal to 400,000 D? with minor
protein bands, constituting [greater than symbol]2% of the total, migrating at
lower molecular weights. Since all four KLH preparations exhibited similar
banding profiles, it is concluded that the processes of dissociating, freezing,
or lyophilizing KLH do not affect its subunit structure. N.B. The molecular
weight estimate of the KLH subunit by SDS-PAGE is known to be reliable, but
anomalously low compared to estimates from other techniques such as
sedimentation-equilibrium ultracentrifugation.
6
EXAMPLE 4
Characterization of Subunit Structures by EM
Electron microscopy (EM) was used to determine the effect of dissociation,
freezing, and lyophilization on KLH structure. As is evident in FIG. 2A, KLH
purified according to the method of the present invention consists primarily of
didecameric or higher multimers. Dissociated KLH (FIG. 2B) consists entirely of
monomeric or dimeric subunits. Frozen and lyophilized KLH (FIGS. 2C and 2D)
exhibit a markedly different appearance, with substantially fewer didecamers,
and an increased proportion of decameric and smaller structures. That is, the
f-KLH or l-KLH preparations contain substantially less than 50% didecameric or
higher multimers.
EXAMPLE 5
Characterization of Native Solution Structures by Velocity Ultracentrifugation
Sedimentation-velocity ultracentrifugation analyses disclosed major
effects of dissociating, freezing, or lyophilizing KLH on the solution
structure (FIG. 3). Whereas p-KLH was found to consist of approximately 73%
didecameric multimers, d-KLH, f-KLH, and l-KLH contained 0%, 13% and 23%,
respectively, of this form. It also will be evident from the data in FIG. 3
that f-KLH and l-KLH exhibited a marked shift from didecameric to decameric
forms that was accompanied by a substantial increase in d-KLH. Such dramatic
changes in quaternary structure, merely upon freezing or lyophilization, were
unexpected, and may influence the immunogenicity of the protein (see below).
EXAMPLE 6
Dose-Response Relationship of p-KLH in an
Intravesical Murine Bladder Tumor Model
The dose-response relationship between the amount of KLH administered and
its anti-tumor effect was determined for p-KLH in the intravesical murine
bladder tumor model of Shapiro et al. (29). Mice were immunized subcutaneously
(footpad) with 200 micrograms of p-KLH three weeks prior to tumor implantation.
On Day 0, mice were anesthesized (Na pentobarbital, 0.05 mg/g), catheterized,
the bladder was cauterized, and 2x10[to the fourth power] MB-49 bladder tumor
cells (provided by G. Chodak, University of Chicago, Chicago, Ill.; 30) were
instilled into the bladder in 0.1 mL of PBS. On Day 1, mice were assigned
randomly to treatment groups containing 10 mice/group. On Days 1, 7, and 14,
mice were anesthetized and catheterized to receive the indicated doses of p-KLH.
The control group was treated s.c. (footpad) on Day 21 and intravesically on
Days 1, 7 and 14 with equivalent volumes of the vehicle. The response variable
in this tumor model is tumor outgrowth, which is detected by palpation and
confirmed in selected animals at autopsy.
Mice were monitored for tumor outgrowth weekly for at least 4 weeks. At
the end of the test period, the mice were sacrificed and the presence or
absence of bladder tumors was verified macroscopically or by histological
examination, as required.
As shown in FIG. 4, there was a dose-dependent delay in tumor onset and
reduction in tumor incidence among the treated groups, with maximal anti-tumor
activity among groups receiving 100-1000 micrograms of
<PAGE> 43
5,407,912
7
p-KLH (the KLH composition of the present invention having enhanced immunogenic
activity). At the four-week time point, significant differences (Fisher's Exact)
between control vs. experimental animals were observed. Thus, 10 micron g of the
p-KLH composition represents a suboptimal dosage, and dosages of 100 micron g or
greater of the p-KLH composition are efficacious in this animal model.
EXAMPLE 7
Comparison of p-KLH, d-KLH, f-KLH and l-KLH Anti-Tumor Activity in an
Intravesical Murine Bladder Tumor Model
The intravesical murine bladder tumor model of Shapiro et al. (29) again
was used to determine anti-tumor activity. Two or three weeks prior to tumor
implantation, female mice (6-10 weeks; 20-30 g) were immunized subcutaneously
(?? footpad) with p-KLH. On Day 0, the mice were anesthetized (Na-pentobarbital,
0.05 mg/g), catheterized, and bladders were cauterized and instilled with
2x10(4) MB-49 bladder tumor cells (30) in 0.1 mL of phosphate-buffered saline
solution (PBS). On Day 1, mice were randomly sorted into groups of 10 animals
each. Control animals either were immunized and treated with the vehicle
(vehicle controls) or were immunized with the vehicle and treated with p-KLH
(KLH controls). All experimental groups were immunized with KLH and treated
either with 10 micron g or 100 micron g instillations. As in the previous
example, the response variable in this tumor model is tumor out-growth, which is
detected by palpation and confirmed in selected animals at autopsy.
The effect of different forms of KLH administered at two dose levels was
determined among the four different KLH preparations at suboptimal (10 micron g)
and optimal (100 micron g) dosages. Two weeks prior to tumor implantation,
female mice (6-10 weeks; 20-30 g) were immunized ?? (footpad) with 200 micron g
of p-KLH. On Day 0, the mice were inoculated intravesically with 2x10(4) MB-45
bladder tumor cells as above. On Day 1, mice were randomly sorted into groups of
10 animals each. Control animals either received sham treatment with the vehicle
or were sham-immunized with the vehicle and treated with KLH. Experimentals were
treated either with 10 micron g or 100 micron g instillations of KLH from each
of the four preparations.
The results for mice receiving the 10 micron g dosage are summarized in
FIG. 5. By four weeks post-inoculation, palpable tumors were present in 70% of
mice in the vehicle of KLH-control groups. Immunized mice that were treated with
10 micron g of p-KLH or d-KLH exhibited significantly fewer tumors (p is less
than 0.09; Fisher's Exact) than either of the control groups. Immunized mice
that received f-KLH or l-KLH did not experience a significantly reduced rate of
tumor outgrowth (p is greater than 0.01; Fisher's Exact). Maximal anti-tumor
activity of a suboptional dose of the p-KLH composition was noted, particularly
at 2-4 week time points.
The results for mice receiving the 100 micron g dosage are summarized in
FIG. 6. By four weeks post-inoculation, palpable tumors were present in 70% of
mice in the vehicle of KLH-control groups. Experimental groups that were treated
with 100 micron g of p-KLH exhibited significantly fewer tumors (p is less than
0.01; Fisher's Exact) than either of the control groups. Immunized mice treated
with dissociated or frozen KLH also experienced significantly reduced tumor
outgrowth at this dosage (p is less than 0.09; Fisher's Exact). Mice treated
with lyophilized
8
KLH did not experience a significantly reduced rate of tumor outgrowth (p
is greater than 0.01; Fisher's Exact). Maximal anti-tumor activity of an
efficacious dose of the p-KLH composition was noted, particularly at 2-4 week
time points.
These results demonstrate that (although they retain some measure of
anti-tumor activity) dissociated, frozen or lyophilized preparations of KLH are
less potent than a solution of KLH that has been protected from such phase
changes. Thus, the KLH composition of the present invention demonstrates
enhanced immunogenic activity, particularly enhanced anti-tumor activity.
It will be appreciated that the methods and compositions of the instant
invention can be incorporated in the form of a variety of embodiments, only a
few of which are disclosed herein. It will be apparent to the artisan that other
embodiments exist and do not depart from the spirt of the invention. Thus, the
described embodiments are illustrative and should not be construed as
restrictive.
LIST OF REFERENCES
1. Senozan, N.M. et al., Hemocyanin of the giant keyhole limpet, Megathura
crenulata, in: "Invertebrate Oxygen-Binding Proteins", J. Lamy et al.,
eds., Marcel Dekker, Inc., N.Y., pp 703-717 (1981).
2. Herscowitz, H.B. et al., Immunochemical and immunogenic properties of a
purified keyhole limpet haemocyanin Immunology 22x51-61 (1972).
3. Curtis, J.E. et al., The human primary immune response to keyhole limpet
haemocyanin: Interrelationships of delayed hypersensitivity, antibody
response and in vitro blast transformation, Clin. Exp. Immunol. 6:473-191
(1970).
4. Curtis, J.E. et al., The human secondary immune response to keyhole limpet
haemocyanin, Clin. Exp. Immunol. 10:171-177 (1972).
5. Garvey, J.S., et al., High-molecular-weight hemocyanin. In: "Methods in
Immunology", Addison-Wesley Publ. Co., pp. 135-139 (1977).
6. Herskovits, T.T. et al., Subunit structure and higher order assembly of the
hemocyanins of the melongenidae family: Melongena corona (Gmelln); Busycan
canalfeslarum (L.inne). B. carica (Gmein). B. contrarium (Conrad), and B.
spiratum (Lamarek). Comp. Biochem. Physiol. [Section] 94B:415-421 (1989).
7. Herskovits, T.T., Recent aspects of the subunit organization and
dissociation of hemocyanins. Comp. Biochem. Physiol. [Section]:597-611
(1988).
8. Herskovits, T.T. et al., Higher order assemblies of mollusean hemocyanins.
Comp. Biochem. Physiol [Section] 99B:19-34 (1991).
9. Savel-Niemann, A. et al., Keyhold limper hemocyanin; On the structure of a
widely used immunologic tool. In: "Invertebrate Dioxygen Carriers". G.
Preaux et al., eds., Leuven University Press. Leuven, pp. 351-356 (1990).
10. Mark, J. et al., The role of two distinct subunit types in the
architecture of keyhole limpet hemocyanin (KLH) Naturwiss. 78:512-514
(1991).
11. Van Holde, K. E. et al., The Hemocyanins. In: "Subunits in Biological
Systems", S.N. Timasheff et al., eds, Marcel Dekker, N.Y., pp. 1-53
(1971).
12. Ellerton, H. D. et al, Hemocyanin - A current perspective. Prog.
Biophys. Mol. Biol. 41:143-248 (1983).
13. Silverman, D. T. et al., Epidemiology of Bladder Cancer. In:
"Hematology/Oncology Clinics of North
<PAGE> 44
5,407,912
9
America", P. W. Kantoff et al., eds., W. B. Saunders Co., Philadelphia,
p. 1 (1992).
14. Itoku, K. A. et al., Superficial Bladder Cancer. In: "Hematology/Oncology
Clinics of North America", P. W. Kantoff et al., eds., W. B. Saunders Co.,
Philadelphia, pp. 99-116 (1992).
15. Morales, A. et al., Intracavitary bacillus Calmette-Guerin in the
treatment of superficial bladder tumors. J. Urol. 116:180-183 (1976).
16. Morales, A. et al., Immunotherapy for superficial bladder cancer. A
developmental and clinical overview. Urol. Clin. Nor. Am. 19:549-556
(1992).
17. Lamm, D. L., Optimal BCG treatment of superficial bladder cancer as
defined by American trials. Eur. Urol. 21 Suppl. 2:12-16 (1992).
18. Olsson, C. A. et al., Immunologic reduction of bladder cancer recurrence
rate. J. Urol. 111:173-176 (1974).
19. Jurincic, C. D. et al., Immunotherapy in bladder cancer with
keyhole-limpet hemocyanin: a randomized study. J. Urol. 139:723-726
(1988).
20. Flamm, J. et al., Recurrent superficial transitional cell carcinoma of
the bladder. Adjuvant topical chemotherapy vs. immunotherapy. A
prospective randomized trial. J. Urol. 144:260-263 (1990).
21. Kaible, T. et al., Intravesilcale residivprophylane beim oberflachlieben
harnblasenkarrinom mit BCG tund KLH. Urologe 30:118-121 (1991).
22. Flamm, J. et al., Adjuvant topical chemotherapy versus immunotherapy in
primary superficial transitional cell carcinoma of the bladder. Br. J.
Urol. 67:70-73 (1991).
23. Lamm, D. L. et al., Keyhole-limpet haemacyanin and immune ribonucleic acid
immunotherapy of murine transitional cell carcinoma, Urol. Res. 9:227-230
(1981).
24. Lamm, D. L. et al., Immunotherapy of murine transitional cell carcinoma,
J. Urol. 128:1104-1108 (1982).
25. Lamm, D. L. et al., Immunotherapy of murine bladder cancer with keyhole
limpet hemocyanin (KLH). J. Urol. 149:648-652 (1993).
10
26. Laemmli, U. K., Cleavage of structural proteins during the assembly of the
head of bacteriophage T4. Nature 227:680-685 (1970).
27. Van Holde, K. E. et al., Boundary analysis of sedimentation-velocity
experiments with monodisperse and paueidisperse solutes. Biopolym.
17:1387-1403 (1978).
28. Vandenbark, A. A. et al., All KLH preparations are not created equal.
Cell. Immunol. 60:240-243 (1981).
29. Shapiro, A., Ratliff, T. L., Oakley, D. M. and Catalona, W. J. Reduction
of bladder tumor growth in mice treated with intravesical bacillus
Calmette-Guerin and its correlation with bacillus Calmette-Guerin
viability and natural killer cell activity. Cancer Res. 43:1611 (1983).
30. Chodak, G.W. and Summerhayes, I., Detection of angiogenesis activity in
malignant bladder tissue and cells. J. Urol. 132:1032 (1984).
What is claimed is:
1. A method for treating bladder cancer which comprises administering
to a patient having bladder cancer an and-tumor effective amount of a keyhole
limpet hemocyanin (KLH) composition which comprises purified KLH and a
physiologically acceptable isotonic buffer, wherein said KLH comprising (i) an
intact, non-degraded subunit of approximately 280,000 in molecular weight, and
(ii) at least about 50% dideomeric or higher multimers of said subunit.
2. The method of claim 1 wherein the concentration of KLH is about 0.1
to about 20 mg/ml.
3. The method of claim 1 wherein the concentration of KLH is about 2
to about 10 mg/ml.
4. The method of claim 1 wherein the concentration of KLH is 5 mg/ml.
5. The method of claim 1 wherein said buffer contains calcium and
magnesium.
6. The method of claim 5 wherein the concentration of KLH is about 0.1
to about 20 mg/ml.
7. The method of claim 5 wherein the concentration of KLH is about 2
to about 10 mg/ml.
8. The method of claim 5 wherein the concentration of KLH is 5 mg/ml.
<PAGE> 45
[LOGO]
Pharma
November 4, 1997
Jeffrey L. Ihnen, Esq.
Rothwell, Figg, Earnst, and Kurz
555 13th Street N.W. Suite 701
East Tower
Washington D.C. 20004
Re: Ebart et al.
USSN: 08/050,697
Filed: April 19, 1993
Now US Patent 5,407,912
Dear Jeffrey,
Enclosed herewith is a copy of the issued patent, the specification from
our file and all papers that I had filed prior to you taking over the
prosecution with the IDS filed November 15, 1993. I am also enclosing a
complete copy of the prosecution filed for the divisional application directed
to the KLH composition. In this case a File Wrapper Continuation was filed
March 26, 1997. We are awaiting a first Office Action. Also included herewith
are associate powers of attorney to prosecute the KLH composition application
and to file a continuation application directed to methods for treating bladder
cancer using KLH having the subunit size of about 400,000.
I believe Dr. Nick Pomato will be the person with whom you can discuss
technical matters at PerImmune. I will speak with him and confirm this. Their
phone number remains (301) 258-5200. Please let me know what else you may need
for taking these two cases forward.
Sincerely,
/s/ WILLIAM M. BLACKSTONE
- ----------------------------------
William M. Blackstone
Enclosures
WMB/dp
<PAGE> 46
EXHIBIT C
PERIMMUNE PROJECT TEAM
Dr. Michael G. Hanna, Jr.
Dr. Diana Goroff
Katherine Habicht
<PAGE> 47
EXHIBIT D
MENTOR PROJECT TEAM
Christopher Conway
Bobby Purkait
Loren McFarland
<PAGE> 48
EXHIBIT E
FORM OF CERTIFICATE OF ANALYSIS
(See Attached)
<PAGE> 49
[PERIMMUNE, INC. LETTERHEAD]
CERTIFICATE OF ANALYSIS
KEYHOLE LIMPET HEMOCYANIN
PAGE 1 OF 2
<TABLE>
KLH-ImmuneActivator(TM) Lot KLH 11B96V
Vial Contents: 2.2 ml of a buffered isotonic solution containing 5.0 [plus or minus] 0.5 mg/ml protein.
Appearance: Blue translucent liquid
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Assay Date Results Specifications Testing Facility
- ----- ---- ------- -------------- ----------------
<C> <S> <S> <S> <S>
Protein Conc. 26 March 96 4.9 mg/ml 4.5 to 5.5 mg/ml PerImmune Inc.,
Rockville, MD.
SDS-PAGE 29 May 96 Major protein band migrates Single major protein band at PerImmune, Inc.
at 275-285 kDa. Minor 275-285 kDa. Minor bands Rockville, MD.
bands (<275 kDa) seen. (<275 kDa) are acceptable.
Determination 8 May 96 0.25% Cu (wt/wt) 0.21-0.31% Cu (wt/wt) West Coast
of Trace Elements Toxic heavy metals Toxic heavy metals Analytical Service, Inc.
by ICP not detected. not detectable. Santa Fe Springs, CA
Sucrose Density 29 May 96 Major pcak that co-migrates KLH co-migrates with PerImmune, Inc.
Gradient Centri- with ferritin. No other ferritin and lacks any Rockville, MD.
fugation pcaks seen. slower migrating forms.
Analytical Ultra- 3 May 96 23% 63.89 [less than or equal to] Dept. of Biochemistry
centrifugation 60% 96.48 50% sediments with S?? Oregon State University
17% >100.08 of 90-10SS. Remaining Corvallix, OR
components may not be <50S.
Endotoxin 14 May 96 3.9 EU/mg protein [greater than or equal to] PerImmune, Inc.
7.0 EU/mg protein Rockville, MD.
Pyrogenicity 20 May 96 Non-pyrogenic at the Non-pyrogenic at Microbiological
50 mg/70 Kg dose level 50 mg/70 kg doseage. Associates, Inc.
Rockville, MD.
</TABLE>
<PAGE> 50
PERIMMUNE, INC.
CERTIFICATE OF ANALYSIS
KEYHOLE LIMPET HEMOCYANIN
Page 2 of 2
KLH-ImmuneActivator(TM) Lot KLH 11B96V
Vial Contents: 2.2 ml of a buffered isotonic solution containing 5.0*0.5 mg/ml
protein.
Appearance: Blue translucent liquid
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assay Date Results Specifications Testing Facility
- ----- ---- ------- -------------- ----------------
<S> <C> <C> <C> <C>
General 20 May 96 Passed test Non-toxic to PerImmune, Inc.
Safety laboratory Rockville, MD.
test animals
Sterility 23 May 96 Negative for Negative for Microbiological
bacterial and bacterial Associates, Inc.
fungal and fungal Rockville, MD.
contamination contamination
</TABLE>
Limited by Federal law to investigational use
Prepared By: /s/ ILLEGIBLE Date: 29 Oct. 96
-----------------------------
Project Supervisor
Approved By: /s/ ILLEGIBLE Date: 29 Oct. 96
-----------------------------
Manager, Pilot Manufacturing
Reviewed By: /s/ ILLEGIBLE Date: 29 Oct. 96
-----------------------------
Quality Assurance
<PAGE> 1
EXHIBIT 10.23
DISTRIBUTION AGREEMENT BETWEEN PERIMMUNE, INC.,
AND MENTOR CORP.
This Exclusive Distribution Agreement (hereinafter the "Agreement") is
made in Rockville, Maryland, by and between PerImmune, Inc. (hereinafter
"PERIMMUNE"), a corporation existing under the laws of Delaware, and MENTOR
Corp. (hereinafter "MENTOR"), a corporation existing under the laws of
Minnesota.
WHEREAS, PERIMMUNE desires to sell and/or market its AuraTek-FDP Bladder
Cancer Diagnostic product and MENTOR desires to purchase PERIMMUNE's product
for resale to customers bearing a trademark or trade name and logo owned by
MENTOR; and
WHEREAS, the parties desire to enter into an agreement setting forth the
terms of their relationship;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties do hereby agree as follows:
1. Product. The product of PERIMMUNE covered by this Agreement is set forth
on Exhibit A attached hereto (hereinafter the "Product") and any future
modifications or improvements thereto. PERIMMUNE reserves the right to
modify the Product from time to time, and shall give MENTOR at least six
(6) months prior written notice before making changes to its
manufacturing process that would have an impact on any of PERIMMUNE's
product verifications or validations, or changes in raw materials that
would alter the operating principle of the Product or other changes that
could impact product labeling or promotional literature; provided,
however, that PERIMMUNE shall be required to provide MENTOR with only
reasonable advance notice where such modification is required to comply
with any applicable legal or regulatory requirement or the unanticipated
modification or unavailability of raw material.
2. Appointment and Acceptance. PERIMMUNE hereby grants MENTOR the exclusive
right to distribute the Products in the United States, and outside the
United States (the "Territory").
3. Term and Renewal. The term of this Agreement shall be for a period of
five (5) years, commencing on the Effective Date (the "Initial Term").
"Effective Date" means the date on which this Agreement is executed. This
Agreement shall automatically renew for additional and successive terms
of one (1) year unless either party provides written notice on
non-renewal at least six (6) months prior to the close of the Initial
Term or any anniversary date thereafter.
4. Terms of Sale.
(a) MENTOR shall fix the price of the individual Product sold hereunder.
On a monthly basis, MENTOR shall pay to PerImmune, in United States
Dollars, fifty
<PAGE> 2
percent (50%) of the Net Sales, as defined below, received by MENTOR
from the sale of the Product, less the Advances, as hereinafter
defined, paid by MENTOR to PerImmune during such month. For purposes
herein, "Advances" shall mean an amount equal to 25% of the list
price, per kit, paid by MENTOR to PerImmune within 30 days of
MENTOR's receipt of kits ordered by it. Unless MENTOR and PerImmune
otherwise agree in a writing signed by both of them, the payment and
other provisions set forth in this Agreement shall supersede those
of any subsequent purchase order, sales confirmation form or other
document hereafter sent by either party hereto to the other. For
purposes hereof, Net Sales shall mean the gross invoiced price for
the sales of the Products to Purchasers by MENTOR, its agents or
affiliates ("Gross Sales") less (a) any credits and allowances
granted by MENTOR to purchasers with respect to the Product,
including, without limitation, credits and allowances on account of
price adjustments, returns, discounts, and chargebacks, (b) any
sales, excise, value added, turnover or similar taxes, and (c)
transportation, insurance and handling expenses if separately
invoiced and directly chargeable to such sales.
(b) Within thirty (30) days after the end of each month MENTOR shall
submit a report to PERIMMUNE setting forth the (i) cumulative
number of kits purchased from PERIMMUNE through the end of the
preceding month (ii) 50% of net sales price for each such kit sold
through the end of the preceding month, (iii) the advances
previously paid for such kits. Each such report shall be
accompanied by payment of the difference between (ii) and (iii).
(c) Title and risk of loss shall pass to MENTOR upon release of Product
for shipment by PERIMMUNE to the designated carrier. All freight and
applicable insurance charges shall be the responsibility of MENTOR.
PERIMMUNE will be responsible for contracting freight services, in
accordance with Section 8(a) of this Agreement, for which MENTOR
will be billed on a shipment by shipment basis. Product is subject
to inspection and acceptance by MENTOR upon receipt. MENTOR shall be
deemed to have accepted all shipments of Product unless rejected for
non-conformity with the Quality Specifications, as hereinafter
defined, in accordance with Article 9 of this Agreement, within
twenty (20) working days after receipt of shipments from PERIMMUNE.
(d) Unless approved by MENTOR in writing, PERIMMUNE will not sell any
Product to MENTOR as of the effective date hereof that has less
than eighteen (18) months shelf-life from date of shipment by
PERIMMUNE.
5. Termination. Should any of the following events occur, the affected party
may terminate this Agreement by giving notice, in writing to be effective
on the date specified in the notice, namely,
2
<PAGE> 3
(a) failure to either party to observe any of the terms hereof to a material
extent and to remedy the same (where it is capable to being remedied)
after having received reasonable notice from the aggrieved party and a
reasonable opportunity to cure;
(b) either party becoming insolvent or having a receiver appointed of its
assets, or execution or distress levied upon its assets;
(c) an order being made or a resolution being passed for the winding up or
liquidation of either party;
(d) if PERIMMUNE discontinues manufacturing the product for valid business
reasons that cannot be remedied during the term of this Agreement then (i)
at the request of MENTOR, PERIMMUNE shall assist MENTOR in establishing an
alternative source of supply and shall transfer any necessary technology or
knowledge to MENTOR or its alternative supplier provided that MENTOR
reimburses PERIMMUNE the out-of-pocket costs of doing so (including salary
and benefits for time expended by PERIMMUNE employees, (ii) or if the
discontinuation occurs during the first three years MENTOR can receive the
return of its investment at its election. Nothing herein is intended to
permit PERIMMUNE to breach its obligation under the agreement.
6. Procedures on Termination. Upon termination or non-renewal of this
Agreement:
(a) MENTOR shall return to PERIMMUNE all literature which PERIMMUNE shall have
supplied to MENTOR and which is in its possession.
(b) the rights and duties of each party under this Agreement in respect of
performance prior to termination or non-renewal shall survive and be
enforceable in accordance with the terms of this Agreement.
(c) within thirty (30) days of receipt of PERIMMUNE's invoice therefor, MENTOR
will pay PERIMMUNE for all remaining inventory of Product for which MENTOR
has issued purchase orders to PERIMMUNE. Upon payment, PERIMMUNE will ship
such inventory to MENTOR at MENTOR's expense.
7. MENTOR's Duties. MENTOR shall:
(a) use best commercial efforts to advertise and promote the sale of the
Product in a manner calculated by MENTOR to yield benefit to the parties
hereto in light of the prevailing circumstances and to the extent to which
any products are at the relevant time competitive with other products.
MENTOR agrees that during the term of this Agreement, it will not market
any product using the same technology which detects the same analyte and
thereby directly competes with a Product.
3
<PAGE> 4
(b) submit its purchase orders to PERIMMUNE in writing or via facsimile, signed
by an authorized representative of MENTOR.
(c) pay all PERIMMUNE invoices in United States currency by company check.
(d) submit to PERIMMUNE a twelve (12) month forecast of purchases delivery
dates from PERIMMUNE for the Product in a format to be mutually determined
by the parties. Said forecast shall be submitted by MENTOR to PERIMMUNE
within thirty (30) days of commencement of the term of this Agreement, and
quarterly thereafter.
(e) obtain advance written authorization and a Returned Material Authorization
("RMA") prior to returning any of the Product.
(f) maintain a properly trained sales force of adequate size to represent and
promote the sale of the Product and provide instructions to customers in
the use of the Product. MENTOR shall be responsible for developing its own
marketing plan and system for dispensing the Product.
(g) carry in stock an inventory of Product sufficient to promptly fill the
orders of MENTOR's customers in the Territory.
(h) apply for and obtain all necessary licenses, permits and other
authorizations required by local law or regulation in relation to the
promotion, marketing, distribution and supply of the Product in any
jurisdiction or country in which MENTOR sells the Product.
(i) pay any import duty or like charge on the entry of the Product into the
Territory and any local or other applicable taxes.
(j) maintain separate and detailed accurate and complete records of all
transactions in respect of the Product, including, but not limited to, such
records as identify all customer purchases by Product and serial and/or lot
number, and possess the capability to notify all purchasers in the event of
a Product recall or corrective action.
(k) defray all expenses of and incidental to the distribution and sale of
Product hereunder incurred by MENTOR.
(l) make no contracts or commitments on behalf of PERIMMUNE or make any
promises or representations or give any warranties or guarantees with
respect to the Product except as herein expressly permitted or otherwise
incur any liability on behalf of PERIMMUNE without PERIMMUNE's prior
written consent, nor
4
<PAGE> 5
represent itself as agent or partner of PERIMMUNE.
(m) comply with all laws and regulations and requirements applicable to
a seller of in-vitro diagnostics products, and with all laws and
regulations and requirements of governmental agencies having
jurisdiction with the Territory.
(n) except as authorized in writing by PERIMMUNE, refrain absolutely
from using the trademark or trade name and logo of PERIMMUNE in
connection with the marketing, distribution and sale of any Product.
8. PERIMMUNE's Duties. PERIMMUNE shall:
(a) make reasonable best efforts, in good faith, to ship MENTOR's
orders for Product within thirty(30) days from date of order
receipt. MENTOR shall specify the method of shipment and insurance
and PERIMMUNE shall make reasonable best efforts, in good faith, to
comply with such specifications. If no such specification is made,
or if the specification cannot be reasonably complied with after
notice to MENTOR and an opportunity to resolve the issues
surrounding PERIMMUNE's alleged inability to comply, PERIMMUNE may
select a reasonable manner of shipment and insurance.
(b) at the time of shipment, the product will have a remaining shelf
life of not less than 16 months.
(c) will provide up to 12,000 units per year of product at PERIMMUNE's
cost plus shipping charges to be used by MENTOR for promotional
purposes at no reimbursement to MENTOR.
(d) comply with all laws and regulations and requirements applicable
to PERIMMUNE as a manufacturer of in-vitro diagnostic products.
(e) except as authorized in writing by MENTOR, refrain absolutely from
using the trademark or trade name and logo of MENTOR in connection
with the marketing, distribution and sale of any Product.
(f) provide reasonable technical assistance to MENTOR's personnel
necessary for the marketing of the Product.
(g) at PERIMMUNE's expense, provide MENTOR with written product inserts
relating to the Product's use, and with such amendments thereto as
subsequently become available.
(h) provide necessary documentation to assist MENTOR in meeting
requirements to
5
<PAGE> 6
register Products in the Territory, and where possible, allow MENTOR
to utilize prior registrations by PERIMMUNE.
(i) provide MENTOR with copies of the 510(k) premarket notifications
submitted for the Product, copies of current package insert for the
Product, copies of documents describing specifications for the
Product, and copies of all current and future correspondence with
the FDA pertaining to the Product. PERIMMUNE will comply with the
FDA's current GMP regulations in the manufacture of the Product, if
those regulations are modified to include components of finished
devices. If needed to comply with any change in the law or FDA's GMP
regulations or policies, MENTOR shall be given the right to inspect
PERIMMUNE's manufacturing facilities and GMP records pertaining to
the manufacture of the Product. If any action should be taken by the
FDA to restrict or prevent the distribution of any of the Product
for more than thirty (30) days, and such restriction is not due to
the negligence of MENTOR, then upon notice to PERIMMUNE, MENTOR
shall have the right to terminate this Agreement as to such Product.
PERIMMUNE shall replace any affected inventory of Product under
this section or refund to Mentor the purchase price it paid to
PERIMMUNE for such inventory if PERIMMUNE is unable to replace the
Product with comparable inventory. PERIMMUNE shall replace or
repurchase any affected inventory of Product which MENTOR replaces
or repurchases from MENTOR's customers, at the price MENTOR paid
PERIMMUNE for such inventory. IN NO CASE SHALL PERIMMUNE BE LIABLE
FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES.
(j) comply with the Federal Food, Drug, and cosmetic Act. The Product
comprising each shipment or other delivery hereafter made by
PERIMMUNE to, or on the order of, MENTOR, as of the date of such
shipment or delivery, shall be, on such date, not adulterated or
misbranded within the meaning of the Federal Food, Drug, and
Cosmetic Act.
9. Performance Standards.
(a) Quality Specifications and Characteristics. PERIMMUNE shall deliver
to MENTOR Product having the quality specifications agreed upon by
the parties as set forth in Exhibit B (the "Quality
Specifications").
(b) Certificate of Analysis. Concurrent with shipment, PERIMMUNE shall
fax to MENTOR a Certificate of Analysis, in the form set forth in
Exhibit B, for each lot of Product sold to MENTOR, confirming that
the Product meets the Quality Specifications.
(c) Product Acceptance. Within twenty (20) working days of receipt of
Product,
6
<PAGE> 7
MENTOR shall take and conduct analysis of samples of Product
delivered by PERIMMUNE. Should the result of an analysis of such
sample deviate from the Quality Specifications, MENTOR shall notify
PERIMMUNE in accordance with Article 4(c) hereof and immediately
thereafter provide PERIMMUNE with samples of the Product tested. If,
following a review of the test results and after conducting its own
tests of the sample, PERIMMUNE agrees that such sample does not
conform to the Quality Specifications, PERIMMUNE shall provide
MENTOR, free of any additional charge, with new deliveries of the
same quantity of the Product as the one from which the sample was
taken, or, in PERIMMUNE's discretion and at its cost, PERIMMUNE may
promptly reprocess the nonconforming Product to meet the Quality
Specifications. In either event, MENTOR shall return, at PERIMMUNE's
expense, the particular lot or shipment of the Product which does
not comply with the Quality Specifications if requested to do so by
PERIMMUNE.
10. PRODUCT RECALL.
(a) PERIMMUNE shall maintain an appropriate record of all claims made or
to be made regarding the Product's performance.
(b) Each party shall keep the other informed of any formal action
relating to any specific lot of Product sold to MENTOR hereunder by
an regulatory agency of any state, national government, or
government agency having jurisdiction.
(c) Should any governmental or corporate action require the recall or
field corrections or withholding from market of Product sold by
PERIMMUNE to MENTOR, MENTOR shall bear the reasonable, direct costs
and expenses of recall or field correction if such recall or field
correction is the result of any fault or omission attributable to
MENTOR and PERIMMUNE shall bear the cost of products and the actual
costs of replacing the Product if such recall or field correction is
the result of any fault or omission attributable to PERIMMUNE.
Should such recall or field correction result from the fault of both
parties, the parties shall share the costs of Products and the
actual cost of replacing the Products in proportion to their
respective degree of fault.
11. PRODUCT COMPLAINTS.
(a) Should either party experience any quality problem involving field
correction or recall of any specific lot(s) of Product supplied to
MENTOR by PERIMMUNE, such party will notify the other in writing by
facsimile within twenty-four (24) hours of the initiation of the
field correction or recall. Both parties will test retained samples
of lots in question and report its findings to the other within ten
(10) working days. Each party retains the right to correct field
problems arising
7
<PAGE> 8
out of its fault or omission as it deems appropriate, with or without
the concurrence of the other. All information about Product complaints
shall be considered "Confidential Information" under the terms of the
Agreement.
(b) Either party shall immediately notify the other party in writing should
it become aware of any defect or condition that renders any lot(s) of
Product supplied by PERIMMUNE to MENTOR in violation of the United
States Food, Drug and Cosmetic Act, or of a similar law of any
jurisdiction or country where the Product is sold. The parties shall
share with each other all data on confirmed lot specific Product
complaints including, but not limited to, complaints or information
regarding performance and/or allegations or reports of any negative
effect from the use or misuse of such affected lot of Product as soon as
such data is available. Each party will provide reasonable assistance to
the other in resolving customer complaints to the extent the complaint
arises out of any fault or omission of the party whose assistance is
requested. However, MENTOR shall have sole responsibility and authority
to interact directly with MENTOR's customers in the resolution of such
complaints and PERIMMUNE agrees that it will only interact with MENTOR
in such matters.
(c) PERIMMUNE shall evaluate and investigate all customer complaints in
connection with the Product which may be brought to its attention, in
writing, by MENTOR; provided such complaints have been confirmed by
MENTOR QA/QC or technical service personnel using the same standards for
confirmation which MENTOR's uses for products other than the PERIMMUNE
Product and which are believe in good faith by MENTOR to arise out of a
fault or omission attributable to PERIMMUNE. Within twenty (20) calendar
days following receipt from MENTOR of the original notification of each
such complaint, PERIMMUNE agrees to provide MENTOR with a written
interim or final complaint investigation report, using the same
standards for evaluation and investigation that PERIMMUNE uses for
products other than the Product. All such Product complaints reported to
PERIMMUNE by MENTOR shall be reviewed monthly by PERIMMUNE until
closure, and a summary report thereof will be provided by PERIMMUNE to
MENTOR.
(d) PERIMMUNE will report to MENTOR all data and/or information pertaining
to adverse reports on any lot of Product supplied by PERIMMUNE for
distribution by MENTOR which would have a materially adverse impact on
performance of the Product.
(e) Recalls or field notifications with respect to the Product, or any of
them, shall be the responsibility of the party whose fault or omission
necessitated such action, as described in Article 10(c).
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(f) Should there be a difference of opinion between PERIMMUNE and
MENTOR regarding a field notification or recall, MENTOR will
exercise the right to notify its customers without delay.
12. Warranties.
(a) PERIMMUNE warrants that the Product which is or will be the subject
of FDA cleared 510(k) premarket notifications have not been changed
or modified in design, components, method of manufacture or
intended use from the Product as described in those 510(k)
premarket notifications, and will notify MENTOR in advance of any
changes in accordance with Article 1.
(b) PERIMMUNE warrants that the Product manufactured and supplied under
this Agreement shall at the time of shipment meet the Quality
Control Specifications of PERIMMUNE which are attached to this
Agreement as Exhibit B. No claim under this warranty may be made
with respect to a unit of the Product if shipped or used after the
expiration of the shelf-life of the Product as determined by
PERIMMUNE. PERIMMUNE further warrants that prior to shipment to
MENTOR, all of its standard tests and quality control procedures
have been carried out in relation to each lot of the Product with
satisfactory results. The limited warranty to MENTOR set forth in
this Agreement shall control over any warranty provisions which may
be set forth in MENTOR's Product literature and MENTOR shall hold
PERIMMUNE harmless from any and all damages and expenses which
PERIMMUNE may incur as a result of unauthorized MENTOR warranties
or representations. PERIMMUNE MAKES NO WARRANTY EXPRESSED OR
IMPLIED WITH RESPECT TO THE PRODUCTS BEYOND THAT WHICH IS SET FORTH
IN THIS AGREEMENT INCLUDING THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR ANY PARTICULAR PURPOSE. Any warranty made by MENTOR to
its customers with respect to the Product shall not obligate
PERIMMUNE in any way.
(c) Upon its verification of any claim of defect or nonconformity of
any unit of the Product arising out of a fault or omission
attributable to PERIMMUNE, during the term of this Agreement,
PERIMMUNE will provide MENTOR with a replacement unit to the extent
necessary to honor PERIMMUNE's warranties contained in Section
12(a) hereof, or make good any shortages or non-completed
deliveries and shall pay all associated freight and insurance
associated therewith.
(d) PERIMMUNE's liability under any legal or equitable theory to any
person with respect to the Product and/or the relationship
described in this Agreement shall be limited to the replacement of
the unit, or if impractical, return of the purchase price paid by
MENTOR for such unit. PERIMMUNE shall in no event be liable to
MENTOR or any other person for any incidental or consequential
damages, lost
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<PAGE> 10
profits, cost procurement of substitute goods or any indirect,
special, or consequential damages even if PERIMMUNE has been
informed of the possibility thereof.
(e) As of the date hereof, PERIMMUNE warrants that it has no knowledge
that the manufacture, use or sale of all or any of the Product under
this Agreement, nor any method of using such Product infringes on
any patent or other industrial property right of a third party, and
PERIMMUNE has not received any notification from any third party
alleging that the manufacture, use or sale of any such Product does
or would infringe any patent or other industrial property. PERIMMUNE
shall further disclose all information relating to the art of the
Product of which it is, or becomes, aware relating to intellectual
property, when PERIMMUNE recognizes necessary to do so.
13. Packaging and Intellectual Property. MENTOR shall be responsible for
packaging and labeling the Product. MENTOR will distribute the Product
only with all appropriate labeling, packaging, and Product literature
and only under MENTOR's applicable trademarks and trade names. MENTOR
recognizes PERIMMUNE's right, title and interest in its patents,
trademarks, trade names and copyrights, trade secrets and proprietary
information in connection with the Product, and MENTOR shall not claim
any ownership right thereto inconsistent with this Agreement, or dispute
the validity thereof. In the event any third party shall contest
PERIMMUNE's rights to its patents, trademarks, trade names or
copyrights, trade secrets or propriety rights, MENTOR shall, at
PERIMMUNE's sole expense, render reasonable assistance to PERIMMUNE in
defending such claims.
14. Compliance with other Agreements. Each party represents and warrants
that the execution and delivery by it of this Agreement and the
performance by it of its obligations hereunder will not, with or without
the giving of notice or the passage of time, violate any judgement,
writ, injunction or order of any court, arbitration or governmental
agency or conflict with, result in the breach of any provisions of, or
the termination of, or constitute a default under, any agreement to
which PERIMMUNE or MENTOR is a party or by which it is or may be bound.
15. Indemnity.
(a) Except as limited by the remainder of this paragraph, PERIMMUNE
hereby agrees to indemnify MENTOR against claims of third parties
for injuries to their persons arising from the use of Product
supplied by PERIMMUNE to MENTOR hereunder. This indemnity shall not
apply to, and PERIMMUNE shall not be liable for, claims for injuries
caused by or arising from:
1) any act or failure to act on the part of MENTOR, its employees,
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<PAGE> 11
representatives, agents, or subsidiaries in packaging,
handling, storing or otherwise distributing such Product; or
2) any representation or warranty concerning the Product made by
or on behalf of MENTOR and not specifically authorized by
PERIMMUNE; or
3) claims where the use of the Product by any customer was not in
accordance with the use prescribed by PERIMMUNE; or
4) MENTOR'S failure to disseminate to purchasers or end-users
any Product Information which PERIMMUNE has made available to
MENTOR; or
5) claims where PERIMMUNE has not been notified in writing within
forty five (45) days of MENTOR's first notice of the claim; or
6) claims where MENTOR fails to furnish evidence in its
possession or fails to fully cooperate with PERIMMUNE in
preparing the defense; or
7) claims where PERIMMUNE is not given the option to assume the
sole defense of the claim at PERIMMUNE's expense; or
(b) PERIMMUNE shall indemnify MENTOR from any claims of patent
infringement relating to a Product subject to this Agreement
provided MENTOR gives PERIMMUNE notice within forty-five (45) days
of MENTOR's first notice of the claim, and permits PERIMMUNE to
assume the sole defense of the claim at PERIMMUNE's expense;
provided, however, that the claim is not based upon (i) the sale or
use of any Product in combination with any other product which is
not specifically authorized by PERIMMUNE in writing; (ii) the
application of any Product in any manner not specifically
authorized by PERIMMUNE in writing.
(c) MENTOR shall indemnify and hold PERIMMUNE harmless from and against
any third party action brought against PERIMMUNE and any loss
therefrom arising or related to this Agreement, except as may be
caused by the negligent or willful act of PERIMMUNE.
(d) Notwithstanding anything above to the contrary, in the event of a
third party claim arising out of this Agreement, in which neither
PERIMMUNE or MENTOR is in breach of this Agreement or is
negligent, each party shall pay its respective legal expenses and
damages caused by such claim.
16. Fees. MENTOR acknowledges that it will pay $500,000 (USD) to PERIMMUNE in
connection with this Agreement, unless MENTOR elects to take an equity
position in PERIMMUNE.
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<PAGE> 12
17. Force Majeure. Neither party shall be responsible for any failure to
perform due to causes beyond its control. These causes shall include, but
not be limited to, fire, storm, flood, earthquake, explosion, wars,
riots, civil disorder, sabotage, quarantine restrictions, labor disputes,
labor shortages, transportation embargoes, or failure or delays or
disruption in manufacturing process, curtailment of or failure in
obtaining fuel or electrical power, or the acts of any governmental
authority, or instrumentalities, orders of any court or tribunal whether
foreign or domestic, exchange restrictions, acts of God, acts of the
Federal Government or any agency thereof, acts of any state or local
government or agency thereof, or shortage of materials or any similar or
dissimilar occurrence beyond the reasonable control of the party which is
prevented, interrupted or delayed in the performance of its obligations
hereunder. In no event shall PERIMMUNE be under any obligations to
purchase Products or similar products from any third party in order to
supply same to MENTOR hereunder. Any force majeure event shall not excuse
performance by the party but shall delay performance, unless such force
majeure continues for a period in excess of ninety (90) days. In such
event, the party seeking performance, as its sole and exclusive remedy,
may cancel its obligations under this Agreement.
18. Insurance. Each party shall keep in force during the term of this
Agreement product liability insurance in such amounts as may be customary
for like sized businesses undertaking like responsibilities to those
contemplated by this Agreement. Each party shall submit a certificate of
insurance to the other evidencing such coverage upon written request
therefor.
19. Confidentiality.
(a) Confidentiality Defined. For the purposes of this Agreement, the
term "Confidential Information" shall be any information embodying
concepts, ideas, techniques, proprietary information, know-how,
formulations, market data, customer lists, product specifications
and accounting date which:
(1) is disclosed by one party hereto to the other;
(2) is claimed by the disclosing party to be secret, confidential
and proprietary to the disclosing party; and
(3) if disclosed in writing, is marked by the disclosing party to
indicate its confidential nature or if disclosed orally as
confidential, is confirmed in writing by the disclosing party
to be confidential within ten (10) days following disclosure.
(b) Non-Disclosure. During the period that this Agreement remains in
effect and for a period of three (3) years following termination
thereof, each party (except as is explicitly otherwise required
hereby) shall keep confidential, shall not use for itself
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<PAGE> 13
or for the benefit of others and shall not copy or allow to be
copied in whole or in part any Confidential Information disclosed to
such party by the other. The obligation of confidentiality imposed
upon the parties by the foregoing paragraph shall not apply with
respect to any alleged Confidential Information which:
(1) is known to the recipient thereof, as evidenced by said
recipient's written records, prior to receipt thereof from the
other party hereto;
(2) is disclosed to said recipient after the date hereof by the
third party who has the right to make such disclosures and who
does not violate any confidentiality agreement with the
affected party hereto;
(3) is or becomes a part of the public domain through no fault of
the said recipient; or
(4) is required by law or judicial or administrative process to be
disclosed.
(c) PERIMMUNE and MENTOR shall agree to keep confidential and not
disclose to third parties, the supply and working relationship under
this Agreement.
(d) Each party agrees to limit access to Confidential Information to
employees and agents having a need to know and to protect
Confidential Information to the same extent as it protects its own
trade secrets.
20. Appointment of Sub-Distributors. MENTOR may assign, sublicense, delegate,
or otherwise transfer the performance of the rights and obligations
hereunder to qualified and reputable sub-distributors, provided, however,
that: (I) MENTOR shall be liable to PERIMMUNE for the errors, negligent
acts and omissions of its sub-distributor's as if such errors, negligent
acts and omissions were its own, including any breach of any provision of
this Agreement by the sub-distributors; (ii) MENTOR shall have and retain
full control of any sub-distributors utilized, and shall be responsible
for the performance by any sub-distributor, and (iii) MENTOR shall not be
relieved of the responsibility for the proper performance and completion
of the sub-distributed portions of its obligations hereunder.
21. Successors. This agreement shall be binding upon the successors of
PERIMMUNE and MENTOR, including successors who acquire the business assets
of PERIMMUNE and MENTOR. In the event the Principal(s) of PERIMMUNE shall
sell all or a majority of the outstanding stock of PERIMMUNE, or in the
event PERIMMUNE sells the business relating to the manufacture and sale
for the Product, then the term of this Agreement may be extended
unilaterally by MENTOR for three (3) successive terms of one (1) year each
from the date of the transfer of the control of PERIMMUNE, or sale of the
Product business, or the date for termination under the Agreement,
whichever is the later, upon the
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<PAGE> 14
terms of this Agreement. MENTOR shall give PERIMMUNE written notice of its
intent to extend the term of this Agreement within thirty (30) days after
PERIMMUNE advises MENTOR of the sale of PERIMMUNE's Product business and at
least ninety (90) days before the end of each one (1) year term.
22. Resolution of Disputes. In the event of any controversy or claim arising
under or in relation to this Agreement, including any issue about payment
of amounts due, the parties shall, in good faith, attempt to resolve the
controversy or claim by negotiation. If the controversy or claim cannot be
resolved within sixty (60) days, then either party shall be entitled to
initiate litigation to resolve the dispute unless the parties have
mutually agreed to arbitrate the dispute.
23. Notices. Any notice or other communication required or that shall be
given pursuant to this Agreement shall be deemed sufficient if delivered
personally, sent by facsimile, telegraph, or sent by certified, registered
or express mail, postage prepaid to the address or facsimile number set
forth below:
To PERIMMUNE:
PERIMMUNE, INC.
1330 Piccard Drive
Rockville, MD 20850-4396
Facsimile No: 301/840-2161
ATTN: President and CEO
MENTOR CORPORATION
5425 Hollister Avenue
Santa Barbara, CA 93111
Facsimile No: 805/967-3362
ATTN: Chairman of the Board, CEO
Either party may change the address to which notice to it is to be given,
as provided herein.
24. Entire Agreement. This Agreement and the exhibits referred to herein
constitute the entire Agreement between the parties and supersede all
prior proposals, communications, representations and agreements, whether
written or oral, with respect to the subject matter hereof. No change to
the written terms of this Agreement shall be made except by written
instrumentation executed by the parties hereto.
25. No Waiver. The failure of either party to enforce at any time any of the
provisions of this Agreement shall not be construed to be a waiver of
those provisions or of the right of that party thereafter to enforce those
provisions.
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<PAGE> 15
26. Severability. If any provision of this Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction in which the
Agreement is sought to be enforced, (a) such provision shall be deemed and
amended to conform to applicable laws of such jurisdiction so as to be
valid and enforceable or, if it cannot be so amended without materially
altering the intention of the parties, it shall be stricken; (b) the
validity, legality and enforceability of such provision will not in any
way be affected or impaired thereby in any other jurisdiction; and (c) the
remainder of this Agreement shall remain in full force and effect.
27. Headings. The headings of this Agreement are included only for ease of
reference and shall not affect the interpretation of this Agreement in any
manner.
28. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION ENFORCEABLE BY
EITHER PARTY.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers or authorized representatives.
PERIMMUNE, INC.
By: /s/ [SIG]
- ------------------------
Title: President & CEO
- ------------------------
Date: 6/16/97
- ------------------------
MENTOR CORPORATION
By: /s/ [SIG]
- ------------------------
Title: Chief Executive Officer
- ------------------------
Date: June 13, 1997
- ------------------------
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EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
PERIMMUNE HOLDINGS, INC.
<PAGE> 17
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
PERIMMUNE HOLDINGS, INC.
----------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
----------
PERIMMUNE HOLDINGS, INC., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation (the "Certificate of Incorporation") and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation by unanimous
written consent dated June __, 1997 adopted the following resolution which
resolution remains in full force and effect on the date hereof.
RESOLVED, that there is hereby established a series of authorized
preferred stock having a par value of $0.01 per share, which series shall be
designated as "Series B Convertible Preferred Stock" (the "Series B Preferred
Stock"), shall consist of 20 shares and shall have the following voting powers,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof as follows:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).
Business Day. The term "Business Day" shall mean a day other than a
Saturday or Sunday or any federal holiday.
<PAGE> 18
Common Equity. The term "Common Equity" shall mean all shares now or
hereafter authorized of any class of common stock of the Corporation, including
the Common Stock, and any other stock of the Corporation, howsoever designated,
authorized after the Initial Issue Date, which has the right (subject always to
prior rights of any class or series of preferred stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
per share amount.
Common Stock. The term "Common Stock" shall mean the common stock, par
value $0.01 per share, of the Corporation.
Conversion Date. The term "Conversion Date" shall have the meaning set
forth in subparagraph 4(b) below.
Conversion Price. The term "Conversion Price" shall initially mean $50,000
and thereafter shall be subject to adjustment from time to time pursuant to the
terms of paragraph 4 below.
Dividend Payment Date. The term "Dividend Payment Date" shall have the
meaning set forth in subparagraph 2(b) below.
Dividend Period. The term "Dividend Period" shall mean the period from,
and including, the Initial Issue Date to, but not including, the first Dividend
Payment Date and thereafter, each annual period from, and including, the
Dividend Payment Date to, but not including, the next Dividend Payment Date.
Initial Issue Date. The term "Initial Issue Date" shall mean the date that
shares of Series B Preferred Stock are first issued by the Corporation.
Junior Stock. The term "Junior Stock" shall mean, for purposes of
paragraph 2 below, Common Equity and any class or series of stock of the
Corporation authorized after the Initial Issue Date which, by its terms, is not
entitled to receive any dividends in any Dividend Period unless all dividends
required to have been paid or declared and set apart for payment on the Series
B Preferred Stock shall have been so paid or declared and set apart for
payment, and for purposes of paragraph 3 below, shall mean Common Equity and
any class or series of stock of the Corporation authorized after the Initial
Issue Date which, by its terms, is not entitled to receive any assets upon
liquidation, dissolution or winding up of the affairs of the Corporation until
the Series B Preferred Stock shall have received the entire amount to which
such stock is entitled upon such liquidation, dissolution or winding up.
Liquidation Preference. The term "Liquidation Preference" shall mean
$50,000 per share.
Parity Stock. The term "Parity Stock" shall mean Series A Convertible
Preferred Stock, and, for purposes of paragraph 2 below, any class or series of
stock of the Corporation
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authorized after the Initial Issue Date which, by its terms, is entitled to
receive payment of dividends on a parity with the Series B Preferred Stock, and
for purposes of paragraph 3 below, shall mean any class or series of stock of
the Corporation authorized after the Initial Issue Date which, by its terms, is
entitled to receive assets upon liquidation, dissolution or winding up of the
affairs of the Corporation on a parity with the Series B Preferred Stock.
Qualifying Convertible Securities Offering. The term "Qualifying
Convertible Securities Offering" shall mean a private offering of securities
that are convertible into shares of Common Stock effected by the Corporation
within twelve-months of the Initial Issue Date which yields gross offering
proceeds to the Corporation in excess of $5 million; provided, however, that,
if more than one such offering is effected within the twelve-month period
following the Initial Issue Date, only the first such offering shall constitute
a "Qualifying Convertible Securities Offering."
Qualifying IPO. The term "Qualifying IPO" means the first registered,
underwritten public offering of shares of Common Stock by the Corporation.
Record Date. The term "Record Date" shall mean the date designated by
the Board of Directors of the Corporation at the time a dividend is declared,
provided, however, that such Record Date shall not be more than thirty (30)
days nor less than ten (10) days prior to the respective Dividend Payment Date
or such other date designated by the Board of Directors for the payment of
dividends.
Redemption Date. The term "Redemption Date" shall have the meaning set
forth in subparagraph 5(a) below.
Redemption Price. The term "Redemption Price" shall mean a price per
share equal to the Liquidation Preference together with accrued and unpaid
dividends thereon to the Redemption Date.
Senior Stock. The term "Senior Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of the Corporation authorized
after the Initial Issue Date which, by its terms, ranks senior to the Series B
Preferred Stock in respect of the right to receive dividends, and for purposes
of paragraph 3 below, shall mean any class or series of stock of the
Corporation authorized after the Initial Issue Date which, by its terms, ranks
senior to the Series B Preferred Stock in respect of the right to participate
in any distribution upon liquidation, dissolution or winding up of the affairs
of the Corporation.
2. Dividends.
(a) Subject to the prior preferences and other rights of any Senior
Stock as to dividends, the record holders of Series B Preferred Stock shall be
entitled to receive dividends if, when and as declared by the Board of
Directors of the Corporation, out of funds legally available for payment of
dividends. Such dividends shall by the Corporation be payable in cash at the
rate of seven percent (7%) per annum of the Liquidation Preference.
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<PAGE> 20
(b) Dividends on shares of Series B Preferred Stock shall be payable
annually in arrears when and as declared by the Board of Directors of the
Corporation on each anniversary of the Initial Issue Date (a "Dividend Payment
Date"), commencing on June __, 1998. If any Dividend Payment Date occurs on a
day that is not a Business Day, any accrued dividends otherwise payable on such
Dividend Payment Date shall be paid on the next succeeding Business Day.
Dividends shall be paid to the holders of record of the Series B Preferred
Stock as their names shall appear on the share register of the Corporation on
the Record Date for such dividend. Dividends payable in any Dividend Period
which is less than a full Dividend Period in length will be computed on the
basis of a 365 day Dividend Period and actual days elapsed in such Dividend
Period. Dividends on account of arrears for any past Dividend Periods may be
declared and paid at any time to holders of record on the Record Date therefor.
(c) So long as any shares of Series B Preferred Stock shall be
outstanding, the Corporation shall not declare, pay or set apart for payment on
any Junior Stock any dividends whatsoever, whether in cash, property or
otherwise (other than dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of Common Stock
with respect to Junior Stock other than Common Stock, together with cash in
lieu of fractional shares), nor shall the Corporation make any distribution on
any Junior Stock, nor shall any Junior Stock be purchased, redeemed or
otherwise acquired by the Corporation or any of its subsidiaries of which it
owns not less than a majority of the outstanding voting power, nor shall any
monies be paid or made available for a sinking fund for the purchase or
redemption of any Junior Stock, unless all dividends to which the holders of
Series B Preferred Stock shall have been entitled for all previous Dividend
Periods shall have been paid or declared and a sum of money sufficient for the
payment thereof has been set apart.
(d) In the event that full dividends are not paid or made available to
the holders of all outstanding shares of Series B Preferred Stock and of any
Parity Stock and funds available for payment of dividends shall be insufficient
to permit payment in full to holders of all such stock of the full preferential
amounts to which they are then entitled, then the entire amount available for
payment of dividends shall be distributed ratably among all such holders of
Series B Preferred Stock and of any Parity Stock in proportion to the full
amount to which they would otherwise be respectively entitled.
(e) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series B Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
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<PAGE> 21
(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation, subject to
the prior preferences and other rights of any Senior Stock as to liquidation
preferences, but before any payment or distribution shall be made to the
holders of Junior Stock, the holders of Series B Preferred Stock shall be
entitled to be paid out of the assets of the Corporation in cash or property at
its fair market value as determined by the Board of Directors of the
Corporation the Liquidation Preference per share plus an amount equal to all
dividends accrued and unpaid thereon to the date of such liquidation or
dissolution or such other winding up. Except as provided in this paragraph
holders of Series B Preferred Stock shall not be entitled to any distribution
in the event of liquidation, dissolution or winding up of the affairs of the
Corporation.
(b) If, upon any such liquidation, dissolution or other winding up of
the affairs of the Corporation the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Preference per
share plus an amount equal to all dividends accrued and unpaid on the Series B
Preferred Stock and the full liquidating payments on all Parity Stock, then the
assets of the Corporation remaining after the distributions to holders of any
Senior Stock of the full amounts to which they may be entitled shall be ratably
distributed among the holders of Series B Preferred Stock and of any Parity
Stock in proportion to the full amounts to which they would otherwise be
respectively entitled if all amounts thereon were paid in full. Neither the
consolidation or merger of the Corporation into or with another corporation or
corporations, nor the sale, lease, transfer or conveyance of all or
substantially all of the assets of the Corporation to another corporation or
any other entity shall be deemed a liquidation, dissolution or winding up of
the affairs of the Corporation within the meaning of this paragraph 3.
4. Conversion Rights.
(a) Each share of Series B Preferred Stock (i) may be converted into
Common Stock at any time before the close of business on the Redemption Date
(unless the Corporation shall default in payment of the Redemption Price) at
the option of the holder thereof and (ii) if not previously converted or
redeemed in accordance with the terms hereof, shall be automatically converted
into Common Stock upon consummation of a Qualifying IPO (i.e., upon the closing
of the offering comprising the Qualifying IPO), effective immediately prior to
the consummation of such Qualifying IPO. For the purposes of conversion, each
share of Series B Preferred Stock shall be deemed to have a value equal to the
sum of (i) the Liquidation Preference and (ii) all accrued and unpaid dividends
on such share of Series B Preferred Stock (such sum being referred to as the
"Per Share Value"), and the number of shares of Common Stock issuable upon
conversion of one share of Series B Preferred Stock (which number may be a
fraction of one share) shall equal (x) the Per Share Value, divided by (y) the
Conversion Price in effect on the Conversion Date (rounded to the nearest 100th
of a share). Immediately following such conversion, the rights of the holders
of converted Series B Preferred Stock shall cease and the persons entitled to
receive the Common Stock upon the conversion of Series B Preferred Stock shall
be treated for all purposes as having become the owners of such Common Stock.
(b) To convert Series B Preferred Stock, a holder must (i) surrender the
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<PAGE> 22
certificate or certificates evidencing the shares of Series B Preferred
Stock to be converted, duly endorsed in a form satisfactory to the
Corporation, at the office of the Corporation or transfer agent for the
Series B Preferred Stock, (ii) notify the Corporation at such office that
he elects to convert the Series B Preferred Stock, and the number of
shares he wishes to convert, (iii) state in writing the name or names in
which he wishes the certificate or certificates for shares of Common Stock
to be issued, and (iv) pay any transfer or similar tax if required. In the
event that a holder fails to notify the Corporation of the number of
shares of Series B Preferred Stock which he wishes to convert, he shall be
deemed to have elected to convert all shares represented by the
certificate or certificates surrendered for conversion. The date on which
the holder satisfies all those requirements is the "Conversion Date." As
soon as practical, the Corporation shall deliver a certificate for the
number of full shares of Common Stock issuable upon the conversion and a
new certificate representing the unconverted portion, if any, of the
shares of Series B Preferred Stock represented by the certificate or
certificates surrendered for conversion. The person in whose name the
Common Stock certificate is registered shall be treated as the stockholder
of record on and after the Conversion Date. If a holder of Series B
Preferred Stock converts more than one share at a time, the number of full
shares of Common Stock issuable upon conversion shall be based on the
total value of all shares of Series B Preferred Stock converted. If the
last day on which Series B Preferred Stock may be converted is not a
Business Day, the shares of Series B Preferred Stock may be surrendered
for conversion on the next succeeding Business Day.
(c) If a holder converts shares of Series B Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of shares of Common Stock upon the conversion.
However, the holder shall pay any such tax which is due because the shares
are issued in a name other than the holder's name.
(d) The Corporation has reserved and shall continue to reserve out
of its authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit the conversion of the
Series B Preferred Stock in full. All shares of Common Stock which may be
issued upon conversion of Series B Preferred Stock shall be fully paid and
nonassessable. The Corporation will comply in all material respects with
all securities laws regulating the offer and delivery of shares of Common
Stock upon conversion of Series B Preferred Stock.
(e) If the Corporation:
(i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into
a greater number of shares;
(iii) combines its outstanding shares of Common Stock into
a smaller number of shares; or
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<PAGE> 23
(iv) issues by reclassification of its Common Stock any shares of its
capital stock;
then the Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of Series B Preferred Stock thereafter converted may
receive the number of shares of capital stock of the Corporation which he would
have owned immediately following such action if he had converted Series B
Preferred Stock immediately prior to such action. The adjustment shall become
effective immediately after the record date in the case of dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If, after an adjustment referred to
in clauses (i) through (iv) above, a holder of Series B Preferred Stock upon
conversion of it may receive shares of two or more classes of capital stock of
the Corporation, the Corporation shall determine the allocation of the adjusted
Conversion Price between the classes of capital stock. After such allocation,
the Conversion Price of each class of capital stock shall thereafter be subject
to adjustment on terms comparable to those applicable to Common Stock in this
subparagraph (e).
(f) No adjustment in the Conversion Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Price. Any adjustments that are not made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph 4 shall be made to the nearest cent or to the nearest 1/100th of
a share, as the case may be.
(g) Whenever the Conversion Price is adjusted, the Corporation shall
promptly mail to holders of Series B Preferred Stock, first class, postage
prepaid, a notice of the adjustment. The Corporation shall file with the
transfer agent, if any, for Series B Preferred Stock a certificate from the
Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it. The certificate shall be
conclusive evidence that the adjustment is correct.
(h) The Corporation from time to time may reduce the Conversion Price
by any amount for any period of time if the period is at least twenty (20)
Business Days and if the reduction is irrevocable during the period, but in no
event may the Conversion Price be less than the par value of a share of Common
Stock. In the event the Corporation shall reduce the Conversion Price of any
Parity Stock, then the Corporation shall reduce the Conversion Price by the
same proportionate amount and for the same period of time as for the conversion
price of such Parity Stock, provided that, in no event, should the Conversion
Price be less than the par value of a share of Common Stock. Whenever the
Conversion Price is reduced, the Corporation shall mail to holders of Series B
Preferred Stock a notice of the reduction. The Corporation shall mail, first
class, postage prepaid, the notice at least 15 days before the date the reduced
conversion price takes effect. The notice shall state the reduced conversion
price and the period it will be in effect.
(i) If the Corporation is party to a merger which reclassifies or
changes its Common Stock, upon consummation of such transaction Series B
Preferred Stock shall automatically become convertible into the kind and amount
of securities, cash or other assets which
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<PAGE> 24
the holder of Series B Preferred Stock would have owned immediately after the
consolidation, merger, transfer or lease if such holder had converted Series B
Preferred Stock immediately before the effective date of the transaction,
appropriate adjustment (as determined by the Board of Directors of the
Corporation) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of Series B
Preferred Stock, to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustment of the Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the conversion of Series B Preferred Stock. If this
subparagraph 4(k) applies, subparagraph 4(e) does not apply.
(j) In any case in which this paragraph 4 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event the issuance to the holder of any shares of Series B Preferred Stock
converted after such record date and before the occurrence of such event of the
additional shares of Common Stock issuable upon such conversion over and above
the shares issuable on the basis of the Conversion Price in effect immediately
prior to adjustment.
(k) All shares of Series B Preferred Stock converted pursuant to
this paragraph 4 shall be retired and shall be restored to the status of
authorized and unissued shares of preferred stock, without designation as to
series and may thereafter be reissued as shares of any series of preferred stock
other than Series B Preferred Stock.
5. Redemption by the Corporation
(a) The Corporation shall redeem on the fifth anniversary of the
Initial Issue Date (the "Redemption Date") at the Redemption Price all of the
then issued and outstanding shares of Series B Preferred Stock. If the
Redemption Date is on or after a dividend record date and on or before the
related Dividend Payment Date, the dividend payable shall be paid to the holder
in whose name the Series B Preferred Stock is registered at the close of
business on such record date.
(b) No Series B Preferred Stock may be redeemed except with funds
legally available for the payment of the Redemption Price.
(c) In case that, on the Redemption Date, the Corporation does not
have sufficient funds available to redeem all of the then issued and outstanding
shares of Series B Preferred Stock and, accordingly, less than all shares of
Series B Preferred Stock at the time outstanding, the shares to be redeemed
shall be selected pro rata or by lot as determined by the Corporation in its
sole discretion. Any shares not so redeemed shall remain outstanding.
(d) Notwithstanding the foregoing provisions of this paragraph 5,
unless the full cumulative dividends on all outstanding shares of Series B
Preferred Stock shall have been paid or contemporaneously are declared and paid
for all past dividend periods, none of the shares of Series B Preferred Stock
shall be redeemed unless all outstanding shares of Series B Preferred Stock are
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<PAGE> 25
simultaneously redeemed.
(e) All shares of Series B Preferred Stock redeemed pursuant to this
paragraph 5 shall be retired and shall be restored to the status of authorized
and unissued shares of preferred stock, without designation as to series and
may thereafter be reissued as shares of any series of preferred stock other
than shares of Series B Preferred Stock.
6. Voting Rights
Except as otherwise set forth in this Section 6 or as otherwise
provided by law, the holders of shares of Series B Preferred Stock shall have
no voting rights:
During such time as any shares of Series B Preferred Stock are
outstanding, the Corporation will not, without the vote of the holders of a
majority of the Series B Preferred Stock voting separately as a class (i) file
or cause to be filed with the Secretary of State of the State of Delaware a
certificate of dissolution with respect to the Corporation as provided for in
Section 275 and Section 103 of the Delaware general Corporation Law; (ii) amend,
alter or repeal any of the provisions of the Certificate of Incorporation so as
to affect adversely the powers, preferences or rights of the holders of Series B
Preferred Stock then outstanding or reduce the minimum time for any required
notice to which the holders of the Series B Preferred Stock then outstanding may
be entitled (an amendment of the Certificate of Incorporation to authorize or
create, or to increase the authorized amount of any common stock or any other
series of preferred stock being deemed not to affect adversely the powers,
preferences, or rights of the holders of the Series B Preferred Stock); or (iii)
merge or consolidate with or into any other corporation, unless each holder of
Series B Preferred Stock immediately preceding such merger or consolidation
shall receive or continue to hold in the resulting corporation the same number
of shares, with substantially the same rights and preferences, including,
without limitation, as set forth in Section 4(k) hereof, as correspond to the
shares of Series B Preferred Stock so held.
7. Exclusion of Other Rights
Except as may otherwise be required by law, the shares of Series B
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Certificate of Incorporation. The shares of Series B Preferred
Stock shall have no preemptive or subscription rights.
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<PAGE> 26
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be duly executed by the undersigned officer and attested by its Secretary, this
___ day of June, 1997.
PERIMMUNE HOLDINGS, INC.,
--------------------------------
Richard G. Hanna, President
ATTEST:
By:
-------------------------
Secretary
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<PAGE> 27
EXHIBIT B
FORM OF
REGISTRATION RIGHTS AGREEMENT
<PAGE> 28
===============================================================================
PERIMMUNE HOLDINGS, INC.
---------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE __, 1997
===============================================================================
<PAGE> 29
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS................................................. 2
2. PIGGYBACK REGISTRATIONS..................................... 5
(a) Participation.......................................... 5
(b) Underwriter's Cutback.................................. 5
(c) Company Control........................................ 5
3. HOLD-BACK AGREEMENTS........................................ 6
4. REGISTRATION PROCEDURES..................................... 6
5. REGISTRATION EXPENSES....................................... 10
(a) Piggyback Registrations................................ 10
(b) Company Expenses....................................... 10
6. INDEMNIFICATION............................................. 11
(a) Indemnification by Company............................. 11
(b) Indemnification Procedures............................. 11
(c) Indemnification by Holder of Registrable Securities.... 12
(d) Contribution........................................... 13
7. EXCHANGE ACT REPORTING REQUIREMENTS......................... 13
8. REQUIREMENTS FOR PARTICIPATION IN UNDERWRITTEN OFFERINGS.... 14
9. SUSPENSION OF SALES......................................... 14
10. MISCELLANEOUS................................................ 14
(a) Remedies............................................... 14
</TABLE>
i
<PAGE> 30
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(b) No Inconsistent Agreements............................. 15
(c) Amendments and Waivers................................. 15
(d) Notices................................................ 15
(e) Successors and Assigns................................. 16
(f) Counterparts........................................... 16
(g) Table of Contents and Headings......................... 16
(h) Governing Law.......................................... 16
(i) Severability........................................... 16
(j) Forms.................................................. 16
(k) Entire Agreement....................................... 16
</TABLE>
ii
<PAGE> 31
PERIMMUNE HOLDINGS, INC.
1330 Piccard Drive, Rockville, Maryland 20850
This Registration Rights Agreement ("Agreement") is made and entered into
as of June __, 1997, by and among PerImmune Holdings, Inc., a Delaware
corporation (the "Company"), and the stockholder of the Company who is a
signatory hereto (the "Investor"). The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Board of Directors: The Board of Directors of the Company.
Claim: Any loss, claim, damages, liability or expense (including the
reasonable costs of investigation and legal fees and expenses).
Common Stock: The common stock, par value $0.01 per share, of the Company.
Equity Security: Any capital stock of the Company or any security
convertible, with or without consideration, into any such stock, or any
security carrying any warrant or right to subscribe to or purchase any such
stock, or any such warrant or right.
Exchange Act: The Securities Exchange Act of 1934, as from time to time
amended.
Firm Commitment Underwritten Offering: An offering in which the
underwriters agree to purchase securities for distribution pursuant to a
registration statement under the Securities Act and in which the obligation
of the underwriters is to purchase all the securities being offered if any are
purchased.
Holder: The beneficial owner of a security. For all purposes of this
Agreement, the Company shall be entitled to treat the record owner of a
security at the beneficial owner of such security unless the Company has been
given written notice of the existence and identity of a different beneficial
owner.
Indemnified Holder: Any Holder of Registrable Securities, any officer,
director, employee or agent of any such Holder and any Person who controls any
such Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act.
Misstatement: An untrue statement of material fact or an omission to
state a material fact required to be stated in a Registration Statement or
Prospectus or necessary to make the statements in a Registration Statement,
Prospectus or preliminary prospectus not misleading.
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<PAGE> 32
Person: A natural person, partnership, corporation, business trust
association, joint venture or other entity or a government or agency or
political subdivision thereof.
Piggyback Registration: A registration pursuant to Section 2 hereof.
Preferred Stock: The Series B Convertible Preferred Stock, par value
$0.01 per share, being issued and sold pursuant to the Purchase Agreement.
Prospectus: The prospectus included in any Registration Statement, as
supplemented by any and all prospectus supplements and as amended by any and
all post-effective amendments and including all material incorporated by
reference in such prospectus.
Qualifying IPO: The first registered, underwritten public offering of
shares of Common Stock by the Company.
Registrable Securities: (a) The shares of Common Stock held by the
Investor, and (b) any securities issued or issuable with respect to such Common
Stock by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
reorganization; provided that any such share or other security shall be deemed
to be Registrable Securities only if and so long as it is a Transfer Restricted
Security.
Registration: A Piggyback Registration.
Registration Expenses: The out-of-pocket expenses of a Registration,
including:
(1) all registration and filing fees (including fees with
respect to filings required to be made with the National Association
of Securities Dealers);
(2) fees and expenses of compliance with securities or blue sky
laws (including fees and disbursements of counsel for the underwriters
or selling holders in connection with blue sky qualifications of the
Registrable Securities and determinations of their eligibility for
investment under the laws of such jurisdictions as the managing
underwriters or holders of a majority of the Registrable Securities
being sold may designate);
(3) printing, messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company, counsel
for the underwriters and of not more than one firm of attorneys for
the sellers of the Registrable Securities (the attorneys for such
sellers to be determined by a vote of the majority of the
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<PAGE> 33
aggregate shares of Registrable Securities requested to be included in
the Registration Statement for such Registration);
(5) fees and disbursements of all independent certified public
accountants of the Company incurred in connection with such
Registration (including the expenses of any special audit and "cold
comfort" letters incident to such registration);
(6) fees and disbursements of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals relating to the
distribution of the Registrable Securities);
(7) premiums and other costs of securities acts liability
insurance if the Company so desires or if the underwriters or selling
holders of Registrable Securities so require; and
(8) fees and expenses of any other Persons retained by the
Company.
Registration Statement: Any registration statement under the
Securities Act on an appropriate form (which form shall be available for
the sale of the Registrable Securities in accordance with the intended
method or methods of distribution thereof and shall include all financial
statements required by the SEC to be filed therewith) which covers
Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus included in such registration statement,
amendments (including post-effective amendments) and supplements to such
registration statement, and all exhibits to and all material incorporated
by reference in such registration statement.
Securities Act: The Securities Act of 1933, as from time to time
amended.
SEC: The Securities and Exchange Commission.
Transfer Restricted Security: A security that has not been sold to or
through a broker, dealer or underwriter in a public distribution or other
public securities transaction or sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act
under Rule 144 promulgated thereunder (or any successor rule). The
foregoing notwithstanding, a security shall remain a Transfer Restricted
Security until (i) all stop transfer instructions or notations and
restrictive legends with respect to such security have been lifted or
removed and (ii) the Holder of such security has received at Company
expense an opinion of counsel to the Company (which counsel and opinion are
reasonably satisfactory to such Holder), to the effect that such shares in
such Holder's hands are freely transferable in any public or private
transaction without registration under the Securities Act (or such Holder
has waived receipt of such opinion).
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<PAGE> 34
Underwritten Registration or Underwritten Offering: A registration
in which securities of the Company are sold to an underwriter for
distribution to the public.
2. PIGGYBACK REGISTRATIONS
(a) PARTICIPATION
Each time the Company decides to file a Registration Statement
under the Securities Act (other than on Forms S-4 or S-8 or any successor form
thereto and other than in connection with a Qualifying IPO) covering the offer
and sale by it or any of its security holders of any of its securities for
money, the Company shall give written notice thereof to all Holders of
outstanding Registrable Securities, which written notice shall state that the
Company has decided to so file a registration statement and shall include the
approximate date that such registration statement is expected to be filed with
the SEC and the name of any underwriter (if any) with respect to such offering.
The Company shall include in such registration statement such shares within 30
days after such written notice has been given. If the registration statement is
to cover an Underwritten Offering, such Registrable Securities shall be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters.
(b) UNDERWRITER'S CUTBACK
Subject to the requirements of Section 10 hereof, if in the good
faith judgment of the managing underwriter of such offering the inclusion of
all of the shares of Registrable Securities and any other Common Stock
requested to be registered would interfere with the successful marketing of a
smaller number of such shares, then the number of shares of Registrable
Securities and other Common Stock to be included in the offering shall be
reduced to such smaller number with the participation in such offering to be in
the following order of priority: (1) first, the shares of Common Stock which
the Company proposes to sell for its own account, (2) second, the shares of
Registrable Securities and any other shares of Common Stock requested to be
included. Any necessary allocation among the Holders of shares within each of
the foregoing groups shall be pro rata among such Holders requesting such
registration based upon the number of shares of Common Stock and Registrable
Securities owned by such Holders.
(c) COMPANY CONTROL
The Company may decline to file a Registration Statement after
giving notice to any Holder pursuant to Section 3(a) above, or withdraw a
Registration Statement after filing and after such notice, but prior to the
effectiveness thereof, provided that the Company shall promptly notify each
Holder in writing of any such action and provided further that the Company
shall bear all expenses incurred by such Holder or otherwise in connection with
such withdrawn Registration Statement.
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<PAGE> 35
3. HOLD-BACK AGREEMENTS
Upon the written request of the managing underwriter of any
Underwritten Offering of the Company's securities, a Holder of Registrable
Securities shall not sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable Securities (other than
those included in such registration) without the prior written consent of such
managing underwriter for a period (not to exceed 30 days before the effective
date and 180 days thereafter) that such managing underwriter reasonably
determines is necessary in order to effect the underwritten public offering;
provided that each of the officers and directors of the Company shall have
entered into substantially similar holdback agreements with such managing
underwriter covering at least the same period.
4. REGISTRATION PROCEDURES
If and whenever the Company is required to register Registrable
Securities in a Piggyback Registration, the Company will use its best efforts
to effect such registration to permit the sale of such Registrable Securities
in accordance with the intended plan of distribution thereof, and pursuant
thereto the Company will as expeditiously as possible:
(a) prepare and file with the SEC as soon as practicable a
Registration Statement with respect to such Registrable Securities and use its
best efforts to cause such Registration Statement to become effective and
remain continuously effective until the date earlier to occur of (i) the date
six months from the date such Registration Statement was declared effective,
and (ii) the date the last of the Registrable Securities covered by such
Registration Statement have been sold provided that before filing a
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company shall furnish to the Holders of the Registrable Securities covered
by such Registration Statement and the underwriters, if any, draft copies of
all such documents proposed to be filed, which documents will be subject to the
review of such Holders and underwriters, and the Company shall not file any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto to which the Holders of a majority of the Registrable Securities
covered by such Registration Statement or the underwriters, if any, shall
reasonably object;
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement, and such supplements
to the Prospectus, as may be requested by any Holder of Registrable Securities
or any underwriter of Registrable Securities or as may be required by the
rules, regulations or instructions applicable to the registration form used by
the Company or by the Securities Act or rules and regulations thereunder to
keep the Registration Statement effective until all Registrable Securities
covered by such Registration Statement are sold in accordance with the intended
plan of distribution set forth in such Registration Statement or supplement to
the Prospectus;
(c) promptly notify the selling Holders of Registrable
Securities and the managing underwriter, if any, and (if requested by any such
Person) confirm such advice in writing,
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<PAGE> 36
(1) when the Prospectus or any supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement
or any post-effective amendment, when the same has become effective,
(2) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information,
(3) of the issuance by the SEC of any stop under suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) if at any time the representations and warranties of the Company
contemplated by clause (1) of paragraph (o) below cease to be accurate in
all material respects,
(5) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and
(6) of the existence of any fact which results in the Registration
Statement, the Prospectus or any document incorporated therein by
reference containing a Misstatement;
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible time;
(e) if requested by the managing underwriter or a Holder of Registrable
Securities being sold in connection with an Underwritten Offering, immediately
incorporate in a supplement or post-effective amendment such information as the
managing underwriter and the Holders of a majority of the Registrable
Securities being sold agree should be included therein relating to the sale of
the Registrable Securities, including, without limitation, information with
respect to the number of shares of Registrable Securities being sold to
underwriters, the purchase price being paid therefor by such underwriters and
with respect to any other terms of the Underwritten Offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such supplement or post-effective amendment;
(f) promptly prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) provide copies of such
document to counsel to the selling Holders of Registrable Securities and to the
managing underwriter, if any, and make the Company's representatives available
for discussion of such document and make such changes in such document prior to
the filing thereof as counsel for such selling Holders or underwriters may
reasonably request;
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<PAGE> 37
(g) furnish to each selling Holder of Registrable Securities and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(h) deliver to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of each Prospectus (and
each preliminary prospectus) as such Persons may reasonably request (the
Company hereby consenting to the use of each such Prospectus (or preliminary
prospectus) by each of the selling Holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus (or preliminary prospectus);
(i) prior to any public offering of Registrable Securities, register
or qualify or cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as such selling
Holders or underwriters may designate in writing and do anything else necessary
or advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement; provided that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action which would subject it
to general service of process in any such jurisdiction where it is not then so
subject;
(j) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold and cause such Registrable Securities to be
in such denominations and registered in such names as the managing underwriter
may request at least three business days prior to any sale of Registrable
Securities to the underwriters;
(k) use its best efforts to cause the Registrable Securities covered
by the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller
or sellers thereof or the underwriters, if any, to consummate the disposition
of such Registrable Securities;
(l) if the Registration Statement or the Prospectus contains a
Misstatement, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, the Prospectus will
not contain a Misstatement;
(m) cause all Registrable Securities covered by the Registration
Statement to be listed on any national securities exchange or authorized for
quotation on NASDAQ or in the National Market System on which Common Stock is
then listed or is authorized for quotation, if requested by the Holders of a
majority of such Registrable Securities or the managing underwriter, if any;
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<PAGE> 38
(n) provide a CUSIP number for all Registrable Securities not later
than the effective date of the Registration Statement;
(o) enter into such agreements (including an underwriting agreement)
and do anything else necessary or advisable in order to expedite or facilitate
the disposition of such Registrable Securities, and in such connection, whether
or not the registration is an Underwritten Registration:
(1) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters
in primary Underwritten Offerings;
(2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriter, if any,
and the Holders of a majority of the Registrable Securities being
sold) addressed to each selling Holder and the underwriter, if any,
covering the matters customarily covered in opinions delivered to
underwriters in primary Underwritten Offerings and such other matters
as may be reasonably requested by such Holders or underwriters;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
selling Holders of Registrable Securities and the underwriters, if
any, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters by underwriters in
connection with primary Underwritten Offerings;
(4) if an underwriting agreement is entered into, cause the same
to include the indemnification and contribution provisions and
procedures of Section 6 hereof with respect to all parties to be
indemnified pursuant to said Section (or, with respect to the
indemnification of such underwriters, such similar indemnification and
contribution provisions as such underwriters shall customarily
require); and
(5) deliver such documents and certificates as may be requested
by the Holders of a majority of the Registrable Securities being sold
and the managing underwriter, if any, to evidence compliance with
clause (1) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent otherwise reasonably requested by the Holders
of a majority of the Registrable Securities being sold;
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<PAGE> 39
(p) make available for inspection by representatives of the
Holders of a majority of the Registrable Securities being sold, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney or accountant retained by the sellers or any
such underwriter, all financial and other records and pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such representative, underwriter, attorney or accountant in
connection with the Registration; provided that any records, information or
documents that are designated by the Company in writing as confidential
shall be kept confidential by such Persons unless disclosure of such
records, information or documents is required by court or administrative
order; and
(q) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its
security holders earnings statements satisfying the provisions of Section
11(a) of the Securities Act, no later than 45 days after the end of any
12-month period (or 90 days, if such period is a fiscal year) (x)
commencing at the end of any fiscal quarter in which Registrable Securities
are sold to underwriters in an Underwritten Offering, or, if not sold to
underwriters in such an offering, (y) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement, which statements shall cover said 12-month periods.
Notwithstanding the foregoing, the Company shall, upon written
notice delivered to the Holders of Registrable Securities, be entitled to
postpone the filing or declaration of effectiveness of a Registration
Statement required or proposed to be filed hereunder (i) upon the happening
of any event of the kind described in Section 4(c)(6), or (ii) if, in the
reasonable determination of the Company, there exists circumstances not yet
disclosed to the public, which would be required to be disclosed in such
Registration Statement and the disclosure of which would be materially
harmful to the Company. The Company shall use its best efforts to minimize
the length of any postponement or discontinuance provided that the Company
may postpone for a period of sixty (60) days the disclosure of any
circumstances if, in the reasonable determination of the Company, such
disclosure would be materially harmful to the Company.
5. REGISTRATION EXPENSES
(a) PIGGYBACK REGISTRATIONS
The Company shall bear all Registration Expenses incurred in
connection with all Piggyback Registrations.
(b) COMPANY EXPENSES
The Company also will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the expense of any
annual audit, the fees and expenses incurred in connection with any listing
of the securities to be registered on a securities exchange, and the fees
and expenses of any Person, including special experts, retained by the
Company.
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<PAGE> 40
6. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless each
Indemnified Holder from and against all Claims arising out of or based upon any
Misstatement or alleged Misstatement, except insofar as such Misstatement or
alleged Misstatement was based upon information furnished in writing to the
Company by any Indemnified Holder expressly for use in the document containing
such Misstatement or alleged Misstatement. This indemnity shall not be
exclusive and shall be in addition to any liability which the Company may
otherwise have.
The foregoing notwithstanding, the Company shall not be liable
to the extent that any such Claim arises out of or is based upon a Misstatement
or alleged Misstatement made in any preliminary prospectus if (i) such
Indemnified Holder failed to send or deliver a copy of the Prospectus with
or prior to the delivery of written confirmation of the sale of Registrable
Securities giving rise to such Claim and (ii) the Prospectus would have
corrected such untrue statement or omission.
In addition, the Company shall not be liable to the extent that
any such Claim arises out of or is based upon a Misstatement or alleged
Misstatement in a Prospectus, (x) if such Misstatement or alleged Misstatement
is corrected in an amendment or supplement to such Prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Indemnified Holder thereafter
fails to deliver such Prospectus as so amended or supplemented prior to or
concurrently with the sale to the person who purchased a Registrable Security
from such Indemnified Holder and who is asserting such Claim.
The Company shall also indemnify underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
a distribution covered by a Registration Statement, their officers and
directors and each Person who controls such Persons (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of the Indemnified
Holders of Registrable Securities.
(b) INDEMNIFICATION PROCEDURES
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an Indemnified
Holder in respect of which indemnity may be sought from the Company, such
Indemnified Holder shall promptly notify the Company in writing, and the
Company shall assume the defense thereof, including the employment of counsel
satisfactory to such Indemnified Holder and the payment of all expenses.
Such Indemnified Holder shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such separate counsel shall be the expense of such
Indemnified Holder unless (i) the Company has agreed to pay such fees and
expenses, (ii) the Company shall have failed to assume the defense of such
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<PAGE> 41
action or proceeding or has failed to employ counsel satisfactory to such
Indemnified Holder in any such action or proceeding or (iii) the named parties
to any such action or proceeding (including any impleaded parties) include both
such Indemnified Holder and the Company, and such Indemnified Holder shall have
been advised by counsel that there may be one or more legal defenses available
to such Indemnified Holder that are different from or additional to those
available to the Company.
If such Indemnified Holder notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company as permitted by
the provisions of the preceding paragraph, the Company shall not have the right
to assume the defense of such action or proceeding on behalf of such Indemnified
Holder. The foregoing notwithstanding, the Company shall not be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for such Indemnified Holder and any other Indemnified Holders (which firm
shall be designated in writing by such Indemnified Holders) in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances.
The Company shall not be liable for any settlement of any such
action or proceeding effected without its written consent, but if settled with
its written consent, or if there be a final judgment for the plaintiff in any
such action or proceeding, the Company agrees to indemnify and hold harmless
such Indemnified Holders from and against any loss or liability by reason of
such settlement or judgment.
(c) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES
Each Holder of Registrable Securities agrees to indemnify and hold
harmless the Company, its directors and officers and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Holder, but only with respect to information
relating to such Holder furnished in writing by such Holder expressly for use
in any Registration Statement, Prospectus or preliminary prospectus. In no
event, however, shall the liability hereunder of any selling Holder of
Registrable Securities be greater than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
In any case any action or proceeding shall be brought against the
Company or its directors or officers or any such controlling person, in respect
of which indemnity may be sought against a Holder of Registrable Securities,
such Holder shall have the rights and duties given the Company and the Company
or its directors or officers or such controlling person shall have the rights
and duties given to each Holder by Sections 6(a) and 6(b) above.
The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement.
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<PAGE> 42
(d) Contribution
If the indemnification provided for in this Section 6 is unavailable
to an indemnified party under Section 6(a) or Section 6(c) above (other than by
reason of exceptions provided in those Sections) in respect of any Claims
referred to in such Sections, then each applicable 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 Claims in such proportion
as is appropriate to reflect the relative fault of the Company on the one hand
and of the Indemnified Holder on the other in connection with the statements or
omissions which resulted in such Claims as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the Claims
referred to above shall be deemed to include, subject to the limitations set
forth in Section 6(b), any legal or other fees or expenses reasonably incurred
by such party in connection with investigating or defending any action or claim.
The relative fault of the Company on the one hand and of the
Indemnified Holder on the other shall be determined by reference to, among
other things, whether the Misstatement or alleged Misstatement relates to
information supplied by the Company or by the Indemnified Holder and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such Misstatement or alleged Misstatement.
The Company and each Holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 6(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 6(d), an Indemnified
Holder shall not be required to contribute any amount in excess of the amount
by which (i) the total price at which the securities that were sold by such
Indemnified Holder and distributed to the public were offered to the public
exceeds (ii) the amount of any damages which such Indemnified Holder has
otherwise been required to pay by reason of such Misstatement.
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.
7. EXCHANGE ACT REPORTING REQUIREMENTS.
From and after the effective date of the first registration
statement filed by the Company under the Securities Act, the Company shall
(whether or not it shall then be required to do so) timely file such
information, documents and reports as the Commission may require or prescribe
under Section 13 or 15(d) (whichever is applicable) of the Exchange Act. In
addition, the Company shall take such other measures and file such other
information, documents and reports, as shall hereafter be required by the
Commission as a condition to the availability of Rule 144 under the Securities
Act (or any successor provision) and the use of Form S-3.
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<PAGE> 43
From and after such date, the Company shall forthwith upon request
furnish any Holder or Registrable Securities (i) a written statement by the
Company that it has compiled with such reporting requirements, (ii) a copy of
the most recent annual or quarterly report of the Company, and (iii) such other
reports and documents filed by the Company with the Commission as such Holder
may reasonably request in availing itself of an exemption for the sale of
Registrable Securities without registration under the Securities Act.
The purpose of the foregoing requirements are (x) to enable any
such Holder to comply with the current public information requirements
contained in paragraph (c) of Rule 144 under the Securities Act (or any
successor provision) and (y) to qualify the Company for the use of registration
statements on Form S-3.
8. REQUIREMENTS FOR PARTICIPATION IN UNDERWRITTEN OFFERINGS
No Person may participate in any Underwritten Offering pursuant to
a Registration hereunder unless such Person (a) agrees to sell such Persons's
securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
9. SUSPENSION OF SALES
Upon receipt of written notice from the Company that (i) a
Registration Statement or Prospectus contains a Misstatement, or (ii) in the
reasonable determination of the Company, there exists circumstances not yet
disclosed to the public which would be required to be disclosed in such
Registration Statement and the disclosure of which would be materially harmful
to the Company, each Holder of Registrable Securities shall forthwith
discontinue disposition of Registrable Securities until such Holder has
received copies of the supplemented or amended Prospectus required by Section
4(1) hereof, or until such Holder is advised in writing by the Company that the
use of the Prospectus may be resumed, and, if so directed by the Company, such
Holder shall deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice. The Company shall use its reasonable best efforts to minimize
the length of such suspension of sales, provided, that the Company may require
the suspension of sales for a period of sixty (60) days in the event that the
disclosure of any circumstances, in the reasonable determination of the Company
would be materially harmful to the Company.
10. MISCELLANEOUS
(a) REMEDIES
Each Holder of Registrable Securities, in addition to being
entitled to exercise all rights provided herein, in the Purchase Agreement and
granted by law, including recovery of damages, shall be entitled to specific
performance of its rights under this Agreement. The
14
<PAGE> 44
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.
(b) NO INCONSISTENT AGREEMENTS
The Company shall not on or after the date of this Agreement enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
Except as otherwise disclosed to the Investor, the Company has not
previously entered into any agreement with respect to its securities granting
any registration rights to any Person.
(c) AMENDMENTS AND WAIVERS
The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company
has obtained the written consent of the Holders of at least a majority of the
outstanding shares of Registrable Securities. The foregoing notwithstanding, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of Holders of shares of Registrable Securities whose
shares are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders of shares of
Registrable Securities may be given by the Holders of a majority of the shares
of Registrable Securities being sold.
(d) NOTICES
All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder of Registrable Securities, at the most
current address given by such Holder to the Company in accordance
with the provisions hereof, which address initially is, with
respect to each Investor, the address set forth on such Investor's
signature page of the Purchase Agreement, with a copy to Reicker,
Clough, Pfau & Pyle LLP, 1421 State Street, Suite B, Santa Barbara,
California 93102-1470, Attention: Dan Reicker, Esq.; and
(ii) if to the Company, initially at its address set forth
in the Purchase Agreement and thereafter at such other address,
notice of which is given in accordance with the provisions hereof,
with a copy to Latham & Watkins, Latham & Watkins, 1001
Pennsylvania Avenue, N.W., Suite 1300, Washington, D.C. 20004,
Attention: Bruce E. Rosenblum, Esq.
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<PAGE> 45
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery. The Company shall promptly provide a list of the most current
addresses of the Holders of Registrable Securities given to it in accordance
with the provisions hereof to any such Holder for the purpose of enabling such
Holder to communicate with other Holders in connection with this Agreement.
(e) SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
(f) COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(g) TABLE OF CONTENTS AND HEADINGS
The table of contents and headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland.
(i) SEVERABILITY
In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(j) FORMS
All references in this Agreement to particular forms of registration
statements are intended to include all successor forms which are intended to
replace, or to apply to similar transactions as, the forms herein referenced.
(k) ENTIRE AGREEMENT
This Agreement and the stock purchase agreement by and between the
Company and the Investor (the "Stock Purchase Agreement") are intended by the
respective parties to those
16
<PAGE> 46
agreements as the final expression of their respective agreement and are
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein or therein with respect to the
registration rights granted by the Company with respect to the securities sold
pursuant to the Stock Purchase Agreement. This Agreement and the Stock Purchase
Agreement supersede all prior agreements and understandings between the parties
with respect to such subject matter.
17
<PAGE> 47
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
PERIMMUNE HOLDINGS, INC.
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
INVESTOR:
MENTOR CORPORATION
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
<PAGE> 48
EXHIBIT C
FORM OF
LEGAL OPINIONS OF
COUNSEL TO
HOLDINGS
<PAGE> 49
OPINION OF COUNSEL TO HOLDINGS
Latham & Watkins, counsel for Holdings, shall have furnished to the
Purchaser its written opinion, as counsel to Holdings, addressed to Purchaser
and dated the Closing Date, in form and substance reasonably satisfactory to
Purchaser, to the effect that:
1. Holdings has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware with corporate power and
authority to enter into this Agreement and the Registration Rights Agreement
and perform its obligations thereunder.
2. PerImmune, Inc. has been duly incorporated and is validly existing and
in good standing under the laws of the State of Delaware.
3. The issuance and sale of the Preferred Shares to the Purchaser have
been duly authorized by all necessary corporate action and, when issued and
delivered to the Purchaser pursuant to this Agreement will be validly issued,
fully paid and non-assessable.
4. The shares of Common Stock initially issuable upon conversion of the
Preferred Shares have been duly authorized and reserved for issuance upon such
conversion and, when issued upon such conversion in accordance with the
Certificate of Designations, will be validly issued, fully paid and
non-assessable.
5. The execution, delivery and performance of this Agreement and the
Registration Rights Agreement, have each been duly authorized by all necessary
corporate action of Holdings, and this Agreement has been duly executed and
delivered by Holdings.
6. Assuming the Preferred Shares are issued, sold and delivered under
the circumstances contemplated by this Agreement, that the representations and
warranties and covenants of the Purchaser and Holdings contained in this
Agreement are true, correct and complete, and that the Purchaser complies with
its covenants in this Agreement: (i) registration under the Securities Act of
the Preferred Shares is not required in connection with the offer and sale of
the Preferred Shares to the Purchaser in the manner contemplated by this
Agreement; and (ii) the offer and sale of the Preferred Shares to the Purchaser
by Holdings pursuant to this Agreement does not require registration,
qualification or other action under any state securities or blue sky laws, other
than action which has been taken.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the federal laws of the United States of
America and the General Corporation Law of the State of Delaware.
<PAGE> 1
EXHIBIT 10.24
INTELLECTUAL PROPERTY AGREEMENT
BY AND AMONG
AKZO NOBEL PHARMA INTERNATIONAL, B.V.
AND
PERIMMUNE HOLDINGS, INC.
<PAGE> 2
INTELLECTUAL PROPERTY AGREEMENT
This Intellectual Property Agreement (the "Agreement") is made this second
day of August, 1996 by and between Akzo Nobel Pharma International, B.V. (a
corporation formed under the laws of the Netherlands) ("Pharma") and PerImmune
Holdings, Inc., a Delaware corporation ("Holdings");
WITNESSETH
WHEREAS, Pharma is the beneficial owner of the Patents and Patent
Applications (each as defined herein), and is the legal and beneficial owner of
the Trademarks and Technical Information (each as defined herein);
WHEREAS, Akzo Nobel, N.V. a corporation formed under the Laws of the
Netherlands and the direct parent corporation of Pharma ("Parent"), holds
title, as legal owner, to the Patents and Patent Applications for the benefit
of Pharma;
WHEREAS, Pharma and Patent each wishes to sell, transfer and convey to
Holdings their respective rights in the Patents, Patent Applications, the
Trademarks and other technology rights and intellectual property owned by such
parties in exchange for the consideration set forth in this Agreement and used
and useful in the PerImmune Business (as defined herein);
NOW, THEREFORE, in consideration of the respective covenants and
representations and warranties hereafter specified it is hereby agreed between
the parties as follows:
1. Definitions
As used in this Agreement, the terms defined below shall have the
respective meanings hereinafter specified, it is hereby agreed between the
parties as follows:
"Affiliates" means, with respect to any entity, any other entity which
directly or indirectly controls, is controlled by, or is under common control
with such entity, where the term "control" means the ownership, directly or
indirectly, of more than fifty percent (50%) of the equity capital or the right
or power in fact to direct the management of such entity.
"Claim" has the meaning set forth in Section 5.3.
"Claim Notice" has the meaning set forth in Section 5.3.
"Damages" has the meaning set forth in Section 5.1.
<PAGE> 3
"Excluded Intellectual Property" means all biological materials, products,
technology, files, records and documentation, including but not limited to data
for regulatory processes, relating to (i) the TICE(R)BCG product line
(including but not limited to the master seed lot), (ii) any and all food
diagnostics and HIV diagnostics in the possession of PerImmune at the Closing
Date, and (iii) any and all cell lines/antibodies set forth on Schedule 1.1.
"Fair Market Value" means as of a given date, (i) the closing price of a
share of common stock on the principal exchange on which the common stock then
trades, if any, on the day previous to such date, or, if shares were not traded
on the day previous to such date, then on the next preceding trading day during
which a sale occurred; or (ii) if such common stock is not traded on an
exchange but is quoted on Nasdaq or a successor quotation system, (1) the last
sales price (if the common stock is then listed as a National Market Issue
under the Nasdaq National Market system) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the common stock
on the day previous to such date as reported by Nasdaq or such successor
quotation systems.
"Indemnitees" has the meaning set forth in Section 5.1.
"License Revenue" means consideration received by Holdings and its
Affiliates (including PerImmune) from third parties as a result of the
licensing by Holdings and its Affiliates (including PerImmune) of Patents,
Patent Applications and/or Technical Information with respect to a specified
Product or Products, including all license fees, royalties and milestone
payments, but excluding payments to fund research or other product development
expenses and costs ("R&D Payments").
"Net Sales" means the amounts invoiced or charged purchasers for Products
sold by Holdings or an Affiliate (including PerImmune) to a third party, less
costs of insurance incident to transportation; transportation and shipping
costs; excise, sales, luxury, gross receipt, turnover or similar taxes and
customs duties; trade and cash discounts; sales commissions; and allowances for
returns and uncollectible accounts. Neither License Revenues nor R&D Payments
shall be considered Net Sales for purposes of this Agreement.
"Patents" means those patents listed on Schedule 1.2(a) hereto and all
divisionals, continuations, continuations-in-part, reissues, renewals,
extensions or additives to any such patents, both U.S. and worldwide.
"Patent Applications" means the patent applications listed on Schedule
1.2(a) hereto, as well as any continuations, continuations-in-part, divisional
or reissue applications, reexamination certificates, or any corresponding
foreign patent applications based on such patent applications and on any
patents issuing worldwide from any of the foregoing.
"PerImmune Business" means the business of research, development and the
commercialization of clinical and therapeutic applications for vaccine-based
active specific immunotherapy and the research, development, clinical and
therapeutic application and manufacturing of human monoclonal antibodies,
non-specific immunotherapy and in-vitro
2
<PAGE> 4
diagnostics, as well as contract research and product sales, as currently
conducted and proposed to be conducted by PerImmune.
"PerImmune Indemnitees" has the meaning set forth in Section 5.1.
"Products" means individually or collectively, as the context indicates
(i) OncoSPECT (Colorectal), (ii) OncoSPECT (non-colorectal), (iii) active
specific immunotherapy (ASI), (iv) Apo-Tek cardiovascular tests and products,
(v) KLH and non-specific immunotherapy products, and (vi) other products
produced by Holdings and its Affiliates (including PerImmune) which are covered
by Patents, Patent Applications or patents or patent applications underlying
the Retained Patents License or make use of Technical Information transferred
hereunder to Holdings.
"Quarterly Payments Report" has the meaning set forth in Section 2.3(a).
"Retained Patents" means the patents list on Schedule 1.4.
"Retained Patents License" has the meaning set forth in Section 3(b).
"Taxes" means all federal, state, local, foreign, and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or charges of any
kind whatever, together with any interest and any penalties, additions to tax,
or additional amounts with respect thereto, and the term "Tax" means any one of
the foregoing Taxes.
"Technical Information" means all technical and commercial information,
specifications, processes, inventions, trade secrets, know how, methods and
techniques, and other materials primarily used in the PerImmune Business,
including models, designs and plans and including the underlying copyright in
works of authorship embodying the foregoing, all of which primarily relate to
the PerImmune Business as conducted by PerImmune on the date hereof, but not
including the Patents, Patent Applications, Trademarks or Excluded Intellectual
Property.
"Third Party Notice" has the meaning set forth in Section 5.3.
"Trademarks" means those trademarks and common law marks listed on
Schedule 1.5 hereto.
3
<PAGE> 5
2. Assignment of Intellectual Property Rights to PerImmune
2.1. Transfer.
(a) Assignment of Patents and Patent Applications. Pharma shall, and
shall cause Parent to, sell, assign, convey and deliver to Holdings, its
successors, assigns and legal representatives, such party's entire right,
title and interest in and to the Patents, the Patent Applications and all
rights and privileges relating thereto including but not limited to the
right to recover and take all such proceedings as may be necessary for the
recovery of damages or otherwise in respect of past, present or future
infringement of any Patent or patents(s) issuing from any Patent
Application;
(b) Assignment of Trademarks. Pharma hereby sells, assigns, conveys
and delivers to Holdings all of its individual rights, title and interest
in and to the Trademarks, including the goodwill of the business
represented by the scheduled trademarks, any registrations and
applications of the scheduled marks and any common law rights in the
scheduled marks.
(c) Assignment of Technical Information. Pharma hereby sells,
assigns, conveys and delivers to Holdings Pharma's right, title and
interest in and to all Technical Information held by Pharma.
2.2. Consideration.
(a) In consideration of the transfers, assignments and conveyances
provided for in Section 2.1, and subject to the limitations included
herein, Holdings agrees to make the following payments to Pharma:
(i) in respect of the Products listed on Schedule 2.2(a)(i),
the payments in each case in the amount set forth next to such Product
on Schedule 2.2(a)(i);
(ii) in respect of the Products listed on Schedule 2.2(a)(ii),
the payments in each case in the amount set forth next to such
Product on Schedule 2.2(a)(ii);
(iii) in respect of other Products covered by the Patents, the
Patent Applications, or patents issued to, or patent applications
filed by, Holdings subsequent to the date hereof, which are the direct
result of the technology owned by Holdings as of the date hereof or
transferred to Holdings hereunder (but excluding the Products set
forth in Schedule 2.2(a)(i) and Schedule 2.2(a)(ii)), payments equal
to 7.5% of Net Sales and 50% of License Revenue for such Products, as
applicable; and
(iv) in respect of all other Products of Holdings which are a
direct result of the technology owned by Holdings as of the date
hereof, but not otherwise
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<PAGE> 6
covered by the provisions of 2.2(a)(i) through 2.2(a)(iii), payments
equal to 5% of Net Sales or 50% of License Revenue, as applicable.
(b) Each lump sum payment for a Product to be made by Holdings
pursuant to Section 2.2(a)(i) is payable in two equal installments: one-half
upon written notification to Holdings by the U.S. Food and Drug Administration
of its approval of such Product for commercial use and one-half upon written
notice of approval of such Product for commercial use in at least two of the
following four countries: France, Germany, United Kingdom and Italy. In the
event that PerImmune's common stock is publicly traded on a U.S. national
securities exchange or quoted on an automatic quotation system, each milestone
payment may, at the election of Pharma, be satisfied in shares of common stock
of PerImmune based upon the Fair Market Value of such common shares on the day
such payment is made.
(c) Holdings' obligation to make the payments referenced in Section
2.2(a)(ii) and Section 2.2(a)(iii) with respect to a particular Product remains
in effect with respect to any sale of that particular Product until the
expiration or termination of the last patent to expire or terminate directly
covering that particular product in any country of manufacture or sale.
Holdings' obligation to make payments contemplated in Section 2.2(a)(iv) with
respect to any Product expires on the earlier of: (i) ten years from the first
commercial introduction of any such Product or (ii) December 31, 2011.
(d) For purposes of this Section 2.2, Products shall be considered
sold upon the date invoiced.
(e) Payments made pursuant to Section 2.2(a)(ii) through 2.2(a)(iv)
in respect of Products returned to Holdings, may be credited against future
payments due and owing pursuant to such sections and credits for returned
Products shall be made in accordance with the Quarterly Payments Report.
(f) Holdings hereby agrees to diligently pursue development,
regulatory approval and commercialization of the Products listed on Schedule
2.2(a)(i).
2.3. Quarterly Payments Report: Audit
(a) Holdings shall, on or before the last day of February, May,
August and November of each year in which payments are payable thereunder,
furnish to Pharma a statement (the "Quarterly Payments Report"), certified by a
financial officer of Holdings, concerning the Net Sales and License Revenue of
Products by Licensee during the preceding calendar quarter in sufficient detail
to permit the computation of the payments due pursuant to Section 2.2(a)(i)
through 2.2(a)(iv) and shall accompany such statement by payment of the amount
of the payment due in the form of a check or confirmation of a wire transfer.
On or before the 30th day of April of each year, Holdings shall furnish to
Pharma at Pharma's request and expense, a comparable statement certified by
Holdings' firm of certified public accountants of the sales of Products during
the term of this
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<PAGE> 7
Agreement for the calendar year ending on the preceding December 31, and shall
accompany such statement by payment of an amount equal to the excess, if any,
of the amount of payments shown to be due on such statement over the aggregate
amount of the four quarterly payments made in respect of such calendar year
pursuant to this Article, or, if the aggregate amount of such payments shall be
in excess of the amount of payment shown to be due on such statement, shall
take appropriate credit of the amount of such over-payment against payments
accruing after such December 31.
(b) Upon thirty (30) days notice to Holdings, Pharma shall
have the right to examine the applicable books and records of Holdings in order
to verify the Net Sales and License Revenue of Products for which payments are
made by Holdings to Pharma pursuant to Section 2.2(a). In the event that any
such examination reveals that the amount of such Net Sales or License Revenue
for any calendar quarter exceeded the amount certified to Pharma herein, the
actual amount of the Net Sales and License Revenue in respect of such calendar
quarter shall be increased for purposes of determining the Payments pursuant to
Section 2.2(c), and the shortfall shall immediately be paid to Pharma by
Holdings. Holdings shall be entitled to examine the work papers relating to any
such examination, and if any such examination reveals an overpayment to Pharma
by Holdings, the overpaid amount shall be refunded to Holdings, without
interest.
2.4 Withholding. Holdings and Pharma recognize that payments by
Holdings to Pharma of amounts described in this Agreement are not royalties,
but rather payments for the purchase of Patents and Patent Applications,
Trademarks and Technical Information. However, Pharma recognizes that Holdings
may be obligated under Section 881(a)(4) of the Internal Revenue Code of 1986,
as amended, or under another provision of law to withhold and pay over, or
otherwise pay, Taxes as a result of the payment by Holdings to Pharma of
amounts described in this Agreement. In connection with such withholding
obligations, Pharma shall be treated as if it were subject to such law and
shall not be accorded the benefit of any exemption or reduction in tax rate
permitted by such law unless Holdings shall have received such evidence, forms
or certificates satisfying Holdings that Pharma is not subject to such law or
is entitled to an exemption or reduction in tax rate. Specifically, Pharma
shall provide Holdings with a duly executed Form 1001 - Ownership, Exemption,
or Reduced Rate Certificate evidencing Pharma's qualification for treaty
exemption prior to the due date for any payments hereunder. Any amounts
withheld by Holdings and remitted to a taxing authority shall be deemed for all
purposes of this Agreement to have been paid by Holdings to Pharma.
2.5 For purposes of this Article 2, all references to "Holdings"
shall refer to either or both of Holdings and PerImmune, as the context
requires.
3. (a) License Back to Pharma. Holdings hereby grants to Pharma a
retained, transferable, non-exclusive, irrevocable, world-wide and royalty-free
license under the assigned Patents and Patent Applications set forth on
Schedule 1.2(b).
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<PAGE> 8
(b) License to Retained Patents. Pharma hereby grants to Holdings a
non-transferable, non-exclusive, irrevocable, world-wide and royalty-free
license under the Retained Patents for use with PerImmune's human monoclonal
antibodies (the "Retained Patents License").
4. Representations and Warranties.
Pharma hereby represents and warrants to Holdings that:
4.1 Pharma is the beneficial owner of all Patents and Patent
Applications and the legal and beneficial owner of all Trademarks and
Technical Information with the authority to transfer to Holdings its interests
in such Patents, Patent Applications, Trademarks and Technical Information as
provided on Section 2.1.
4.2 Parent is the legal owner of all Patents and Patent Applications,
with the authority to transfer to PerImmune its interests in such Patents and
Patent Applications as provided in Section 2.1.
4.3 Pharma has full authority to cause Parent to assign to Holdings
Parent's interests in the Patents and the Patent Applications pursuant to
Section 2.1(a) and to grant the Retained Patents License. Neither Pharma nor
Parent has acted in any way that would interfere with Holdings' rights as
granted herein.
4.4 Except as set forth on Schedule 4.4, the Patents, Patent
Applications, and the Technological Information being transferred to Holdings
by Parent and Pharma under this Agreement and the Retained Patents License
together convey to Holdings legal and beneficial ownership of intellectual
property rights sufficient to permit Holdings to conduct the PerImmune
Business, substantially in the same manner as such business was conducted prior
to the date hereof.
4.5 Except as set forth on Schedule 4.5, no other person or entity
has or is asserting an ownership interest in any of the Products, and neither
Parent nor Pharma has had to pay or been requested to pay any royalty or
license fee which would be an obligation of Holdings after the date hereof to
any third party to make, use, sell or distribute, any of the Products.
4.6 Except as set forth on Schedule 4.6, the Trademarks represent all
marks registered in any jurisdiction worldwide which were used primarily by or
for the PerImmune Business prior to the date hereof.
4.7 Except as otherwise disclosed in Schedule 4.7, there has been no
claim against either Parent or Pharma or any of their Affiliates of any
infringement of any patent, trademark, patent application, trade name, trade
secret, copyright or other intellectual property rights of any third party
occurring from the operation of the PerImmune Business; provided, however, that
nothing in this Agreement shall constitute or be deemed a representation or
warranty that the manufacture, use or sale of any product under the Patents or
Patent Applications, the use of the Technical Information or the use of the
Trademarks are, or will be, free from infringement of any intellectual property
rights, including patents or trademarks, of third parties.
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<PAGE> 9
5. Indemnification.
5.1 By Pharma. Pharma shall indemnify, save and hold harmless Holdings
and its respective Affiliates and subsidiaries, and their respective directors,
officers, shareholders and employees (the "PerImmune Indemnitees") from and
against any and all costs, losses, Taxes, liabilities, damages, lawsuits,
deficiencies, claims, demands, and expenses (whether or not arising out of
third-party claims), including, without limitation, reasonable attorneys' fees
and all reasonable amounts paid in investigation, defense or settlement of any
of the foregoing herein (collectively, "Damages") incurred in connection with,
arising out of or resulting from any breach of any representation, warranty,
covenant or agreement made by Pharma in, or in connection with, this Agreement
provided, however, that Pharma shall not be liable to the PerImmune Indemnitees
in respect of a breach of a representation or warranty made by Pharma in this
Agreement which was true as of the date of this Agreement but which is rendered
inaccurate by events beyond the control of Pharma occurring between the date of
this Agreement and the Closing, to the extent that Pharma has notified Holdings
of such breach in writing prior to the Closing and Holdings has effected the
Closing with knowledge of such breach.
5.2 Damages. The term "Damages" as used in this Section 5 is not limited
to matters asserted by third parties, but includes Damages incurred or
sustained by an Indemnitee in the absence of third party claims. Payments by an
Indemnitee or amounts for which such Indemnitee is indemnified hereunder shall
not necessarily be a condition precedent to recovery.
5.3 Defense of Claims. If a claim for Damages (a "Claim") is to be made
by an Indemnitee, such Indemnitee shall give written notice (a "Claim Notice")
to the indemnifying party as soon as practicable after such Indemnitee becomes
aware of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 5. If any lawsuit or
enforcement action is filed against any Indemnitee hereunder, notice thereof (a
"Third Party Notice") shall be given to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) calendar days after the
service of the citation or summons). The failure of any indemnified party to
give timely notice hereunder shall not affect the rights to indemnification
hereunder, except to the extent that the indemnifying party demonstrates actual
damage caused by such failure. After receipt of a Third Party Notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying
party shall be entitled, if it so elects, (i) to take control of the defense
and investigation of such lawsuit or action, (ii) to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense unless the named parties to such action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such indemnified party that are different
from or additional to those available to the indemnifying party, and (iii) to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the indemnified party, such consent not to be
unreasonably withheld. The indemnified party shall cooperate in all reasonable
respects with the indemnifying party and such attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom;
and the indemnified party
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may, at its own cost, participate in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom and appoint its own
counsel therefor, at its own cost. The parties shall also cooperate with each
other in any notifications to insurers. If the indemnifying party fails to
assume the defense of such claim within fifteen (15) calendar days after
receipt of the Third Party Notice, the indemnified party against which such
claim has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake the defense, compromise or
settlement of such claim and the indemnifying party shall have the right to
participate therein at its own cost; provided, however, that such claim shall
not be compromised or settled without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld. In the event the
indemnified party assumes the defense of the claim the indemnified party will
keep the indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement.
5.4 Limitation on Indemnity. Holdings shall not be entitled to
indemnification based upon the breach of any representation or warranty of
Pharma if, as of the Closing, Holdings had actual knowledge of facts that cause
such representation or warranty to be untrue. For purposes of the foregoing,
the parties intend only that the actual knowledge of Michael G. Hanna, Jr. and
of senior management and laboratory directors of PerImmune on the Closing Date
shall be imputed to Holdings. Such persons shall not be personally liable to
Pharma under the provisions of the preceding sentence.
6. Miscellaneous
6.1 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder or thereunder may be assigned by any party without the
prior written consent of the other parties thereto, which consent will not
unreasonably be withheld; except that either party may, without such consent,
assign this Agreement and all such rights and obligations to an Affiliate or to
a successor in interest which shall assume all obligations and liabilities of
the assigning party under this Agreement and Holdings may (i) assign all such
rights to any lender as collateral security (provided that no assignment shall
release the assigning party from responsibility for its obligations hereunder)
or (ii) novate its rights and obligations hereunder to PerImmune and shall
thereafter be released from responsibility for its obligations thereunder. Upon
effecting such a novation, all references herein to Holdings shall be deemed to
refer to PerImmune, unless the context otherwise requires. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, and no
other Person shall have any right benefit or obligation under this Agreement as
a third party beneficiary or otherwise.
6.2 Further Assurances. Pharma shall, and shall cause Parent to, execute,
sign and deliver to Holdings all documents, and to perform all acts as are
reasonably required for the assignment of the Patents, Patent Applications,
Trademarks and Technical Information to PerImmune as contemplated hereunder,
including the timely filing of all documents necessary to reflect Holdings'
ownership of the Patents, the Patent Applications and the Trademarks in any
jurisdiction where such Patents, Patent Applications and Trademarks are
currently registered or filed.
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6.3 Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered,
when transmitted if transmitted by telecopy, electronic or digital transmission
method provided that such transmission is confirmed by telephone, the day after
it is sent, if sent for next day delivery to a domestic address by overnight
mail or via private delivery service, and upon receipt, if sent by
international air courier service, certified or registered mail return receipt
requested. In each case notice shall be sent to:
If to Pharma, addressed to:
Akzo Nobel Pharma International B.V.
P.O. Box 20 5345 BH
Oss, The Netherlands
Attention: General Counsel
With a copy to:
Organon Teknika N.V.
Veedijk 58, 2300 Turnhout
Belgium
Attention: President
If to Holdings, addressed to:
PerImmune Holdings, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attention: Michael G. Hanna, Ph.D.
With a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
Attention: Bruce E. Rosenblum
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
6.4 Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the internal law, and not
the law of conflicts, of the State of Maryland.
6.5 Jurisdiction. Pharma hereto irrevocably submits for the benefit of
PerImmune to the jurisdiction of the federal district courts located in the
State of Maryland in connection with any controversy, suit, action or
proceeding which may arise out of or in connection with this
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Agreement or the transactions contemplated hereby. Pharma hereto irrevocably
waives any objection which it might now or hereafter have to the courts
referred to in the preceding sentence being nominated as the forum to hear and
determine any controversy, suit, action or proceeding which may arise out of or
in connection with this Agreement or the transaction contemplated hereby, on
the basis of improper venue, inconvenient forum or otherwise, and agrees not to
claim that any such court is not a convenient or appropriate forum. The parties
agree hereby that nothing in this Section 6.5 is intended to alter the
agreement in Section 6.9.
6.6. Agent for Service of Process.
(a) In connection with this Agreement, Pharma hereto agrees that
the process by which any suit, action or proceeding is begun in the
federal district courts located in the State of Maryland may be served on
it by being delivered to Organon Teknika Corporation, 100 Akzo Avenue,
Durham, North Carolina 27712, and hereby irrevocably appoints such person
as its agent for the service of process in connection therewith. If the
appointment of the person mentioned in this Section 6.6 ceases to be
effective, Pharma shall immediately appoint a further person to accept
service of process on its behalf in Maryland and, failing such
appointment within five (5) days after notice thereof to Pharma, Holdings
shall be entitled to appoint such a person by notice to Pharma. Pharma
further irrevocably consents to the service of process out of the
aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to
Pharma, at its address identified in Section 6.3, such service to become
effective ten (10) days after such mailing. Nothing contained herein
shall affect the right to serve process in any other manner permitted by
law.
(b) The submission to the jurisdiction of the courts referred to
above shall not (and shall not be construed so as to) limit the right of
Holdings hereto to take proceedings against Pharma with respect to this
Agreement in any other court of competent jurisdiction nor shall the
taking of proceedings in any one or more jurisdictions preclude the
taking of proceedings in any other jurisdiction (whether concurrently or
not) if and to the extent permitted by applicable law.
6.7. Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.8. Severability. The Parties hereto agree that the invalidity or
unenforceability of any of the provisions hereof shall not in any way affect
the validity or enforceability of any other provisions of this Intellectual
Property Agreement except those of which the invalidated or unenforceable
provisions comprise an integral part of or are otherwise clearly inseparable
from such other provisions.
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6.9 Arbitration
(a) Notwithstanding anything herein to the contrary, in the event
that there shall be a dispute among the parties after the Closing arising
out of or relating to this Agreement, including, without limitation, the
indemnities provided in Article 5 the parties agree to attempt to settle
any such disputes in a amicable manner. Should the parties fail to resolve
such a dispute within three (3) months following written notice thereof,
such dispute shall, upon request of the contesting party, be submitted to
an arbitrator jointly agreed to by the parties. If a single arbitrator
cannot be agreed upon within thirty (30) days, each party shall select one
arbitrator and the two arbitrators will select a third arbitrator.
(b) Arbitration shall be conducted in accordance with rules and
procedures of the Center for Public Resources ("CPR"), subject to the
following terms:
(i) the arbitration shall be held at a mutually agreeable
location in the vicinity of Washington, D.C.
(ii) the arbitrator(s) shall be independent, impartial third
parties, having no direct or indirect personal or financial
relationship to any of the parties of the dispute, each of whom has
agreed to accept an appointment as arbitrator(s) on the terms set
forth in this Section.
(iii) within thirty (30) days after selection of the
arbitrator(s), each party shall submit a description of the matter to
be arbitrated to said arbitrator(s).
(iv) from the date the arbitrator(s) is/are in possession of
both parties' submitted material, the arbitrator(s) shall have sixty
(60) days in which to hear the parties and fifteen (15) days
thereafter to render a decision.
(v) time period set forth in this Section 6.9 may be altered
only mutual consent of the parties.
(vi) the arbitrator(s) shall announce the award in writing
accompanied by written findings of fact in support of the award and
any relevant conclusions of law. Any award issued as a result of such
arbitration shall be final and binding between the parties thereto,
and shall be enforceable by any court having jurisdiction over the
party against whom enforcement is sought.
the fees of the arbitrator(s) and any other costs and fees associated
with the arbitration shall be paid in accordance with the decision of
the arbitrator(s), except that the prevailing party shall pay no
more than one-half of such costs.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
PERIMMUNE HOLDINGS, INC.
By: /s/ MICHAEL G. HANNA, JR.
----------------------------------
Name: Michael G. Hanna, Jr.
Title: President
AKZO NOBEL PHARMA INTERNATIONAL, B.V.
By:
-----------------------------------
Name:
Title:
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
PERIMMUNE HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
AKZO NOBEL PHARMA INTERNATIONAL, B.V.
By: [SIG]
-----------------------------------
Name: Dr. R.S. [ILLEGIBLE]
Title: Authorized Representative
<PAGE> 1
EXHIBIT 10.25
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement (the "Security Agreement")
is made and entered into as of this 13th day of August, 1996, by and among
PerImmune Holdings, Inc., whose address is 1330 Piccard Drive, Rockville,
Maryland 20850-4396 ("Holdings"), PerImmune, Inc. ("PerImmune"), Akzo Nobel
Pharma International, B.V., a corporation formed under the laws of the
Netherlands ("Pharma"), Organon Teknika Corporation ("OTC" together with
Pharma, the "Secured Parties") and Pharma, in its capacity as Collateral Agent
hereunder ("Collateral Agent").
RECITAL
WHEREAS, pursuant to that certain Promissory Note (the "Purchase Price
Note") dated as of August 2, 1996, made by Holdings pursuant to Section 2.2 of
the Stock Purchase Agreement, dated as of July 1, 1996 (as amended, modified or
supplemented from time to time) (the "Stock Purchase Agreement"), Holdings has
promised to pay to OTC an amount equal to Nine Million Two Hundred Thirty-four
Thousand Nine Hundred Thirty-five Dollars ($9,234,935).
WHEREAS, pursuant to a certain credit agreement, dated as of August 2,
1996 (as amended, modified or supplemented from time to time) (the "Credit
Agreement") between PerImmune and OTC, OTC has agreed to make to or for the
account of PerImmune certain loans up to Three Million Six Hundred Thousand
Dollars ($3,600,000) as may be increased by One Million Eight Hundred Thousand
Dollars ($1,800,000) in accordance with such Credit Agreement, to be evidenced
by PerImmune's Secured Promissory Note (the "Secured Note").
WHEREAS, pursuant to a certain working capital facility, dated as of
August 2, 1996 (as amended, modified or supplemented from time to time) (the
"Working Capital Facility") between PerImmune and OTC, OTC has agreed to make
to or for the account of PerImmune certain loans up to Two Million Eight
Hundred Seventy-one Thousand Five Hundred Thirty-two Dollars ($2,871,532) to be
evidenced by PerImmune's Working Capital Secured Note (the "Working Capital
Note").
WHEREAS, pursuant to a certain intellectual property agreement by and
between Holdings and Pharma dated as of August 2, 1996 (the "Intellectual
Property Agreement") whereby, in consideration of the transfer to Holdings of
certain patents and patent applications and other intellectual property,
Holdings has agreed to make to Pharma certain future payments.
WHEREAS, the parties hereto intend that the respective obligations of
Holdings under the Purchase Price Note and under the Intellectual Property
Agreement, and of PerImmune under the Credit Agreement and the Working Capital
Facility shall be secured by a pledge of Holdings' right, title and interest
in the Collateral (as defined herein).
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<PAGE> 2
WHEREAS, the parties hereto intend that Pharma act as Collateral Agent for
the equal and ratable benefit of the Secured Parties.
AGREEMENT
Now therefore, in consideration of the above recitals and the agreement
hereinafter set forth, the parties hereto agree as follows:
1. Creation of Security Interest. In order to secure the payment and
performances of all Obligations, Holdings hereby grants to the Collateral
Agent, for the equal and ratable benefit of the Secured Parties, a security
interest in all of Holdings' right, title and interest in and to the collateral
described in Section 2 below (the "Collateral") in order to secure the payment
and performance of the respective obligations of PerImmune and Holdings to
Secured Parties described in Section 3 below.
2. Collateral.
(a) The Collateral under this Security Agreement shall mean (i)
those certain patents and patent applications set forth in Schedule A
attached hereto (including, without limitation, all divisions,
continuations, continuations-in-part, reissues, renewals or extensions
thereof) (the "Patents") and (ii) those certain trademarks set forth on
Schedule B attached hereto (including all goodwill of Holdings' business
connected with the use of, and symbolized by, any and all such trademarks)
(the "Trademarks").
(b) If, before the termination of this Agreement, Holdings shall
become entitled to the benefit of any patent or patent application for any
division, continuation, continuation-in-part, reissues, renewal or
extension of a Patent, the provisions of Section 1 shall automatically
apply thereto and Holdings shall give to the Collateral Agent prompt notice
thereof in writing. Holdings authorizes the Collateral Agent to modify this
Agreement by amending Schedule A to reflect the addition of such patents or
patent applications.
3. Secured Obligations of Debtor. The Collateral secures and shall
hereafter secure (i) the payment by PerImmune to OTC of all indebtedness now or
hereafter owed to OTC by PerImmune under the Credit Facility, the Secured Note,
the Working Capital Facility, the Working Capital Note and this Security
Agreement together with any interest thereon and extensions, modifications and
renewals thereof, and (ii) the payment of Holdings (a) to OTC of all
indebtedness owed to OTC under the Purchase Price Note, and (b) to Pharma of
all amounts due pursuant to Section 2.2(a)(i) and Section 2.2(b) of the
Intellectual Property Agreement prior to the termination of this Agreement and
(iii) performance by Holdings of all other obligations and the discharge of all
other liabilities to Secured Parties of every kind and character, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, joint, several and joint and several, created under this
Security Agreement (together, the "Obligations"). All payments and performance
shall be in
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<PAGE> 3
accordance with the terms under which said indebtedness, obligations and
liabilities were or are hereafter incurred or created.
4. The Collateral Agent. Pharma is hereby appointed as the
Collateral Agent to serve in such capacity until a successor is duly appointed.
The Collateral Agent hereby accepts such appointment and acknowledges that it
is acting in such capacity for the benefit of the Secured Parties.
5. Restrictions on Future Agreements. Holdings agrees that, except
as set forth in Section 8 hereof, until the Obligations shall have been
satisfied in full and this Agreement shall have been terminated, Holdings will
not, without the Collateral Agent's prior written consent, (a) enter into any
agreement that is inconsistent with Holdings' obligations under this Agreement
or (b) sell, pledge, license or assign its interest in any of the Collateral.
6. Defaults and Remedies
Holdings shall be in default under this Agreement upon the happening
of any of the following events:
(a) PerImmune fails to pay or perform any of the obligations
owed to OTC in accordance with the terms upon which such obligations were
incurred or created under the Secured Note or the Working Capital Note and such
failure continues thereafter for a period of thirty (30) days after such sum
becomes due and owing.
(b) Holdings fails to pay or perform any of the obligations
owed to OTC under the Purchase Price Note or to Pharma under Section 2.2(a)(i)
and Section 2.2(b) of the Intellectual Property Agreement in accordance with
the respective terms upon which such obligation was incurred or created and
such failure continues thereafter, in the case of the Purchase Price Note, for
a period of thirty (30) days after such sum becomes due and owing, and in the
case of payments under Section 2.2(a)(i) and Section 2.2(b) of the Intellectual
Property Agreement, for a period of thirty (30) days after written notice to
Holdings that such sums are due and owing.
(c) All or any portion of the Collateral is seized or levied by
writ of attachment, garnishment, execution or otherwise and such seizure or
levy is not released within fifteen (15) days thereof.
(d) PerImmune executes a general assignment for the benefit of
its credits, ceases to conduct its business in the ordinary course as it is now
conducted, convenes any meeting of its creditors, becomes insolvent, admits in
writing its insolvency or inability to pay its debts, or is unable to pay or is
generally not paying its debts as they become due.
(e) Holdings executes a general assignment for the benefit of
its creditors, ceases to conduct its business in the ordinary course as it is
now
3
<PAGE> 4
conducted, convenes any meeting of its creditors, becomes insolvent, admits
in writing its insolvency or inability to pay its debts, or is unable to
pay or is generally not paying its debts as they become due.
(f) A receiver, trustee, custodian or agent is appointed to take
possession of all or any substantial portion of PerImmune's assets.
(g) A receiver, trustee, custodian or agent is appointed to take
possession of all or any portion of the Collateral or all or any
substantial portion of Holdings' assets.
(h) Any case or proceeding is voluntarily commenced by PerImmune
under any provision of the Federal Bankruptcy Code or any other federal or
state law relating to debtor rehabilitation, insolvency, bankruptcy,
liquidation or reorganization, or any such case or proceeding is
involuntarily commenced against PerImmune.
(i) Any case or proceeding is voluntarily commenced by Holdings
under any provision of the Federal Bankruptcy Code or any other federal or
state law relating to debtor rehabilitation, insolvency, bankruptcy,
liquidation or reorganization, or any such case or proceeding is
involuntarily commenced against Holdings.
Upon such default hereunder, Collateral Agent, acting for the benefit of the
Secured Parties, shall have the remedies of a secured party under the
applicable Uniform Commercial Code and as set forth in Section 10, PerImmune or
Holdings, as appropriate, shall reimburse the Collateral Agent for all
reasonable costs and reasonable attorney's fees incurred by Collateral Agent in
pursuing any remedies, which costs and fees are also Obligations secured
hereunder.
7. Use and Pledge of Pledged Collateral. Unless an event of default
shall have occurred, Collateral Agent, on behalf of Secured Parties, shall from
time to time execute and deliver, upon written request of Holdings, any and all
instruments, certificates or other documents, in the form so requested,
necessary or appropriate in the reasonable judgment of Holdings to enable
PerImmune to continue to exploit, license, use, enjoy and protect the
Collateral throughout the world provided such instrument, certificate or
document does not conflict with nor diminish the rights of the Collateral Agent
or the Secured Parties hereunder and provided that Holdings gives adequate
assurance that the proceeds of the proposed transaction will be applied toward
any payment obligations that will be due and owing to Pharma under the
Intellectual Property Agreement as a result of such transaction. The parties
hereto each acknowledges that this Agreement is intended for the benefit of the
Collateral Agent on behalf of the Secured Parties and to grant a security
interest in and lien upon the Collateral and that, notwithstanding the
provisions of Section 10 hereof, shall not constitute or create a present
assignment of the Collateral.
8. Transfer of Collateral. The parties hereto each recognize and
acknowledge the right of Holdings under the Intellectual Property Agreement to
transfer and
4
<PAGE> 5
assign to PerImmune all of Holdings' rights, title and interest in the
Collateral, and the Collateral Agent and the Secured Parties agree to promptly
execute and deliver all further documents and instruments, and to take all
further actions that may be necessary or that Holdings or PerImmune may
request, in order to reflect or acknowledge such transfer. Upon consummation of
the transfer of the Collateral, PerImmune shall be bound by all terms of this
Agreement.
9. Termination of Agreement. This Security Agreement shall terminate
upon the earlier of (i) full and final payment and performance of all
indebtedness and obligations secured hereunder, and (ii) in the absence of a
default hereunder, two (2) years from the date of this Security Agreement
(provided that such term shall be extended for the length of any cure period if
an event has occurred which would constitute a default if not for the
additional time allowed for the cure period). At such time, Collateral Agent
shall promptly execute and deliver to Holdings all deeds, assignments and other
instruments (including termination statements on Form UCC-3 and documents
suitable for recordation in the United States Patent and Trademark Office, the
United States Copyright Office or similar domestic or foreign authority)
acknowledging the termination of this Agreement and the release of the security
interest in the Collateral created hereunder.
10. Conditional Assignment.
10.1 In order to induce the Secured Parties to provide funds and
credit as set forth above, Holdings has agreed to make the conditional
assignment described in this Section 10 to the Collateral Agent of the Patents
and the Trademarks to secure Holdings' and PerImmune's performance of their
Obligations pursuant to this Agreement.
10.2 Holdings hereby conditionally grants, assigns and conveys to the
Collateral Agent the entire right, title and interest in and to the Patents and
the Trademarks. The parties hereto acknowledge that the conditional assignment
pursuant to this Section 10.2 shall have no effect, and the Collateral Agent
shall have no ownership interest in the Patents and the Trademarks pursuant to
this Section 10.2, unless and until there shall have occurred an event of
default under Section 6 above. Upon termination of this Agreement pursuant to
Section 9 above, the conditional assignment pursuant to this Section 10.2 shall
be terminated, and thereafter shall not be given any effect. Upon the
occurrence of an event of default hereunder, any and all rights, residual,
inchoate, by license or of any kind, that Holdings may have in the Patents and
the Trademarks shall be deemed assigned to Collateral Agent, which shall then
have the entire right, title and interest in and to the Patents and the
Trademarks, free of any obligation to Holdings, by effect of this conditional
assignment.
10.3 If, before the Obligations shall have been satisfied in full,
Holdings shall become entitled to the benefit of any patent application or
patent for any reissue, division, continuation, renewal, extension, or
continuation-in-part of any Patent or any improvement on any Patent, the
provisions of Section 10.2 shall automatically apply thereto and Holdings shall
give to Collateral Agent prompt notice thereof in writing. Holdings
5
<PAGE> 6
authorizes Collateral Agent to modify this Agreement by amending Schedule A to
include any such future patents and patent applications.
11. Miscellaneous Provisions
11.1 Notices. Notices, requests and other communications hereunder
shall be in writing and may be delivered personally or sent by telegram, telex
or first class mail to the parties addressed as follows:
To PerImmune:
PerImmune, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attention: Michael G. Hanna, Jr.
To Holdings:
PerImmune Holdings, Inc.
1330 Piccard Drive
Rockville, MD 20850-4396
Attention: Michael G. Hanna, Jr.
To Pharma:
Akzo Nobel Pharma International, B.V.
P.O. Box 20 5345 BH
Oss, The Netherlands
Attn: General Counsel
To OTC:
Organon Teknika Corporation
100 Akzo Avenue
Durham, N.C. 27712
Attn: President
Such notices, requests and other communications sent as provided above shall be
effective when received by the addressee thereof, but if sent by registered or
certified mail, postage prepaid, shall be effective three (3) business days
after being deposited in the United States mail. The parties hereto may change
their addresses by giving notice thereof to the other parties hereto in
conformity with this section.
11.2 Headings. All headings have been inserted for convenience only
and shall not affect the meaning or interpretation of this Security Agreement
or any provision hereof.
6
<PAGE> 7
11.3 Governing Law. This Security Agreement shall be construed in
accordance with and all disputes hereunder shall be governed by the laws of the
State of Maryland.
11.4 Binding Agreement. All rights of Secured Parties hereunder
shall inure to the benefit of each of its successors and assigns. PerImmune
shall not assign any of its interest under this Security Agreement without the
prior written consent of Secured Parties.
11.5 Definitions. All terms not defined herein shall have the
meaning set forth in the applicable Uniform Commercial Code, except where the
context otherwise requires.
11.6 Entire Agreement. This Security Agreement, the Credit
Agreement, the Working Capital Agreement, the Purchase Price Note, the Secured
Note and the Working Capital Note executed in connection herewith, are intended
by the parties as a final expression of their agreement and are intended as a
complete and exclusive statement of the terms and conditions thereof.
11.7 Severability. If any provision of this Security Agreement
should be found to be invalid or unenforceable, all of the other provisions
shall nonetheless remain in full force and effect to the maximum extent
permitted by law.
11.8 Jurisdiction. Pharma (including in its capacity as Collateral
Agent) hereby irrevocably submits for the benefit of PerImmune and Holdings to
the jurisdiction of the federal district courts located in the State of
Maryland in connection with any controversy, suit, action or proceeding which
may arise out of or in connection with this Security Agreement and the
transactions contemplated hereby. Pharma (including in its capacity as
Collateral Agent) hereby irrevocably waives any objection which it might now or
hereafter have to the courts referred to in the preceding sentence being
nominated as the forum to hear and determine any controversy, suit, action or
proceeding which may arise out of or in connection with this Security Agreement
and the transactions contemplated hereby, on the basis of improper venue,
inconvenient forum or otherwise, and agrees not to claim that any such court is
not a convenient or appropriate forum.
11.9 Agent for Service of Process.
(a) In connection with this Security Agreement and the
transactions contemplated hereby, Pharma (including in its capacity as
Collateral Agent) hereby agrees that the process by which any suit, action
or proceeding is begun in the federal district courts located in the State
of Maryland may be served on it by being delivered to Organon Teknika
Corporation, 100 Akzo Avenue, Durham, N.C. 27712, Attn: President, and
hereby irrevocably appoints such person as its agent for the service of
process in connection therewith. If the appointment of the person
mentioned in this Section 11.9 ceases to be effective, Pharma shall
immediately appoint a further person to accept service of process on its
behalf in Maryland and, failing such
7
<PAGE> 8
appointment within five (5) days after notice thereof to Pharma, Holdings
or PerImmune shall be entitled to appoint such a person by notice to
Pharma. Pharma (including in its capacity as Collateral Agent) further
irrevocably consents to the service of process out of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to Pharma, at the
address identified for it in Section 11.1, such service to become
effective ten (10) days after such mailing. Nothing contained herein shall
affect the right to serve process in any other manner permitted by law.
(b) The submission to the jurisdiction of the courts referred
to above shall not (and shall not be construed so as to) limit the right
of Holdings or PerImmune hereby to take proceedings against Pharma
(including in its capacity as Collateral Agent) with respect to this
Security Agreement and the transactions contemplated hereby in any other
court of competent jurisdiction nor shall the taking of proceedings in any
one or more jurisdictions preclude the taking of proceedings in any other
jurisdiction (whether concurrently or not) if and to the extent permitted
by applicable law.
Counterparts. This Security Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed as of the day and year first above written.
PerImmune, Inc.
By [SIG]
---------------------------
Title
---------------------------
PerImmune Holdings, Inc.
By [SIG]
---------------------------
Title
---------------------------
Akzo Nobel Pharma International, B.V.
By [SIG]
---------------------------
Title
---------------------------
Organon Teknika Corporation
By [SIG]
---------------------------
Title
---------------------------
Akzo Nobel Pharma International, B.V.
as Collateral Agent
By [SIG]
---------------------------
Title
---------------------------
<PAGE> 10
Schedule A
Intellectual Property Security Agreement
Patents and Patent Applications
<TABLE>
<S> <C> <C> <C> <C>
Title Country Patent # Allowed App # Filed App #
Monoclonal Antibodies
Tumor specific monoclonal
antibodies US 4,828,991
Tumor associated
monoclonal antibodies
derived from human B-cell US 4,997,762
line 5,180,814
AT E71410
AU 589,351
635,511
BE 0151030
CA 473130
CH 0151030
DE P3585093
DK 408/85
EP 0151030
ES 539,987
FR 0151030
GB 0151030
GR 850,179
HU 209,519
IE 58,859
IL 74,156
91,045
IT 0151030
JP 2021518 269230/93
LU 0151030
NL 0151030
NZ 210,867
PT 79,894
SE 0151030
ZA 8,500,689
</TABLE>
<PAGE> 11
Schedule A
PATENTS AND PATENT APPLICATIONS
<TABLE>
Title Country Patent # Allowed App# Filed App#
<S> <C> <C> <C> <C>
Tumor specific monoclonal antibodies US 5,106,738
Tumor associated monoclonal antibody 8IAV78 US 5,348,880
AU 656785
CA 2108767
EP 92913154.8
FI 935038
JP 500176/93
KR 93/703412
WO US92/04023
Tumor associated monoclonal antibodies US 5,474,755
Monoclonal Antibody 88BV59 US 08/341469
AU 651,261
CA 2083542
EP 92203827.8
FI 925638
HU 9203932
ID P-005142
IL 103258
JP 331961/92
KR 92/23925
NO 924803
NZ 245443
TW 81109353
ZA 92/8880
Monoclonal antibody 88BV59, sublones and
method of making US 08/192089
AU 17425/95
CA 2158572
EP 95909472.3
FI 954700
JP 520778/95
</TABLE>
<PAGE> 12
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
TITLE COUNTRY PATENT # ALLOWED APP# FILED APP #
- ----- ------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
KR 95/704282
WO US95/01440
Tumor associated monoclonal US 5,495,002
antibody 123AV16
ID P-950285
WO EP95/00581
ZA 95/1113
In-vitro method for producing US 5,229,275
antigen specific human
monoclonal antibodies
AT E123,311
AU 647;112
BE 0,454,225
CA 2,041,213
CH 0,454,225
DE 69,110,084.5
sss
DK 0,454,225
EP 0,454,225
ES 0,454,225
FI 912,016
FR 0,454,225
GB 0,454,225
GR 3,017,162
IE 66,523
IT 0,454,225
JP 191343/91
KR 91/6661
NL 0,454,225
SE 0,454,225
ZA 91/2998
Imaging infectious foci with US 08/346,988
human IgM 16.88
</TABLE>
<PAGE> 13
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
TITLE COUNTRY PATENT # ALLOWED APP # FILED APP #
<S> <C> <C> <C> <C>
CHELATORS
Method for purifying chelator conjugated compounds US 5,244,816
AU 656,717
CA 2,069,303
DK 0488/92
EP 90915696.0
FI 921,579
IE 3585/90
JP 514572/90
KR 92/700833
NZ 235,618
PT 95574
WO US90/05772
ZA 90,8095
Chelating agents for attaching metal ions to proteins US 5,292,868 08/430657
5,488,126
AT E128035
AU 638,757
BE 0429644
CA 2,033,086
CH 0429644
DE 690225423
DK 0429644
EP 0429644 95200465.3
ES 0429644
FI 910,329
FR 0429644
GB 0429644
IE 1867/90
</TABLE>
<PAGE> 14
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
TITLE COUNTRY PATENT # ALLOWED APP # FILED APP #
<S> <C> <C> <C> <C>
IT 0429644
JP 513354/90
KR 91/700100
NL 0429644
SE 0429644
WO US90/02910
ZA 90/4047
Technetium/99M labelling of proteins US 5,317,091
AU 658,403
CA 2104943
EP 92907824.4
FI 933760
JP 507406/92
KR 93/702561
WO US92/01577
Chelator IDAC-2 and methods for purifying US 08/278721
chelator conjugated compounds 08/442856
WO US95/09285
New Polyaminocarboxylate chelators US 95/00068
WO US95/00068
Pre-Targeting
Site specific in vivo activation of US 5,433,955 07/300999
therapeutic drugs 08/382469
AT E123414
AU 648,015
BE 0454783
CA 2025899
CH 0454783
DE 69019959.7
DK 0454783
</TABLE>
<PAGE> 15
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
EP 0454783
ES 0454783
FI 913,511
FR 0454783
GE 0454783
IT 0454783
JP 503116/90
KR 90/702129
LU 0454783
NL 0454783
NO 912,864
SE 0454783
WO 90/00503
In Vivo Binding Pair Pretargeting US 08/140186 08/452938
08/461267
AU 663,582
CA 2,107,558
EP 93906276.6
FI 934,857
ID P-005991
JP 515830/93
KR 93/703311
WO US93/01858
ZA 93/3035
High yield preparation of dimeric US 08/397464
to decameric chitin oligomers
IL 117052
WO US96/02705
</TABLE>
<PAGE> 16
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Polymer affinity systems in the US 08/471264
delivery of cytotoxic materials
and other compounds to the site
of disease
Immunotherapy
Active specific immunotherapy US 5,484,596 08/540298
CTAA 28A32, the antigen recognized US 08/041529
by MCA 28A32 AT 0537168
AU 660,927
BE 0537168
CA 2079601
CH 0537168
DE 0537168
DK 0537168
EP 0537168
ES 0537168
FI 924576
FR 0537168
GB 0537168
GR 0537168
IT 0537168
JP 508604/91
KR 92/702530
LU 0537168
NL 0537168
</TABLE>
<PAGE> 17
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
SE 0537168
WO US91/02459
Antigen recognized by MCA 16.88 US 5,338,832
AT E137674
AU 618,209
BE 0328578
CA 571,017
CH 0328578
DE P3855290.9
DK 1025/89
EP 0328578
FR 0328578
GB 0328578
HU 4187/88
IE 2034/88
IL 86,958
IT 0328578
JP 505983/89
LU 0328578
NL 0328578
NZ 225,280
SE 0328578
WO US88/02245
ZA 88/4777
Keyhole limpet hemocyanin composition US 5,407,912 08/343808
with enhanced immunogenic activity
AU 60519/94
CA 2121296
EP 94200997.8
</TABLE>
<PAGE> 18
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
FI 941725
ID P-940578
JP 104838/94
KR 94/8063
ZA 94/2510
Tumor associated epitope US 08/478591
CTAA 81AV78, the antigen recognized US 08/150036
by human monoclonal antibody 81AV78
AU 20085/92
CA 2102422
EP 92912470.9
FI 934,963
JP 500223/93
KR 93/703413
WO US92/04108
Others
Leukoregulin, an antitumor lymphokine US 4,849,506
and its therapeutic uses 5,082,657
AT ?48617
AU 592,529
641,386
BE 0179127
CA 478,987
CH 0179127
DE P3574710.2
DK 170,781
170,423
EP 0179127
FI 85,867
FR 0179127
OB 0179127
</TABLE>
<PAGE> 19
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0179127
JP 501862/85
LU 0179127 300409/93
NL 0179127
NO 170,423
SE 0179127
WO US85/00626
Urethral catheter and US 5,120,316
catheterization process
Immunoreactive peptides of apo(a) US 08/266407
08/456840
08/457449
08/172461
AU 81.606/94
CA 2138605
EP 94203653.4
FI 945976
ID P-942209
JP 318892/94
KR 94/358098
ZA 94/10145
An alignment system to overlay US 5,299,253
abdominal computer aided tomography
and magnetic resonance anatomy with
single photon emission tomography
</TABLE>
<PAGE> 20
Schedule B
Intellectual Property Security Agreement
Trademarks
OncoSpect(TM)
Oncovax(TM)
Onconostika(TM)
Oncoscan(TM)
Oncoselect(TM)
Apo-Tek Lp(a)*
Apo-Tek Apo E*
KLH Immune Activator*
* Final name and registration to be completed
<PAGE> 1
EXHIBIT 10.29
================================================================================
SECURITIES
PURCHASE AGREEMENT
among
INTRACEL CORPORATION,
BARTELS INC.,
PERIMMUNE HOLDINGS, INC.,
PERIMMUNE, INC.
and
NORTHSTAR HIGH YIELD FUND
NORTHSTAR HIGH TOTAL RETURN FUND
NORTHSTAR HIGH TOTAL RETURN FUND II
NORTHSTAR STRATEGIC INCOME FUND
Dated as of August 25, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...............................2
Section 1.1 Definitions...........................................................................2
Section 1.2 Accounting Terms and Determinations..................................................13
ARTICLE II THE SECURITIES.......................................................................13
Section 2.1 Issuance, Sale and Delivery of the Securities........................................13
Section 2.2 Closing; Purchase Price; Purchase Price Allocation...................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SUBSIDIARIES...................15
Section 3.1 Organization, Qualifications and Corporate Power.....................................15
Section 3.2 Authorization of Agreements, etc.....................................................15
Section 3.3 Validity.............................................................................16
Section 3.4 Authorized Capital Stock.............................................................16
Section 3.5 Financial Statements.................................................................17
Section 3.6 Absence of Undisclosed Liabilities and Charges.......................................18
Section 3.7 Events Subsequent to the Date of the Balance Sheet...................................18
Section 3.8 Litigation; Compliance with Law......................................................18
Section 3.9 Title to Properties..................................................................19
Section 3.10 Leasehold Interests..................................................................19
Section 3.11 Taxes................................................................................19
Section 3.12 Other Agreements.....................................................................20
Section 3.13 Patents, Trademarks, etc.............................................................22
Section 3.14 Loans and Advances...................................................................22
Section 3.15 Assumptions, Guaranties, etc. of Debt of Other Persons...............................22
Section 3.16 Significant Customers and Suppliers..................................................23
Section 3.17 Governmental Approvals...............................................................23
Section 3.18 Insurance............................................................................23
Section 3.19 Employment Relations.................................................................23
Section 3.20 Compensation of Key Employees........................................................24
Section 3.21 Environmental Compliance.............................................................24
Section 3.22 Projections..........................................................................24
Section 3.23 Disclosure; Accuracy of Statements...................................................24
Section 3.24 Matters Relating to OncoVAX Products.................................................24
Section 3.25 Subsidiaries.........................................................................24
Section 3.26 Use of Proceeds......................................................................25
Section 3.27 Location of Collateral...............................................................25
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.....................................25
Section 4.1 Purchase of Securities...............................................................25
Section 4.2 Authority............................................................................26
Section 4.3 Projections..........................................................................26
Section 4.4 Risk Factors.........................................................................26
ARTICLE V COVENANTS............................................................................26
Section 5.1 Payment of Principal, Premium and Interest...........................................26
Section 5.2 Money for Note Payments to be Held in Trust..........................................26
Section 5.3 Existence............................................................................26
Section 5.4 Maintenance of Assets................................................................27
Section 5.5 Payment of Taxes and Other Claims; Comply with Material Obligations..................27
Section 5.6 Financial Covenants..................................................................27
Section 5.7 Limitation on Restricted Payments....................................................29
Section 5.8 Limitation on Certain Restrictions Affecting any Subsidiary..........................29
Section 5.9 Limitation on Liens..................................................................30
Section 5.10 Maintenance of Insurance.............................................................30
Section 5.11 Waiver of Stay, Extension and Usury Laws.............................................31
Section 5.12 Financial Statements; Other Information..............................................32
Section 5.13 Inspection and Delivery of Property; Books and Records; Discussions..................35
Section 5.14 Further Security Interest............................................................35
Section 5.15 Further Assurances...................................................................36
Section 5.16 Limitation on Debt...................................................................37
Section 5.17 Limitation on Mergers; Etc...........................................................38
Section 5.18 Limitation on Sales of Property......................................................39
Section 5.19 Limitation on Transactions with Affiliates...........................................39
Section 5.20 Limitation on Credit Extensions......................................................39
Section 5.21 Limitation on Certain Amendments.....................................................40
Section 5.22 Limitation on Investments............................................................40
Section 5.23 Use of Proceeds......................................................................40
Section 5.24 Assumption of Company Debt by Subsidiaries...........................................41
Section 5.25 Covenants with respect to OncoVAX Cancer Vaccine.....................................41
Section 5.26 Covenant with respect to Transfer of Certain Patents................................41
Section 5.27 Foreign Currency Liabilities.........................................................42
Section 5.28 Unaudited Financial Statements.......................................................42
Section 5.29 Consent of Transamerica Business Credit Corporation..................................42
Section 5.30 Interest Escrow Security Agreement...................................................42
Section 5.31 Waiver of Certain Covenants..........................................................42
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS......................................42
Section 6.1 Supporting Documents.................................................................42
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 6.2 Fees of Purchasers...................................................................43
Section 6.3 Warrants.............................................................................43
Section 6.4 Amended and Restated Warrants........................................................43
Section 6.5 Interest Escrow Security Agreement...................................................43
Section 6.6 Notes................................................................................43
Section 6.7 Security Agreements..................................................................43
Section 6.8 Pledge Agreement.....................................................................43
Section 6.9 Guarantees...........................................................................43
Section 6.10 Pledged Stock........................................................................44
Section 6.11 Escrow Agreement.....................................................................44
Section 6.12 Financing Statements.................................................................44
Section 6.13 First Union Agreement................................................................44
Section 6.14 Principal Executive Officer..........................................................44
Section 6.15 Agreement with Akzo..................................................................44
Section 6.16 Financial Statements.................................................................45
Section 6.17 Letter of Instructions...............................................................45
Section 6.18 Other Actions........................................................................45
Section 6.19 No Adverse Actions...................................................................45
Section 6.20 Opinion of Counsel...................................................................45
ARTICLE VII PAYMENT FOR PURCHASE OF SECURITIES...................................................45
ARTICLE VIII MISCELLANEOUS........................................................................45
Section 8.1 Expenses.............................................................................45
Section 8.2 Brokerage............................................................................46
Section 8.3 Notices..............................................................................46
Section 8.4 Governing Law; Submission to Jurisdiction............................................46
Section 8.5 Entire Agreement.....................................................................47
Section 8.6 Counterparts.........................................................................48
Section 8.7 Amendments...........................................................................48
Section 8.8 Disclosure to Other Persons..........................................................48
Section 8.9 Limitation on Interest...............................................................49
Section 8.10 Severability.........................................................................49
Section 8.11 Titles and Subtitles.................................................................49
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A-1 and A-2 Form of Primary Note and Escrow Note, respectively
Exhibit B-1 Form of Series A-VI Warrant
Exhibit B-2 through B-6 Form of Amended and Restated Warrants
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Interest Escrow Security Agreement
Exhibit E Form of Security Agreement
Exhibit F Form of Intellectual Property Security Agreement
Exhibit G Form of Pledge Agreement
Exhibits H-1 through H-3 Form of Subsidiary Guaranty
Exhibit I Form of Agreement with CoreStates Enterprises Fund
Exhibit J Form of Akzo Agreement
Exhibit K Form of Counsel Opinion
Exhibit L Funded Commitment Facility Escrow Agreement
</TABLE>
iv
<PAGE> 6
SCHEDULES
<TABLE>
<S> <C>
Schedule 2.1 Issuance of Newly Issued Securities to Purchasers and Stipulated
Contribution Value of Existing Securities
Schedule 2.2 Cash Position of Purchase Price Paid by Purchasers
Schedule 3.4 Subscriptions, Warrants, Options, Convertible Securities and
Commitments Therefor
Schedule 3.5 Material Adverse Changes Since Most Recent Financial Statements
Schedule 3.6 Liabilities and Charges
Schedule 3.7 Events Subsequent to the Date of the Balance Sheet
Schedule 3.9 Title to Properties
Schedule 3.10 Leasehold Interests
Schedule 3.11 Taxes
Schedule 3.12 Other Agreements
Schedule 3.13 Intellectual Property
Schedule 3.14 Loans and Advances
Schedule 3.15 Assumptions or Guaranties of Indebtedness of other Persons
Schedule 3.16 Significant Customers and Suppliers
Schedule 3.18 Insurance
Schedule 3.19(b) Employee Benefit Plans
Schedule 3.20 Compensation of Key Employees
Schedule 3.25 Subsidiaries
Schedule 5.16 Debt Outstanding as of June 30, 1998
Schedule 5.26 Patents to be Acquired
</TABLE>
v
<PAGE> 7
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August
25, 1998, by and among Intracel Corporation, a Delaware corporation (the
"Company"), its wholly-owned subsidiaries (Bartels, Inc. ("Bartels"), PerImmune
Holdings, Inc. ("Holdings") and PerImmune, Inc. ("PerImmune" and, together with
Bartels and Holdings, the "Subsidiaries")) and each of the parties listed on
Schedule 2.1 hereto (each a "Purchaser" and, collectively, the "Purchasers").
PREAMBLE
WHEREAS, the Company wishes to issue and sell to the Purchasers (i)
the Company's 12% Guaranteed Senior Secured Primary Notes, substantially in the
form attached hereto as Exhibit A-1, in the aggregate original principal amount
of $35,000,000 (the "Guaranteed Senior Secured Primary Notes"), (ii) the
Company's 12% Guaranteed Senior Secured Escrow Notes, substantially in the form
attached hereto as Exhibit A-2, in the aggregate original principal amount of
$6,000,000 (the "Guaranteed Senior Secured Escrow Notes" and, together with the
Guaranteed Senior Secured Primary Notes, the "Notes"), (iii) the Series A-VI
Common Stock Warrants, substantially in the form attached hereto as Exhibit B-1
(the "Warrants"), to purchase up to 1,625,000 shares of common stock, $.0001 par
value per share (the "Warrant Shares"), of the Company (the Notes and the
Warrants shall collectively be referred to as the "Securities"); and
WHEREAS, the Company has agreed to amend and restate (i) certain
provisions of the warrants previously granted to certain of the Purchasers (the
"Existing Warrants") and (ii) certain provisions of that portion of a warrant
(the "CoreStates Warrant") previously granted to CoreStates Enterprise Fund, a
division of CoreStates Bank, N.A. ("CoreStates") which is to be assigned and
transferred to the Purchasers pursuant to the CoreStates Agreement, as
hereinafter defined, and will deliver amended and restated warrants in the forms
attached hereto as Exhibits B-2 through B-6 to effect such amendments (the
"Amended and Restated Warrants"); and
WHEREAS, the Company is to enter into an agreement substantially in
the form attached hereto as Exhibit C (the "Registration Rights Agreement"), to
register (i) the Warrant Shares; (ii) the shares issuable upon exercise of the
Existing Warrants (the "Existing Warrant Shares"); (iii) the shares issuable
upon exercise of the CoreStates Warrant (the "CoreStates Warrant Shares"); and
(iv) 381,296 shares of Common Stock owned by the Purchasers and their Affiliates
as of the date hereof and 522,550 shares of Common Stock issuable to the
Purchasers upon conversion of Series A-I Preferred Stock of the Company owned by
the Purchasers as of the date hereof (collectively, the "Existing Shares") (the
Warrant Shares, Existing Warrant Shares, CoreStates Warrant Shares and Existing
Shares are collectively referred to herein as the "Registrable Securities"); and
WHEREAS, each Purchaser is to purchase the Securities set forth
opposite such Purchaser's name in Sections 1 and 2 of Schedule 2.1 hereto, on
the terms and subject to the conditions set forth in this Agreement; and
<PAGE> 8
WHEREAS, the Company has issued to certain of the Purchasers,
severally, (i) a Secured Promissory Note on December 28, 1995 (the "1995 Note")
in the original principal amount of $4,700,000, (ii) $8,000,000 aggregate
original principal amount of Secured Promissory Notes issued on April 1, 1998
(the "April 1998 Notes"), and (iii) an aggregate of 47,030 shares of Series A-2
Preferred Stock (the "Series A-2 Preferred Stock"), $.0001 par value per share
(the 1995 Note, the April 1998 Notes and the Series A-2 Preferred Stock together
with the Existing Warrants are collectively referred to herein as the "Existing
Securities"), all of which are to be contributed to the Company in partial
payment of the purchase price of the Securities; and
WHEREAS, to induce the Purchasers to purchase the Securities, the
Company is to enter into the interest escrow security agreement in substantially
the form attached hereto as Exhibit D (the "Interest Escrow Security Agreement")
relating to the payment of certain interest due on the Notes; and
WHEREAS, to induce the Purchasers to purchase the Securities, the
Company and the Subsidiaries are entering into various agreements that will
create perfected security interests in favor of the Purchasers of the Notes (the
"Security Agreement," the "Intellectual Property Security Agreement," and the
"Pledge Agreement," substantially in the forms attached hereto as Exhibits E, F,
and G, respectively), and the Subsidiaries are to guaranty the Company's
obligations (each, a "Subsidiary Guaranty Agreement" substantially in the form
attached hereto as Exhibits H-1 through H-3) under this Agreement, the Notes and
the Ancillary Agreements (as defined herein) (together with the Warrants, the
Notes, the Interest Escrow Security Agreement, the Registration Rights
Agreement, the Amended and Restated Warrants, the Funded Commitment Facility
Escrow Agreement (substantially in the form attached hereto as Exhibit L), the
Agreement with CoreStates Enterprise Fund substantially in the form attached
hereto as Exhibit I (the "CoreStates Agreement"), the agreement by and among
Akzo Nobel Pharma International, B.V., Organon Teknika Corporation, PerImmune
Holdings, Inc., PerImmune Inc. and the Company, substantially in the form
attached hereto as Exhibit J (the "Akzo Agreement"), the "Ancillary
Agreements"); and
WHEREAS, the Company has agreed to utilize the proceeds from the sale
of the Notes in accordance with the provisions of Section 5.23;
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants and agreements, and other consideration
contained and exchanged in this Agreement, and other consideration provided by
the parties hereto, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 1.1 Definitions. For all purposes of this Agreement and the
Ancillary Agreements, except as otherwise expressly provided or unless the
context otherwise requires:
2
<PAGE> 9
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the singular.
(b) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP; and
(c) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Accountant" has the meaning specified in Section 5.12(c).
"Adjusted Debt" shall mean, at any time, the consolidated Debt of the
Company and its Subsidiaries minus the amount of consolidated cash and cash
equivalents owned by the Company and its Subsidiaries that is not (i) at such
time restricted or reserved for purposes other than the repayment or defeasance
of Debt and (ii) within the ninety (90) days following such date, needed to pay
the difference between (a) operating expenses and (b) operating revenues, to the
extent that such operating expenses are not then included in the calculation of
Debt.
"Adjusted Debt to EBITDA Ratio" shall mean the Adjusted Debt of a
Person as of the end of such Person's fiscal quarter divided by the product of
(i) such Person's EBITDA for the quarterly period ending on such date times (ii)
four (4).
"Affiliate" of any specified Person means (i) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (ii) any spouse, child or parent of
any Person described in clause (i) of this paragraph or any other relative of
any Person described in clause (i) who has the same principal residence as such
Person, and (iii) any trust for the sole benefit of any one or more Persons
described in clause (ii) of this paragraph. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Ancillary Agreements" has the meaning specified in the Preamble, as
each of the same may be amended or supplemented from time to time in accordance
with the terms thereof.
"Approved McKenzie Successor" means the person elected by the Board
of Directors, to be Mr. McKenzie's successor as Chief Executive Officer of the
Company, and who shall have been approved by the Required Holders (as such term
is defined in the Notes) within 180 days of such person's election.
"Assets" shall mean with respect to any Person, all property owned by
such person whether tangible, intangible, real, personal or fixtures.
3
<PAGE> 10
"Asset Sale Excess Proceeds" shall mean, with respect to all sales
and other dispositions of assets during any fiscal year of the Company, the
excess of (i) the aggregate Net Cash Proceeds of all such sales or other
dispositions over (ii) $250,000.
"Balance Sheet" has the meaning specified in Section 3.5.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board, empowered to act on its
behalf.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
"By-laws" means the by-laws of the Company, as amended to the date
hereof.
"Capital Lease Obligation" of any Person means the obligations to pay
rent or other amounts under a lease of (or other arrangement conveying the right
to use) real or personal property of such Person which are required to be
classified and accounted for as a capital lease on the face of a Balance Sheet
of such Person, and, for the purposes of this Agreement and the Ancillary
Agreements, the amount of such obligations shall be the capitalized amount
thereof, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations, rights or equivalents (however designated) of corporate stock of
such Person.
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company filed with the Secretary of State of
the State of Delaware, as amended to the date hereof.
"Closing" has the meaning specified in Section 2.1.
"Closing Date" has the meaning specified in Section 2.2.
"Common Stock" has the meaning specified in Section 3.4.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Agreement and the Ancillary
Agreements and thereafter "Company" shall mean such successor Person.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
4
<PAGE> 11
"CoreStates Debt" means all obligations under that certain Secured
Promissory Note of the Company (together with all "payment-in-kind" notes issued
pursuant thereto) dated as of June 11, 1996 issued to CoreStates Enterprise
Fund, a division of CoreStates Bank, N.A.
"CoreStates Warrants" means that portion of the Series A-III Common
Stock Warrant originally issued by the Company to CoreStates Enterprise Fund, a
division of CoreStates Bank, N.A. representing the right to purchase 238,610
shares of Common Stock.
"CoreStates Warrant Shares" has the meaning specified in the
Preamble.
"Debt" means (without duplication) with respect to any Person, (i)
every obligation of such Person for money borrowed, (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) every obligation of such Person issued or assumed as the deferred purchase
price of property, every conditional sale obligation and every obligation under
any title retention agreement (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not overdue by
more than 90 days or which are being contested in good faith) in each case if on
terms permitting any portion of the purchase price to be paid beyond 90 days
from the date of purchase, (iv) every Capital Lease Obligation of such Person,
(v) every obligation of such Person with respect to any Sale and Leaseback
Transaction to which such Person is a party, (vi) the maximum fixed repurchase
price of any Redeemable Stock, (vii) every obligation of such Person issued or
contracted for as payment in consideration of (A) the purchase by such Person or
an Affiliate of such Person of the Capital Stock or all or substantially all of
the Assets of another Person or (B) a merger or consolidation to which such
Person or an Affiliate of such Person was a party, (viii) every Guaranty of
every obligation of the type referred to in clauses (i) through (vii) of other
Persons and all dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or, otherwise (whether or not such items would appear on the Balance
Sheet of such Person) and (ix) every obligation of the type referred to in
clauses (i) through (viii) of other Persons secured by any Lien on any Asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
Assets or the amount of the obligation so secured. For purposes of this
definition, "obligation" of any Person means any obligation of such Person
(whether contingent or otherwise or whether recourse to all or a portion of such
Person's property or assets) to pay principal, interest, penalties,
reimbursement or indemnity amounts, fees or other amounts.
"Default" has the meaning specified in Section 6(a) of the Notes.
"Determination Date" has the meaning specified in paragraph (i) of
the definition of the term "Fair Market Value".
"Domestic Subsidiary" means any Subsidiary that is not a Foreign
Subsidiary.
"EBITDA" shall mean, with reference to any period, the consolidated
operating income of the Company and its Subsidiaries, plus the amount of all
depreciation and amortization
5
<PAGE> 12
deducted in determining the amount of such operating income, all as determined
on a consolidated basis in accordance with GAAP.
"Eligible Institution" means a commercial banking institution in the
United States of America that has combined capital and surplus of not less than
500 million in U.S. dollars whose debt is rated "A" or higher or the equivalent
rating according to Standard & Poor's Corporation ("S&P") or Moody's Investors
Services, Inc. ("Moody's") at the time as of which any investment or rollover
thereof is made.
"Employee Benefit Plan" has the meaning specified in Section 3.19(b).
"EMEA" means the European Medicines Evaluation Agency.
"ERISA" has the meaning specified in Section 3.19(b).
"Event of Default" has the meaning specified in Section 6(a) of the
Notes.
"Existing Securities" has the meaning specified in the Preamble.
"Existing Warrant Shares" has the meaning specified in the Preamble.
"Fair Market Value" means:
(i) in the case of any equity security of the
Company, as of a specific date of determination (the "Determination
Date"):
(A) if the Determination Date is the
date on which any class of equity security of the Company
is first sold to the public pursuant to a Public Offering,
then the initial public offering price (before deducting
commissions, discounts or expenses) at which such security
is sold in such Public Offering;
(B) if the Determination Date is a
date after the date on which any class of equity
securities of the Company are first sold to the public
pursuant to a Public Offering, then the price per security
thereof, equal to the average of the last sale of such
security on each of the ten (10) trading days (or such
lesser number of days as shares shall have been listed or
traded) prior to the Determination Date on the principal
exchange on which such security may at the time be listed;
or, if there shall have been no sales on such exchange on
any such trading day, the average of the closing bid and
asked price on such exchange on such trading day; or, if
there is no such bid and asked price on any such bid
trading day, on the next preceding date when such bid and
asked price occurred; or, if no such equity security shall
so be listed the average of the closing sales price as
reported by NASDAQ at the end of each of the ten (10)
trading days (or such lesser number of days as shares
shall have been traded) prior to the Determination Date in
the over-the-counter market; and
6
<PAGE> 13
(C) if the Determination Date is prior
to the date on which any class of equity securities is
first sold to the public pursuant to a Public Offering (or
the value of such equity securities is not otherwise
determinable under clause (B) above), an amount as
reasonably determined jointly by the Board of Directors of
the Company and the holders representing a majority in
interest of the securities of which the Fair Market Value
is to be determined; provided, however, that if such
parties are unable to reach agreement within a reasonable
time, the Fair Market Value shall be determined, at the
expense of the Company, in good faith by an investment
banking firm that is nationally recognized in the United
States selected jointly by the Board of Directors of the
Company and the holders of a majority in interest of such
securities or, if that selection cannot be made within
fifteen (15) days, by an independent investment banking
firm selected by the American Arbitration Association in
accordance with its rules; it being the intention of the
parties that the value of an equity security of the
Company shall constitute a pro rata portion of the
Company's equity on a fully diluted basis, valuing the
Company as a going concern and without discount in respect
of a minority interest;
(ii) in the case of any equity securities of a
Person other than the Company, an amount determined jointly by the
Board of Directors of the Company and the Purchasers using the rules,
to the extent applicable, set forth in paragraph (i) of this
definition, and subject to the dispute resolution provisions
contained in subsection (C) of said section (i);
(iii) in the case of any Assets, (the fair market
value of which exceeds or could reasonably be expected to exceed
$2,000,000 until the Company has consummated a Qualified Equity
Transaction, as defined in the Interest Escrow Security Agreement
and, thereafter, $5,000,000), an amount as reasonably determined in
good faith by the Company's Board of Directors, at the expense of the
Company, based upon a review of relevant factors and a written
appraisal by an appraiser that (A) had at the time of such appraisal,
and based its appraisal upon, a knowledge of the then-prevailing
methods of valuing such Assets and the then-current valuations of
assets similar to such Assets and (B) is selected by the Company and
approved by the Required Holders, such approval not to be
unreasonably withheld; and
(iv) in case of any other Assets, an amount as
reasonably determined in good faith by the Company's Board of
Directors upon a review of relevant factors.
"FDA" means the United States Food and Drug Administration.
"Foreign Subsidiary" means any Subsidiary or New Subsidiary (i) more
than 80% of the sales, earnings or Assets (determined with respect to such
Foreign Subsidiary on a consolidated basis) of which are or will be located or
derived from operations outside of the United States of America or (ii) which is
or will be a "controlled foreign corporation" within the meaning of Section 952
of the Internal Revenue Code.
7
<PAGE> 14
"Fully Diluted Shares" means, as of the date hereof: (i) that number
of shares of the Company's Common Stock outstanding; plus (ii) that number of
shares of Common Stock into which all other securities of the Company are
convertible, exchangeable or exercisable (including, but not limited to
convertible preferred stock, options, warrants and convertible indebtedness).
For purposes of this Agreement, the parties agree that the number of Fully
Diluted Shares is as of the date hereof 21,666,667, which number was based on
the information set forth in Schedule 3.4 provided, however, that, the parties
hereto acknowledge that this number has not been calculated in accordance with
GAAP.
"Funded Debt" shall mean, with respect to any Person, all Debt
Incurred for borrowed money of such Person which by its terms or by the terms of
any instrument or agreement relating thereto matures, or which is otherwise
payable or unpaid, more than one year from, or is directly or indirectly
renewable or extendible at the option of the debtor to a date more than one year
(including an option of the debtor under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of more than one
year) from, the date of the creation thereof.
"GAAP" means generally accepted accounting principles in effect in
the United States at the time of application thereof, including those set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a majority of the
accounting profession, which are in effect from time to time.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing any Debt of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such Debt, (ii) to purchase property, securities or services for the purpose
of assuring the holder of such Debt of the payment of such Debt, or (iii) to
maintain working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor to pay
such Debt; provided, however, that the Guaranty by any Person shall not include
endorsements by such Person for collection or deposit, in either case in the
ordinary course of business.
"Guaranty Obligation" has the meaning specified in Section 11 of the
Notes.
"Holder" means a Purchaser of the Note or any Person to whom the Note
is sold, assigned, conveyed or otherwise transferred.
"Incur" means, with respect to any Debt, Lien or Guaranty of any
Person, to create, issue, assume, guarantee, incur or otherwise become liable in
respect of such Debt, Lien or Guaranty, as the case may be (and "Incurrence",
"Incurred" and "Incurring" shall have meanings correlative to the foregoing),
and "Incur" means, with respect to any Lien to create, incur, assume or suffer
to exist such Lien on any Asset.
8
<PAGE> 15
"Intellectual Property" has the meaning specified in Section 3.13.
"Interest Escrow Security Agreement" has the meaning specified in the
Preamble, as it may be amended or supplemented from time to time in accordance
with the terms thereof.
"Interest Expense" shall mean, with respect to any Person, for any
period, the sum, for such Person in accordance with GAAP, of (i) all interest
that is paid, accrued or amortized as an expense during such period (including,
without limitation, imputed interest under Capitalized Lease Obligations), plus
without duplication (ii) all amounts paid, accrued or amortized as an expense
during such period in respect of interest rate protection agreements, minus
(iii) all amounts received or accrued as income during such period in respect of
interest rate protection agreements.
"Investments" means all investments in other Persons in the form of
loans or capital contributions, purchases or other acquisitions for
consideration or evidences of indebtedness, or Capital Stock or other securities
and all other items which are or would be classified as investments on a Balance
Sheet prepared in accordance with GAAP.
"Laws" shall mean, with respect to any Person, all federal, state,
local and foreign laws, ordinances, rules, regulations (including, without
limitation, rules and regulations of the FDA and the EMEA), codes, orders or
zoning requirements and all judicial decisions and other interpretations thereof
applicable to such Person.
"Lien" means with respect to any Assets, any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to Assets (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"McKenzie Policy" has the meaning specified in Section 5.10.
"Net Cash Proceeds" shall mean the cash proceeds of any sale or other
disposition of Assets (including cash proceeds subsequently received (as and
when received) in respect of non-cash consideration initially received, all
insurance settlements and condemnation awards and all reserves referred to in
clause (ii) below, as and when such reserves are no longer required), minus (i)
transaction expenses (including broker's fees or commissions, legal fees,
accounting fees, investment banking fees and other professional fees, transfer
and similar taxes and the Company's good faith estimate of income taxes payable
and the actual amount of taxes paid in connection with the receipt of such cash
proceeds), (ii) amounts provided as a reserve, in accordance with GAAP,
including pursuant to any escrow arrangement, against any liabilities under any
indemnification obligations associated with such sale or disposition, (iii) the
principal amount, premium or penalty, if any, interest and other amounts on any
Debt which is secured by the Assets sold and is defeased or repaid with such
proceeds and (iv) subject to any provisions of any Security Documents between a
Subsidiary and Purchasers, such distributions required to be
9
<PAGE> 16
made to holders of interests in Subsidiaries that are not wholly owned by the
Company or any of its Subsidiaries, in each case made pro rata in accordance
with their interests in such Subsidiaries, provided, however, that with respect
to the cash proceeds of any such sale or other disposition, if the Company shall
have delivered an Officer's Certificate to Purchasers, at the time of the
receipt thereof certifying in good faith that the Company has established a cash
reserve for the reinvestment of such proceeds in productive Assets of a kind
then used or useable in the business of the Company within nine months of
receipt of such proceeds, such proceeds shall not constitute Net Cash Proceeds
except to the extent not so used prior to the end of such nine-month period, at
which time such proceeds shall be deemed to be Asset Sale Excess Proceeds.
"New Subsidiary" has the meaning specified in Section 5.14.
"Notes" has the meaning specified in the Preamble.
"Officer's Certificate" shall mean a certificate signed in the name
of the Company by a Responsible Officer of the Company, provided, however, that
if such certificate relates to any Financial Statements, the financial condition
or other financial information of the Company, such Responsible Officer shall be
a senior executive officer responsible for managing the financial affairs of the
Company or, in such officer's absence, the Chief Executive Officer, President or
Chairman of the Company.
"Outstanding", when used with respect to Notes, means, as of any date
of determination, all Notes theretofore issued and delivered under this
Agreement and the Ancillary Agreements, except:
(i) Notes theretofore cancelled by the Company
or delivered to the Company for cancellation;
(ii) Notes for which payment in full has been
made by the Company pursuant to the terms of the Notes; and
(iii) Notes which have been exchanged for other
securities;
provided, however, that in determining whether the Purchasers of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor under the Notes or any Affiliate of the Company
(other than any Purchaser) or of such other obligor shall be disregarded and
deemed not to be Outstanding.
"PBGC" has the meaning specified in Section 3.19(b).
"Permitted Investments" shall mean:
(i) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by,
the United States of America (or by any agency
10
<PAGE> 17
thereof to the extent such obligations are backed by the full faith
and credit of the United States of America), in each case maturing
within 180 days from the date of acquisition thereof.
(ii) investments in commercial paper maturing
within 90 days from the date of acquisition thereof and having, at
such date of acquisition, the highest rating obtainable from S&P or
from Moody's.
(iii) investments in certificates of deposit,
banker's acceptances and time deposits maturing within 90 days from
the date of acquisition thereof issued or guaranteed by or placed
with, and money market deposit accounts issued or offered by any
Eligible Institution.
(iv) shares of funds registered under the
Investment Company Act of 1940, as amended, that have Assets of at
least $100,000,000 and invest substantially all their Assets in
obligations described in clauses (i) through (iii) above;
provided that any investment which, when made, constituted a Permitted
Investment may continue to be held (but not reinvested) notwithstanding that
such investment may thereafter cease to constitute a Permitted Investment.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock" has the meaning specified in Section 3.4.
"Public Offering" means the consummation by the Company of the first
offering of its equity securities to the public pursuant to a registration
statement declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act").
"Purchaser" means the Person listed as "Purchaser" on Schedule 2.1
hereto.
"Receivables Facility" means a revolving line of credit that is
secured by trade receivables of the Company and amounts outstanding under which
shall not exceed 80% of the face amount of trade receivables of the Company that
are not more than 60 days past due.
"Redeemable Stock" means any equity security that by its terms or
otherwise is or may be required to be redeemed prior to the Stated Maturity of
the Notes, or is redeemable at the option of the Purchaser thereof at any time
prior to the Stated Maturity of the Notes.
"Registrable Securities" has the meaning specified in the Preamble.
"Reportable Event" has the meaning specified in Section 5.12(d)(iii).
"Responsible Officer" shall mean the duly elected Secretary, Chief
Financial Officer, Chief Operating Officer, Chief Executive Officer, President
or Chairman of the Company.
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"Restricted Payment" has the meaning specified in Section 5.7.
"Required Holders" means that number of Holders of Notes constituting
not less than 70% of the total amount due under the Outstanding Notes.
"Sale and Leaseback Transaction" means an arrangement by a Person
with any other Person, providing for the leasing from such other Person, on
terms creating a Capital Lease obligation by such Person or any Subsidiary of
such Person of any Asset of such Person or any Subsidiary of such Person which
has been or is being sold or transferred by such Person or such Subsidiary to
such other Person from whom funds have been or are to be advanced by such lender
or investor on the security of such Asset.
"Securities" has the meaning specified in the Preamble.
"Security Documents" means the Security Agreement, the Intellectual
Property Security Agreement, the Pledge Agreement, the Interest Escrow Security
Agreement, the Funded Commitment Facility Escrow Agreement and the Subsidiary
Guaranty.
"Series A Preferred" has the meaning specified in Section 3.4.
"Series A-1 Preferred" has the meaning specified in Section 3.4.
"Series A-2 Preferred" has the meaning specified in Section 3.4.
"Series A-3 Preferred" has the meaning specified in Section 3.4.
"Series B-1 Preferred" has the meaning specified in Section 3.4.
"Series B-2 Preferred" has the meaning specified in Section 3.4.
"Stated Maturity", when used with respect to any Note or any
installment of interest thereon, means August 25, 2003.
"Statement No. 5" has the meaning specified in Section 3.6(b).
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries of the Company, or by the Company and one or more
other Subsidiaries of the Company. For the purposes of this definition, "voting
stock" means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency. Unless otherwise specified, the
term "Subsidiary" also includes Foreign Subsidiary and New Subsidiary.
"Warrants" has the meaning specified in the Preamble.
"Warrant Shares" has the meaning specified in the Preamble.
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Section 1.2 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, any
computation required or permitted hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with GAAP,
applied on a basis consistent with the Audited Financial Statements of the
Company delivered pursuant to Section 6.16.
ARTICLE II
THE SECURITIES
Section 2.1 Issuance, Sale and Delivery of the Securities. The
Company hereby agrees to issue, sell and deliver to each Purchaser, and each
Purchaser hereby agrees to purchase from the Company, at the closing (the
"Closing"), a Guaranteed Senior Secured Primary Note and a Guaranteed Senior
Secured Escrow Note, in each case, in the original principal amount set forth
opposite its name in Section 1 on Schedule 2.1 hereto and a Warrant to purchase
such number of Warrant Shares as set forth opposite its name in Section 2 on
Schedule 2.1 hereto. The Guaranteed Senior Secured Primary Note, the Guaranteed
Senior Secured Escrow Note and the Warrants are referred to collectively
hereinafter as the "Newly Issued Securities." In addition, the Company hereby
agrees to deliver, at the Closing, the Amended and Restated Series A-II, Series
A-III and Series A-V Warrants to the Purchasers as set forth in Section 3 on
Schedule 2.1 hereto.
Section 2.2 Closing; Purchase Price; Purchase Price Allocation.
(a) The Closing shall take place at the offices of Morrison
& Foerster LLP, 1290 Avenue of the Americas, New York, NY 10104, at 10:00 a.m.,
New York time, on the date hereof, or at such other place, date and time as may
be otherwise mutually agreed in writing by the parties hereto. The date on which
the Closing actually occurs is referred to herein as the "Closing Date."
(b) At the Closing, the Company shall issue and deliver to
each Purchaser a Guaranteed Senior Secured Primary Note and a Guaranteed Senior
Secured Escrow Note, in each case, in the original principal amount set forth
opposite its name in Section 1 on Schedule 2.1 hereto and a Warrant to purchase
such number of Warrant Shares as set forth opposite its name in Section 2 on
Schedule 2.1 hereto.
(c) At the Closing, and upon receipt of the Newly Issued
Securities, the Purchasers shall deliver to the Company, marked as cancelled,
the Existing Securities set forth opposite its name in Section 4 on Schedule 2.1
hereto as follows:
(i) the senior secured promissory note in the
original principal amount of $4,700,000 issued by the Company to
Northstar High Total Return Fund ("Northstar
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Return") on December 27, 1995 (the "Northstar Return Note"), due and
payable on December 31, 2000;
(ii) the senior secured promissory note in the
original principal amount of $4,000,000 issued by the Company to
Northstar High Total Return Fund II ("Northstar Return II"), on April
1, 1998 (the "Northstar Return II Note"), due and payable on April
17, 1998, as amended on June 10, 1998 to extend the maturity date to
July 10, 1998 and increase the principal amount to $5,000,000, as
further amended on July 10, 1998 to extend the maturity date to July
31, 1998 and increase the principal amount to $6,000,000, and as
further amended on July 31, 1998 to extend the maturity date to
August 24, 1998;
(iii) the senior secured promissory note in the
original principal amount of $4,000,000 issued by the Company to
Northstar High Yield Fund ("Northstar High Yield"), on April 1, 1998
(the "Northstar High Yield Note"), due and payable on April 17, 1998,
as amended on June 10, 1998 to extend the maturity date to July 10,
1998, as further amended on July 10, 1998 to extend the maturity date
to July 31, 1998, and as further amended on July 31, 1998 to extend
the maturity date to August 24, 1998;
(iv) The Series A-V Warrant to purchase 49,066
shares of the Company Common Stock, for an exercise price per share
of $7.64, issued to Northstar Return II on April 1, 1998 (the
"Northstar Return II Warrant");
(v) The Series A-V Warrant to purchase 49,066
shares of the Company Common Stock for an exercise price per share of
$7.64, issued to Northstar High Yield on April 1, 1998 (the "North
Star High Yield warrant");
(vi) The Series A-II Warrant to purchase
initially, 94,010 shares of the Company Common Stock for an exercise
price per share of $14.00 (subject to a two for one split of the
Company Common Stock on December 31, 1997), issued to Northstar
Return on December 27, 1995 (the "Northstar Return Warrant"); and
(vii) The Series A-2 Preferred Stock certificate
evidencing the right to purchase 40,000 shares initially (subject to
the issuance of additional dividend shares) of Series A-2 Preferred
Stock issued by the Company to Northstar Return in March 1997.
(d) At the Closing, the Company shall deliver to the
Purchasers a calculation setting forth in reasonable detail, the stipulated
contribution value of the Northstar Return Note, the Northstar Return II Note,
the Northstar High Yield Note and the Series A-2 Preferred Stock, as set forth
in Section 2.2(c), the aggregate amount of which shall constitute the Company's
allocation of that portion of the Purchase Price payable by the exchange of the
Existing Securities for the Newly Issued Securities. Set forth in Schedule 2.2
is the Company's calculation of the cash portion of the purchase price paid by
such Purchaser.
(e) At the Closing, as payment in full for the Newly Issued
Securities and against delivery of such Newly Issued Securities, each Purchaser
shall deliver, on the Closing
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Date, the Existing Securities as listed opposite its name in Section 4 on
Schedule 2.1 hereto, for cancellation by the Company, and shall transfer the sum
of $18,839,432 by wire transfer of immediately available funds to such account
or accounts as the Company may direct in accordance with its letter of
instruction. The Company and each Purchaser agree that $4,553,050 of the
aggregate consideration for the Guaranteed Senior Secured Primary Notes and the
Warrants shall for all purposes be allocated to the Warrants, and that the
balance of such aggregate consideration shall be allocated to the Guaranteed
Senior Secured Primary Notes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SUBSIDIARIES
The Company represents and warrants, and each Subsidiary represents
and warrants as to itself, to the Purchasers as of the Closing Date that:
Section 3.1 Organization, Qualifications and Corporate Power. The
Company and each Subsidiary is a corporation duly organized, validly existing,
and in good standing under the Laws of the jurisdiction of its respective
incorporation, and the Company and each Subsidiary is duly licensed or qualified
to transact business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification, except where the failure so to qualify will not have a material
adverse effect on the business, operations, property or financial condition of
the Company or such Subsidiary, as applicable. The Company and each Subsidiary
has the power and authority to own and hold its properties and to carry on its
business as now conducted and as proposed to be conducted, and the Company and
each Subsidiary has the power and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements to which it is a party, and the Company
has the power and authority to issue, sell and deliver the Notes, the Warrants
and the Amended and Restated Series A-II Warrants, Series A-III Warrants and
Series A-V Warrants and to issue and deliver the Warrant Shares upon the
exercise of the Warrants and the Amended and Restated Series A-II Warrants,
Series A-III Warrants and Series A-V Warrants.
Section 3.2 Authorization of Agreements, etc.
(a) The execution and delivery by the Company and each
Subsidiary of this Agreement and the Ancillary Agreements to which it is a party
and the performance by the Company and each Subsidiary of its respective
obligations hereunder and thereunder, and with respect to the Company, the
issuance, sale and delivery of the Notes and the Warrants, and the Amended and
Restated Series A-II Warrants, Series A-III Warrants and Series A-V Warrants and
the issuance, sale and delivery of the Warrant Shares upon the exercise of the
Warrants, and the Amended and Restated Series A-II Warrants, Series A-III
Warrants and Series A-V Warrants have been duly authorized by all requisite
corporate action and will not violate any provision of Law, any order of any
court or other agency of government (except that the issuance of the Warrant
Shares may require filings under one or more state securities laws, all of which
filings
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the Company hereby agrees will be made within the requisite time period), the
Amended and Restated Certificate of Incorporation of the Company (as amended to
date, the "Certificate of Incorporation") or the Certificate of Incorporation of
the respective Subsidiary or the by-laws of the Company, as amended (the
"By-laws") or the by-laws of the respective Subsidiary, or any provision of any
indenture, agreement or other instrument to which the Company or such Subsidiary
is a party or by which either the Company or such Subsidiary or any of its
respective Assets is bound, or conflict with, result in a breach of, give rise
to a right of termination under or constitute (whether with or without notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
Assets of the Company or such Subsidiary.
(b) The Warrants have been authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed under or through the Company or any of its Subsidiaries
except as set forth in this Agreement. The Warrant Shares have been duly
authorized and reserved for issuance upon exercise of the Warrants, and, when so
issued, will be duly authorized, validly issued, fully paid and nonassessable
with no personal liability attaching to the ownership thereof and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
under or through the Company or any of its Subsidiaries except as set forth in
this Agreement. Neither the issuance, sale or delivery of the Warrants, nor the
issuance or delivery of the Warrant Shares is subject to any preemptive right of
stockholders of the Company or to any right of first refusal or other right in
favor of any person.
Section 3.3 Validity. This Agreement and each of the Ancillary
Agreements have been duly executed and delivered by the Company and the
Subsidiaries party thereto, as the case may be, and each of the Notes, the
Warrants and the Amended and Restated Series A-II Warrants, Series A-III
Warrants and Series A-V Warrants has been duly executed and delivered by the
Company, and each of the foregoing constitutes the legal, valid and binding
obligation of the Company or the respective Subsidiary, as applicable,
enforceable in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium Laws and other
similar Laws of general application affecting enforcement of creditors' rights
generally and (b) the availability of equitable remedies including specific
performance may be limited by equitable principles of general applicability
(regardless of whether enforcement is sought in a proceeding in equity or at
Law).
Section 3.4 Authorized Capital Stock. The authorized Capital Stock of
the Company consists of 25,000,000 shares of common stock, $.0001 par value
("Common Stock"), and 5,000,000 shares of preferred stock ("Preferred Stock").
As of March 30, 1998, 10,917,256 shares of Common Stock were issued and
outstanding, all of which were validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof. The
Company has authorized 730,000 shares of Series A Convertible Preferred Stock,
$.0001 par value per share (the "Series A Preferred"). As of March 30, 1998, a
total of 615,697 shares of Series A Preferred were issued and outstanding. The
Company has authorized 850,000
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shares of Series A-1 Convertible Preferred Stock, $.0001 par value per share
(the "Series A-1 Preferred"). As of March 30, 1998, a total of 664,196 shares of
Series A-1 Preferred were issued and outstanding. The Company has authorized
155,000 shares of Series A-2 Preferred Stock, $.0001 par value per share (the
"Series A-2 Preferred"). As of March 30, 1998, a total of 45,482 shares of
Series A-2 were issued and outstanding. The Company has authorized 200,000
shares of Series A-3 Convertible Preferred Stock, $.0001 par value per share
(the "Series A-3 Preferred"). As of March 30, 1998, 150,881 shares of Series A-3
Preferred were issued and outstanding. The Company has authorized 100 shares of
Series B-1 Convertible Preferred Stock, $.0001 par value per share (the "Series
B-1 Preferred"). As of March 30, 1998, 100 shares of Series B-1 Preferred were
outstanding. The Company has authorized 120 shares of Series B-2 Convertible
Preferred Stock, $.0001 par value per share (the "Series B-2 Preferred"). As of
March 30, 1998, 120 shares of Series B-2 Preferred were outstanding. The
Warrants will be exercisable immediately upon issuance into an aggregate of
1,625,000 shares of Common Stock, representing 7.5% of the number of Fully
Diluted Shares. As of the date hereof and except as otherwise provided in this
Agreement or the Ancillary Agreements, the outstanding shares of Capital Stock
of the Company are not subject to, nor were they issued in violation of, any
preemptive rights of shareholders or any right of first refusal or other similar
right in favor of any shareholder. As of the date hereof and except as otherwise
provided in this Agreement or the Ancillary Agreements or Schedule 3.4 attached
hereto (i) there has been no material change (defined as more than a five
percent (5%) increase or decrease) in the number of shares of outstanding Common
Stock or outstanding Preferred Stock of the Company since March 31, 1998, (ii)
no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase capital stock of the Company is authorized
or outstanding, (iii) there is no commitment to issue any shares, warrants,
options or other such rights or to distribute to holders of any capital stock of
the Company, in respect thereof, any evidences of indebtedness or Assets, and
(iv) the Company has no obligation (contingent or otherwise) to purchase, redeem
or otherwise acquire any capital stock or pay any dividend or make any other
distribution in respect thereof.
Section 3.5 Financial Statements. The Company has furnished to the
Purchasers the audited balance sheet of each of the Company and Holdings for the
fiscal year ended December 31, 1997 and the related audited statements of
income, stockholders' equity and cash flows of each of the Company and Holdings
for the fiscal year ended December 31, 1997 (the "Audited Financial
Statements"). The Company has furnished to the Purchasers the unaudited balance
sheet of the Company for the quarter ended March 31, 1998 (the "Balance Sheet")
and the related unaudited statements of income, stockholders' equity and cash
flows of the Company for the quarter ended March 31, 1998 certified by a
Responsible Officer of the Company (the "Most Recent Financial Statements"). All
such financial statements have been prepared in accordance with GAAP and fairly
present the financial position of the Company and Holdings as of December 31,
1997 and of the Company as of March 31, 1998, respectively, and the results of
the Company's and Holdings' operations and cash flows as of December 31, 1997
and of the Company's operations and cash flows as of March 31, 1998,
respectively. Except as set forth in Schedule 3.5 hereto, since the date of the
Most Recent Financial Statements, (a) there has been no change in the Assets,
liabilities or financial condition of the Company from that reflected in the
Balance Sheet except for changes in the ordinary course of business which in the
aggregate
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have not been materially adverse and (b) none of the business, financial
condition, operations or Assets of the Company have been materially adversely
affected by any occurrence or development, individually or in the aggregate,
whether or not insured against.
Section 3.6 Absence of Undisclosed Liabilities and Charges. Except as
set forth on Schedule 3.6 attached hereto, as of the date hereof, (a) neither
the Company nor any Subsidiary had any liabilities of any nature (matured or
unmatured, fixed or contingent) which were not provided for on the Balance
Sheet, except for (i) liabilities which, individually and in the aggregate, were
not material to the financial condition of the Company or such Subsidiary or
(ii) liabilities incurred in the ordinary course of the Company's or such
Subsidiary business and not required to be so provided for under generally
accepted accounting principles, and (b) all reserves established by the Company
and set forth on the Balance Sheet were adequate in all material respects. There
are no loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 ("Statement No. 5") issued by the Financial
Accounting Standards Board in March 1975) which are not adequately provided for
on the Balance Sheet as required by Statement No. 5.
Section 3.7 Events Subsequent to the Date of the Balance Sheet.
Except as set forth in the attached Schedule 3.7 or as contemplated by this
Agreement, since the date of the Balance Sheet, neither the Company nor any
Subsidiary has (a) issued any stock, bond or other corporate security, (b)
borrowed any amount or incurred or became subject to any liability (absolute,
accrued or contingent), except current liabilities incurred and liabilities
under contracts entered into in the ordinary course of business, (c) discharged
or satisfied any Lien or encumbrance or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than current liabilities shown
on the Balance Sheet and current liabilities incurred since the date of the
Balance Sheet in the ordinary course of business, (d) declared or made any
payment or distribution to stockholders or purchased or redeemed any share of
its Capital Stock or other security, (e) mortgaged, pledged or subjected to Lien
any of its Assets, other than liens of current real property taxes not yet due
and payable, (f) sold, assigned or transferred any of its tangible Assets except
in the ordinary course of business, or canceled any Debt or claim, (g) sold,
assigned, transferred or granted any exclusive license with respect to any
material patent, trademark, trade name, service mark, copyright, trade secret or
other intangible Asset other than in the ordinary course of business, (h)
suffered any material loss of property or waived any right of substantial value,
(i) made any change in officer compensation except in the ordinary course of
business and consistent with past practice, (j) made any material change in the
manner of business or operations of the Company or any Subsidiary, (k) entered
into any transaction except in the ordinary course of business or as otherwise
contemplated hereby or (l) entered into any commitment (contingent or otherwise)
to do any of the foregoing.
Section 3.8 Litigation; Compliance with Law. There is no material (a)
action, suit, claim, proceeding or investigation pending or, to the knowledge of
the Company or the respective Subsidiary, threatened against or affecting the
Company or the respective Subsidiary, at Law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (b) arbitration
proceeding relating to the Company or the respective Subsidiary, pending under a
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collective bargaining agreement or otherwise or (c) governmental inquiry pending
or to the knowledge of the Company or the respective Subsidiary, threatened
against or affecting the Company or the respective Subsidiary, (including,
without limitation, any inquiry as to the qualification of the Company or the
respective Subsidiary, to hold or receive any license or permit). Neither the
Company nor the respective Subsidiary has received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to its
business, financial condition, operations or Assets. Neither the Company nor the
respective Subsidiary is in default with respect to any order, writ, injunction
or decree known to or served upon the Company or the respective Subsidiary of
any court or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign. There
is no material action or suit by the Company or the respective Subsidiary
pending or threatened against others. The Company and each Subsidiary has
complied in all material respects with all Laws, applicable to its respective
business, operations, Assets, products and services, and the Company or the
respective Subsidiary has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed to
be conducted, except where the failure to own or possess such permits, licenses
or authorizations could not, either singly or in the aggregate, have a material
adverse effect on the business, operations, Assets or financial condition of the
Company or the respective Subsidiary.
Section 3.9 Title to Properties. Except as disclosed in Schedule 3.9
hereof, the Company has good and marketable title to its Assets reflected on the
Balance Sheet (other than Assets disposed of in the ordinary course of business
since the date of the Balance Sheet), and all such Assets are free and clear of
mortgages, pledges, security interests, Liens, charges, claims, restrictions and
other encumbrances, except for Liens for current taxes not yet due and payable
and minor imperfections of title, if any, not material in nature or amount and
not materially detracting from the value or materially impairing the use of the
Asset subject thereto or impairing the operations or proposed operations of the
Company.
Section 3.10 Leasehold Interests. Each lease or agreement to which
the Company or any Subsidiary is a party under which it is a lessee of any
Asset, real or personal (a list of all such leases being attached hereto as
Schedule 3.10), is a valid and subsisting agreement without any material Default
of the Company or the respective Subsidiary thereunder and, to the knowledge of
the Company or the respective Subsidiary, without any material default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a Default or
Event of Default by the Company or the respective Subsidiary, under any such
lease or agreement or, to the knowledge of the Company or the respective
Subsidiary, by any other party thereto.
Section 3.11 Taxes. Except as set forth on Schedule 3.11, the Company
and each Subsidiary has filed or will file within the time prescribed by law
(including extensions of time approved by the appropriate taxing authority) all
tax returns, federal, state, county and local, required to be filed by it, and
the Company or the respective Subsidiary has paid all taxes shown to be due by
such returns and extensions as well as all other taxes, assessments and
governmental charges which have become due or payable, including, without
limitation, all taxes which the
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Company or the respective Subsidiary is obligated to withhold from amounts owing
to employees, creditors and third parties. All such taxes with respect to which
the Company or the respective Subsidiary has become obligated have been paid and
adequate reserves have been established for all taxes accrued but not yet
payable. No deficiency assessment with respect to or proposed adjustment of the
Company's or the respective Subsidiary's federal, state, county or local taxes
is pending or, to the knowledge of the Company or the respective Subsidiary,
threatened. There is no tax Lien in favor of any federal, state, county or local
taxing authority, outstanding against the Assets, or business of the Company or
the respective Subsidiary.
Section 3.12 Other Agreements. Except as set forth in the attached
Schedule 3.12, neither the Company nor any Subsidiary is a party to or otherwise
bound by any written or oral contract or instrument or other restriction which
individually or in the aggregate could materially adversely affect the business,
financial condition, operations or Assets of the Company or the respective
Subsidiary. Except as set forth in the attached Schedule 3.12, or as a result of
the transactions contemplated in this Agreement, or the Ancillary Agreements,
neither the Company nor any Subsidiary is a party to or otherwise bound by any
written or oral:
(a) distributor, dealer, manufacturer's representative or
sales agency contract or agreement which is not terminable on less than ninety
(90) days' notice without cost or other liability to the Company or the
respective Subsidiary;
(b) sales contract which entitles any customer to a rebate
or right of set-off, to return any product to the Company or the respective
Subsidiary after acceptance thereof or to delay the acceptance thereof, or which
varies in any material respect from the Company's or the respective Subsidiary's
standard form contracts;
(c) contract with any labor union (and, to the knowledge of
the Company or the respective Subsidiary, no organizational effort is being made
with respect to any of its employees);
(d) contract or other commitment with any supplier
containing any provision permitting any party other than the Company or the
respective Subsidiary to renegotiate the price or other terms, or containing any
pay-back or other similar provision, upon the occurrence of a failure by the
Company or the respective Subsidiary to meet its obligations under the contract
when due or the occurrence of any other event;
(e) contract for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) contract for the employment of any officer, employee or
other person (whether of a legally binding nature or in the nature of informal
understandings), on a full-time or consulting basis which is not terminable on
notice without cost or other liability to the Company or the respective
Subsidiary except normal severance arrangements and accrued vacation pay;
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(g) agreement or indenture relating to the borrowing of
money or to the mortgaging or pledging of, or otherwise placing a lien or
security interest on, any Asset of the Company or the respective Subsidiary;
(h) guaranty of any Obligation for borrowed money or
otherwise;
(i) agreement, or group of related agreements with the same
party or any group of affiliated parties, under which the Company or the
respective Subsidiary has advanced or agreed to advance money or has agreed to
lease any Asset as lessee or lessor;
(j) agreement or Obligation (contingent or otherwise) to
issue, sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its Capital Stock or any of its other equity securities;
(k) assignment, license or other agreement with respect to
any form of intangible Assets or Intellectual Property (as defined in Section
3.13) or the development or use thereof;
(l) agreement under which it has granted any person any
registration rights;
(m) agreement under which it has limited or restricted its
right to compete with any person in any respect; or
(n) other contract or group of related contracts with the
same party involving more than $500,000 or continuing over a period of more than
one (1) year from the date or dates thereof (including renewals or extensions
optional with another party), which contract or group of contracts is not
terminable by the Company or the respective Subsidiary without penalty upon
notice of thirty (30) days or less, but excluding any contract or group of
contracts with a customer of the Company or the respective Subsidiary for the
sale, lease or rental of the Company's or the respective Subsidiary's products
or services if such contract or group of contracts was entered into by the
Company or the respective Subsidiary in the ordinary course of business.
Each of the contracts listed on Schedule 3.12 hereof is valid and enforceable.
The Company or its respective Subsidiaries are not in Default nor has an Event
of Default, or event that with the lapse of time or the giving of notice, or
both, would constitute an Event of Default occurred or would result therefore
(and, to the knowledge of the Company or the respective Subsidiaries, no other
party thereto is in Default) under the material terms and conditions of any
contract listed on Schedule 3.12 including, but not limited to (i) the
Promissory Note dated August 2, 1996 by PerImmune to Organon Teknika Corporation
("Organon"), (ii) the Intellectual Property Security Agreement dated as of
August 8, 1996, by and among Holdings, PerImmune, Akzo Nobel Pharmaceutical
International, B.V. ("Akzo") and Organon, and (iii) the Intellectual Property
Agreement dated August 2, 1996, by and among Holdings and Akzo, all as amended
by Amendment No. 1 dated July 31, 1998 by Organon, Holdings and PerImmune.
Section 3.13 Patents, Trademarks, etc. Set forth in Schedule 3.13 is
a list and brief description of all patents, patent rights, patent applications,
trademarks, trademark applications,
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<PAGE> 28
service marks, service mark applications, trade names and
copyrights, and all applications for such which are in the process of being
prepared, owned by or registered in the name of the Company or any Subsidiary,
or of which the Company or any Subsidiary is a licensor or licensee or in which
the Company or any Subsidiary has any right, and in each case a brief
description of the nature of such right. Except as set forth in Schedule 3.13,
the Company or the respective Subsidiary owns or possesses adequate licenses or
other rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, copyrights,
manufacturing processes, formulas, trade secrets and know-how (collectively,
"Intellectual Property") necessary to the conduct of its respective business as
conducted, and no claim is pending or, to the best knowledge of the Company or
the respective Subsidiary, threatened to the effect that the operations of the
Company or the respective Subsidiary infringe upon or conflict with the rights
of any other Person with respect to any Intellectual Property, and to the best
knowledge of the Company or the respective Subsidiary there is no basis for any
such claim. No claim is pending or, to the best knowledge of the Company or the
respective Subsidiary, threatened to the effect that any such Intellectual
Property owned or licensed by the Company or the respective Subsidiary, or which
the Company or the respective Subsidiary otherwise has the right to use, is
invalid or unenforceable by the Company or the respective Subsidiary in any
jurisdiction where it currently does or intends to exploit such Intellectual
Property and to the best knowledge of the Company there is no basis for any such
claim. To the best knowledge of the Company or the respective Subsidiary, all
technical information developed by and belonging to the Company or the
respective Subsidiary which has not been patented has been kept confidential.
Except as set forth in Schedule 3.13, neither the Company nor the respective
Subsidiary has granted or assigned to any other Person any right to manufacture
or assemble any products or proposed products of the Company or the respective
Subsidiary, other than to its affiliates, and to the knowledge of the Company or
the respective Subsidiary no other person or entity has asserted any such right.
Section 3.14 Loans and Advances. Except as set forth on Schedule
3.14, neither the Company nor any Subsidiary has any outstanding loans or
advances to any Person and is not obligated to make any such loans or advances,
except, in each case, for advances to employees of the Company or the respective
Subsidiary in respect of reimbursable business expenses anticipated to be
incurred by them in connection with their performance of services for the
Company or the respective Subsidiary.
Section 3.15 Assumptions, Guaranties, etc. of Debt of Other Persons.
Except as set forth on Schedule 3.15, neither the Company nor any Subsidiary has
assumed, guaranteed, endorsed or otherwise become directly or contingently
liable on any indebtedness of any other Person (including, without limitation,
liability by way of agreement, contingent or otherwise, to purchase, to provide
funds for payment, to supply funds to or otherwise invest in a debtor, or
otherwise to assure a creditor against loss), except for guaranties by
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business and guaranties by the Subsidiaries of the Obligations of the
Company or another Subsidiary.
Section 3.16 Significant Customers and Suppliers. Except as set forth
on Schedule 3.16, (a) no customer which accounted for 5% or more of the
Company's or any
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<PAGE> 29
Subsidiary's sales or revenues during the periods covered by the financial
statements referred to in Section 3.5 or which has been comparably significant
to the Company or the respective Subsidiary thereafter has terminated,
materially reduced or threatened to terminate or materially reduce its purchases
from the Company and (b) as of the date of this Agreement, there is no supplier
that accounts for more than 5% of the Company's or its Subsidiaries' cost of
goods sold during the periods covered by the Financial Statements in Section
3.5.
Section 3.17 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article IV hereof,
no registration or filing with, or consent or approval of or other action by,
any federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company or
any Subsidiary of this Agreement, or for the valid execution delivery and
performance by the Company of the Notes or the Warrants, or the Amended and
Restated Series A-II, Series A-III and Series A-V Warrants or the issuance, sale
and delivery of the Warrant Shares upon exercise of the Warrants, or the Amended
and Restated Series A-II, Series A-III and Series A-V Warrants other than
filings pursuant to state securities laws in connection with the issuance and
sale of the Warrants.
Section 3.18 Insurance. Schedule 3.18 lists all insurance policies
which the Company or any Subsidiary maintains with respect to its businesses,
Assets and employees. Such policies are in full force and effect and neither the
Company nor the respective Subsidiary has received a notice of termination from
the insurance carriers. Such policies, with respect to their amounts and types
of coverage, are adequate in the reasonable commercial judgment of the Company
or the respective Subsidiary to insure against risks to which the Company or the
respective Subsidiary and its respective businesses are subject. Since the date
of the Balance Sheet, there has been no material adverse change in the Company's
or any Subsidiary's relationship with its insurers or in the premiums payable
pursuant to such policies.
Section 3.19 Employment Relations.
(a) The Company and each Subsidiary is in material
compliance with applicable Laws, respecting employment and employment practices,
safety, terms and conditions of employment and wages and hours.
(b) Except as set forth in Schedule 3.19(b), neither the
Company nor any Subsidiary maintains or contributes to any employee benefit plan
("Employee Benefit Plan") within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject
to ERISA but which is not in substantial compliance with ERISA, or which has
incurred any material liability to the Pension Benefit Guaranty Company ("PBGC")
in connection with any Employee Benefit Plan covering any employees of the
Company or the respective Subsidiary or ceased operations at any facility or
withdrawn from any such Plan in a manner which could subject it to material
liability under Section 462(f), 4063 or 4064 of ERISA, and knows of no facts or
circumstances which might give rise to any material liability of the Company or
any Subsidiary to the PBGC under Title IV of ERISA.
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<PAGE> 30
Section 3.20 Compensation of Key Employees. Schedule 3.20 sets forth
the aggregate compensation (salaries, wages and bonuses) paid by the Company to
its four most highly compensated employees for the 1997 fiscal year and the
amount of such compensation scheduled to be paid to such employees for the 1998
fiscal year.
Section 3.21 Environmental Compliance. The Company and each
Subsidiary is in compliance with all applicable Laws relating to environmental
matters in each jurisdiction where it is presently engaged in a material
manufacturing business, except for such failures to comply which, in the
aggregate, could reasonably be expected not to have a material adverse effect on
the Company or the respective Subsidiary. Neither the Company nor any Subsidiary
is subject to any liability under any such environmental Laws, that, in the
aggregate for all such liabilities, could be reasonably expected to have a
material adverse effect on the Company or the respective Subsidiary.
Section 3.22 Projections. The projections delivered to the Purchasers
by the Company on August 25, 1998, were prepared by the Company based upon its
experience in the industry and based upon assumptions of fact and opinion which
the Company believes to have been reasonable and accurate both at the time such
projections were delivered and as of the date hereof.
Section 3.23 Disclosure; Accuracy of Statements. Neither this
Agreement nor any Schedule, Exhibit, Ancillary Agreement, statement, list,
certificate or other document including the Registration Statement on Form S-1
filed by the Company on July 9, 1998 (the "Registration Statement") furnished to
the Purchasers by or on behalf of the Company in connection herewith contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading in light of the circumstances under which they were made. There is no
fact peculiar to the Company which materially adversely affects or in the future
may (so far as the Company can now foresee) materially adversely affect the
business operations, Assets, or the financial condition of the Company that has
not been set forth in this Agreement or the Ancillary Agreements, or other
documents (including the Registration Statement) furnished by the Company prior
to the date hereof in connection with the transactions contemplated hereby.
Section 3.24 Matters Relating to OncoVAX Products. The Company's
Registration Statement contains an accurate description of the Company's OncoVAX
cancer vaccine product as of the date of the Registration Statement and does not
omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which they
were made, and, to the best of the Company's knowledge, there have been no
material adverse events respecting such product from the date of the filing of
the Registration Statement through the date hereof.
Section 3.25 Subsidiaries. Schedule 3.25 hereto lists all the
Subsidiaries of the Company, all of which are wholly-owned by the Company.
Section 3.26 Use of Proceeds. The Company acknowledges that the
receipt of the proceeds from its sale of the Guaranteed Senior Secured Primary
Notes and the Guaranteed
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<PAGE> 31
Senior Secured Escrow Notes constitutes a financial benefit to the Company and
each of its wholly-owned subsidiaries, PerImmune Holdings, Inc., ("Holdings"),
PerImmune, Inc. ("PerImmune") and Bartels, Inc. ("Bartels"), as described in
Section 5.23.
Section 3.27 Location of Collateral.
The Company has no material amount of Collateral, as that term is defined in the
Security Agreement and the Intellectual Property Security Agreement located, in
the State of Massachusetts valued, in the aggregate at more than $5,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company, as to itself,
as of the Closing Date that:
Section 4.1 Purchase of Securities.
(a) It is an "accredited investor" within the meaning of
Rule 501 under the Securities Act and was not organized for the specific purpose
of acquiring the Notes or the Warrants.
(b) It has sufficient knowledge and experience in investing
in companies in a similar stage of development to the Company and the
Subsidiaries so as to be able to evaluate the risks and merits of its investment
in the Company and the Subsidiaries and it is able financially to bear the risks
thereof.
(c) It has had an opportunity to discuss the Company's and
the Subsidiaries' business, management and financial condition with the
Company's and the Subsidiaries' management.
(d) It is acquiring the Notes and the Warrants for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof.
(e) It understands that (i) the Notes, the Warrants and,
upon exercise thereof, the Warrant Shares have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof, (ii) the Notes, the Warrants and, upon exercise thereof, the Warrant
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (iii)
the Notes, the Warrants and, upon exercise thereof, the Warrant Shares will bear
a legend to such effect and (iv) the Company will make a notation on its
transfer books to such effect.
Section 4.2 Authority. It has all requisite power and authority to
execute, deliver and perform this Agreement, and has taken all necessary action
to authorize the execution, delivery
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<PAGE> 32
and performance of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement on the Closing Date will constitute the
legal, valid and binding obligations of the Purchaser, enforceable in accordance
with their terms, except (a) to the extent that enforceability may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
(b) that the availability of equitable remedies, including specific performance,
is subject to the discretion of the court before which any proceedings therefor
may be brought.
Section 4.3 Projections. It understands that any and all financial
projections and other estimates delivered to it were based on the Company's
experience in the industry and on assumptions of fact and opinion which the
Company believes to have been, and to be, as of the date hereof, reasonable. It
understands that the Company cannot and does not assure or guarantee the
attainment of such projections or other estimates.
Section 4.4 Risk Factors. It understands that the Notes and the
Warrants are subject to certain risk factors and has fully and independently
evaluated to its satisfaction each risk factor prior to making a decision to
invest in the Notes and Warrants (and, upon exercise of the Warrants, the
Warrant Shares).
ARTICLE V
COVENANTS
Section 5.1 Payment of Principal, Premium and Interest. The Company
will duly and punctually pay the principal of (and premium, if any) and interest
on the Notes in accordance with the terms of the Notes and this Agreement.
Section 5.2 Money for Note Payments to be Held in Trust. The Company
will, on or before each due date of the principal of (and premium, if any) or
interest on any of the Notes, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided.
Section 5.3 Existence. Neither the Company nor any of its
Subsidiaries shall engage in any business which is materially different from the
business now conducted by the Company and its Subsidiaries as of the date hereof
and as described in the Registration Statement. The Company shall preserve and
keep in full force and effect the respective existence, rights (charter and
statutory) and franchises; provided, however, that the Company shall not be
required to preserve any such right or franchise of the Company or any
Subsidiary if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company or
such Subsidiary and that the loss thereof is not disadvantageous in any
material respect to the Purchasers. The Company will satisfy all material
contractual obligations to which the Company or any of its Subsidiaries is a
party or by which it or any of its or their Assets are bound and comply in all
material respects with all requirements of law applicable or
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<PAGE> 33
binding upon the Company or any of its Subsidiaries or to which the Company or
any of its Subsidiaries or any of its or their respective Assets are subject.
Section 5.4 Maintenance of Assets. The Company will cause all Assets,
licenses, rights and franchises and those of its Subsidiaries used or useful in
the conduct of its business or the business of any Subsidiary to be maintained
and kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, or in the case of licenses,
rights and franchises, cause to be preserved, renewed and maintained in full
force and effect, all as required by Law and all as in the judgment of the
Company may be necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times; provided, however,
that nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such Assets if such discontinuance is, in the
judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Purchasers.
Section 5.5 Payment of Taxes and Other Claims; Comply with Material
Obligations. The Company will pay or discharge or cause to be paid or discharge,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or Assets of the Company or any Subsidiary, (b) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a Lien upon the Assets of the Company or any Subsidiary and (c) all
obligations of whatever nature material to the Company and its Subsidiaries,
taken as a whole, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the Company or
its Subsidiaries, as the case may be. The Company will comply with, and cause
each Subsidiary of the Company to comply with, all material obligations under
leases, contracts and other agreements, and all applicable Laws, (including,
without limitation, any of same (hereinafter "Environmental Laws") regulating,
relating to or imposing liability or standards of conduct concerning pollution
or the protection of the environment, as may now or hereafter be in effect),
except to the extent the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a material adverse effect on the
business operations, Assets or financial condition of the Company and its
Subsidiaries, taken as a whole.
Section 5.6 Financial Covenants. The Company shall comply with the
following financial covenants:
(a) Adjusted Debt to EBITDA Ratio. The Company shall not
permit the Adjusted Debt to annualized EBITDA Ratio as of the last day of each
March, June, September and December during each period specified below to be
greater than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
On or after 1/l/2001 but before 1/l/2001 9:1
</TABLE>
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<PAGE> 34
<TABLE>
<CAPTION>
<S> <C>
On or after 1/l/2001 but before 1/l/2002 4:5
After 1/l/2002 2:1
</TABLE>
If the Adjusted Debt to EBITDA Ratio as of a measuring date is
greater than the ratio set forth above for such date, the Company may, on or
prior to forty-five (45) days after such measuring date (or, if earlier, the
date on which such Financial Statements are required to be delivered pursuant to
Section 5.12) including the Balance Sheet as of such date, cure such Default
either by increasing the consolidated amount of cash and cash equivalents owned
by the Company and its Subsidiaries or by making payments to reduce the
consolidated Debt of the Company and its Subsidiaries, and the Adjusted Debt to
EBITDA Ratio shall be recalculated as of such original measuring date, but
giving retroactive effect to such additional cash or cash equivalents or such
reduction in consolidated Debt of the Company and its Subsidiaries.
(b) Minimum Tangible Net Worth Levels. The Company shall
maintain minimum Tangible Net Worth for each quarter as follows;
<TABLE>
<CAPTION>
Minimum Tangible Net
Date Worth Amount
---- --------------------
<S> <C>
On or after 1/l/2000 but before 1/l/2001 $20,000,000
After 1/l/2001 $30,000,000
</TABLE>
provided that the Company may include 75% of GAAP book value of its patents and
25% of GAAP book value of its tradenames and trademarks in such calculations.
(c) EBITDA to Interest Expense Ratio. The Company shall not
permit the ratio of EBITDA to Interest Expense as of the last day of each March,
June, September and December during each period specified below to be greater
than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
On or after 1/1/2000 but before 1/l/2001 2:1
On or after 1/l/2001 but before 1/l/2002 4:1
</TABLE>
(d) Investment of Proceeds of Guaranteed Senior Secured
Escrow Notes. The proceeds of the issuance of the Guaranteed Senior Secured
Escrow Notes shall be deposited into the Company's account number
20-10-340-4128260 in accordance with the terms of the Funded Commitment Facility
Escrow Agreement. Unless otherwise utilized by the Company in its operations,
such proceeds shall be invested as set forth in the Funded Commitment Facility
Escrow Agreement. If a Default, an Event of Default or any event that with the
lapse of time or the giving of notice, or both, would constitute an Event of
Default shall occur and be continuing, or would result therefrom, the Company
shall not withdraw any funds from the Escrow Account (as defined in the Funded
Commitment Facility Escrow Agreement), which funds shall be held
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<PAGE> 35
thereafter in constructive trust by the Company, as trustee for the benefit of
the Holders who shall be entitled to disbursement of such funds in accordance
with Section 6(b)(v) of the Notes.
Section 5.7 Limitation on Restricted Payments. The Company (a) shall
not declare or pay any dividend or make any distribution in respect of any class
of its Capital Stock or to the holders of any class of its Capital Stock (other
than dividends or distributions payable solely in shares of its Capital Stock or
in options, warrants or other rights to acquire its Capital Stock), (b) shall
not, and will not permit any Subsidiary to, purchase, redeem or otherwise
acquire or retire for value (i) any Capital Stock of the Company or (ii) any
options, warrants or rights to purchase or acquire shares of Capital Stock, (c)
shall not make, or permit any Subsidiary to make, any loan, advance, capital
contribution to or investment in, or payment on a guarantee of any obligation
of, any Person, other than a wholly-owned Subsidiary, (d) shall not, and shall
not permit any Subsidiary to redeem, release, repurchase, retire or otherwise
acquire or retire for value prior to any scheduled maturity, repayment or
sinking fund payment, Debt of the Company which is subordinate in right of
payment to the Notes, and (e) shall not, and shall not permit any Subsidiary to
make any Investments other than Permitted Investments (the transactions
described in clauses (a) through (e) being referred to herein as "Restricted
Payments").
Notwithstanding the foregoing provision, if, at the time thereof no
Default, Event of Default or an event that with the lapse of time or the giving
of notice, or both, would constitute an Event of Default shall have occurred and
is continuing, or would result therefrom the Company may make the following
Restricted Payments:
(a) the redemption or purchase of Capital Stock of the
Company held by an employee or former employee of the Company or its
Subsidiaries who has forfeited the right to own such Capital Stock in accordance
with the terms of an agreement between the Company and such employee entered
into at the time of issuance of such Capital Stock (including pursuant to an
option), in an amount not to exceed $500,000 per employee or $1,000,000 for all
employees, in the aggregate, per annum; or
(b) an investment by the Company or any Subsidiary in any
Foreign Subsidiaries; or
(c) an investment by the Company or any Subsidiary in any
Subsidiary.
Nothing in this Section 5.7 shall be construed to prohibit a merger of the
Company or any Subsidiary in accordance with Section 5.17.
Section 5.8 Limitation on Certain Restrictions Affecting any
Subsidiary. The Company will not, and will not permit any Subsidiary to, create
or otherwise suffer to become effective or exist any consensual encumbrance or
restriction on the ability of any Subsidiary to (a) pay dividends, directly or
indirectly, or make any other distributions on its Capital Stock or pay any Debt
or any other obligation owed to the Company or any Subsidiary, (b) make loans or
advances to the Company or any Subsidiary, or (c) transfer any of its Assets to
the Company or any Subsidiary, provided, however, that this Section shall not
restrict or prohibit any restriction
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<PAGE> 36
existing under this Agreement or under agreements in effect at the date of
execution of this Agreement.
Section 5.9 Limitation on Liens. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien upon any of its Assets or revenues, whether now owned
or hereafter acquired except for:
(a) Liens on Assets existing at the time of acquisition
thereof, provided the principal amount of the Debt secured by such Lien does not
exceed 100% of the Fair Market Value of the Assets acquired at the time it was
acquired;
(b) Liens on Assets of a corporation existing at the time
such corporation becomes a Subsidiary or is merged into or consolidated with the
Company or any Subsidiary, provided such Liens were not created within 180 days
prior thereto;
(c) Liens on Assets of the Company or any Subsidiary
resulting from Debt secured by the bond issued or to be issued by the Washington
Economic Development Finance Authority in the aggregate principal amount of
$1,500,000;
(d) Liens to secure Debt Incurred for the purpose of
financing all or any part of the purchase price or the cost of construction or
improvement of the Assets subject to such Liens, so long as such Liens are
incurred prior to or within 180 days after such Assets is acquired or such
construction or improvement is completed;
(e) any extension, renewal or refinancing (or successive
extensions, renewals or refinancings), in whole or in part, of any Lien referred
to in the foregoing clauses (a) through (d) and Liens existing as of the date of
this Agreement, so long as in each case such extension, renewal or refinancing
does not extend to any other Assets and the Debt so secured is not increased;
(f) any Lien securing Debt owing by the Company to one or
more wholly owned Subsidiaries, but only if such Debt cannot be transferred by
such Subsidiaries;
(g) any Lien securing the Receivable Facility; and
(h) Liens created by the Security Documents.
Section 5.10 Maintenance of Insurance. The Company will at all times
obtain and maintain (or cause to be obtained and maintained) for itself and each
of its Subsidiaries insurance policies for all of their Assets which are of an
insurable nature insured against loss or damage with insurers believed by the
Company to be responsible (but in no event, with insurers having a claims paying
ability of less than "A" or better by S&P's or Moody's), ("Insurance Carriers")
to the extent that Assets of similar character is usually so insured by
corporations similarly situated and owning like properties in accordance with
good business practice, provided, however, that the Company shall maintain at
least (a) business interruption insurance covering all locations, and (b) "all
risk" and general public liability insurance against loss, damage or claims of
the kind
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<PAGE> 37
that, in the reasonable good faith opinion of the Company, is adequate
and appropriate for the conduct of the business of the Company and, its
Subsidiaries, all of which insurance shall be in such amounts, with such
deductibles and amounts of self-insurance and by such methods as shall be
customary for entities similarly situated in its industry. Where applicable,
each such insurance policy shall name the Holders of the Notes as additional
insureds, beneficiaries, assignees and loan payees. The Company will, and will
cause its Subsidiaries to, use the proceeds from any such insurance policy to
repair, replace or otherwise restore the Assets to which such proceeds relate.
The Company may elect not to make such repair, replacement or restoration if the
Board of Directors, in its reasonable discretion, determines that such repair,
replacement or restoration is not in the best interests of the Company. Within
sixty (60) days of the date hereof, the Company shall obtain and the Company
shall thereafter, maintain one or more life insurance policies (the "McKenzie
Policies") on the life of Simon McKenzie from one or more Insurance Carriers
selected by the Company in an aggregate face amount of at least $5,000,000. Each
McKenzie Policy shall provide that such insurance cannot be terminated unless
thirty (30) days' advance notice has been provided to the Purchasers of the
Notes, during which time such Purchasers shall have the right to pay any premium
due, and shall be promptly reimbursed by the Company for any amounts so paid.
Each McKenzie Policy shall be for a minimum of a five year term, and premiums in
respect of the first three years of the term shall have been prepaid as of the
date on which the first premium is due. The Purchasers shall be named as a
co-owners and beneficiaries of the McKenzie Policies, and the Company shall
assign, in form and substance satisfactory to the Purchasers their ownership
interest to the Purchasers with the consent and acknowledgment of the Insurance
Carrier thereof, free and clear of any Lien or encumbrance (other than any Lien
or encumbrance created pursuant to the Security Documents), to be applied as
follows: (i) first for the benefit of the Purchasers of Notes, to the extent of
the aggregate outstanding principal balance of the Outstanding Notes plus
accrued but unpaid interest thereon, and any other amounts due under any of the
Ancillary Agreements and then (ii) for the benefit of the Company. Upon the
indefeasible payment in full of the Notes, the Purchasers shall re-assign each
McKenzie Policy to the Company.
Section 5.11 Waiver of Stay, Extension and Usury Laws. The Company
and Subsidiaries covenant (to the extent that they may lawfully do so) that they
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury Law or other Law
which would prohibit or forgive the Company or such Subsidiary from paying all
or any portion of the principal and/or interest on the Notes wherever such Law
is or may be enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance of this Agreement and the Notes; and the
Company and each of the Subsidiaries (to the extent that they may lawfully do
so) hereby expressly waive all benefit or advantage of any such Law, and
covenant that they will not, by resort to any such Law, hinder, delay or impede
the execution of any power herein granted to the Holders, but will suffer and
permit the execution of every such power as though no such law had been enacted.
Section 5.12 Financial Statements; Other Information. The Company
will deliver in duplicate to Northstar Return, which agrees to accept, on behalf
of each Purchaser:
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(a) if the Company is not subject to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as soon as practicable and in any event within 30 days after
the end of each month commencing with the month of September 1998, internally
prepared consolidated statements of income, stockholders' equity, and cash flows
of the Company and its Subsidiaries for such month, and a consolidated Balance
Sheet of the Company any and its Subsidiaries as at the end of such month,
together with a summary of significant facts and developments occurring within
such month of which it is aware affecting its and/or their operations, financial
condition or prospects;
(b) as soon as practicable and in any event within 45 days
after the end of each of the first three quarterly periods in each fiscal year
if the Company is subject to the requirements of Section 13 or 15(d) of the
Exchange Act, and, if the Company is not subject to such requirements, after the
end of each quarterly period in each fiscal year, internally prepared
consolidated statements of income, stockholders' equity, and cash flows of the
Company and its Subsidiaries for the quarterly period and for the period from
the beginning of the current fiscal year to the end of such quarterly period,
and a consolidated Balance Sheet of the Company and its Subsidiaries as at the
end of such quarterly period, setting forth in each case in comparative form
figures for the corresponding periods in the preceding fiscal year, all in
reasonable detail and satisfactory in form to the Purchasers, certified by a
Responsible Officer as having been prepared in accordance with GAAP and as
fairly presenting the consolidated financial condition and consolidated results
of operations of the Company and its Subsidiaries (subject to normal year-end
audit adjustments and the absence of footnotes); provided, however, that
delivery within the aforesaid 45-day period, pursuant to subsection (d)(i)
below, of copies of the Quarterly Report on Form 10-Q of the Company for such
quarterly period filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this subsection (b) with respect to the
consolidated financial statements;
(c) as soon as practicable and in any event within 90 days
after the end of each fiscal year, consolidating and consolidated statements of
income and cash flows and a consolidated statement of stockholders' equity of
the Company and its Subsidiaries for such year, and a consolidating and
consolidated Balance Sheet of the Company and its Subsidiaries as at the end of
such year, setting forth in each case in comparative form the corresponding
consolidated figures from the preceding annual audit, all in reasonable detail
and satisfactory in form to the Purchasers and, as to the consolidated
statements, a report by independent public accountants of recognized national
standing (an "Accountant") selected by the Company whose report shall be without
limitation as to the scope of the audit, and satisfactory in substance to the
Purchasers along with an opinion of such Accountant to the effect that such
consolidated financial statements present fairly in all material respects the
financial condition and results of operations of the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP without any
going-concern or other qualification expressed in such opinion; provided,
however, that delivery within the aforesaid 90-day period, pursuant to
subsection (d)(i) below, of copies of the Annual Report Form 10-K of the Company
for such fiscal year filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this clause (c) with respect to
consolidated financial statements.
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(d) The Company will also deliver:
(i) from and after the date the Company becomes
subject to the requirements of Section 13 or 15(d) of the Exchange
Act, promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it shall send to
its stockholders and copies of all registration statements (without
exhibits) and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to
the functions of the Securities and Exchange Commission);
(ii) promptly upon receipt thereof, a copy of
each other report submitted to the Company or any Subsidiary by its
Accountant in connection with any annual, interim or special audit
made by such Accountant of the books of the Company or any
Subsidiary;
(iii) as soon as practicable and in any event
within 10 days after obtaining knowledge of (A) any Person giving any
written notice to the Company or any of its Subsidiaries with respect
to a claimed Default, or event or condition which would result in the
acceleration of Debt in an amount in excess of $1,000,000, (B) the
institution of any litigation or other proceeding involving claims
against the Company or any of its Subsidiaries equal to or greater
than $1,000,000 or any adverse determination in any proceeding
against the Company equal or greater than $1,000,000 with respect to
a single cause of action, (C) any of the events set forth in Section
4043(b) of ERISA (a "Reportable Event"), or (D) any regulatory
proceeding directly involving the Company or any Subsidiary which, in
the opinion of the Company, would, if adversely determined, have a
material adverse effect on the Company and its Subsidiaries taken as
a whole, an officer's certificate specifying the nature and period of
existence of any such condition or event, specifying the notice given
or action taken by such Person and the nature of any such claimed
Default, event or condition, and specifying the details of such
proceeding, litigation or dispute and what action the Company or any
of its Subsidiaries has taken, is taking or proposes to take with
respect thereto; provided, however, that, with respect to any event
set forth in (A) and (B) above, if the amount involves does not
exceed $3,500,000 the Company shall have 30 days to notify the
Holders after obtaining knowledge thereof;
(iv) promptly after the occurrence thereof (A) a
summary of any material dispute between the Company and its
Accountant and (B) a decision by the Company to change its
Accountant;
(v) with reasonable promptness after request from
any Holder, such information respecting the condition or operations,
financial or otherwise, of the Company or any of its Subsidiaries as
such Purchaser may reasonably request;
(vi) promptly after the filing or receiving
thereof, copies of all reports and notices which the Company or any
Subsidiary files under ERISA with the Internal
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Revenue Service or the PBGC or the U.S. Department of Labor or which
the Company or any Subsidiary received from such corporation;
(vii) within forty-five (45) days after each of
March 31, June 30 and September 30, 2000, a certificate of a
Responsible Officer certifying whether the Company is in compliance
with Section 1(f) of the Note and setting forth in reasonable detail
the information required for the calculations thereof;
(viii) within five (5) business days prior to the
closing of any proposed sale (public or private) by the Company of
its debt or equity securities, a report from a Responsible Officer
setting forth in reasonable detail the amount of securities proposed
for sale; the proceeds expected to be received by the Company
therefrom; and the proposed date for receipt of the funds by the
Company;
(ix) within 45 days after the end of each
quarterly period in each fiscal year, the Company will deliver to the
Purchasers an Officer's Certificate certified by a Responsible
Officer (with such financial information with computations in
reasonable detail) to demonstrate compliance by the Company and its
Subsidiaries with the financial covenants set forth in Section 5.6
and any computations required by the Notes and stating that there
exists no Event of Default or Default, or an event that with the
lapse of time or the giving of notice, or both, could constitute an
Event of Default or, if any Event of Default or Default or an event
that with the lapse of time or the giving of notice, or both, could
constitute an Event of Default exists, specifying the nature and
period of existence thereof and what action the Company proposes to
take with respect thereto;
(x) promptly after the occurrence of a Change of
Control or the cessation of employment for any reason of Simon R.
McKenzie as the Company' Chief Executive Officer for a period of
thirty (30) days (the "McKenzie Termination"), a summary of the
event(s) constituting the Change of Control or McKenzie Termination
and the date of such occurrence;
(xi) The Company will, upon the request of the
Holder of any Note, provide such Holder, and any qualified
institutional buyer or accredited investor designated by such Holder,
such financial and other information as such Holder may reasonably
determine to be necessary in order to permit compliance with the
information requirements of Rule 144A under the Securities Act in
connection with the resale of Notes, except at such times as the
Company is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act. For the purpose of this paragraph
5.12(d)(xi), the term "qualified institutional buyer" and "accredited
investor" shall have the meanings specified in Rule 144A and Rule 501
of Regulation D, respectively, under the Securities Act; and
(xii) Along with the quarterly Financial
Statements delivered pursuant to Section 5.12(b) hereof when they are
due (A) a report analyzing changes in the Company's gross revenues
and in its net revenues in such fiscal quarter compared to the
comparable quarter in the prior fiscal year, and (B) when and to the
extent practicable, a
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report of the number of people treated and the quantity of doses of
all therapeutic products sold in such fiscal quarter, provided
however, that the gross revenue and net revenue data required
hereunder need not be compared to the prior fiscal year for the first
four quarterly reports under this clause, and provided, further, that
the obligation to provide information pursuant to (B) above, shall
not commence until the earlier to occur of (I) January 1, 2000, (II)
FDA approval for commercial use by the Company of OncoVAX cancer
vaccine or HumaSPECT or HumaRAD (as those products are described in
the Registration Statement), or (III) the approval of a Marketing
Authorization Application (as defined in the Registration Statement)
or a reimbursement agreement for the commercial use by the Company of
OncoVAX cancer vaccine or HumaSPECT or HumaRAD (as those products are
described in the Registration Statement) by a member country of the
European Union or the United Kingdom.
Section 5.13 Inspection and Delivery of Property; Books and Records;
Discussions. The Company hereby agrees that, so long as any Obligations under
this Agreement or any Ancillary Agreements are Outstanding, the Company shall
provide, and shall cause each of its Subsidiaries to provide, within ten (10)
days after request therefore, in writing, such business, financial and other
information as the Holders may from time to time reasonably request. The Company
also agrees that it shall keep proper books of records and accounts in which
full, true and correct entries in conformity with GAAP and all requirements of
Law shall be made of all dealings and transactions in relation to its business
and activities, and permit representatives of the Holders to visit and inspect
any of its properties and examine and make abstracts from any of its books and
corporate, financial and other records at any reasonable time and as often as
may reasonably be desired and to discuss the business, operations, Assets and
financial and other condition of the Company with officers and employees of the
Company and with its Accountants; provided that the Holders shall bear their own
expenses if any such inspection, examination or discussion occurs at a time when
no Default or Event of Default shall have occurred and be continuing.
Section 5.14 Further Security Interest. In the event that the Company
or any Subsidiary of the Company at any time or from time to time after the date
hereof shall form or acquire any Subsidiary (a "New Subsidiary") as may be
permitted hereby, (a) the Company or, as the case may be, such Subsidiary, as
beneficial owner of the capital stock of the New Subsidiary, shall promptly
execute and deliver to the Holders of the Notes a supplemental agreement
pursuant to which the Company or such Subsidiary will pledge shares of Capital
Stock or other equity interests to the Holders of the Notes, pursuant to which
supplemental agreement 100% of the issued and outstanding shares of Capital
Stock or other equity interests in or of the New Subsidiary held beneficially by
the Company or such Subsidiary, as the case may be, shall be pledged under and
in accordance with such supplemental agreement, (b) the Company or such
Subsidiary, as the case may be, shall promptly take all actions necessary and
appropriate to perfect the Liens of such pledge (including without limitation,
the delivery of stock or other certificates evidencing the shares of Capital
Stock or other equity interest so pledged (if, any), accompanied by duly
executed and undated stock powers in blank) and (c) the Company and
such Subsidiary shall promptly deliver to the Holders of the Notes such legal
opinions respecting
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such supplemental agreement, and the pledge granted thereby, as the Holders of
the Notes shall reasonably request.
The Company or, as the case may be, any of its Subsidiaries as the
record or beneficial owners of the Capital Stock of any New Subsidiary shall
promptly cause such New Subsidiary to become a party to the Security Documents
and such New Subsidiary shall promptly take all actions necessary and
appropriate to perfect the Liens of such Security Interests as are granted by
such Security Documents which such New Subsidiary shall have entered into as
aforesaid (including, without limitation, the delivery to the Holders of the
Notes of financing statements, executed by such New Subsidiary), and otherwise
in form and substance appropriate for filing in all appropriate jurisdictions)
and such New Subsidiary shall promptly deliver to the Holders of the Notes such
legal opinions in form and substance respecting such Security Documents and the
Security Interests granted thereby as the Holders of the Notes shall reasonably
request. The Company, or as the case may be, any of its Subsidiaries as the
record or beneficial owners of the capital stock of any New Subsidiary shall
promptly cause such New Subsidiary to become a party to a Guaranty Agreement
substantially in the form of Exhibits H-1 through H-3 attached hereto and such
New Subsidiary shall promptly take all actions necessary and appropriate to
guaranty the obligations of the Company and its Subsidiaries hereunder.
Section 5.15 Further Assurances.
(a) The Company, at its own cost and expense, will cause to
be promptly duly taken, executed, acknowledged and delivered all such further
acts, documents and issuances as the Holders of the Notes may from time to time
reasonably request in order to more effectively carry out the intent and
purposes of this Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby. In furtherance, but not in limitation of the
foregoing, the Company agrees to deliver and to cause its Subsidiaries to
deliver all further instruments and documents that may be necessary or desirable
in order to grant, confirm, protect and perfect first and prior Liens in any
real or personal property which is at such time Collateral or which was intended
to be Collateral pursuant to the Security Documents.
(b) The Company further agrees to take all actions
requested by the Holders of the Notes to name the Holders of the Notes as the
beneficiaries of the McKenzie Policy delivered on the Closing Date, or as
co-owners, assignees or additional insureds, as applicable.
(c) The Company further agrees, at its own cost and
expense, to take all actions necessary to (i) file for patent protection in any
and all jurisdictions in which the Company intends to operate its business with
respect to patents reasonably expected to generate, directly, or indirectly
(through product sales or licensing of products related to such patents), more
than 10% of the Company's annual revenues in such jurisdiction (the "Material
Patents"); (ii) cause the Holders' Security Interests in the Company's existing
or future Material Patents to be perfected, protected and maintained as a first
priority security interest (except with respect to certain Collateral in which
Akzo Nobel Pharma International, B.V., as Collateral Agent under the
Intellectual Property Security Agreement dated August 8, 1996 (the "Collateral
Agent") has a first priority security interest (the "Akzo Security Interest
Collateral") and with respect to the
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Akzo Security Interest Collateral, a second priority perfected security
interest until such time as payment in full of the Debt underlying the Akzo
Security Interest Collateral has been made and at such time, a first priority
perfected security interest in the Akzo Security Interest Collateral) to the
fullest extent permitted by the laws of the jurisdiction in which the Company is
operating its business utilizing Material Patents; and (iii) to comply with the
obligations of Section 5.26 to assure that the patents and patent applications
set forth on Schedule 5.26 have been assigned and transferred into the name of
Holdings in the United States, the Netherlands, Belgium and the United Kingdom
and to cause the Holders' Security Interests in such patents to be perfected,
protected and maintained in such jurisdictions as a second priority Security
Interest (until such time as the Debt underlying the Akzo Security Interest
Collateral shall have been repaid and in such case, as a first priority
perfected security interest).
(d) The Company further agrees to make prompt payment of
all fees, costs and expenses of the Holders and their counsel arising out of the
transactions contemplated hereby which have not been paid in full at the
Closing.
Section 5.16 Limitation on Debt. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Debt, except:
(a) Debt of the Company in respect of the Notes.
(b) Debt of the Company to any Subsidiary of the Company
that has executed and delivered Security Documents and of any such Subsidiary to
the Company or any other such Subsidiary.
(c) Debt outstanding as of June 30, 1998 as set forth on
Schedule 5.16 hereto and any amendments or modifications thereof (but excluding
any increase in the principal amount or interest on such Debt).
(d) Debt of the Company or any of its Subsidiaries that was
incurred by such Person on customary commercial trade terms to vendors,
suppliers or other Persons providing services for use by such Person in the
ordinary course of its business, unless and until such Debt is outstanding more
than 60 days past the original due date therefor.
(e) Debt of the Company or any of its Subsidiaries for any
deposit received by the Company or such Subsidiary from any customer or client
for services to be performed or goods sold by the Company or such Subsidiary,
unless the Company or such Subsidiary for any reason becomes obligated to refund
such deposit and the reimbursement obligation has been outstanding for more than
60 days from the date such reimbursement obligation occurred.
(f) So long as (i) no Default or Event of Default or event
that with the lapse of time or the giving of notice, or both, would constitute
an Event of Default, then exists or is continuing or would result therefrom and
(ii) no Default or Event of Default or event that with the lapse of time or the
giving of notice, or both, would constitute an Event of Default, would
exist after giving pro forma effect to the Debt to be incurred (including,
without limitation, Defaults or Events of Default or under Section 5.6).
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(A) Debt outstanding under the Company's
Receivables Facility;
(B) Unsecured Debt of the Company and its
Subsidiaries which, by its terms, is made expressly
subordinate to the Debt of the Company under the Notes,
provided that the Company may incur unsecured Debt which
is subordinate to the Debt of the Notes without regard to
any Default, Event of Default or event that with the lapse
of time or the giving of notice, or both, would constitute
an Event of Default, under Section 5.6, in an amount equal
to the difference between $11,000,000 and the amount of
the Notes that have been prepaid before the date on which
such unsecured Debt is incurred under this provision;
(C) Debt of the Company and its Subsidiaries
incurred to finance the acquisition of tangible Assets
(whether pursuant to a loan, a lease financing or
otherwise) after the date hereof provided that such Debt
shall be limited to 100% of the cost of such Assets at the
time such Assets were acquired.
(D) Debt of a corporation, limited liability
company, partnership or other entity which becomes a
Subsidiary of the Company after the date hereof as
permitted hereunder, provided that such Debt existed at
the time at the same time such entity became a Subsidiary
and was not created within 180 days prior thereto or
otherwise in anticipation thereof; and
(E) Debt of the Company with respect to letters
of credit or applications or reimbursements therefor to
support payment or performance obligations of the Company.
Section 5.17 Limitation on Mergers; Etc. The Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, enter into
any merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or convey, sell, lease,
assign, transfer or otherwise dispose of, all or substantially all of its
business or Assets, or make any material change in its present method of
conducting business, except so long as no Default, Event of Default or event
that with the lapse of time or the giving of notice, or both, would constitute
an Event of Default, has occurred and is continuing or would result therefrom:
(a) any wholly-owned Subsidiary may be merged or
consolidated with or into the Company (provided that the Company shall be
continuing or surviving corporation) or with or into any one or more
wholly-owned Subsidiaries (provided that a wholly-owned Subsidiary or
Subsidiaries shall be the continuing or surviving corporation);
(b) any wholly-owned Subsidiary may sell, lease, transfer
or otherwise dispose of any or all of its Assets (upon voluntary liquidation or
otherwise) to the Company or any other wholly-owned Subsidiary; and
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(c) the Company or any Subsidiary may be merged or
consolidated with one or more entities provided that (i) the Company or any such
Subsidiary shall be the continuing or surviving corporation, (ii) the Required
Holders shall have consented to such merger or consolidation and (iii)
immediately after giving effect thereto, no Default or Event of Default or event
that with the lapse of time or them giving notice, would constitute an Event of
Default shall have occurred and be continuing or would result therefrom.
Section 5.18 Limitation on Sales of Property. The Company shall not,
and shall not permit any Subsidiaries to, directly or indirectly, convey, sell,
lease, assign, transfer or otherwise dispose of any of its Assets or business
(including, without limitation receivables and leasehold interests) or any
product line, whether owned or hereafter acquired, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any
Person other than the Company or any wholly-owned Subsidiary, except:
(a) the sale, lease or other disposition of any product,
inventory or equipment in the ordinary course of business in bona fide
commercial transactions;
(b) as permitted by Section 5.16(a), (b) or (f) (A); or
(c) a sale or other disposition where the consideration
received is at least equal to the Fair Market Value of such Assets; provided
that the Asset Sale Excess Proceeds must be used to prepay the Notes.
Section 5.19 Limitation on Transactions with Affiliates. The Company
shall not, and shall not permit any of its Subsidiaries, directly or indirectly,
to enter into any transaction (including, without limitation, any purchase,
sale, lease or exchange of Assets or the rendering of any service) with any
Affiliate that is not a wholly-owned Subsidiary, unless such transaction (a) is
otherwise permitted hereunder, (b) is in the ordinary course of the Company or
such Subsidiary's business, and (c) is on terms no less favorable to the Company
or such Subsidiary, as the case may be, than it would obtain in an arm's-length
transaction; provided, that the Company may pay customary directors' fees and
reimburse reasonable out-of-pocket expenses directly related to meetings of the
Board of Directors.
Section 5.20 Limitation on Credit Extensions. The Company shall not,
and shall not permit any of its Subsidiaries to, extend credit, make advances or
make loans other than (a) normal and prudent extensions of credit to customers
buying goods and services in the ordinary course or business, which extensions
shall not be for longer periods than those extended by similar businesses
operated in a normal and prudent manner, (b) loans or other advances, however,
characterized, to the Company or to any of its wholly-owned Subsidiaries to the
extent otherwise permitted hereunder, and (c) loans to employees in the
furtherance of the Company's business as shall not exceed at any one time
outstanding $500,000 in the aggregate.
Section 5.21 Limitation on Certain Amendments. The Company shall not
amend or otherwise modify or waive any provision of its Certificate of
Incorporation without the prior written consent of the Required Holders, which
consent shall not unreasonably withheld.
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Section 5.22 Limitation on Investments. The Company shall not, and
shall not permit any of its Subsidiaries to, purchase, hold or acquire
beneficially any stock, bond, notes, debentures or other securities or any
Assets constituting a business unit of, or make any other investment in, any
Person, except (a) as expressly permitted by Section 5.20 hereof, (b)
investments in Capital Stock of any of the wholly owned Subsidiaries of the
Company that have executed and delivered Security Documents, (c) investments in
joint ventures, partnerships and other entities in the biopharmaceutical
business that have, for all such investments taken together, an aggregate cost
basis not greater than $1,000,000, so long as no Default or Event of Default or
event that with the lapse of time or the giving of notice, or both, would
constitute an Event of Default exists at the time of and after giving effect to
any such investment, (d) investments in any entity for which the only
consideration paid therefor by the Company or any of its Subsidiaries is the
Common Stock of the Company or such Subsidiary, valued at its Fair Market Value
and (e) Permitted Investments.
Section 5.23 Use of Proceeds. The Company and its Subsidiaries will
utilize the proceeds from the sale of the Guaranteed Senior Secured Primary
Notes and the Guaranteed Senior Secured Escrow Notes as follows:
(a) $7,171,131 will be applied at the Closing to repay the
1995 Note owed by the Company to Northstar High Total Return Fund;
(b) $10,113,014 will be applied at the Closing to repay the
April 1998 Notes owed by the Company to Northstar High Total Return Fund II and
Northstar High Yield Fund;
(c) $4,876,423 will be applied at the Closing to the
redemption of the Company's Series A-II Preferred Stock held by Northstar High
Total Return Fund;
(d) $5,097,568.91 will be applied at the Closing to
discharge in full the Company's Debt to CoreStates Enterprise Fund, a division
of CoreStates Bank, N.A. ("CoreStates");
(e) $500,000 will be applied at the Closing to the payment
by Holdings of amounts owed by it to Organon pursuant to the Intellectual
Property Agreement dated August 2, 1996 by and among Holdings, and Akzo Nobel
Pharma International, B.V. ("Akzo"); and
(f) $2,165,365.09 will be advanced by the Company to its
Subsidiaries, Holdings, PerImmune and Bartels for capital (including, without
limitation, working capital) required by such Subsidiaries.
The Company agrees that the funds utilized to make payments pursuant to Section
5.23(a) through and including (f) will be disbursed directly to the
corresponding payees from the Purchasers at the Closing.
Section 5.24 Assumption of Company Debt by Subsidiaries. Upon the
request of any Holder after the Closing Date, the Company shall cause each of
its Subsidiaries, Holdings, PerImmune and Bartels, and any New Subsidiaries to
execute Notes (the "Subsidiary Notes"), on
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terms and conditions identical to the Guaranteed Senior Secured Primary Notes
and the Guaranteed Senior Secured Escrow Notes, evidencing the aggregate
principal amount of Outstanding Notes held by such Holder pursuant to this
Purchase Agreement, provided that in the event there shall be any amounts owed
to the Collateral Agent at the time of such request, the Company shall use its
best efforts to obtain, within twenty (20) business days after delivery of the
request, the consent of the Collateral Agent to the execution and delivery of
the Subsidiary Notes. The Company shall not be required to deliver the
Subsidiary Notes pursuant to this provision if the Collateral Agent refuses to
consent thereto provided that the Company has used its best efforts to obtain
the Collateral Agent's consent. If there shall be no amounts owing to the
Collateral Agent at the time of the request for Subsidiary Notes, the Company
shall deliver the Subsidiary Notes to the requesting Holder within seven (7)
business days after delivery of the request by such Holder to the Company.
Section 5.25 Covenants with respect to OncoVAX Cancer Vaccine. The
Company will use its commercially reasonable best efforts (a) to file its
Biological License Application with respect to the OncoVAX cancer vaccine not
later than December 31, 1998, (b) to obtain FDA approval expeditiously of the
Company's therapeutic products currently utilized in its clinical trials and to
initiate Phase III clinical trials for OncoVAX in combination with chemotherapy
for Stage III colon cancer and (c) to obtain not later than December 31, 1998,
regulatory and/or reimbursement approvals required for the commercial use of its
OncoVAX cancer vaccine in the Netherlands.
Section 5.26 Covenant with respect to Transfer of Certain Patents.
The Company at its own cost and expense, within 60 days after the date hereof,
will take all actions necessary to record the assignment and transfer of patents
and patent applications listed on Schedule 5.26 hereto into the name of Holdings
with the appropriate authorities in the United States, Netherlands, Belgium, and
the United Kingdom and to cause the Holders' Security Interests in such patents
to be perfected, protected and maintained in such jurisdictions as a second
priority perfected security interest until such time as the Debt underlying the
Akzo Security Interest has been repaid in full, and in such case, a first
priority perfected security interest in the Akzo Security Interest Collateral.
In the event that the Company shall fail to have caused the Holders'
Security Interests in such patents to be perfected, protected and maintained in
such jurisdictions as a second priority perfected security interest (or, in the
event that the Debt underlying the Akzo Security Interest Collateral shall have
been repaid in full, and in such case, a first priority perfected security
interest in the Akzo Security Interest Collateral) within 60 days after the date
hereof, the rate of interest payable with respect to the principal amount of
Outstanding Notes shall be increased to 15% per annum in accordance with Section
2(c) of the Guaranteed Senior Secured Primary Note and Section 2(c) of the
Guaranteed Senior Secured Escrow Note until such time as the Company has
fulfilled its obligations under this Section 5.26; provided however, that
failure of the Company to fulfill its obligations under this Section 5.26 within
180 days after the date hereof shall be deemed an "Event of Default" in
accordance with Section 6(a)(iv) of the Guaranteed Senior Secured Primary Note
and Section 6(a)(iv) of the Senior Secured Escrow Note.
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<PAGE> 48
Section 5.27 Foreign Currency Liabilities. The Company will manage
its foreign currencies, Assets, liabilities and expenses in a manner that will
protect and promote its ability to pay its U.S. Dollar liabilities and related
costs and expenses.
Section 5.28 Unaudited Financial Statements. The Company shall
furnish to the Purchasers, on or prior to September 15, 1998, the unaudited
balance sheet of the Company for the quarter and six months ended June 30, 1998
and the related unaudited statements of income, stockholders' equity and cash
flows of the Company for the quarter ended June 30, 1998, each certified by a
Responsible Officer of the Company. Such financial statements shall be prepared
in accordance with GAAP and shall fairly present the financial position of the
Company as of June 30, 1998.
Section 5.29 Consent of Transamerica Business Credit Corporation. The
Company shall use its best efforts to obtain the consent of the Transamerica
Business Credit Corporation to the grant of a second lien on the Excluded
Equipment.
Section 5.30 Interest Escrow Security Agreement. The Company will
provide information reasonably requested by the Holders respecting the
Depositary appointed under the Interest Escrow Security Agreement and will
change the Depositary, if requested by the Holders.
Section 5.31 Waiver of Certain Covenants. The Company may omit in any
particular instance to comply with any covenant or condition set forth in
Sections 5.1 to 5.30, inclusive, if before the time for such compliance the
Required Holders shall, by act of such Required Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent and for the time so expressly waived, and, until
such waiver shall become effective, the obligations of the Company in respect of
any such covenant or condition shall remain in full force and effect.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligations of each Purchaser to purchase and pay for the Newly
Issued Securities being purchased by it on the Closing Date are subject, at the
option of such Purchaser, to the satisfaction of the following conditions on or
before such Closing Date:
Section 6.1 Supporting Documents. At the Closing, the Purchasers
shall have received copies of the following documents:
(a) (i) the Charter, certified as of a recent date by the
Secretary of State of the State of Delaware and (ii) a certificate of said
Secretary dated as of a recent date as to the due incorporation and subsistence
of the Company, and listing all documents of the Company on file with said
Secretary; and
42
<PAGE> 49
(b) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying: (i) that
attached thereto is a true and complete copy of all resolutions adopted by the
Board of Directors (the "Company Board") or the stockholders of the Company
authorizing the execution, delivery and performance of this Agreement, the
issuance, sale, delivery, and performance of the Notes and the Warrants, and the
reservation, issuance and delivery of the Warrant Shares upon the exercise of
the Warrants, and that all such resolutions are in full force and effect and are
all the resolutions adopted in connection with the transactions contemplated by
this Agreement; (ii) that the Charter has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to clause
(a)(ii) above; and (iii) the incumbency and specimen signature of each officer
of the Company executing this Agreement, the Notes, and the Warrants and any
certificate or instrument furnished pursuant hereto, and a certification by
another officer of the Company as to the incumbency and signature of the officer
signing the certificate referred to in this clause (b);
Section 6.2 Fees of Purchasers. The Company shall have paid, in
accordance with Article VII, the reasonable legal and other fees and
disbursements of the Purchasers, as invoiced.
Section 6.3 Warrants. The Company shall have issued and duly executed
the Warrants to the Purchasers and shall have executed a registration rights
agreement, substantially in the form set forth as Exhibit B-1 hereto.
Section 6.4 Amended and Restated Warrants. The Company shall have
duly executed and delivered the Amended and Restated Warrants, substantially in
the form of Exhibits B-2 through B-6 hereto.
Section 6.5 Interest Escrow Security Agreement. The Company shall
have duly executed the Interest Escrow Security Agreement, substantially in the
form set forth as Exhibit D hereto.
Section 6.6 Notes. Each Purchaser shall have received the Guaranteed
Senior Secured Primary Note and the Guaranteed Senior Secured Escrow Note it is
purchasing duly executed and delivered by a duly authorized officer of the
Company.
Section 6.7 Security Agreements. The Company and its Subsidiaries and
the Holders shall have duly executed and delivered the Global Security Agreement
in substantially the form of Exhibit E hereto and the Intellectual Property
Security Agreement in substantially the form of Exhibit F hereto.
Section 6.8 Pledge Agreement. The Company and its Subsidiaries shall
have duly executed and delivered a pledge agreement in substantially the form of
Exhibit G hereto.
Section 6.9 Guarantees. Each of the Subsidiaries shall have duly
executed and delivered their respective guaranty in substantially the form of
Exhibits H-1 through H-3 hereof.
Section 6.10 Pledged Stock. The Company shall have delivered to the
Holders certificates representing all issued and outstanding shares of Capital
Stock of each of the existing
43
<PAGE> 50
Subsidiaries, together with stock powers duly executed in blank, to be held
pursuant to the terms of the Pledge Agreement.
Section 6.11 Escrow Agreement. The Company shall have duly executed
the Funded Commitment Facility Escrow Agreement, substantially in the form of
Exhibit L annexed hereto.
Section 6.12 Financing Statements. The Company and each Subsidiary
shall have duly executed such financing statements (Form UCC-1) as shall be
requested by the Holders to perfect the security interest provided by the Global
Security Agreement and shall have taken all action reasonably requested by
Purchasers to perfect and protect the security interests created by such Form
UCC-1s.
Section 6.13 First Union Agreement. The Company shall have executed
an agreement with First Union National Bank (as successor-in-interest to
CoreStates), as amended through the date hereof containing, among other things,
a waiver of any defaults under the agreements between the Company and
Corestates, substantially in the form of Exhibit I hereto and shall have caused
CoreStates to deliver (a) an assignment of the CoreStates Warrants to the
Purchasers and (b) such UCC-3 termination notices and other releases in form and
substance satisfactory to the Purchasers terminating CoreStates' interest in the
Company's Assets.
Section 6.14 Principal Executive Officer. Simon McKenzie Successor
shall be the principal executive of the Company in charge of the Company's
management and policies. The Company shall obtain a "McKenzie Policy" in
accordance with Section 5.10, with premiums prepaid for a period of not less
than three years from the Closing Date and shall execute and deliver an
Assignment of Life Insurance as Collateral in a form reasonably acceptable to
the Purchasers within sixty (60) days of the date hereof.
Section 6.15 Agreement with Akzo. The Company shall have duly
executed an agreement with Akzo, Organon, Holdings and PerImmune substantially
in the form of Exhibit J attached hereto amending certain terms of the
Intellectual Property Security Agreement by and among PerImmune, Organon, and
Akzo as Collateral Agent pursuant to which the Collateral Agent consents to the
granting of a second priority security interest to the Purchasers on all assets
of PerImmune in which the Collateral Agent maintains a first priority security
interest. The Company shall have delivered to the Purchasers, a confirmation
signed by the Collateral Agent that it has received the guaranty duly executed
by the Company on August 21, 1998 and that the provisions of Amendment No. 1
executed by and among Holdings, PerImmune, Akzo and Organon dated July 31, 1998
to the Akzo Agreement are of full legal force and effect as of the date hereof.
44
<PAGE> 51
Section 6.16 Financial Statements. The Company shall have delivered
its (a) audited consolidated financial statements as of and for the year ended
December 31, 1997, together with the notes thereto, the auditor's unqualified
report thereon and any accompanying management letter and (b) unaudited
consolidated financial statements as of and for the three months ended March 31,
1998, together with the notes thereto.
Section 6.17 Letter of Instructions. Purchasers shall have received
irrevocable instructions from the Company to direct funds to accounts maintained
pursuant to the Interest Escrow Security Agreement and the Funded Commitment
Facility Agreement.
Section 6.18 Other Actions. The Company and each Subsidiary shall
have taken all other action reasonably requested by the Purchasers desirable to
perfect and protect the security interests created by the Security Documents.
Section 6.19 No Adverse Actions. There shall be no action, suit,
complaint, investigation or proceeding pending or, to the knowledge of the
Company, threatened against the Company, or any properties or rights of the
Company, by or before any court, arbitrator or administrative or governmental
body which could reasonably be expected to result in any material adverse change
in the business, financial condition or operations of the Company taken as a
whole. There shall be no action, suit, investigation or proceeding pending or
threatened against the Company which purports to affect the validity or
enforceability of this Agreement or the Ancillary Agreements.
Section 6.20 Opinion of Counsel. The Purchasers shall have received
from Morrison & Foerster LLP, counsel for the Company, opinions dated the
Closing Date, in the form attached hereto as Exhibit K-1 and Exhibit K-2.
ARTICLE VII
PAYMENT FOR PURCHASE OF SECURITIES
Contemporaneously with the satisfaction of the obligations of the
Company as set forth in Article VI, each Purchaser shall transfer to the Company
such sum, and deliver the Existing Securities, as set forth opposite its name in
Column 2 and Column 3, respectively, of Schedule 2.1 hereto, as specified in
Section 2.2 of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Expenses. The Company will pay its own expenses and the
Purchasers' expenses in connection with the transactions contemplated hereby
whether or not such transactions shall be consummated and the Company shall pay
for all out-of-pocket costs of the Purchasers, including, without limitation (a)
legal fees incurred by Purchasers in connection with
45
<PAGE> 52
due diligence, documentation and closing of this transaction, and (b) the costs
of appraisals, financial reports and other documents requested by Purchasers in
connection with this transaction.
Section 8.2 Brokerage. Each party hereto will indemnify and hold
harmless any other party hereto against and in respect of any claim for
brokerage or other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party.
Section 8.3 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
or mailed by certified or registered mail, return receipt requested, or
nationwide overnight delivery service (with charges prepaid) as follows:
(a) if to the Company or any Subsidiary, at Intracel
Corporation, 2005 NW Sammamish Road, Suite 107, Issaquah Washington 98027, Attn:
Chief Executive Officer, with a copy to Joseph W. Bartlett, Esq., Morrison &
Foerster LLP, 1290 Avenue of the Americas, New York, NY 10104; and
(b) if to the Purchasers, at their respective addresses set
forth on Schedule 2.1 hereto with a copy to Karen Weidemann, Esq., Reboul,
MacMurry, Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York, New York
10111.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered when delivered in person, or three days
after mailing by mail or one day after delivery to an overnight express service
for next day delivery, as the case may be.
Section 8.4 Governing Law; Submission to Jurisdiction. This Agreement
shall be construed in accordance with, and governed by, the internal laws of the
State of New York as permitted by Section 5-401 of the New York General
Obligations Law (or any similar successor provision) without giving effect to
any choice of law rule that would cause the application of the Laws of any
jurisdiction other than the State of New York. The Company and each existing
Subsidiary of the Company hereby irrevocably and unconditionally:
(a) submit itself and its Subsidiaries and their respective
Assets in any legal action or proceeding relating to this Agreement and the
Ancillary Agreements to which it is a party, or for recognition and enforcement
of any judgment in respect thereof, to the general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
46
<PAGE> 53
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to it at its
address set forth in or determined pursuant to Section 8.3 or at such other
address of which the Purchasers shall have been notified pursuant thereto; and
(d) waives, to the maximum extent not prohibited by Law,
any right it may have to claim or recover in any legal action or proceeding
referred to in this Section 8.4 any punitive or exemplary damages and any
damages which are not proximately caused by or the reasonably foreseeable result
of the breach which is the subject of such action or proceeding.
The Company hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Ancillary Agreements;
(b) the Purchasers do not have any fiduciary relationship
with or duty to the Company arising out of or in connection with this Agreement,
or the Ancillary Agreements; and
(c) no joint venture or partnership exists between the
Purchasers, on the one hand, and the Company, on the other hand, and the
relationship of the Company and the Purchasers is that of, inter alia, debtor
and creditor.
THE COMPANY, EACH SUBSIDIARY OF THE COMPANY AND THE PURCHASERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY, ANY OBJECTION BASED ON
FORUM NON CONVENIENS OR VENUE IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT, THE ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
THE COMPANY WILL CAUSE EACH NEW SUBSIDIARY TO TAKE SUCH ACTION AS IS
REQUIRED TO CONSENT TO, AND BE BOUND BY, THE PROVISIONS OF THIS SECTION 8.4 IN
ITS ENTIRETY.
Section 8.5 Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto and the Ancillary Agreements, constitutes the sole and
entire agreement of the parties with respect to the subject matter hereof. All
Schedules and Exhibits hereto are hereby incorporated herein by reference.
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<PAGE> 54
Section 8.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall not
be effective unto duly executed by each and every party hereto.
Section 8.7 Amendments. This Agreement may not be amended or modified
and no provisions hereof may be waived, without the written consent of the
Company, each Subsidiary and each Purchaser. However, this Agreement may be
amended, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company shall
obtain the written consent to such amendment, action or omission to act, of the
Required Holders, except that, without the prior written consent of one hundred
percent (100%) of the Purchasers, no amendment to this Agreement shall change
the maturity of any Note, or change the principal of, or the rate or time of
payment of interest on any Note, or affect the time, amount or allocation of any
prepayments, change the proportion of the principal amount of the Notes required
with respect to any consent, amendment, waiver or declaration, amend, modify or
waive any provision of this Section 8.7, change the percentage specified in the
definition of Required Holders or consent to the assignment or transfer by the
Company or any of its Subsidiaries of their respective rights and obligations
under this Agreement or the Ancillary Agreements. Each Purchaser of the Notes
shall be bound by any consent authorized by this Section 8.7 whether or not such
Note shall have been marked to indicate such consent, but any Notes issued
thereafter may bear notation referring to any such consent. Any amendment or
waiver of any provision of any Note shall be effective only for the purposes and
period of time expressly set forth therein and shall not entitle the Company to
any other waiver or amendment in similar or other circumstances. No course of
dealing between the Company and any Purchaser of any Note, nor any failure to
exercise or any delay in exercising on the part of the holder of any Note any
right, remedy, power or privilege under any Note shall or operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege under any Note preclude any other right, remedy, power or privilege.
The rights, remedies, powers and privileges under the Notes are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by Law. As
used herein and in the Notes, the term "this Agreement and the Ancillary
Agreements" and references thereto shall mean this Agreement and the Ancillary
Agreements as they may from time to time be amended or supplemented.
Section 8.8 Disclosure to Other Persons. The Company hereby
authorizes any of the Purchasers of the Notes to deliver copies of any financial
statements and other documents delivered to such Purchaser, and disclose any
other information disclosed to such Purchaser, by or on behalf of the Company or
any Subsidiary in connection with or pursuant to this Agreement or the Ancillary
Agreements to (a) such Purchaser's directors, officers, employees, agents and
professional consultants, (b) any other Purchaser of any Note, (c) any Person to
which such Purchaser offers to sell such Note or any part thereof, (d) any
Person to which such Purchaser sells or offers to sell a participation in all or
any part of such Note, (e) any Person from which such Purchaser offers to
purchase any security of the Company, (f) any federal or state regulatory
authority having jurisdiction over such Purchaser, or (g) any other Person to
which such delivery or disclosure may be necessary or appropriate (i) in
compliance with any Law applicable to such Purchaser, (ii) in response to any
subpoena or other legal process or informal investigative
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<PAGE> 55
demand or (iii) in connection with any litigation to which such Purchaser is a
party. Notwithstanding the foregoing, except as provided in clauses (f) and (g)
above, the Purchasers agree that they shall not disclose any information learned
or received by them in connection with the negotiation, execution, delivery and
performance of this Agreement or the Ancillary Agreements to any Person that
directly competes or may reasonably be expected to directly compete with any
business of the Company.
Section 8.9 Limitation on Interest. The Company and each Purchaser
intends to comply with applicable usury Laws from time to time in effect. At no
time shall the interest rate payable on the Notes exceed the maximum rate of
interest, if any, that at any time or from time to time may be contracted for,
taken, charged or received on the Notes or on any amount which may be owing to
the Purchasers of the Notes under the Laws applicable to such Purchasers of
Notes and this transaction. In the event that the interest rate payable on the
Notes shall exceed the maximum rate of interest allowable under applicable usury
Laws, then the rate of interest shall automatically be reduced to the maximum
rate permitted by Law.
Section 8.10 Severability. If any provision of this Agreement shall
be declared void or unenforceable by any judicial or administrative authority,
the validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 8.11 Titles and Subtitles. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
49
<PAGE> 56
IN WITNESS WHEREOF, the Company, the Subsidiaries and the Purchasers
have executed this Agreement as of the day and year first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
--------------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
BARTELS, INC.
By: /s/ SIMON R. McKENZIE
--------------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
PERIMMUNE HOLDINGS, INC.
By: /s/ SIMON R. McKENZIE
--------------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
PERIMMUNE, INC.
By: /s/ SIMON R. McKENZIE
--------------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
--------------------------------------
Name: Michael A. Graves
Title: Vice President
50
<PAGE> 57
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
--------------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
--------------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
--------------------------------------
Name: Michael A. Graves
Title: Vice President
51
<PAGE> 58
EXHIBIT A-1
GUARANTEED SENIOR SECURED PRIMARY NOTE
<PAGE> 59
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD,
OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER SUCH ACT OR IN
COMPLIANCE WITH ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME
TAX PURPOSES. FOR FURTHER INFORMATION, CONTACT: MORRISON & FOERSTER LLP, 1290
AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10104, ATTN: JOSEPH W. BARTLETT, ESQ.
INTRACEL CORPORATION
12% GUARANTEED SENIOR SECURED PRIMARY PROMISSORY NOTE
August 25, 1998 $3,841,463
FOR VALUE RECEIVED, INTRACEL CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to the order of NORTHSTAR HIGH YIELD FUND its
successors or assigns (the "Noteholder"), the Principal Amount (as defined
below) payable on August 25, 2003 (the "Principal Payment Date") with interest
payable pursuant to Section 2. Capitalized terms used in this Note have the
meanings provided in Section 11. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Securities Purchase Agreement
dated the date hereof by and among the Company and the other parties thereto
(including this Noteholder) (the "Securities Purchase Agreement").
SECTION 1. Payments of Principal.
(a) Prior Loans. The Company issued to the Noteholder or
Affiliates of the Noteholder certain Senior Secured Promissory Notes dated
December 28, 1995 and certain Promissory Notes dated April 1, 1998, as amended,
in the aggregate principal amount of $16,800,000, and, in connection therewith,
granted certain other rights to the Noteholder to acquire shares of the
Company's Capital Stock (such Notes and rights collectively referred to herein
as the "Existing Securities"). The Noteholder or its Affiliates have agreed to
contribute the Existing Securities and pay additional consideration as set forth
in the Securities Purchase Agreement to purchase $3,841,463 these Guaranteed
Senior Secured Primary Promissory Notes (the "Guaranteed Senior Secured Primary
Notes") on the terms and conditions set forth herein.
(b) Principal Amount. On August 25, 1998 (the "Closing Date"),
the Noteholder purchased this Note for Three Million Three Hundred Forty-One
Thousand Seven Hundred Thirty-Eight Dollars ($3,341,738) pursuant to the
Securities Purchase Agreement and
<PAGE> 60
the principal amount of this Note is Three Million Eight Hundred Forty-One
Thousand Four Hundred Sixty-Three Dollars ($3,841,463) (the "Principal Amount").
(c) Principal Payment Date. Subject to earlier redemption or
prepayment as provided herein, the Principal Amount of this Guaranteed Senior
Secured Primary Note and all other theretofore unpaid amounts due hereunder
shall be due and payable on the Principal Payment Date.
(d) Prepayment. (i) The Noteholder, at its option, may require
the Company to prepay this Guaranteed Senior Secured Primary Note in whole or in
part, not later than five (5) Business Days after notice of prepayment is
delivered to the Company, pursuant to Section 1(d)(ii) hereof, at a price equal
to 101% of the principal amount so prepaid, plus accrued interest to the date of
prepayment, if:
(A) there is a Change of Control of the Company,
or
(B) (x) Simon R. McKenzie ("McKenzie") shall
cease at any time for whatever reason to be
the principal executive officer of the
Company in charge of the Company's
management and policies for a period of
thirty (30) days or more and (y) the
Required Holders, in the reasonable exercise
of their discretion, shall not have approved
the successor to McKenzie (the "McKenzie
Successor") within 180 days after the
cessation by McKenzie of his full time
service to the Company; and
(ii) the notice of prepayment delivered by the Noteholder
to the Company upon occurrence of the event(s) described in this Section
1(d) shall specify the event requiring such prepayment and the amount of
such prepayment.
(e) Mandatory Redemption in the Event of the Sale of Assets, Debt
or Equity Securities. Commencing on or after the date of this Guaranteed Senior
Secured Primary Note, if at any time or from time to time, the Company or any of
its Subsidiaries receives cash proceeds (the "Net Cash Proceeds") from the sale
of its debt or equity securities or from Asset Sale Excess Proceeds (as defined
in the Securities Purchase Agreement) for sales of property under Section
5.18(c) of the Securities Purchase Agreement, all of the Net Cash Proceeds or
Asset Sale Excess Proceeds, as applicable, from such sale shall be utilized to
(i) pay all accrued unpaid past due interest on all Notes and all accrued unpaid
interest on the principal amount of the Notes actually redeemed pursuant to this
Section 1(e), all through the date of redemption; and (ii) to redeem this Note
in accordance with the terms set forth in the notice of redemption attached
hereto as Exhibit A (the "Notice of Redemption"). On the date of receipt of Net
Cash Proceeds from the sale of debt or equity securities or the receipt of Asset
Sale Excess Proceeds, as applicable (the "Funding Date"), an amount equal to the
lesser of all Net Cash Proceeds or Asset Sale Excess Proceeds, as applicable, or
$5,000,000 shall be held in constructive trust by the Company, as trustee for
the benefit of Holders who shall be entitled to disbursement of such funds in
accordance with this Section 1(e). On the Funding Date, the Company shall
forward to each
2
<PAGE> 61
Noteholder by facsimile transmission and by overnight courier, a Notice of
Redemption. Each Noteholder shall select one of the four redemption options set
forth on such notice and return by facsimile or overnight courier the executed
Notice of Redemption to the Company by the close of business on the fifth
Business Day following the Funding Date. If an executed Notice of Redemption has
not been delivered to the Company by the close of business on such date, the
Noteholder shall be deemed to have elected Redemption Option A in Section 2 of
the Notice of Redemption. The Company shall prepay the Guaranteed Senior Secured
Primary Notes, in accordance with the provisions of the Notice of Redemption, on
the seventh Business Day following the Funding Date. Any Notice of Redemption
forwarded pursuant to this provision shall be irrevocable. Notwithstanding
anything in this Guaranteed Senior Secured Primary Note to the contrary, (i) the
Company shall have no obligation to make any payments under this Section 1(e)
which result from the sale of debt or equity securities pursuant to the exercise
(or series of related exercises) of employee stock options not exceeding
$250,000; (ii) the Company shall have no obligation to make payments pursuant to
this Section 1(e) in excess of $5,000,000 in the aggregate, and (iii) the
Company shall have no obligation to make payments under this Section 1(e) which
result from proceeds received from Transamerica Business Credit Corporation (as
a result of a financing guaranteed by a bond posted by the State of Washington
Economic Development Council), provided, and to the extent that, such proceeds
are utilized to purchase equipment for the Company or its Subsidiaries.
(f) EBITDA Required Redemptions
(i) For purposes of this provision, the terms set forth
below shall have the following meanings:
(A) "EBITDA Measurement Date" shall mean each of
March 31, 2000, June 30, 2000 and September
30, 2000.
(B) "EBITDA Ratio" shall mean the ratio of the
Company's EBITDA to the Company's Interest
Expense for each of the quarters ended March
31, 2000, June 30, 2000 and September 30,
2000 as follows:
<TABLE>
<CAPTION>
Quarter Ended EBITDA Ratio
------------- ------------
<S> <C>
March 31, 2000 3:1
June 30, 2000 4:1
September 30, 2000 5:1
</TABLE>
(C) "EBITDA" means with reference to any
Measurement Period, the consolidated
operating income of the Company and its
Subsidiaries, plus the amount of all
depreciation and amortization deducted in
determining the amount of such operating
income, all as determined on a consolidated
basis in accordance with GAAP applied on a
basis consistent
3
<PAGE> 62
with the Audited Financial Statements of the
Company delivered pursuant to Section 6.16
of the Securities Purchase Agreement.
(D) "Interest Expense" means, for any
Measurement Period, the sum, in accordance
with GAAP, of (i) all interest on Debt that
is paid or accrued as an expense during such
period (including without limitations,
imputed interest under Capitalized Lease
Obligations (as defined in the Securities
Purchase Agreement), plus (ii) all amounts
paid, accrued or ---- amortized as an
expense during such period in respect of
interest rate protection agreements minus,
(iii) all amounts received or accrued as
income during such period in respect of
interest rate protection agreements.
(E) "Measurement Period" means any quarterly
period ending on an EBITDA Measurement Date.
(F) "Notice of EBITDA Redemption" means the
Noteholder's demand for payment by the
Company at the Pro Rata Redemption Price of
its Pro Rata Redemption Amount as set forth
in Exhibit B attached hereto.
(G) "Pro Rata Redemption Amount" means the
product of (i) a fraction, the numerator of
which is the Principal Amount of this
Guaranteed Senior Secured Primary Note and
the denominator is the aggregate Principal
Amount of all Notes initially Outstanding
pursuant to the Securities Purchase
Agreement, multiplied by (ii) the Quarterly
Redemption Amount.
(H) "Pro Rata Redemption Price" means the Pro
Rata Redemption Amount, plus accrued unpaid
interest thereon to the date of redemption.
(I) "Quarterly Redemption Amount" means
$2,500,000 for each of the quarters ended
March 30, 2000, June 30, 2000 and September
30, 2000.
(J) "Report Date" shall mean thirty (30) days
after an EBITDA Measurement Date.
(K) "Total Redemption Amount" means $7,500,000.
(ii) Unless the Company is in compliance with the EBITDA
Ratio on each EBITDA Measurement Date, the Noteholder, at its option,
may demand, by sending
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<PAGE> 63
a Notice of EBITDA Redemption, that the Company redeem the Pro Rata
Redemption Amount of the Guaranteed Senior Secured Primary Note at the
Pro Rata Redemption Price for each EBITDA Measurement Date on which the
Company fails to comply with the applicable EBITDA Ratio. The
Noteholder's right to redemption under this Section 1(f) is subject to
the following provisions:
(A) The Company shall deliver a certificate to
the Noteholder not later than each Report
Date (the "EBITDA Ratio Certificate"), which
sets forth, with reference to the applicable
EBITDA Measurement Date: (i) EBITDA and
Interest Expense; (ii) the EBITDA Ratio; and
(iii) a statement to the effect that the
Company has either satisfied the EBITDA
Ratio or has failed to satisfy the EBITDA
Ratio for such EBITDA Measurement Date. In
the event that the Company has failed to
meet or exceed the EBITDA Ratio applicable
to such Measurement Date (or, the Company
fails to deliver the EBITDA Ratio
Certificate to the Noteholder on or prior to
the Report Date), the Noteholder shall have
the right to demand payment to it of the Pro
Rata Redemption Amount at a price equal to
the Pro Rata Redemption Price within five
(5) Business Days after a Notice of EBITDA
Redemption is delivered by the Noteholder to
the Company.
(B) Notwithstanding the provisions of
1(f)(ii)(A) above, in the event the Company
fails to comply with the EBITDA Ratio
applicable to an EBITDA Measurement Date,
the Noteholder shall be deemed to have
waived its right to redemption arising from
such failure to comply (the "Waiver of
Payment") if both of the following
conditions are met: (i) a subsequent
quarterly certificate delivered to the
Noteholder pursuant to this Section 1(f) or
Section 5.12 of the Securities Purchase
Agreement certifies that the EBITDA Ratio
(or the EBITDA to Interest Ratio) certified
thereby meets or exceeds the EBITDA Ratio
applicable to the EBITDA Measurement Date
giving rise to the Noteholder's right of
redemption hereunder; and (y) the Noteholder
has not delivered its Notice of EBITDA
Redemption to the Company respecting such
EBITDA Measurement Date prior to receiving
such subsequent certificate.
(iii) Any Waiver of Payment with respect to an EBITDA
Measurement Date shall not constitute or be construed as a Waiver of
Payment with respect to any other EBITDA Measurement Date.
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<PAGE> 64
(iv) Subject to the provisions of Section 1(f)(ii)(B)
above, the Noteholder's rights to demand and receive the Pro Rata
Redemption Amount at the Pro Rata Redemption Price under this Section
1(f) are cumulative.
(v) The Pro Rata Redemption Price shall be paid by wire
transfer of immediately available funds.
(vi) Notwithstanding anything herein to the contrary, the
Company shall not be required to redeem more than the Total Redemption
Amount plus unpaid and accrued interest to the dates of redemption,
pursuant to this Section 1(f).
(g) Optional Prepayment. This Guaranteed Senior Secured Primary
Note may be prepaid at the option of the Company at any time, in part or in full
together with accrued interest through the date of prepayment on the principal
amount, prepaid. Any prepayment (other than a payment pursuant to Section 1(e)
or Section 1(f)) made prior to July 31, 2002, shall include amounts equal to the
following increases in the principal amount to be prepaid:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
If Prepaid
During the Percentage
12-month period of Principal
beginning and ending: Amount Prepaid
- --------------------------------------------------------------------------------
<S> <C>
August 1, 1999 - July 31, 2000 112%
August 1, 2000 - July 31, 2001 108.0%
August 1, 2001 - July 31, 2002 104.0%
Thereafter 100.0%
- --------------------------------------------------------------------------------
</TABLE>
SECTION 2. Payments of Interest.
(a) Interest Rate. Except as otherwise expressly provided in
Section 6(b), interest shall accrue from the Closing Date at the rate of twelve
percent (12%) per annum on the Unpaid Principal Amount, provided, however, that,
in the event the Company does not comply with the covenant set forth in Section
5.26 of the Securities Purchase Agreement within the sixty (60) day period set
forth therein, interest shall accrue from the expiration of the sixty (60) day
period until such covenant has been satisfied, at the Default Interest Rate. All
computations of interest shall be made on the basis of a year of three hundred
and sixty (360) days for the actual number of days including the first day but
excluding the last day for which any interest period is calculated.
(b) Interest Payment Date. All accrued and unpaid interest shall
be payable quarterly in arrears on each Interest Payment Date beginning on
November 25, 1998.
(c) Interest Escrow Security Agreement for Certain Interest
Payments. To secure the Company's obligations to make certain interest payments
pursuant to this Guaranteed Senior Secured Primary Note, the Company has
executed an interest escrow security agreement
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<PAGE> 65
as of the date hereof (the "Interest Escrow Security Agreement"), pursuant to
which the Company has agreed to deposit funds into and restrict withdrawals from
an account for the benefit of the Noteholder and to make additional
contributions as described in the Interest Escrow Security Agreement. The
Company will make interest payments, and in certain circumstances principal and
other payments, in accordance therewith.
SECTION 3. Covenants.
The Company hereby agrees that, so long as any amount is owing to the
Noteholder, it shall and shall cause its Subsidiaries to perform the covenants
set forth in Article V of the Securities Purchase Agreement.
SECTION 4. Guaranties.
The performance of the Company's obligations under the Securities Purchase
Agreement, this Guaranteed Senior Secured Primary Note, all Notes issued
pursuant to the Securities Purchase Agreement and the Ancillary Agreements (the
"Obligations") has been unconditionally guaranteed by the Company's Subsidiaries
(the "Guaranties") as set forth in the Guaranty Agreements executed as of the
date hereof.
SECTION 5. Security.
This Guaranteed Senior Secured Primary Note and all other Notes issued
pursuant to the Securities Purchase Agreement represent Senior Secured Debt of
the Company. The performance of the Company's Obligations and the Guaranties
relating to the Obligations are secured by certain Collateral as set forth in
the Security Documents.
SECTION 6. Events of Default.
(a) Definition. For purposes of this Guaranteed Senior Secured
Primary Note, an Event of Default shall have occurred and shall be deemed to
have occurred if:
(i) the Company shall fail to pay any principal when due
in accordance with the terms hereof; or
(ii) the Company shall fail to pay any interest or any
other amount payable hereunder or under the Securities Purchase
Agreement or any of the Ancillary Agreements when due in accordance with
their respective terms by a date which is five calendar days after such
interest or other amount payable hereunder is due and payable in
accordance with the terms hereof; or
(iii) any representation or warranty made or deemed made
by the Company in the Securities Purchase Agreement, the Ancillary
Agreements or any written document furnished in connection with or
pursuant to such Agreements shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
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<PAGE> 66
(iv) the Company shall have failed to comply with the
covenant set forth in Section 5.26 of the Securities Purchase Agreement
within 180 days from the date hereof or the Company or any Subsidiary
shall default in the observance or performance of any other agreement
contained in this Guaranteed Senior Secured Primary Note, the Securities
Purchase Agreement or any of the Ancillary Agreements; or
(v) the Company or any Subsidiary (whether as primary
obligor or as a guarantor or other surety) shall (A) default in any
payment of principal of or interest on any Debt (after giving effect to
any applicable grace period); or (B) default in the observance or
performance of any other agreement or condition relating to any such
Debt or any Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to give the Holder thereof the right to cause such
Debt to become due prior to its stated maturity or such Guarantee
Obligation to become payable (whether by the terms of any document
evidencing such Debt or Guarantee Obligation, upon the election of any
Holder of Debt or beneficiary of any Guarantee Obligation or otherwise);
provided, that the aggregate amount of all obligations as to which such
payment Default shall occur and be continuing or other event causing or
permitting acceleration thereof exceeds $500,000; or
(vi) (A) the Company or any Subsidiary shall commence any
case, proceeding or other action (1) under any existing or future Law of
any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (2) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its Assets, or the Company
shall make a general assignment for the benefit of its creditors; or (B)
there shall be commenced against the Company any case, proceeding or
other action of a nature referred to in clause (A) above which (1)
results in the entry of an order for relief or any such adjudication or
appointment or (2) remains undismissed, undischarged or unbonded for a
period of sixty (60) days; or (C) there shall be commenced against the
Company any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its Assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days
from the entry thereof; or (D) the Company shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (A), (B) or (C)
above; or (E) the Company shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due; or
(vii) one or more final judgments or decrees shall be
entered against the Company or any Subsidiary involving in the aggregate
a liability (not paid or fully covered by insurance) of two hundred
fifty thousand dollars ($250,000) or more; or
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<PAGE> 67
(viii) any judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up
of the Company or such Subsidiary which requires the divestiture of
Assets representing more than 33 1/3%, or the divestiture of the stock
of a Subsidiary whose Assets represent more than 33 1/3%, of the
consolidated Assets of the Company and its Subsidiaries (determined in
accordance with GAAP) or which requires the divestiture of Assets, or
stock of a Subsidiary, which shall have contributed more than 33 1/3%
of the consolidated net income of the Company and its Subsidiaries
(determined in accordance with GAAP) during the three fiscal years then
most recently ended, and such order, judgment or decree remains unstayed
and in effect for more than 120 days; or
(ix) the Company or any Community Controlled Entity, in
its capacity as an employer under a Multiemployer Plan, makes a complete
or partial withdrawal from such Multiemployer Plan resulting in the
incurrence by such withdrawing employer of a withdrawal liability in an
amount exceeding $500,000; or
(x) the Company shall have not consummated on or prior to
August 25, 1999 a sale of its Common Stock, whether in a public offering
registered under the Securities Act or otherwise, which sale has an
aggregate offering price of not less than $40,000,000 and results in
aggregate proceeds to the Company (net of selling expenses and
underwriter's discount or selling agent's commission) of not less than
$35,000,000; or
(xi) (A) the Securities Purchase Agreement or any
Ancillary Agreement entered into on or after the date hereof shall cease
in any material respect, for any reason, to be in full force and effect
or the Company or any subsidiary shall assert that any of such
Agreements has ceased in any material respect to be in full force and
effect, (B) the Liens created by any Security Documents shall cease, in
any material respect, for any reason other than a release executed and
delivered by each Holder of the Notes, to be enforceable and of the same
effect and first priority purported to be created thereby (unless
otherwise contemplated thereby), or (C) any breach, default or event of
default occurs under any Securities Purchase Agreement or any Ancillary
Agreement and the same is not remedied within the applicable period of
grace (if any) provided in such Agreement; or
(xii) the Company shall fail to prepay the Guaranteed
Senior Secured Primary Note in accordance with the terms of Section 1(d)
hereof; or
(xiii) the Company shall fail to redeem the Guaranteed
Senior Secured Primary Note in accordance with the terms of Section 1(e)
hereof; or
(xiv) the Company shall fail to pay any amounts under
Section 1(f) hereof.
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<PAGE> 68
(b) Consequences of Events of Default.
(i) When any Event of Default has occurred and is
continuing, the interest rate on this Guaranteed Senior Secured Primary
Note shall increase to the Default Interest Rate. Any increase of the
interest rate resulting from the operation of this clause shall
terminate as of the close of business on the date on which no Events of
Default exist (subject to subsequent increases pursuant to this clause),
provided, however, that nothing herein shall prevent subsequent
increases of the interest rate to the Default Interest Rate upon any
subsequent Defaults or Events of Default by the Company.
(ii) If an Event of Default of the type described in
Section 6(a)(vi) has occurred, the aggregate principal amount of this
Guaranteed Senior Secured Primary Note (together with all accrued
interest thereon and all other amounts due and payable with respect
thereto) shall become immediately due and payable without any action on
the part of the Noteholder, and the Company shall immediately pay to the
Noteholder all amounts due and payable hereunder.
(iii) If any Event of Default has occurred (other than
under Section 6(a)(vi)), the Noteholder may declare this Guaranteed
Senior Secured Primary Note to be immediately due and payable and may
demand immediate payment of the Unpaid Principal Amount (together with
all accrued and unpaid interest and all other amounts due and payable
with respect thereto).
(iv) If any Event of Default or Default shall occur and be
continuing, the Holder of any Guaranteed Senior Secured Primary Note may
proceed to protect and enforce its rights under the Guaranteed Senior
Secured Primary Note and the Securities Purchase Agreement by exercising
such remedies as are available to such Holder in respect thereof, under
applicable Law, whether for specific performance of any covenant or
other agreement contained in this Guaranteed Senior Secured Primary Note
or otherwise; no remedy is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter
existing at Law or in equity or by statute or otherwise.
(v) If an Event of Default or Default shall occur and be
continuing, payments by the Company of amounts due to the Noteholder
shall be made in the following order or priority:
(A) all accrued unpaid past due interest on the
Notes issued pursuant to the Securities
Purchase Agreement;
(B) all accrued unpaid interest due on the Notes
issued pursuant to the Securities Purchase
Agreement and the Ancillary Agreements;
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<PAGE> 69
(C) all accrued unpaid and past due amounts
pursuant to the Securities Purchase
Agreement and the Ancillary Agreements;
(D) all other accrued unpaid amounts pursuant to
the Securities Purchase Agreement and the
Ancillary Agreements; and
(E) the principal amount due under the Notes.
(c) Rescission of Acceleration. At any time after any or all of
the Guaranteed Senior Secured Primary Notes shall have been declared immediately
due and payable pursuant to subsection (b), the Required Holders may, by notice
in writing to the Company, rescind and annul such declaration and its
consequences if (i) the Company shall have paid all overdue interest on the
Guaranteed Senior Secured Primary Notes, the principal of any Guaranteed Senior
Secured Primary Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue principal at the
rate specified in the Guaranteed Senior Secured Primary Notes, (ii) the Company
shall have paid any amounts which have become due solely by reason of such
declaration, (iii) all Events of Default and Defaults, other than non-payment of
amounts which have become due solely by reason of such declaration, shall have
been cured or waived and (iv) no judgment or decree shall have been entered for
the payment of any amounts due pursuant to the Guaranteed Senior Secured Primary
Notes. No such rescission or annulment shall extend to or affect any subsequent
Event of Default or Default or impair any right arising therefrom.
(d) Notice of Acceleration or Rescission. Whenever any Guaranteed
Senior Secured Primary Note shall be declared immediately due and payable
pursuant to subsection (b) or any such declaration shall be rescinded and
annulled pursuant to subsection (c), the Company shall forthwith give written
notice thereof to each Holder of Guaranteed Senior Secured Primary Notes at the
time outstanding.
SECTION 7. Waiver of Certain Rights. The Company hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of this Guaranteed Senior Secured Primary Note, and
expressly agrees that this Guaranteed Senior Secured Primary Note, or any
payment hereunder, may be extended from time to time and that the Holder hereof
may accept security for this Guaranteed Senior Secured Primary Note or release
security for this Guaranteed Senior Secured Primary Note, all without in any way
affecting the liability of the Company hereunder.
SECTION 8. Transfer of this Guaranteed Senior Secured Primary Note. Upon
surrender for registration of transfer of this Guaranteed Senior Secured Primary
Note at the principal office of the Company, the Company shall, execute and
deliver one or more new Guaranteed Senior Secured Primary Notes of like tenor
and of like aggregate principal amount, registered in the name of such
transferee or transferees and or the Noteholder, as the case may be. At the time
this Guaranteed Senior Secured Primary Note is surrendered for registration of
transfer, it shall be duly endorsed, or be accompanied by a written instrument
of transfer duly executed, by the Noteholder or such Holder's attorney duly
authorized in writing. Any
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<PAGE> 70
Guaranteed Senior Secured Primary Note or Guaranteed Senior Secured Primary
Notes issued upon transfer of this Guaranteed Senior Secured Primary Note shall
carry the rights to unpaid interest and the accrual of interest which were
carried by this Guaranteed Senior Secured Primary Note, so that neither gain nor
loss of interest shall result from any such transfer. In the event that the
Holder shall transfer less than the full amount of the Note, the Company shall
execute and deliver a replacement Note of like tenor for the balance of the
amount of the Note due to Holder. In addition, on receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note and, in the case of any such loss, theft or destruction of this Note,
and delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company in the case of such mutilation, on delivery and
cancellation of this Note, the Company at its expense, will execute and deliver
in lieu thereof, a replacement Note of like tenor.
SECTION 9. Assignment. The rights and obligations of the Company and the
Noteholder shall be binding upon and benefit the permitted successors, assigns
and transferees of the parties; provided that (i) in no event shall the Company
assign its rights hereunder without the prior written consent of the Noteholder,
(ii) the Noteholder may sell, assign, convey, or otherwise transfer this
Guaranteed Senior Secured Primary Note with the consent of the Company, which
consent will not be unreasonably withheld, (iii) notwithstanding Section 9(ii),
the Noteholder may at all times, without the consent of the Company, sell,
assign, convey or otherwise transfer this Guaranteed Senior Secured Primary Note
to an Affiliate of the Noteholder and (iv) the Noteholder may, at all times,
sell, convey or otherwise transfer this Guaranteed Senior Secured Promissory
Note to a Qualified Institutional Buyer or an Accredited Investor, without the
consent of the Company if, after the proposed transfer, the aggregate unpaid
principal amount of all Notes then held by the Noteholder and its Affiliates,
exceeds $10,000,000.
SECTION 10. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Guaranteed Senior Secured Primary Note may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Required Holders. No failure or delay on the
part of the Noteholder in exercising any power or right under this Guaranteed
Senior Secured Primary Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right.
SECTION 11. Definitions. For purposes of this Guaranteed Senior Secured
Primary Note, the following capitalized terms have the following meaning:
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"Affiliate" means, with reference to a specified person or
entity, any person or entity that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with the
specified person or entity. For purposes of this definition, "control"
(including, with correlative meaning, the terms "controlled by" and "under
common control
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with"), as used with respect to any person or entity, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership
of voting securities or by contract or otherwise.
"Business Day" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Capital Lease Obligation" has the meaning specified in Section
1.1 of the Securities Purchase Agreement.
"Change in Control" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Closing Date" is defined in Section 1(a).
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
"Common Stock" means the common stock of the Company.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"Company" is defined in the preamble.
"Debt" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Default" means any of the events specified in Section 6, whether
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Default Interest Rate" means a rate of interest equal to fifteen
percent (15%) per annum.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" means each of the events described in Section
6; provided, however, that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"GAAP" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
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<PAGE> 72
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Debt, leases, dividends or other obligations (the "primary
obligations") of any other third Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of any
such primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (x) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (y) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Company in good faith.
"Guaranteed Senior Secured Primary Note" means this 12%
Guaranteed Senior Secured Primary Promissory Note.
"Interest Payment Dates" mean, for any year, November 25,
February 25, May 25, and August 25, beginning with the Interest Payment Date of
November 25, 1998.
"Lien" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Multiemployer Plan" means a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means the cash proceeds of any sale or other
disposition of debt or equity securities of the Company (including cash proceeds
subsequently received (as and when received) in respect of non-cash
consideration initially received and all reserves referred to in clause (ii)
below, as and when such reserves are no longer required), minus (i) transaction
expenses (including broker's fees or commission, legal fees, accounting fees,
investment banking fees and other professional fees, transfer and similar taxes
and the Company's good faith estimate of income taxes payable and the actual
amount of taxes paid in connection with the receipt of such cash proceeds); and
(ii) amounts provided as a reserve, in accordance with
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<PAGE> 73
GAAP, including pursuant to any escrow arrangement, against any liabilities
under any indemnification obligations associated with such sale or disposition.
"Noteholder" means the Person defined as such in the first
paragraph hereof and its permitted successors, transferees and assigns.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Principal Amount" is defined in Section 1(a).
"Principal Payment Date" is defined in the preamble.
"Qualified Institutional Buyer" means shall have the meaning specified
in Rule 144A of the Securities Act.
"Required Holders" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Subsidiary" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Unpaid Principal Amount" means, at any time, the portion of the
Principal Amount outstanding at such time.
SECTION 12. Notices Relating to Patents and Trademarks. The Company
agrees that as long as any amount is owing to the Noteholder, it shall promptly
give notice to the Noteholder of any application or registration relating to any
Material Patent or trademark of the Company becoming abandoned or dedicated, or
of any adverse determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office or any court or tribunal in any
country regarding the Company's ownership of any material patent or trademark or
its right to register the same and keep and maintain same). Notice shall be
accompanied by a statement of a Responsible Officer setting forth details of the
occurrence and stating what action the Company proposes to take with respect
thereto.
SECTION 13. Cancellation. After all principal, accrued interest thereon
and all other amounts due hereunder at any time owed on this Guaranteed Senior
Secured Primary Note has been paid in full, this Guaranteed Senior Secured
Primary Note shall be surrendered to the Company for cancellation and shall not
be reissued.
SECTION 14. Payment of Expenses and Taxes. The Company hereby agrees (a)
to pay or reimburse the Noteholder for all its reasonable and documented costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Guaranteed Senior Secured Primary Note after the occurrence of
any Event of Default, including, without
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<PAGE> 74
limitation, the reasonable and documented fees and disbursements of counsel to
the Noteholder and (b) to pay, indemnify, and hold the Noteholder harmless from,
any and all recording and filing fees and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise and other taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Guaranteed Senior Secured
Primary Note.
SECTION 15. Payments. All payments to be made to the Noteholder shall be
made in the lawful money of the United States of America in immediately
available funds.
SECTION 16. Place of Payment. Payments of principal and interest shall
be delivered to the Noteholder by wire transfer of immediately available funds
to the following account: State Street Bank & Trust, Boston/SPEC WJ09, ABA
#011-000-028, For further credit to: Northstar High Yield Fund, Regarding:
Intracel 12% Guaranteed Senior Secured Primary Promissory Note due August 25,
2003, Taxpayer ID# 04-3042919, or to such other Noteholder at such other address
or to the attention of such other person or to such other account as specified
by prior written notice to the Company.
SECTION 17. Severability. Whenever possible, each provision of this
Guaranteed Senior Secured Primary Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Guaranteed Senior Secured Primary Note is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Guaranteed Senior Secured Primary Note.
SECTION 18. Descriptive Headings; Interpretation. The descriptive
headings of this Guaranteed Senior Secured Primary Note are inserted for
convenience only and do not constitute a substantive part of this Guaranteed
Senior Secured Primary Note. The use of the word "including" in this Guaranteed
Senior Secured Primary Note shall be by way of example rather than by
limitation.
SECTION 19. Governing Law; Submission to Jurisdiction. This Note shall
be construed in accordance with, and governed by, the internal laws of the State
of New York as permitted by Section 5-401 of the New York General Obligations
Law (or any similar successor provision) without giving effect to any choice of
law rule that would cause the application of the laws of any jurisdiction other
than the State of New York. The Company hereby irrevocably and unconditionally:
(i) submits itself and its properties in any legal action
or proceeding relating to this Note, the Securities Purchase Agreement
and the Ancillary Agreements to which it is a party, or for recognition
and enforcement of any judgment in respect thereof, to the general
jurisdiction of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts of any thereof;
16
<PAGE> 75
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such
court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to it at its address set forth in or delivered pursuant to
Section 21 or at such other address of which the Holders shall have been
notified pursuant thereto;
(iv) waives, to the maximum extent not prohibited by Law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section 19 any punitive or exemplary
damages and any damages which are not proximately caused by or the
reasonably foreseeable result of the breach which is the subject of such
action or proceeding.
The Company hereby acknowledges that:
(v) it has been advised by counsel in the negotiation,
execution and delivery of this Note, the Securities Purchase Agreement
and the Ancillary Agreements;
(vi) the Holders do not have any fiduciary relationship
with or duty to the Company arising out of or in connection with this
Note, the Securities Purchase Agreement, or the Ancillary Agreements;
and
(vii) no joint venture or partnership exists between the
Holders, on the one hand, and the Company, on the other hand and the
relationship of the Company and the Holders is that of inter alia,
debtor and creditor.
THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS NOTE, THE
SECURITIES PURCHASE AGREEMENT, THE ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM
THEREIN.
THIS NOTE, THE SECURITIES PURCHASE AGREEMENT AND THE ANCILLARY
AGREEMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
SECTION 20. Other Jurisdictions. The Company agrees that the Noteholder
shall have the right to proceed against the Company in a court in any location
to enable such Holder to enforce a judgment or other court order entered in
favor of such holder. The Company waives
17
<PAGE> 76
any objection that it may have to the location of the court in which the
Noteholder has commenced a proceeding described in this Section 20.
SECTION 21. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Guaranteed Senior
Secured Primary Note shall be in writing and shall be deemed to have been duly
given if (a) delivered personally, (b) mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or (c) sent by
next-day or overnight courier:
If to the Noteholder:
Northstar High Yield Fund
300 First Stamford Place
Stamford, Connecticut 06902
Attn: Michael Graves
Fax Number (203) 862-8601
Confirm Number (203) 863-6224
with a copy, which will
not constitute notice to
the Noteholder, to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attn: Karen Wiedemann, Esq.
Fax Number (212) 841-5725
Confirm Number (212) 841-5781
18
<PAGE> 77
If to the Company:
Intracel Corporation
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
Attn: Simon R. McKenzie
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
with a copy, which will
not constitute notice to
the Company, to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett, Esq.
Fax Number: (212) 468-7900
Confirm Number.: (212) 468-8240
or at such other address as may be specified in writing to the other parties in
accordance with this Section 21.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been delivered if by personal delivery or by courier on the date
of such delivery and if by certified or registered mail, on the third (3rd)
Business Day after the mailing thereof.
SECTION 22. Business Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is not a Business Day,
the payment shall be due and payable on, and the time period shall automatically
be extended to, the next Business Day immediately following such day, and
interest shall continue to accrue at the required rate hereunder until any such
payment is made.
SECTION 23. Usury Laws. The Company and each Noteholder intend to comply
with applicable usury Laws from time to time in effect. At no time shall the
interest rate payable on the Notes exceed the maximum rate of interest, if any,
that at any time or from time to time may be contracted for, taken, charged or
received on the Notes or on any amount which may be owing to the Holders of the
Notes under the Laws applicable to such Holders of Notes and this transaction.
In the event that the interest rate payable on the Notes shall exceed the
maximum rate of interest allowable under applicable usury Laws, then the rate of
interest shall automatically be reduced to the maximum rate permitted by Law.
* * * * *
19
<PAGE> 78
IN WITNESS WHEREOF, the Company has executed and delivered this
Guaranteed Senior Secured Primary Note on August 25, 1998.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
-------------------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
20
<PAGE> 79
Exhibit A
NOTICE OF REDEMPTION
Name of Holder
Address of Holder
Gentlemen:
Pursuant to Section 1(e) of the 12% Guaranteed Senior Secured Primary
Notes (the "Guaranteed Senior Secured Primary Notes"), Intracel Corporation (the
"Company") hereby notifies the Noteholder that the Company has received on
_____, 199__ (the "Funding Date"), aggregate Net Cash Proceeds of $__________
from the sale of its debt or equity securities and, in accordance with the
mandatory redemption provisions of Section 1(e), the Company shall apply an
aggregate of (i) $_________ to pay accrued unpaid past due interest on all
outstanding Guaranteed Senior Secured Primary Notes and accrued unpaid interest
on the principal amount of this Note actually redeemed pursuant to Section 1(e),
all through the Redemption Date, as defined below, and the balance of (ii)
$________ (the "Available Redemption Amount") is hereby offered to reduce the
outstanding principal amount of the Guaranteed Senior Secured Primary Notes in
accordance with the elections made in Section 2 below, or subject to the
provisions of Section 3 below. All payments of principal and interest pursuant
to this redemption shall be made by the Company on the Redemption Date by wire
transfer, immediately available funds.
1. Definitions. All capitalized terms used but not defined herein shall
have the meanings set forth in the Guaranteed Senior Secured Primary Notes. For
purposes of this notice the following terms shall have the following meanings:
"Redemption Date" shall mean ________, 199_, which shall not be later
than two (2) Business Days after the date set forth in Section 2.
"Pro Rata Amount" as to any Noteholder shall mean the product of (i) a
fraction, the numerator of which is the unpaid principal amount of the
Guaranteed Senior Secured Primary Note held by such Noteholder on the date
hereof and the denominator of which is the aggregate unpaid principal amount of
all Guaranteed Senior Secured Primary Notes issued pursuant to the Securities
Purchase Agreement and outstanding on the date hereof, multiplied by (ii) the
Available Redemption Amount.
"Pro Rata Unclaimed Amount" means the sum of (I) the Pro Rata Amount due
to the Noteholder less the amount actually elected by the Noteholder for
redemption under Redemption
21
<PAGE> 80
Option B; and (ii) the Pro Rata Amount due to the Noteholder which elects
Redemption Option C.
"Proportional Amount" as to any Noteholder shall mean the Pro Rata
Amount plus the Unsubscribed Amount.
"Unsubscribed Amount" as to any Noteholder shall mean the product of (i)
a fraction, the numerator of which is the unpaid principal amount of the
Guaranteed Senior Secured Primary Note held by such Noteholder on the date
hereof and the denominator of which is the aggregate unpaid principal amount of
all Guaranteed Senior Secured Primary Notes on the date hereof held by
Noteholders who have elected Redemption Option (D) set forth in Section 2 below,
multiplied by (ii) an amount equal to the aggregate unpaid principal amount of
the Guaranteed Senior Secured Primary Notes held by Noteholders who have elected
Redemption Option (B) or (C) set forth in Section 2 below minus the aggregate
redemption amount elected to be received by the Noteholders which selected
Redemption Option B.
2. Election of Redemption Option. (a) Please indicate your selection of
a redemption option by checking the appropriate box set forth below and signing
and returning this Notice of Redemption to the Company no later than 5:00 p.m.
on ______, 199__, which date is five (5) Business Days after delivery of this
Notice to the Noteholder. If the Company has not received an executed copy of
this Notice by such time, the Noteholder shall be deemed to have elected
Redemption Option A:
[ ] Redemption Option A. The Noteholder hereby elects to receive its Pro
Rata Amount, which is equal to $_____________.
[ ] Redemption Option B. The Noteholder hereby elects to receive
$____________, which amount is less than its Pro
Rata Amount.
[ ] Redemption Option C. The Noteholder hereby elects to receive no
redemption of principal at this time.
[ ] Redemption Option D. The Noteholder hereby elects to receive its
Proportional Amount.
(b) Notwithstanding the provisions of Section 2(a) above, each
Noteholder hereby acknowledges and agrees that in the event the aggregate amount
to be prepaid to the Noteholders as a result of the elections under Section 2 is
less than the Available Redemption Amount, each holder shall receive an amount
equal to its Pro Rata Amount notwithstanding such Noteholders election pursuant
to Section 2.
3. Notwithstanding the provisions of Section 2 above, the Company shall
not be required to redeem any Pro Rata Unclaimed Amount of Net Cash Proceeds.
4. This Notice of Redemption may not be amended or rescinded by the
Company without the prior written consent of the Noteholders. Upon receipt of an
executed Notice of
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<PAGE> 81
Redemption from a Noteholder, the Noteholder's election of a
redemption option may not be amended or rescinded without the prior written
consent of the Company and the other holders of Guaranteed Senior Secured
Primary Notes.
Please acknowledge your election of a redemption option by checking the
appropriate box in Section 2, signing below and returning this Notice of
Redemption to the Company on or before the time specified in Section 2 above.
Intracel Corporation
By:________________________________
Name of Noteholder
By:_____________________
23
<PAGE> 82
Exhibit B
NOTICE OF EBITDA REDEMPTION
Intracel Corporation
2005 NW Sammamish Road
Suite 107
Issaquah, Washington 98027
Gentlemen:
Pursuant to Section 5.12 of the Securities Purchase Agreement, Intracel
Corporation (the "Company") has advised ____________________ (the "Noteholder"),
that it has failed to comply with the EBITDA Ratio set forth in Section 1(f) of
the 12% Guaranteed Senior Secured Primary Notes (the "Guaranteed Senior Secured
Primary Notes"), for the EBITDA Measurement Period ending on
____________________, or the Company has failed to notify the Noteholder of its
EBITDA Ratio for such EBITDA Measurement Period.
Accordingly, pursuant to Section 1(f) of the Guaranteed Senior Secured
Primary Notes, the Noteholder hereby demands that the Company redeem the Pro
Rata Redemption Amount of the Guaranteed Senior Secured Primary Note at a price
equal to the Pro Rata Redemption Price within five (5) Business Days after this
Notice of EBITDA Redemption is delivered to the Company.
Dated: __________, 199__
[Noteholder]
By:___________________________________________
Name:
Title:
24
<PAGE> 83
EXHIBIT A-2
GUARANTEED SENIOR SECURED ESCROW NOTE
<PAGE> 84
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD,
OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER SUCH ACT OR IN
COMPLIANCE WITH ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS.
INTRACEL CORPORATION
12% GUARANTEED SENIOR SECURED ESCROW PROMISSORY NOTE
August 25, 1998 $658,537
FOR VALUE RECEIVED, INTRACEL CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to the order of NORTHSTAR HIGH YIELD FUND,
its successors or assigns (the "Noteholder"), the Principal Amount (as defined
below) payable on August 25, 2003 (the "Principal Payment Date") with interest
payable pursuant to Section 2. Capitalized terms used in this Note have the
meanings provided in Section 11. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Securities Purchase Agreement
dated the date hereof by and among the Company and the other parties thereto
(including this Noteholder) (the "Securities Purchase Agreement").
SECTION 1. Payments of Principal.
(a) Prior Loans. The Company issued to the Noteholder or
Affiliates of the Noteholder certain Senior Secured Promissory Notes dated
December 28, 1995 and certain Promissory Notes dated April 1, 1998, as amended,
in the aggregate principal amount of $16,800,000, and, in connection therewith,
granted certain other rights to the Noteholder to acquire shares of the
Company's Capital Stock (such Notes and rights collectively referred to herein
as the "Existing Securities"). The Noteholder or its Affiliates have agreed to
contribute the Existing Securities and pay additional consideration as set forth
in the Securities Purchase Agreement to purchase $658,537 of these Guaranteed
Senior Secured Escrow Promissory Notes (the "Guaranteed Senior Secured Escrow
Notes") on the terms and conditions set forth herein.
<PAGE> 85
(b) Principal Amount. On August 25, 1998 (the "Closing Date"),
the Noteholder purchased this Note for Six Hundred Fifty-Eight Thousand Five
Hundred Thirty Seven Dollars ($658,537) (the "Principal Amount").
(c) Principal Payment Date. Subject to earlier redemption or
prepayment as provided herein, the Principal Amount of this Guaranteed Senior
Secured Escrow Note and all other theretofore unpaid amounts due hereunder shall
be due and payable on the Principal Payment Date.
(d) Prepayment. (i) The Noteholder, at its option, may require
the Company to prepay this Guaranteed Senior Secured Escrow Note in whole or in
part, not later than five (5) Business Days after notice of prepayment is
delivered to the Company, pursuant to Section 1(d)(ii) hereof, at a price equal
to 101% of the principal amount so prepaid, plus accrued interest to the date of
prepayment, if:
(A) there is a Change of Control of the Company,
or
(B) (x) Simon R. McKenzie ("McKenzie") shall
cease at any time for whatever reason to be
the principal executive officer of the
Company in charge of the Company's
management and policies for a period of
thirty (30) days or more and (y) the
Required Holders, in the reasonable exercise
of their discretion, shall not have approved
the successor to McKenzie (the "McKenzie
Successor") within 180 days after the
cessation by McKenzie of his full time
service to the Company; and
(ii) the notice of prepayment delivered by the Noteholder
to the Company upon occurrence of the event(s) described in this Section
1(d) shall specify the event requiring such prepayment and the amount of
such prepayment.
(e) Mandatory Redemption in the Event of the Sale of Assets, Debt
or Equity Securities. Commencing on or after the date of this Guaranteed Senior
Secured Escrow Note, if at any time or from time to time, the Company or any of
its Subsidiaries receives cash proceeds ("Net Cash Proceeds") from the sale of
its debt or equity securities or from Asset Sale Excess Proceeds (as defined in
the Securities Purchase Agreement) for sales of property under Section 5.18 (c)
of the Securities Purchase Agreement, the Company shall, or all of the Net Cash
Proceeds or Asset Sale Excess Proceeds, as applicable, from such sale shall be
utilized to (i) pay all accrued unpaid past due interest on all Notes and all
accrued unpaid interest on the principal amount of the Notes actually redeemed
pursuant to this Section 1(e), all through the date of redemption; and (ii)
redeem this Note in accordance with the terms set forth in the notice of
redemption attached hereto as Exhibit A (the "Notice of Redemption"). On the
date of receipt of Net Cash Proceeds from the sale of debt or equity securities
or the receipt of Asset Sale Excess Proceeds, as applicable (the "Funding
Date"), an amount equal to the lesser of all Net Cash Proceeds or Asset Sale
Excess Proceeds, as applicable, or $6,000,000 shall be held in constructive
trust by the Company, as trustee for the benefit of Holders who shall be
entitled to
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<PAGE> 86
disbursement of such funds in accordance with this Section 1(e). On the Funding
date, the Company shall forward to each Noteholder by facsimile transmission and
by overnight courier, a Notice of Redemption. Each Noteholder shall select one
of the four redemption options set forth on such notice and return by facsimile
or overnight courier the executed Notice of Redemption to the Company by the
close of business on the fifth Business Day following the Funding Date. If an
executed Notice of Redemption has not been delivered to the Company by the close
of business on such date, the Noteholder shall be deemed to have elected
Redemption Option A in Section 2 of the Notice of Redemption. The Company shall
prepay the Guaranteed Senior Secured Escrow Notes, in accordance with the
provisions of the Notice of Redemption, on the seventh Business Day following
the Funding Date. Any Notice of Redemption forwarded pursuant to this provision
shall be irrevocable. Notwithstanding anything in this Guaranteed Senior Secured
Escrow Note to the contrary (i) the Company shall have no obligation to make any
payments under this Section 1(e) which result from the sale of debt or equity
securities pursuant to the exercise (or series of related exercises) of employee
stock options not exceeding $250,000; (ii) the Company shall have no obligation
to make payments pursuant to this Section 1(e) in excess of $6,000,000 in the
aggregate, and (iii) the Company shall have no obligation to make payments under
this Section 1(e) which result from proceeds received from Transamerica Business
Credit Corporation (as a result of a financing guaranteed by a bond posted by
the State of Washington Economic Development Council), provided, and to the
extent that, such proceeds are utilized to purchase equipment for the Company or
its Subsidiaries.
(f) EBITDA Required Redemptions
(i) For purposes of this provision, the terms set forth
below shall have the following meanings:
(A) "EBITDA Measurement Date" shall mean each of
March 31, 2000, June 30, 2000 and September
30, 2000.
(B) "EBITDA Ratio" shall mean the ratio of the
Company's EBITDA to the Company's Interest
Expense for each of the quarters ended March
31, 2000, June 30, 2000 and September 30,
2000 as follows:
<TABLE>
<CAPTION>
Quarter Ended EBITDA Ratio
------------- ------------
<S> <C>
March 31, 2000 3:1
June 30, 2000 4:1
September 30, 2000 5:1
</TABLE>
(C) "EBITDA" means with reference to any
Measurement Period, the consolidated
operating income of the Company and its
Subsidiaries, plus the amount of all
depreciation and amortization deducted in
determining the amount of such operating
income, all as determined on a consolidated
basis in accordance with GAAP applied on a
basis consistent
3
<PAGE> 87
with the Audited Financial Statements of the
Company delivered pursuant to Section 6.16
of the Securities Purchase Agreement.
(D) "Interest Expense" means, for any
Measurement Period, the sum, in accordance
with GAAP, of (i) all interest on Debt that
is paid or accrued as an expense during such
period (including without limitations,
imputed interest under Capitalized Lease
Obligations (as defined in the Securities
Purchase Agreement), plus (ii) all amounts
---- paid, accrued or amortized as an
expense during such period in respect of
interest rate protection agreements minus,
(iii) all amounts received or accrued as
income during such period in respect of
interest rate protection agreements.
(E) "Measurement Period" means any quarterly
period ending on an EBITDA Measurement Date.
(F) "Notice of EBITDA Redemption" means the
Noteholder's demand for payment by the
Company at the Pro Rata Redemption Price of
its Pro Rata Redemption Amount as set forth
in Exhibit B attached hereto.
(G) "Pro Rata Redemption Amount" means the
product of (i) a fraction, the numerator of
which is the Principal Amount of this
Guaranteed Senior Secured Escrow Note and
the denominator is the aggregate Principal
Amount of all Notes initially Outstanding
pursuant to the Securities Purchase
Agreement, multiplied by (ii) the Quarterly
Redemption Amount
(H) "Pro Rata Redemption Price" means the Pro
Rata Redemption Amount, plus accrued unpaid
interest thereon to the date of redemption.
(I) "Quarterly Redemption Amount" means
$2,500,000 for each of the quarters ended
March 30, 2000, June 30, 2000 and September
30, 2000.
(J) "Report Date" shall mean thirty (30) days
after an EBITDA Measurement Date.
(K) "Total Redemption Amount" means $7,500,000.
(ii) Unless the Company is in compliance with the EBITDA
Ratio on each EBITDA Measurement Date, the Noteholder, at its option,
may demand, by sending
4
<PAGE> 88
a Notice of EBITDA Redemption, that the Company redeem the Pro Rata
Redemption Amount of the Guaranteed Senior Secured Escrow Note at the
Pro Rata Redemption Price for each EBITDA Measurement Date on which the
Company fails to comply with the applicable EBITDA Ratio. The
Noteholder's right to redemption under this Section 1(f) is subject to
the following provisions:
(A) The Company shall deliver a certificate to
the Noteholder not later than each Report
Date (the "EBITDA Ratio Certificate"), which
sets forth, with reference to the applicable
EBITDA Measurement Date: (i) EBITDA and
Interest Expense; (ii) the EBITDA Ratio; and
(iii) a statement to the effect that the
Company has either satisfied the EBITDA
Ratio or has failed to satisfy the EBITDA
Ratio for such EBITDA Measurement Date. In
the event that the Company has failed to
meet or exceed the EBITDA Ratio applicable
to such Measurement Date (or, the Company
fails to deliver the EBITDA Ratio
Certificate to the Noteholder on or prior to
the Report Date), the Noteholder shall have
the right to demand payment to it of the Pro
Rata Redemption Amount at a price equal to
the Pro Rata Redemption Price within five
(5) Business Days after a Notice of EBITDA
Redemption is delivered by the Noteholder to
the Company.
(B) Notwithstanding the provisions of
1(f)(ii)(A) above, in the event the Company
fails to comply with the EBITDA Ratio
applicable to an EBITDA Measurement Date,
the Noteholder shall be deemed to have
waived its right to redemption arising from
such failure to comply (the "Waiver of
Payment") if both of the following
conditions are met: (i) a subsequent
quarterly certificate delivered to the
Noteholder pursuant to this Section 1(f) or
Section 5.12 of the Securities Purchase
Agreement certifies that the EBITDA Ratio
(or the EBITDA to Interest Ratio) certified
thereby meets or exceeds the EBITDA Ratio
applicable to the EBITDA Measurement Date
giving rise to the Noteholder's right of
redemption hereunder; and (y) the Noteholder
has not delivered its Notice of EBITDA
Redemption to the Company respecting such
EBITDA Measurement Date prior to receiving
such subsequent certificate.
(iii) Any Waiver of Payment with respect to an EBITDA
Measurement Date shall not constitute or be construed as a Waiver of
Payment with respect to any other EBITDA Measurement Date.
5
<PAGE> 89
(iv) Subject to the provisions of Section 1(f)(ii)(B)
above, the Noteholder's rights to demand and receive the Pro Rata
Redemption Amount at the Pro Rata Redemption Price under this Section
1(f) are cumulative.
(v) The Pro Rata Redemption Price shall be paid by wire
transfer of immediately available funds.
(vi) Notwithstanding anything herein to the contrary, the
Company shall not be required to redeem more than the Total Redemption
Amount plus unpaid and accrued interest to the dates of redemption,
pursuant to this Section 1(f).
(g) Optional Prepayment. This Guaranteed Senior Secured Escrow
Note may be prepaid utilizing funds from any source, at the option of the
Company at any time, in part or in full together with accrued interest through
the date of prepayment on the principal amount prepaid, provided that the
Company shall give notice to the Noteholder of its intention to prepay (the
"Notice to Prepay") the Guaranteed Senior Secured Escrow Note seven (7) calendar
days prior to the date of prepayment (the "Prepayment Date") and the Noteholder
shall, within three (3) calendar days prior to the Prepayment Date, mail a
notice of its election to the Company to accept or decline to accept such
prepayment. In the event that the Noteholder shall decline to accept such
prepayment or shall elect to accept less than the full amount to be prepaid by
the Company (the "Unsubscribed Amount"), the Unsubscribed Amount shall be
prepaid pro rata to the remaining holders of the Guaranteed Senior Secured
Escrow Notes who have elected to be prepaid. In the event that all holders of
outstanding Guaranteed Senior Secured Escrow Notes shall decline to accept the
amount to be prepaid by the Company, the Unsubscribed Amount shall be prepaid to
all holders of outstanding Guaranteed Senior Secured Escrow Notes pro rata.
SECTION 2. Payment of Interest.
(a) Interest Rate. Except as otherwise expressly provided in
Section 6(b), interest shall accrue from the Closing Date at the rate of twelve
percent (12%) per annum on the Unpaid Principal Amount, provided, however, that,
in the event the Company does not comply with the covenant set forth in Section
5.26 of the Securities Purchase Agreement within the sixty (60) day period set
forth therein, interest shall accrue from the expiration of the sixty (60) day
period until such covenant has been satisfied, at the Default Interest Rate. All
computations of interest shall be made on the basis of a year of three hundred
and sixty (360) days for the actual number of days including the first day but
excluding the last day for which any interest period is calculated.
(b) Interest Payment Date. All accrued and unpaid interest shall
be payable quarterly in arrears on each Interest Payment Date beginning on
November 25, 1998.
(c) Interest Escrow Security Agreement for Certain Interest
Payments. To secure the Company's obligations to make certain interest payments
pursuant to this Guaranteed Senior Secured Escrow Note, the Company has executed
an interest escrow security agreement as of the date hereof (the "Interest
Escrow Security Agreement"), pursuant to which the Company has agreed to deposit
funds into and restrict withdrawals from an account for the
6
<PAGE> 90
benefit of the Noteholder and to make additional contributions as described in
the Interest Escrow Security Agreement. The Company will make interest payments,
and in certain circumstances principal and other payments, in accordance
therewith.
SECTION 3. Covenants.
The Company hereby agrees that, so long as any amount is owing to the
Noteholder, it shall and shall cause its Subsidiaries to perform the covenants
set forth in Article V of the Securities Purchase Agreement.
SECTION 4. Guaranties.
The performance of the Company's obligations under the Securities
Purchase Agreement, this Guaranteed Senior Secured Escrow Note, all Notes issued
pursuant to the Securities Purchase Agreement and the Ancillary Agreements (the
"Obligations") has been unconditionally guaranteed by the Company's Subsidiaries
(the "Guaranties") as set forth in the Guaranty Agreements executed as of the
date hereof.
SECTION 5. Security.
This Guaranteed Senior Secured Escrow Note and all other Notes issued
pursuant to the Securities Purchase Agreement represent Senior Secured Debt of
the Company. The performance of the Company's Obligations and the Guaranties
relating to the Obligations are secured by certain Collateral as set forth in
the Security Documents.
SECTION 6. Events of Default.
(a) Definition. For purposes of this Guaranteed Senior Secured
Escrow Note, an Event of Default shall have occurred and shall be deemed to have
occurred if:
(i) the Company shall fail to pay any principal when due
in accordance with the terms hereof; or
(ii) the Company shall fail to pay any interest or any
other amount payable hereunder or under the Securities Purchase
Agreement or any of the Ancillary Agreements when due in accordance with
their respective terms by a date which is five calendar days after such
interest or other amount payable hereunder is due and payable in
accordance with the terms hereof; or
(iii) any representation or warranty made or deemed made
by the Company in the Securities Purchase Agreement, the Ancillary
Agreements or any written document furnished in connection with or
pursuant to such Agreements shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(iv) the Company shall have failed to comply with the
covenant set forth in Section 5.26 of the Securities Purchase Agreement
within 180 days from the date hereof or the Company or any Subsidiary
shall default in the observance or performance
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of any other agreement contained in this Guaranteed Senior Secured
Escrow Note, the Securities Purchase Agreement or any of the Ancillary
Agreements; or
(v) the Company or any Subsidiary (whether as primary
obligor or as a guarantor or other surety) shall (A) default in any
payment of principal of or interest on any Debt (after giving effect to
any applicable grace period); or (B) default in the observance or
performance of any other agreement or condition relating to any such
Debt or any Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to give the Holder thereof the right to cause such
Debt to become due prior to its stated maturity or such Guarantee
Obligation to become payable (whether by the terms of any document
evidencing such Debt or Guarantee Obligation, upon the election of any
Holder of Debt or beneficiary of any Guarantee Obligation or otherwise);
provided, that the aggregate amount of all obligations as to which such
payment Default shall occur and be continuing or other event causing or
permitting acceleration thereof exceeds $500,000; or
(vi) (A) the Company or any Subsidiary shall commence any
case, proceeding or other action (1) under any existing or future Law of
any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (2) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its Assets, or the Company
shall make a general assignment for the benefit of its creditors; or (B)
there shall be commenced against the Company any case, proceeding or
other action of a nature referred to in clause (A) above which (1)
results in the entry of an order for relief or any such adjudication or
appointment or (2) remains undismissed, undischarged or unbonded for a
period of sixty (60) days; or (C) there shall be commenced against the
Company any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its Assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days
from the entry thereof; or (D) the Company shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (A), (B) or (C)
above; or (E) the Company shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due; or
(vii) one or more final judgments or decrees shall be
entered against the Company or any Subsidiary involving in the aggregate
a liability (not paid or fully covered by insurance) of two hundred
fifty thousand dollars ($250,000) or more; or
(viii) any judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up
of the Company or such Subsidiary
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which requires the divestiture of Assets representing more than 33 1/3%,
or the divestiture of the stock of a Subsidiary whose Assets represent
more than 33 1/3%, of the consolidated Assets of the Company and its
Subsidiaries (determined in accordance with GAAP) or which requires the
divestiture of Assets, or stock of a Subsidiary, which shall have
contributed more than 33 1/3% of the consolidated net income of the
Company and its Subsidiaries (determined in accordance with GAAP) during
the three fiscal years then most recently ended, and such order,
judgment or decree remains unstayed and in effect for more than 120
days; or
(ix) the Company or any Community Controlled Entity, in
its capacity as an employer under a Multiemployer Plan, makes a complete
or partial withdrawal from such Multiemployer Plan resulting in the
incurrence by such withdrawing employer of a withdrawal liability in an
amount exceeding $500,000; or
(x) the Company shall have not consummated on or prior to
August 25, 1999 a sale of its Common Stock, whether in a public offering
registered under the Securities Act or otherwise, which sale has an
aggregate offering price of not less than $40,000,000 and results in
aggregate proceeds to the Company (net of selling expenses and
underwriter's discount or selling agent's commission) of not less than
$35,000,000; or
(xi) (A) the Securities Purchase Agreement or any
Ancillary Agreement entered into on or after the date hereof shall cease
in any material respect, for any reason, to be in full force and effect
or the Company or any subsidiary shall assert that any of such
Agreements has ceased in any material respect to be in full force and
effect, (B) the Liens created by any Security Documents shall cease, in
any material respect, for any reason other than a release executed and
delivered by each Holder of the Notes, to be enforceable and of the same
effect and first priority purported to be created thereby (unless
otherwise contemplated thereby), or (C) any breach, default or event of
default occurs under any Securities Purchase Agreement or any Ancillary
Agreement and the same is not remedied within the applicable period of
grace (if any) provided in such Agreement; or
(xii) the Company shall fail to prepay the Guaranteed
Senior Secured Escrow Note in accordance with the terms of Section 1(d)
hereof; or
(xiii) the Company shall fail to redeem the Guaranteed
Senior Secured Escrow Note in accordance with the terms of Section 1(e)
hereof; or
(xiv) the Company shall fail to pay any amounts under
Section 1(f) hereof.
(b) Consequences of Events of Default.
(i) When any Event of Default has occurred and is
continuing, the interest rate on this Guaranteed Senior Secured Escrow
Note shall increase to the Default
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Interest Rate. Any increase of the interest rate resulting from the
operation of this clause shall terminate as of the close of business on
the date on which no Events of Default exist (subject to subsequent
increases pursuant to this clause), provided, however, that nothing
herein shall prevent subsequent increases of the interest rate to the
Default Interest Rate upon any subsequent Defaults or Events of Default
by the Company.
(ii) If an Event of Default of the type described in
Section 6(a)(vi) has occurred, the aggregate principal amount of this
Guaranteed Senior Secured Escrow Note (together with all accrued
interest thereon and all other amounts due and payable with respect
thereto) shall become immediately due and payable without any action on
the part of the Noteholder, and the Company shall immediately pay to the
Noteholder all amounts due and payable hereunder.
(iii) If any Event of Default has occurred (other than
under Section 6(a)(vi)), the Noteholder may declare this Guaranteed
Senior Secured Escrow Note to be immediately due and payable and may
demand immediate payment of the Unpaid Principal Amount (together with
all accrued and unpaid interest and all other amounts due and payable
with respect thereto).
(iv) If any Event of Default or Default shall occur and be
continuing, the Holder of any Guaranteed Senior Secured Escrow Note may
proceed to protect and enforce its rights under the Guaranteed Senior
Secured Escrow Note and the Securities Purchase Agreement by exercising
such remedies as are available to such Holder in respect thereof, under
applicable Law, whether for specific performance of any covenant or
other agreement contained in this Guaranteed Senior Secured Escrow Note
or otherwise; no remedy is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter
existing at Law or in equity or by statute or otherwise.
(v) If an Event of Default or Default shall occur and be
continuing, payments by the Company of amounts due to the Noteholder
shall be made in the following order or priority:
(A) all accrued unpaid past due interest on the
Notes issued pursuant to the Securities
Purchase Agreement;
(B) all accrued unpaid interest due on the Notes
issued pursuant to the Securities Purchase
Agreement and the Ancillary Agreements;
(C) all accrued unpaid and past due amounts
pursuant to the Securities Purchase
Agreement and the Ancillary
Agreements;
(D) all other accrued unpaid amounts pursuant to
the Securities Purchase Agreement and the
Ancillary Agreements; and
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(E) the principal amount due under the Notes.
(c) Rescission of Acceleration. At any time after any or all of
the Guaranteed Senior Secured Escrow Notes shall have been declared immediately
due and payable pursuant to subsection (b), the Required Holders may, by notice
in writing to the Company, rescind and annul such declaration and its
consequences if (i) the Company shall have paid all overdue interest on the
Guaranteed Senior Secured Escrow Notes, the principal of any Guaranteed Senior
Secured Escrow Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue principal at the
rate specified in the Guaranteed Senior Secured Escrow Notes, (ii) the Company
shall have paid any amounts which have become due solely by reason of such
declaration, (iii) all Events of Default and Defaults, other than non-payment of
amounts which have become due solely by reason of such declaration, shall have
been cured or waived and (iv) no judgment or decree shall have been entered for
the payment of any amounts due pursuant to the Guaranteed Senior Secured Escrow
Notes. No such rescission or annulment shall extend to or affect any subsequent
Event of Default or Default or impair any right arising therefrom.
(d) Notice of Acceleration or Rescission. Whenever any Guaranteed
Senior Secured Escrow Note shall be declared immediately due and payable
pursuant to subsection (b) or any such declaration shall be rescinded and
annulled pursuant to subsection (c), the Company shall forthwith give written
notice thereof to each Holder of Guaranteed Senior Secured Escrow Notes at the
time outstanding.
SECTION 7. Waiver of Certain Rights. The Company hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of this Guaranteed Senior Secured Escrow Note, and
expressly agrees that this Guaranteed Senior Secured Escrow Note, or any payment
hereunder, may be extended from time to time and that the Holder hereof may
accept security for this Guaranteed Senior Secured Escrow Note or release
security for this Guaranteed Senior Secured Escrow Note, all without in any way
affecting the liability of the Company hereunder.
SECTION 8. Transfer of this Guaranteed Senior Secured Escrow Note. Upon
surrender for registration of transfer of this Guaranteed Senior Secured Escrow
Note at the principal office of the Company, the Company shall execute and
deliver one or more new Guaranteed Senior Secured Escrow Notes of like tenor and
of like aggregate principal amount, registered in the name of such transferee or
transferees and or the Noteholder, as the case may be. At the time this
Guaranteed Senior Secured Escrow Note is surrendered for registration of
transfer, it shall be duly endorsed, or be accompanied by a written instrument
of transfer duly executed, by the Noteholder or such Holder's attorney duly
authorized in writing. Any Guaranteed Senior Secured Escrow Note or Guaranteed
Senior Secured Escrow Notes issued upon transfer of this Guaranteed Senior
Secured Escrow Note shall carry the rights to unpaid interest and the accrual of
interest which were carried by this Guaranteed Senior Secured Escrow Note, so
that neither gain nor loss of interest shall result from any such transfer. In
the event that the Holder shall transfer less than the full amount of the Note,
the Company shall execute and deliver a replacement Note of like tenor for the
balance of the amount of the Note due to Holder.
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In addition, on receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note and, in the case of any
such loss, theft or destruction of this Note, and delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
in the case of such mutilation, on delivery and cancellation of this Note, the
Company at its expense, will execute and deliver in lieu thereof, a replacement
Note of like tenor.
SECTION 9. Assignment. The rights and obligations of the Company and the
Noteholder shall be binding upon and benefit the permitted successors, assigns
and transferees of the parties; provided that (i) in no event shall the Company
assign its rights hereunder without the prior written consent of the Noteholder,
(ii) the Noteholder may sell, assign, convey, or otherwise transfer this
Guaranteed Senior Secured Escrow Note with the consent of the Company, which
consent will not be unreasonably withheld, (iii) notwithstanding Section 9(ii),
the Noteholder may at all times, without the consent of the Company, sell,
assign, convey or otherwise transfer this Guaranteed Senior Secured Escrow Note
to an Affiliate of the Noteholder, and (iv) the Noteholder may, at all times,
sell, convey or otherwise transfer this Guaranteed Senior Secured Promissory
Note to a Qualified Institutional Buyer or an Accredited Investor, without the
consent of the Company if, after the proposed transfer, the aggregate unpaid
principal amount of all Notes then held by the Noteholder and its Affiliates,
exceeds $10,000,000.
SECTION 10. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Guaranteed Senior Secured Escrow Note may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Required Holders. No failure or delay on the
part of the Noteholder in exercising any power or right under this Guaranteed
Senior Secured Escrow Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right.
SECTION 11. Definitions. For purposes of this Guaranteed Senior Secured
Escrow Note, the following capitalized terms have the following meaning:
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"Affiliate" means, with reference to a specified person or entity, any
person or entity that directly or indirectly through one or more intermediaries
controls or is controlled by or is under common control with the specified
person or entity. For purposes of this definition, "control" (including, with
correlative meaning, the terms "controlled by" and "under common control with"),
as used with respect to any person or entity, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership
of voting securities or by contract or otherwise.
"Business Day" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
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"Capital Lease Obligation" has the meaning specified in Section
1.1 of the Securities Purchase Agreement.
"Change in Control" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Closing Date" is defined in Section 1(a).
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
"Common Stock" means the common stock of the Company.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"Company" is defined in the preamble.
"Debt" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Default" means any of the events specified in Section 6, whether
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Default Interest Rate" means a rate of interest equal to fifteen
percent (15%) per annum.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" means each of the events described in Section
6; provided, however, that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"GAAP" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Debt, leases, dividends or other obligations (the "primary
obligations") of any other third Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether or not
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contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (x) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (y) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith.
"Guaranteed Senior Secured Escrow Note" means this 12% Guaranteed
Senior Secured Escrow Promissory Note.
"Interest Payment Dates" mean, for any year, November 25,
February 25, May 25 and August 25, beginning with the Interest Payment Date of
November 25, 1998.
"Lien" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Multiemployer Plan" means a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means the cash proceeds of any sale or other
disposition of debt or equity securities of the Company (including cash proceeds
subsequently received (as and when received) in respect of non-cash
consideration initially received and all reserves referred to in clause (ii)
below, as and when such reserves are no longer required), minus (i) transaction
expenses (including broker's fees or commission, legal fees, accounting fees,
investment banking fees and other professional fees, transfer and similar taxes
and the Company's good faith estimate of income taxes payable and the actual
amount of taxes paid in connection with the receipt of such cash proceeds); and
(ii) amounts provided as a reserve, in accordance with GAAP, including pursuant
to any escrow arrangement, against any liabilities under any indemnification
obligations associated with such sale or disposition.
"Noteholder" means the Person defined as such in the first
paragraph hereof and its permitted successors, transferees and assigns.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
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"Principal Amount" is defined in Section 1(a).
"Principal Payment Date" is defined in the preamble.
"Qualified Institutional Buyer" means shall have the meaning specified
in Rule 144A of the Securities Act.
"Required Holders" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Subsidiary" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Unpaid Principal Amount" means, at any time, the portion of the
Principal Amount outstanding at such time.
SECTION 12. Notices Relating to Patents and Trademarks. The Company
agrees that as long as any amount is owing to the Noteholder, it shall promptly
give notice to the Noteholder of any application or registration relating to any
Material Patent or trademark of the Company becoming abandoned or dedicated, or
of any adverse determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office or any court or tribunal in any
country regarding the Company's ownership of any material patent or trademark or
its right to register the same and keep and maintain same). Notice shall be
accompanied by a statement of a Responsible Officer setting forth details of the
occurrence and stating what action the Company proposes to take with respect
thereto.
SECTION 13. Cancellation. After all principal, accrued interest thereon
and all other amounts due hereunder at any time owed on this Guaranteed Senior
Secured Escrow Note has been paid in full, this Guaranteed Senior Secured Escrow
Note shall be surrendered to the Company for cancellation and shall not be
reissued.
SECTION 14. Payment of Expenses and Taxes. The Company hereby agrees (a)
to pay or reimburse the Noteholder for all its reasonable and documented costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Guaranteed Senior Secured Escrow Note after the occurrence of
any Event of Default, including, without limitation, the reasonable and
documented fees and disbursements of counsel to the Noteholder and (b) to pay,
indemnify, and hold the Noteholder harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Guaranteed Senior Secured Escrow Note.
SECTION 15. Payments. All payments to be made to the Noteholder shall be
made in the lawful money of the United States of America in immediately
available funds.
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SECTION 16. Place of Payment. Payments of principal and interest shall
be delivered to the Noteholder by wire transfer of immediately available funds
to the following account: State Street Bank & Trust, Boston/SPEC WJ 09, ABA
#011-000-028, For further credit to: Northstar High Yield Fund, Regarding:
Intracel 12% Guaranteed Senior Secured Promissory Note due August 25, 2003,
Taxpayer ID# 04-3042919, or to such other Noteholder at such other address or to
the attention of such other person or to such other account as specified by
prior written notice to the Company.
SECTION 17. Severability. Whenever possible, each provision of this
Guaranteed Senior Secured Escrow Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Guaranteed Senior Secured Escrow Note is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Guaranteed Senior Secured Escrow Note.
SECTION 18. Descriptive Headings; Interpretation. The descriptive
headings of this Guaranteed Senior Secured Escrow Note are inserted for
convenience only and do not constitute a substantive part of this Guaranteed
Senior Secured Escrow Note. The use of the word "including" in this Guaranteed
Senior Secured Escrow Note shall be by way of example rather than by limitation.
SECTION 19. Governing Law; Submission to Jurisdiction. This Note shall
be construed in accordance with, and governed by, the internal laws of the State
of New York as permitted by Section 5-401 of the New York General Obligations
Law (or any similar successor provision) without giving effect to any choice of
law rule that would cause the application of the laws of any jurisdiction other
than the State of New York. The Company hereby irrevocably and unconditionally:
(i) submits itself and its properties in any legal action
or proceeding relating to this Note, the Securities Purchase Agreement
and the Ancillary Agreements to which it is a party, or for recognition
and enforcement of any judgment in respect thereof, to the general
jurisdiction of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts of any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such
court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to it at its address set forth in or delivered pursuant to
Section 21 or at such other address of which the Holders shall have been
notified pursuant thereto;
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(iv) waives, to the maximum extent not prohibited by Law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section 19 any punitive or exemplary
damages and any damages which are not proximately caused by or the
reasonably foreseeable result of the breach which is the subject of such
action or proceeding.
The Company hereby acknowledges that:
(v) it has been advised by counsel in the negotiation,
execution and delivery of this Note, the Securities Purchase Agreement
and the Ancillary Agreements;
(vi) the Holders do not have any fiduciary relationship
with or duty to the Company arising out of or in connection with this
Note, the Securities Purchase Agreement, or the Ancillary Agreements;
and
(vii) no joint venture or partnership exists between the
Holders, , on the one hand, and the Company, on the other hand and the
relationship of the Company and the Holders is that of inter alia,
debtor and creditor.
THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS NOTE, THE
SECURITIES PURCHASE AGREEMENT, THE ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM
THEREIN.
THIS NOTE, THE SECURITIES PURCHASE AGREEMENT AND THE ANCILLARY
AGREEMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
SECTION 20. Other Jurisdictions. The Company agrees that the Noteholder
shall have the right to proceed against the Company in a court in any location
to enable such Holder to enforce a judgment or other court order entered in
favor of such holder. The Company waives any objection that it may have to the
location of the court in which the Noteholder has commenced a proceeding
described in this Section 20.
SECTION 21. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Guaranteed Senior
Secured Escrow Note shall be in writing and shall be deemed to have been duly
given if (a) delivered personally, (b) mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or (c) sent by
next-day or overnight courier:
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If to the Noteholder:
Northstar High Yield Fund
300 First Stamford Place
Stamford, Connecticut 06902
Attn: Michael Graves
Fax Number (203) 862-8601
Confirm Number (203) 863-6224
with a copy, which will
not constitute notice to
the Noteholder, to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attn: Karen Wiedemann, Esq.
Fax Number (212) 841-5725
Confirm Number (212) 841-5781
If to the Company:
Intracel Corporation
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
Attn: Simon R. McKenzie
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
with a copy, which will
not constitute notice to
the Company, to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett, Esq.
Fax No: (212) 468-7900
Confirm No.: (212) 468-8240
or at such other address as may be specified in writing to the other parties in
accordance with this Section 21.
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All such notices, requests, demands, waivers and other communications shall be
deemed to have been delivered if by personal delivery or by courier on the date
of such delivery and if by certified or registered mail, on the third (3rd)
Business Day after the mailing thereof.
SECTION 22. Business Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is not a Business Day,
the payment shall be due and payable on, and the time period shall automatically
be extended to, the next Business Day immediately following such day, and
interest shall continue to accrue at the required rate hereunder until any such
payment is made.
SECTION 23. Usury Laws. The Company and each Noteholder intend to comply
with applicable usury Laws from time to time in effect. At no time shall the
interest rate payable on the Notes exceed the maximum rate of interest, if any,
that at any time or from time to time may be contracted for, taken, charged or
received on the Notes or on any amount which may be owing to the Holders of the
Notes under the Laws applicable to such Holders of Notes and this transaction.
In the event that the interest rate payable on the Notes shall exceed the
maximum rate of interest allowable under applicable usury Laws, then the rate of
interest shall automatically be reduced to the maximum rate permitted by Law.
* * * * *
19
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IN WITNESS WHEREOF, the Company has executed and delivered this
Guaranteed Senior Secured Escrow Note on August 25, 1998.
INTRACEL CORPORATION
By: /s/ SIMON R. MCKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
20
<PAGE> 104
Exhibit A
NOTICE OF REDEMPTION
Name of Holder
Address of Holder
Gentlemen:
Pursuant to Section 1(e) of the 12% Guaranteed Senior Secured Escrow
Notes (the "Guaranteed Senior Secured Escrow Notes"), Intracel Corporation (the
"Company") hereby notifies the Noteholder that the Company has received on
_____, 199__ (the "Funding Date"), aggregate Net Cash Proceeds of $__________
from the sale of its debt or equity securities and, in accordance with the
mandatory redemption provisions of Section 1(e), the Company shall apply an
aggregate of (i) $_________ to pay accrued unpaid past due interest on all
outstanding Guaranteed Senior Secured Escrow Notes and accrued unpaid interest
on the principal amount of this Note actually redeemed pursuant to Section 1(e),
all through the Redemption Date, as defined below, and the balance of (ii)
$________ (the "Available Redemption Amount") is hereby offered to reduce the
outstanding principal amount of the Guaranteed Senior Secured Escrow Notes in
accordance with the elections made in Section 2 below, or subject to provisions
of Section 3 below. All payments of principal and interest pursuant to this
redemption shall be made by the Company on the Redemption Date by wire transfer
in immediately available funds.
1. Definitions. All capitalized terms used but not defined herein shall
have the meanings set forth in the Guaranteed Senior Secured Escrow Notes. For
purposes of this notice the following terms shall have the following meanings:
"Redemption Date" shall mean ________, 199_, which shall not be later
than two (2) Business Days after the date set forth in Section 2.
"Pro Rata Amount" as to any Noteholder shall mean the product of (i) a
fraction, the numerator of which is the unpaid principal amount of the
Guaranteed Senior Secured Escrow Note held by such Noteholder on the date hereof
and the denominator of which is the aggregate unpaid principal amount of all
Guaranteed Senior Secured Escrow Notes issued pursuant to the Securities
Purchase Agreement and outstanding on the date hereof, multiplied by (ii) the
Available Redemption Amount.
"Proportional Amount" as to any Noteholder shall mean the Pro Rata
Amount plus the Unsubscribed Amount.
"Unsubscribed Amount" as to any Noteholder shall mean the product of (i)
a fraction, the numerator of which is the unpaid principal amount of the
Guaranteed Senior Secured Escrow Note held by such Noteholder on the date hereof
and the denominator of which is the aggregate unpaid principal amount of all
Guaranteed Senior Secured Escrow Notes on the date hereof held by Noteholders
who have elected Redemption Option (D) set forth in Section 2 below, multiplied
by (ii) an amount equal to the aggregate unpaid principal amount of the
Guaranteed Senior Secured Escrow Notes held by Noteholders who have elected
Redemption Option (B) or (C) set
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<PAGE> 105
forth in Section 2 below minus the aggregate redemption amount elected to be
received by the Noteholders which selected Redemption Option B.
2. Election of Redemption Option. (a) Please indicate your selection of
a redemption option by checking the appropriate box set forth below and signing
and returning this Notice of Redemption to the Company no later than 5:00 p.m.
on ______, 199__, which date is five (5) Business Days after delivery of this
Notice to the Noteholder. If the Company has not received an executed copy of
this Notice by such time, the Noteholder shall be deemed to have elected
Redemption Option A:
[ ] Redemption Option A. The Noteholder hereby elects to receive its Pro
Rata Amount, which is equal to $_____________.
[ ] Redemption Option B. The Noteholder hereby elects to receive
$____________, which amount is less than its Pro
Rata Amount.
[ ] Redemption Option C. The Noteholder hereby elects to receive no
redemption of principal at this time.
[ ] Redemption Option D. The Noteholder hereby elects to receive its
Proportional Amount.
(b) Notwithstanding the provisions of Section 2(a) above, each
Noteholder hereby acknowledges and agrees that in the event the aggregate amount
to be paid to the Noteholders as a result of the elections under Section 2 is
less than the Available Redemption Amount, each holder shall receive an amount
equal to its Pro Rata Amount notwithstanding such Noteholders election pursuant
to Section 2.
3. This Notice of Redemption may not be amended or rescinded by the
Company without the prior written consent of the Noteholders. Upon receipt of an
executed Notice of Redemption from a Noteholder, the Noteholder's election of a
redemption option may not be amended or rescinded without the prior written
consent of the Company and the other holders of Guaranteed Senior Secured Escrow
Notes.
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<PAGE> 106
Please acknowledge your election of a redemption option by checking the
appropriate box in Section 2, signing below and returning this notice of
redemption to the Company on or before the time specified in Section 2 above.
Intracel Corporation
By:________________________________
Name of Noteholder
By:_________________
23
<PAGE> 107
Exhibit B
NOTICE OF EBITDA REDEMPTION
Intracel Corporation
2005 NW Sammamish Road
Suite 107
Issaquah, Washington 98027
Gentlemen:
Pursuant to Section 5.12 of the Securities Purchase Agreement, Intracel
Corporation (the "Company") has advised ____________________ (the "Noteholder"),
that it has failed to comply with the EBITDA Ratio set forth in Section 1(f) of
the 12% Guaranteed Senior Secured Primary Notes (the "Guaranteed Senior Secured
Primary Notes"), for the EBITDA Measurement Period ending on
____________________, or the Company has failed to notify the Noteholder of its
EBITDA Ratio for such EBITDA Measurement Period.
Accordingly, pursuant to Section 1(f) of the Guaranteed Senior Secured
Primary Notes, the Noteholder hereby demands that the Company redeem the Pro
Rata Redemption Amount of the Guaranteed Senior Secured Primary Note at a price
equal to the Pro Rata Redemption Price within five (5) Business Days after this
Notice of EBITDA Redemption is delivered to the Company.
Dated: __________, 199__
[Noteholder]
By:_________________________________
Name:
Title:
24
<PAGE> 108
EXHIBIT B-1
WARRANT
<PAGE> 109
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
SERIES A-VI COMMON STOCK WARRANT
Void after Right to purchase 178,354
August 25, 2003 shares of Common Stock
(subject to adjustment)
of Intracel Corporation
No. A-VI-1
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Northstar High Yield Fund (the "Holder") or
its registered assigns, is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time before 5:00 P.M. New
York time, on August 25, 2003 (the "Expiration Time"), up to one hundred seventy
eight thousand three hundred fifty four (178,354) fully paid and nonassessable
shares of the Company's Common Stock, $.0001 par value per share, at a purchase
price per share equal to the lesser of (i) $10.00, or (ii) in the event that the
Company consummates an Initial Public Offering ("IPO") (as hereinafter defined),
at any time prior to the Expiration Time, the price per share offered to the
public in the IPO less underwriter(s) discounts and commissions (the "IPO
Price"); provided that in the event the IPO shall be consummated on or prior to
December 31, 1998, the purchase price per share shall be equal to the IPO Price
if the IPO Price is more than $10.00 (the "Purchase Price"). The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
This warrant (this "Warrant") is issued pursuant to a certain Securities
Purchase Agreement, dated as of August 25, 1998, between, among other parties,
the Company and the Holder, a copy of which is on file at the principal office
of the Company (the "Securities Purchase Agreement"). This Warrant has not been
issued as part of any unit. As used herein, all capitalized terms not otherwise
defined herein shall have the meanings set forth in the Securities Purchase
Agreement.
This warrant is subject to the rights and obligations set forth in that
certain Registration Rights Agreement dated as of August 25, 1998, between,
among other parties, the Company and the Holder, a copy of which is on file at
the principal office of the Company (the "Registration Rights Agreement.")
<PAGE> 110
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"Affiliate" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Assets" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Common Stock" means the Company's common stock, $.0001 par
value per share, in existence on the date of this Warrant, or any class
or classes (however designated) replacing such Common Stock as a result
of any recapitalization, reorganization or other reclassification of the
Company's capital stock which affects the holders of Common Stock.
"Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the
Company with or the merger of the Company into any other corporation or
entity (other than a merger in which the Company is the continuing
entity) or the sale or transfer of all or substantially all of the
Assets of the Company to another person or entity.
"Fair Market Value" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Fully Diluted Shares" has the meaning specified in Section 1.1
of the Securities Purchase Agreement.
"Initial Public Offering" means an underwritten public offering
pursuant to an effective registration statement on Form S-1 or successor
form under the Securities Act covering the offering and sale of Common
Stock for the account of the Company with an aggregate purchase price of
at least $40,000,000 and aggregate net proceeds to the Company of at
least $35,000,000.
"Qualified Institutional Buyer" means shall have the meaning
specified in Rule 144A of the Securities Act.
"Required Holders" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
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"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Securities and Exchange Commission" or "Commission" refers to
the Securities and Exchange Commission or any other Federal agency then
administering the Securities Act.
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
1. Restricted Stock.
1.1 This Warrant and all rights hereunder may not be transferred
by the Holder unless (i) the transferee is an Affiliate of the Holder; or (ii)
the transferee is a Qualified Institutional Buyer or an Accredited Investor,
and, after giving effect to the transfer, the aggregate unpaid principal amount
of all Notes then held by the Holder and its Affiliates, exceeds $10,000,000, or
(iii) the Company gives its prior written consent to the transfer, which consent
will not be unreasonably withheld.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or exchange,
and in the case of an exercise of this Warrant if the Warrant Shares to be
issued thereupon are not registered pursuant to the Securities Act, the Company
may require a written statement that such Warrant or Warrant Shares, as the case
may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of Law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at the
time of exercise such Warrant Shares are registered under the Securities Act,
bear a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
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<PAGE> 112
2. Exercise of Warrant.
(a) The Holder may exercise this Warrant in whole or in part (but
not as to fractional shares of Common Stock) by delivering this Warrant prior to
the Expiration Time, with the form of subscription at the end hereof duly
executed by the Holder, to the Company at its principal office.
(b) The Holder may make payment of the Purchase Price (as such
may be adjusted as provided herein) in respect of the exercise of this Warrant
as follows:
(i) Cash Exercise. By payment to the Company of the
Purchase Price in cash or official bank check;
(ii) Notes Exercise. By surrender to the Company of any of
the Notes issued pursuant to the Securities Purchase Agreement as of the
date hereof, with all such Notes or other Obligations of the Company so
surrendered being credited against the Purchase Price in an amount equal
to the principal amount thereof plus the amount of any accrued unpaid
interest thereon to the date of such surrender;
(iii) Securities Exercise. By delivery to the Company of
any other securities issued by the Company, with such securities being
credited against the Purchase Price in an amount equal to the Fair
Market Value thereof;
(iv) Net Issue Exercise. By an election to receive shares
of the Company's Common Stock, without payment of additional cash
consideration in an amount equal to the number of shares as to which
this Warrant is so exercised, less the number of shares having a Fair
Market Value on the date of exercise equal to the aggregate Purchase
Price then in effect for the number of shares as to which this Warrant
is so exercised;
(v) Combined Payment Method. By satisfaction of the
Purchase Price for each share being acquired in any combination of the
methods described in sections (i) through (iv);
provided that, irrespective of the form of payment, the amount paid therefor
must be equal to the aggregate Purchase Price of the Common Stock being
purchased pursuant to such exercise.
(c) The Company represents and warrants that the number of shares
of Common Stock issued or issuable upon exercise, of this Warrant constitutes
0.82% of the number of Fully Diluted Shares as of the original date of issuance
of this Warrant and that the number of Shares of Common Stock issuable upon
exercise of all Series A-VI Warrants issued pursuant to the Securities Purchase
Agreement constitutes, in the aggregate, 7.5% of the number of Fully Diluted
Shares as of the original date of issuance of this Warrant.
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<PAGE> 113
(d) In the event of the purchase of less than all of the shares
of Common Stock purchasable under this Warrant, the Company shall execute and
deliver a replacement Warrant of like tenor for the balance of the shares of
Common Stock purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this
Warrant shall be issued as soon as practicable after the exercise of this
Warrant in accordance with Section 2 hereof, but in no event later than 10 days
after the date of delivery to the Company of this Warrant for exercise, without
charge to the Holder, including, without limitation, any tax that may be payable
in respect thereof, and such certificates shall be issued and registered in the
name of, or, subject to Section 1.1, in such names as may be directed by, the
Holder; provided, however, that the Company shall not be required to pay any
income tax to which the Holder may be subject in connection with the issuance of
this Warrant or the shares of Common Stock upon exercise of this Warrant;
provided, further, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate in a name other than that of the Holder and the Company
shall not be required to issue or deliver such certificate unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
for payment by it of the amount of such tax or shall have established to the
satisfaction of the Company that such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at
any time or from time to time, the number of shares of Common Stock outstanding
is increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would have received if (A) this Warrant had
been exercised into Common Stock on the date of such event and (B) it had
thereafter retained such securities and all rights and distributions relating to
them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event, the
Holder of this Warrant shall have the right thereafter to convert its Warrant
Shares into the kind and amount of shares of stock and other securities and
Assets receivable upon such reorganization, reclassification, or other change.
If, at any time or from time to time, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date for such
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<PAGE> 114
combination, the Purchase Price shall appropriately increase and the number of
Warrant Shares shall be appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time or from
time to time after the date hereof, the Company issues shares of Common Stock
for a price per share less than the then applicable Purchase Price per share
(other than for Exempt Issuances (as hereinafter defined)) ("Lower Price"), on
the date such additional shares are issued, the Purchase Price shall be reduced
to such Lower Price. This subsection does not apply to (the "Exempt Issuances")
(i) any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of subsection (b) or the issuance of Common Stock upon the exercise of
such rights described therein, (ii) the issuance by the Company or any of its
Subsidiaries' of preferred stock issued in lieu of cash dividends on the
preferred stock as provided for under the terms of the applicable designations
or provisions of the Company's certificate of incorporation on the date hereof,
(iii) upon the exercise of rights under securities issued before the date hereof
to convert, exchange or exercise such securities into shares of Common Stock,
(iv) the issuance of shares of Common Stock upon the exercise of rights or
warrants issued by the Company prior to the date hereof, or (v) the issuance of
shares of Common Stock upon the exercise of options granted, either prior to the
date hereof or in the future, to employees and directors of the Company pursuant
to employee benefit plans or employee stock option plans available for grants to
the Company's executives in general.
(b) Adjustment for Convertible Securities Issue. If at any time
after the date hereof, the Company issues any securities convertible,
exchangeable or exercisable into shares of Common Stock for a price per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities less than the then applicable Purchase Price per share (other than
for Exempt Derivatives (as hereinafter defined)) (a "Lower Payment"), on the
date of issuance of such securities, the Purchase Price shall be reduced to such
Lower Payment.
This subsection does not apply to (the "Exempt Derivatives") (i)
any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of subsection (a) or (ii) the rights, warrants or options described in
Section 5(a)(iv) and (v).
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of like
tenor.
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<PAGE> 115
7. Notices.
7.1 Notices for Adjustments under Section 4 and Section 5. In
the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or Assets, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Capital Stock of the Company or the
occurrence of any Extraordinary Transaction; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issuance of Warrant Shares); or
(e) any action by the Company pursuant to Section 5(a) or (b);
then, and in each such event, the Company will send to the Holders, a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, Extraordinary Transaction,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other Assets
deliverable on such reorganization, reclassification, recapitalization,
Extraordinary Transaction, dissolution, liquidation or winding up, and (iii) the
amount and character of any stock or other securities, or rights or options with
respect thereto, proposed to be issued or granted, the date of such proposed
issue or grant the persons or class of persons to whom such proposed issue or
grant is to be offered or made, and the consideration to be received by the
Company therefor.
All notices to be given pursuant to subsection (a) of this Section 7.1
shall be sent at least fifteen (15) days prior to the record date of such events
described therein, and in any event at least twenty-five (25) days prior to the
actual event. All notices to be given pursuant to subsections (b) through (d) of
this Section 7.1 shall be sent at least thirty (30) days prior to the record
date of such events described therein.
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<PAGE> 116
7.2 Other Notices. (a) In the event of an Initial Public
Offering, the Company will send a notice of the initial filing of the
registration statement for the Initial Public Offering. Any notice to be given
pursuant to this Section 7.2(a) shall be sent on the date of such filing.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, or mailed by
certified or registered mail, return receipt requested, or nationwide overnight
delivery service (with charges prepaid) as follows:
(i) if to the Company or any Subsidiary, at Intracel
Corporation, 2005 NW Sammamish Road, Suite 107, Issaquah, Washington
98027, Attn: Chief Executive Officer, with a copy to Joseph W. Bartlett,
Esq., Morrison & Foerster LLP, 1290 Avenue of the Americas, New York,
NY 10104; and
(ii) if to the Holders, at their respective addresses set
forth on Schedule 2.1 to the Securities Purchase Agreement, with a copy
to Karen Weidemann, Esq., Reboul, MacMurry, Hewitt, Maynard & Kristol,
45 Rockefeller Plaza, New York, New York 10111.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered when delivered in person, or three days
after mailing by mail or one day after delivery to an overnight express service
for next day delivery, as the case may be.
8. Consent to Amendments. This Agreement may not be amended or modified
and no provisions hereof may be waived, without the written consent of the
Company and each Holder. However, this Agreement may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holders, except
that, without the prior written consent of one hundred percent (100%) of the
Holders, no amendment to this Agreement shall change the Expiration Time of this
Warrant, the Purchase Price of this Warrant or the number of shares issuable
hereunder or change the percentage specified in the definition of Required
Holders or consent to the assignment or transfer by the Company of its rights
and obligations under this Agreement or the Ancillary Agreements. Each Holder of
the Warrants shall be bound by any consent authorized by this Section 8 whether
or not such Warrant shall have been marked to indicate such consent, but any
Warrants issued thereafter may bear notation referring to any such consent. Any
amendment or waiver of any provision of any Warrant shall be effective only for
the purposes and period of time expressly set forth therein and shall not
entitle the Company to any other waiver or amendment in similar or other
circumstances. No course of dealing between the Company and any Holder of any
Warrant, nor any failure to exercise or any delay in exercising on the part of
the holder of any Warrant any right, remedy, power or privilege under any
Warrant shall or operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under any Warrant preclude any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges under the Warrants are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by Law. As used herein and in the
Warrants,
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<PAGE> 117
the term "this Agreement and the Ancillary Agreements" and references thereto
shall mean this Agreement and the Ancillary Agreements as they may from time to
time be amended or supplemented.
9. Governing Law; Submission to Jurisdiction. This Warrant shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as permitted by Section 5-401 of the New York General Obligations Law
(or any similar successor provision) without giving effect to any choice of law
rule that would cause the application of the laws of any jurisdiction other than
the State of New York. The Company hereby irrevocably and unconditionally:
(a) submits itself and its properties in any legal action or
proceeding relating to this Agreement and the Ancillary Agreements to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to it
at its address set forth in or determined pursuant to Section 7.2 or at
such other address of which the Holders shall have been notified
pursuant thereto;
(d) waives, to the maximum extent not prohibited by Law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this Section 9 any punitive or exemplary damages and any
damages which are not proximately caused by or the reasonably
foreseeable result of the breach which is the subject of such action or
proceeding.
The Company hereby acknowledges that:
(e) it has been advised by counsel in the negotiation, execution
and delivery of this Warrant, the Securities Purchase Agreement and the
Ancillary Agreements;
(f) the Holders do not have any fiduciary relationship with or duty
to the Company arising out of or in connection with this Agreement, or
the Ancillary Agreements; and
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<PAGE> 118
(g) no joint venture or partnership exists between the Holders, on
the one hand, and the Company, on the other hand, and the relationship
of the Company and the Holders is that of, inter alia, debtor and
creditor.
THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE
ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
10. Stock to be Reserved. The Company will, at all times reserve and
keep available out of its authorized Common Stock or its treasury shares solely
for the purpose of issue upon the exercise of this Warrant as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Company covenants that all shares of Common Stock
which shall be so issued shall be duly and validly issued and fully paid and
nonassesable and free from all taxes, Liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the Company
covenants that it will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Purchase Price. The Company will take
all such action as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable Law, or any
requirements of any national securities exchange upon which the Common Stock of
the Company may be listed. The Company will not take any action which results in
any adjustment of the Purchase Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation. The Company has not granted and will not
grant any right of first refusal with respect to shares issuable upon exercise
of this Warrant, and there are no preemptive rights associated with such shares.
11. Issue Tax. The issuance of certificates for shares of Common Stock
upon exercise of the Warrants shall be made without charge to the Holder of such
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of the Warrant.
12. Miscellaneous. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Warrant is being executed as an instrument under seal. All nouns and
pronouns used herein shall be deemed to refer to the
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masculine, feminine or neuter, as the identity of the person or persons to whom
reference is made herein may require.
13. Expiration. This Warrant shall expire, and be without further force
and effect, at 5:00 P.M., New York time, on August 25, 2003.
[see attached signature page]
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Dated: August 25, 1998 INTRACEL CORPORATION
(Corporate Seal) By: /s/ SIMON R. MCKENZIE
------------------------------------
Simon R. McKenzie, Chief
Executive Officer
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FORM OF SUBSCRIPTION
(To be signed upon exercise of Warrant)
To Intracel Corporation:
The undersigned, pursuant to the provisions of the Warrant issued by
Intracel Corporation on August 25, 1998 and held by the undersigned, hereby
subscribes for and purchases at the price per share provided in such Warrant
__________ shares of Common Stock issuable upon exercise of such Warrant, and
(i) makes cash payment herewith in an amount equal to
[___%] of the aggregate purchase price therefor;
(ii) surrenders to the Company its Notes due __________
or such other promissory notes or other obligations
issued by the Company, in accordance with Section
2(b)(ii) of such Warrant, as payment herewith in an
amount equal to [___%] of the aggregate purchase
price therefor;
(iii) delivers to the Company other securities issued by
the Company, in accordance with Section 2(b)(iii)
of such Warrant, as payment herewith in an amount
equal to [___%} of the aggregate purchase price
therefor; and/or
(iv) elects Net Issue Exercise as provided in Section
2(b)(iv) of such Warrant as to an amount equal to
[___%] of the aggregate purchase price therefor.
The combination of (i) through (iv) above shall equal 100%
of the purchase price of the shares being issued upon
exercise of the Warrant.
Dated:
-----------------------------------------------
(Name must conform in all respects to name of
holder as specified on the face of the Warrant)
HOLDER:
By:
-------------------------------------------
Name:
Title:
Address:
<PAGE> 122
EXHIBIT B-2
AMENDED AND RESTATED SERIES-II WARRANT
<PAGE> 123
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
AMENDED AND RESTATED SERIES A-II COMMON STOCK WARRANT
Void after Right to purchase 188,020
August 25, 2003 shares of Common Stock
(subject to adjustment )
of Intracel Corporation
No. A-II-1
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Northstar High Total Return Fund (the
"Holder") or its registered assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:00
P.M. New York time, on August 25, 2003 (the "Expiration Time"), up to One
Hundred Eighty-Eight Thousand Twenty (188,020) fully paid and nonassessable
shares of the Company's Common Stock, $.0001 par value per share, at a purchase
price per share of $7.00 (the "Purchase Price"). The number and character of
such shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Amended and Restated Warrant (this "Warrant") amends, as of August
25, 1998, the warrant issued on December 28, 1995 pursuant to a certain Warrant
Agreement dated as of December 28, 1995, between the Company and the Holder, a
copy of which is on file at the principal office of the Company. This Warrant
has been amended and restated in accordance with the terms of a certain
Securities Purchase Agreement, dated as of August 25, 1998, between, among other
parties, the Company and the Holder, a copy of which is on file at the principal
office of the Company (the "Securities Purchase Agreement"). This Warrant was
not issued as part of any unit. As used herein, all capitalized terms not
otherwise defined herein shall have the meanings set forth in the Securities
Purchase Agreement.
This warrant is subject to the rights and obligations set forth in that
certain Registration Rights Agreement dated as of August 25, 1998, between,
among other parties, the Company and the Holder, a copy of which is on file at
the principal office of the Company (the "Registration Rights Agreement.")
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
<PAGE> 124
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"Affiliate" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Assets" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Common Stock" means the Company's common stock, $.0001 par value per
share, in existence on the date of this Warrant, or any class or classes
(however designated) replacing such Common Stock as a result of any
recapitalization, reorganization or other reclassification of the Company's
capital stock which affects the holders of Common Stock.
"Company" includes any corporation which shall succeed to or assume the
obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the Company with
or the merger of the Company into any other corporation or entity (other than a
merger in which the Company is the continuing entity) or the sale or transfer of
all or substantially all of the Assets of the Company to another person or
entity.
"Fair Market Value" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Initial Public Offering" means an underwritten public offering pursuant
to an effective registration statement on Form S-1 or successor form under the
Securities Act covering the offering and sale of Common Stock for the account of
the Company with an aggregate purchase price of at least $40,000,000 and
aggregate net proceeds to the Company of at least $35,000,000.
"Qualified Institutional Buyer" means shall have the meaning specified
in Rule 144A of the Securities Act.
"Required Holders" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Securities Act" means the Securities Act of 1933, or any successor
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Securities and Exchange Commission" or "Commission" refers to the
Securities and Exchange Commission or any other Federal agency then
administering the Securities Act.
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"Warrant Shares" means the Common Stock issued or issuable upon exercise
of this Warrant.
1. Restricted Stock.
1.1 This Warrant and all rights hereunder may not be transferred
by the Holder unless (i) the transferee is an Affiliate of the Holder; (ii) the
transferee is a Qualified Institutional Buyer or an Accredited Investor, and,
after giving effect to the transfer, the aggregate unpaid principal amount of
all Notes then held by the Holder and its Affiliates, exceeds $10,000,000, or
(iii) the Company gives its prior written consent to the transfer, which consent
will not be unreasonably withheld.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or exchange,
and in the case of an exercise of this Warrant if the Warrant Shares to be
issued thereupon are not registered pursuant to the Securities Act, the Company
may require a written statement that such Warrant or Warrant Shares, as the case
may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of Law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at the
time of exercise such Warrant Shares are registered under the Securities Act,
bear a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
2. Exercise of Warrant.
(a) The Holder may exercise this Warrant in whole or in part (but
not as to fractional shares of Common Stock) by delivering this Warrant prior to
the Expiration Time, with the form of subscription at the end hereof duly
executed by the Holder, to the Company at its principal office.
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<PAGE> 126
(b) The Holder may make payment of the Purchase Price (as such
may be adjusted as provided herein) in respect of the exercise of this Warrant
as follows:
(i) Cash Exercise. By payment to the Company of the
Purchase Price in cash or official bank check;
(ii) Notes Exercise. By surrender to the Company of any
of the Notes issued pursuant to the Securities
Purchase Agreement as of the date hereof, with all
such Notes or other Obligations of the Company so
surrendered being credited against the Purchase
Price in an amount equal to the principal amount
thereof plus the amount of any accrued unpaid
interest thereon to the date of such surrender;
(iii) Securities Exercise. By delivery to the Company of
any other securities issued by the Company, with
such securities being credited against the Purchase
Price in an amount equal to the Fair Market Value
thereof;
(iv) Net Issue Exercise. By an election to receive
shares of the Company's Common Stock, without
payment of additional cash consideration in an
amount equal to the number of shares as to which
this warrant is so exercised, less the number of
shares having a Fair Market Value on the date of
exercise equal to the aggregate Purchase Price then
in effect for the number of shares as to which this
Warrant is so exercised;
(v) Combined Payment Method. By satisfaction of the
Purchase Price for each share being acquired in any
combination of the methods described in sections
(i) through (iv);
provided that, irrespective of the form of payment, the amount paid therefor
must be equal to the aggregate Purchase Price of the Common Stock being
purchased pursuant to such exercise.
(c) In the event of the purchase of less than all of the shares
of Common Stock purchasable under this Warrant, the Company shall execute and
deliver a replacement Warrant of like tenor for the balance of the shares of
Common Stock purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this
Warrant shall be issued as soon as practicable after the exercise of this
Warrant in accordance with Section 2 hereof, but in no event later than 10 days
after the date of delivery to the Company of this Warrant for exercise, without
charge to the Holder, including, without limitation, any tax that may be payable
in respect thereof, and such certificates shall be issued and registered in the
name of, or, subject to Section 1.1, in such names as may be directed by, the
Holder; provided,
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however, that the Company shall not be required to pay any income tax to which
the Holder may be subject in connection with the issuance of this Warrant or the
shares of Common Stock upon exercise of this Warrant; provided, further, that
the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificate unless or until the person or persons
requesting the issuance thereof shall have paid to the Company for payment by it
of the amount of such tax or shall have established to the satisfaction of the
Company that such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at
any time or from time to time, the number of shares of Common Stock outstanding
is increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would have received if (A) this Warrant had
been exercised into Common Stock on the date of such event and (B) it had
thereafter retained such securities and all rights and distributions relating to
them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event, the
Holder of this Warrant shall have the right thereafter to convert its Warrant
Shares into the kind and amount of shares of stock and other securities and
Assets receivable upon such reorganization, reclassification, or other change.
If, at any time or from time to time, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date for such combination, the Purchase Price
shall appropriately increase and the number of Warrant Shares shall be
appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time or from
time to time after the date hereof, the Company issues shares of Common Stock
for a price per share less than the then applicable Purchase Price per share
(other than for Exempt Issuances (as hereinafter defined)) ("Lower Price"), on
the date such additional shares are issued, the Purchase Price shall be reduced
to such Lower Price. This subsection does not apply to (the "Exempt Issuances")
(i) any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of subsection (b) or the issuance of Common Stock upon the exercise of
such rights described therein, (ii) the issuance by the Company or any of its
Subsidiaries of preferred stock issued in lieu of cash dividends on the
preferred stock as provided for under the terms of the applicable
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designations or provisions of the Company's certificate of incorporation on the
date hereof, (iii) upon the exercise of rights under securities issued before
the date hereof to convert, exchange or exercise such securities into shares of
Common Stock, (iv) the issuance of shares of Common Stock upon the exercise of
rights or warrants issued by the Company prior to the date hereof, or (v) the
issuance of shares of Common Stock upon the exercise of options granted, either
prior to the date hereof or in the future, to employees and directors of the
Company pursuant to employee benefit plans or employee stock option plans
available for grants to the Company's executives in general.
(b) Adjustment for Convertible Securities Issue. If at
any time after the date hereof, the Company issues any securities convertible,
exchangeable or exercisable into shares of Common Stock for a price per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities less than the then applicable Purchase Price per share (other than
for Exempt Derivatives (as hereinafter defined)) (a "Lower Payment"), on the
date of issuance of such securities, the Purchase Price shall be reduced to such
Lower Payment.
This subsection does not apply to (the "Exempt Derivatives") (i) any of
the transactions described in Sections 4.1 and 4.2 and the first paragraph of
subsection (a) or (ii) the rights, warrants or options described in Section
5(a)(iv) and (v).
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of like
tenor.
7. Notices.
7.1 Notices for Adjustments under Section 4 and Section 5. In
the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or Assets, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Capital Stock of the Company or the
occurrence of any Extraordinary Transaction; or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company; or
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<PAGE> 129
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities (other than the issuance of Warrant Shares); or
(e) any action by the Company pursuant to Section 5(a) or
(b); then, and in each such event, the Company will send to the Holders, a
notice specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date on which any
such reorganization, reclassification, recapitalization, Extraordinary
Transaction, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other Assets deliverable on such reorganization, reclassification,
recapitalization, Extraordinary Transaction, dissolution, liquidation or winding
up, and (iii) the amount and character of any stock or other securities, or
rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant the persons or class of persons to whom
such proposed issue or grant is to be offered or made, and the consideration to
be received by the Company therefor.
All notices to be given pursuant to subsection (a) of this Section 7.1
shall be sent at least fifteen (15) days prior to the record date of such events
described therein, and in any event at least twenty-five (25) days prior to the
actual event. All notices to be given pursuant to subsections (b) through (d) of
this Section 7.1 shall be sent at least thirty (30) days prior to the record
date of such events described therein.
7.2 Other Notices. (a) In the event of an Initial Public
Offering, the Company will send a notice of the initial filing of the
registration statement for the Initial Public Offering. Any notice to be given
pursuant to this Section 7.2(a) shall be sent on the date of such filing.
(b) All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
or mailed by certified or registered mail, return receipt requested, or
nationwide overnight delivery service (with charges prepaid) as follows:
(i) if to the Company or any Subsidiary, at Intracel
Corporation, 2005 NW Sammamish Road, Suite 107,
Issaquah, Washington 98027, Attn: Chief Executive
Officer, Fax Number (425) 392-2992, Confirm Number
(425) 557-1894 with a copy to Joseph W. Bartlett,
Esq., Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, NY 10104, Fax Number (212)
468-7900, Confirm Number (212) 468-8240; and
(ii) if to the Holders, at their respective addresses
set forth on Schedule 2.1 to the Securities
Purchase Agreement, with a copy to Karen Weidemann,
Esq., Reboul, MacMurry, Hewitt, Maynard &
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<PAGE> 130
Kristol, 45 Rockefeller Plaza, New York, New
York 10111, Fax Number (212) 841-5725, Confirm
Number (212) 841-5781.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered when delivered in person, or three days
after mailing by mail or one day after delivery to an overnight express service
for next day delivery, as the case may be.
8. Consent to Amendments. This Agreement may not be amended or modified
and no provisions hereof may be waived, without the written consent of the
Company and each Holder. However, this Agreement may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holders, except
that, without the prior written consent of one hundred percent (100%) of the
Holders, no amendment to this Agreement shall change the Expiration Time of this
Warrant, the Purchase Price of this Warrant or the number of shares issuable
hereunder or change the percentage specified in the definition of Required
Holders or consent to the assignment or transfer by the Company of its rights
and obligations under this Agreement or the Ancillary Agreements. Each Holder of
the Warrants shall be bound by any consent authorized by this Section 8 whether
or not such Warrant shall have been marked to indicate such consent, but any
Warrants issued thereafter may bear notation referring to any such consent. Any
amendment or waiver of any provision of any Warrant shall be effective only for
the purposes and period of time expressly set forth therein and shall not
entitle the Company to any other waiver or amendment in similar or other
circumstances. No course of dealing between the Company and any Holder of any
Warrant, nor any failure to exercise or any delay in exercising on the part of
the holder of any Warrant any right, remedy, power or privilege under any
Warrant shall or operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under any Warrant preclude any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges under the Warrants are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by Law. As used herein and in the
Warrants, the term "this Agreement and the Ancillary Agreements" and references
thereto shall mean this Agreement and the Ancillary Agreements as they may from
time to time be amended or supplemented.
9. Governing Law; Submission to Jurisdiction. This Warrant shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as permitted by Section 5-401 of the New York General Obligations Law
(or any similar successor provision) without giving effect to any choice of law
rule that would cause the application of the laws of any jurisdiction other than
the State of New York. The Company hereby irrevocably and unconditionally:
(a) submits itself and its properties in any legal action or
proceeding relating to this Agreement and the Ancillary Agreements to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the general jurisdiction of the Courts of the
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State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to it at its address set forth in or determined pursuant to
Section 7.2 or at such other address of which the Holders shall have
been notified pursuant thereto;
(d) waives, to the maximum extent not prohibited by Law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section 9 any punitive or exemplary damages and any
damages which are not proximately caused by or the reasonably
foreseeable result of the breach which is the subject of such action or
proceeding.
The Company hereby acknowledges that:
(e) it has been advised by counsel in the negotiation, execution
and delivery of this Warrant, the Securities Purchase Agreement and the
Ancillary Agreements;
(f) the Holders do not have any fiduciary relationship with or
duty to the Company arising out of or in connection with this Agreement,
or the Ancillary Agreements; and
(g) no joint venture or partnership exists between the Holders,
on the one hand, and the Company, on the other hand, and the
relationship of the Company and the Holders is that of, inter alia,
debtor and creditor.
THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE
ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
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10. Stock to be Reserved. The Company will, at all times reserve and
keep available out of its authorized Common Stock or its treasury shares solely
for the purpose of issue upon the exercise of this Warrant as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Company covenants that all shares of Common Stock
which shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, Liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the Company
covenants that it will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Purchase Price. The Company will take
all such action as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable Law, or any
requirements of any national securities exchange upon which the Common Stock of
the Company may be listed. The Company will not take any action which results in
any adjustment of the Purchase Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation. The Company has not granted and will not
grant any right of first refusal with respect to shares issuable upon exercise
of this Warrant, and there are no preemptive rights associated with such shares.
11. Issue Tax. The issuance of certificates for shares of Common Stock
upon exercise of the Warrants shall be made without charge to the Holder of such
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of the Warrant.
12. Miscellaneous. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Warrant is being executed as an instrument under seal. All nouns and
pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
13. Expiration. This Warrant shall expire, and be without further force
and effect, at 5:00 P.M., New York time, on August 25, 2003.
[see attached signature page]
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Dated: August 25, 1998 INTRACEL CORPORATION
(Corporate Seal) By: /s/ SIMON R. McKENZIE
-----------------------------------
Simon R. McKenzie, President and
Chief Executive Officer
c
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FORM OF SUBSCRIPTION
(To be signed upon exercise of Warrant)
To Intracel Corporation:
The undersigned, pursuant to the provisions of the Warrant issued by
Intracel Corporation and amended on August 25, 1998 and held by the undersigned,
hereby subscribes for and purchases at the price per share provided in such
Warrant __________ shares of Common Stock issuable upon exercise of such
Warrant, and
(i) makes cash payment herewith in an amount equal to
[___%] of the aggregate purchase price therefor;
(ii) surrenders to the Company its Notes due __________
or such other promissory notes or other obligations
issued by the Company, in accordance with Section
2(b)(ii) of such Warrant, as payment herewith in an
amount equal to [___%] of the aggregate purchase
price therefor;
(iii) delivers to the Company other securities issued by
the Company, in accordance with Section 2(b)(iii)
of such Warrant, as payment herewith in an amount
equal to [___%] of the aggregate purchase price
therefor; and/or
(iv) elects Net Issue Exercise as provided in Section
2(b)(iv) of such Warrant as to an amount equal to
[___%] of the aggregate purchase price therefor.
The combination of (i) through (iv) above shall equal 100%
of the purchase price of the shares being issued upon
exercise of the Warrant.
Dated:
-----------------------------------------------
(Name must conform in all respects to name of
holder as specified on the face of the Warrant)
HOLDER:
By:
-------------------------------------------
Name:
Title:
Address:
<PAGE> 135
EXHIBIT B-3
AMENDED AND RESTATED SERIES-III WARRANT
<PAGE> 136
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
AMENDED AND RESTATED SERIES A-III COMMON STOCK WARRANT
Void after Right to purchase 190,888
August 25, 2003 shares of Common Stock
(subject to adjustment)
of Intracel Corporation
No. A-III-1
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Northstar High Total Return Fund II (the
"Holder") or its registered assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:00
P.M. New York time, on August 25, 2003 (or such earlier date as provided in
Section 7 hereof) (the "Expiration Time"),up to One Hundred Ninety Thousand
Eight Hundred Eighty Eight(190,888) fully paid and nonassessable shares of the
Company's Common Stock, $.0001 par value per share, at a purchase price per
share of $7.00 (the "Purchase Price"). The number and character of such shares
of Common Stock and the Purchase Price are subject to adjustment as provided
herein.
This Amended and Restated Warrant (this "Warrant") amends, as of August
25, 1998 the warrant issued on June 11, 1996 pursuant to a Note and Warrant
Purchase Agreement dated as of June 11, 1996, a copy of which is on file at the
principal office of the Company. This Warrant has been amended and restated in
accordance with the terms of a certain Securities Purchase Agreement, dated as
of August 25, 1998, between, among other parties, the Company and the Holder, a
copy of which is on file at the principal office of the Company (the "Securities
Purchase Agreement"). This Warrant was not issued as part of any unit. As used
herein, all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Securities Purchase Agreement.
This warrant is subject to the rights and obligations set forth in that
certain Registration Rights Agreement dated as of August 25, 1998, between,
among other parties, the Company and the Holder, a copy of which is on file at
the principal office of the Company (the "Registration Rights Agreement.")
<PAGE> 137
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"Affiliate" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Assets" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Common Stock" means the Company's common stock, $.0001 par
value per share, in existence on the date of this Warrant, or any class or
classes (however designated) replacing such Common Stock as a result of any
recapitalization, reorganization or other reclassification of the Company's
capital stock which affects the holders of Common Stock.
"Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the
Company with or the merger of the Company into any other corporation or entity
(other than a merger in which the Company is the continuing entity) or the sale
or transfer of all or substantially all of the Assets of the Company to another
person or entity.
"Fair Market Value" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Initial Public Offering" means an underwritten public offering
pursuant to an effective registration statement on Form S-1 or successor form
under the Securities Act covering the offering and sale of Common Stock for the
account of the Company with an aggregate purchase price of at least $40,000,000
and aggregate net proceeds to the Company of at least $35,000,000.
"Qualified Institutional Buyer" means shall have the meaning
specified in Rule 144A of the Securities Act.
"Required Holders" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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<PAGE> 138
"Securities and Exchange Commission" or "Commission" refers to
the Securities and Exchange Commission or any other Federal agency then
administering the Securities Act.
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
1. Restricted Stock.
1.1 This Warrant and all rights hereunder may not be transferred
by the Holder unless (i) the transferee is an Affiliate of the Holder; or (ii)
the transferee is a Qualified Institutional Buyer or an Accredited Investor,
and, after giving effect to the transfer, the aggregate unpaid principal amount
of all Notes then held by the Holder and its Affiliates, exceeds $10,000,000, or
(iii) the Company gives its prior written consent to the transfer, which consent
will not be unreasonably withheld.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or exchange,
and in the case of an exercise of this Warrant if the Warrant Shares to be
issued thereupon are not registered pursuant to the Securities Act, the Company
may require a written statement that such Warrant or Warrant Shares, as the case
may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at the
time of exercise such Warrant Shares are registered under the Securities Act,
bear a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
2. Exercise of Warrant.
(a) The Holder may exercise this Warrant in whole or in part (but
not as to fractional shares of Common Stock) by delivering this Warrant prior to
the Expiration Time,
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<PAGE> 139
with the form of subscription at the end hereof duly executed by the Holder, to
the Company at its principal office.
(b) The Holder may make payment of the Purchase Price (as such
may be adjusted as provided herein) in respect of the exercise of this Warrant
as follows:
(i) Cash Exercise. By payment to the Company of the
Purchase Price in cash or official bank check;
(ii) Notes Exercise. By surrender to the Company of any
of the Notes issued pursuant to the Securities
Purchase Agreement as of the date hereof, with all
such Notes or other Obligations of the Company so
surrendered being credited against the Purchase
Price in an amount equal to the principal amount
thereof plus the amount of any accrued unpaid
interest thereon to the date of such surrender;
(iii) Securities Exercise. By delivery to the Company of
any other securities issued by the Company, with
such securities being credited against the Purchase
Price in an amount equal to the Fair Market Value
thereof;
(iv) Net Issue Exercise. By an election to receive
shares of the Company's Common Stock, without
payment of additional cash consideration in an
amount equal to the number of shares as to which
this Warrant is so exercised, less the number of
shares having a Fair Market Value on the date of
exercise equal to the aggregate Purchase Price then
in effect for the number of shares as to which this
Warrant is so exercised;
(v) Combined Payment Method. By satisfaction of the
Purchase Price for each share being acquired in any
combination of the methods described in sections
(i) through (iv);
provided that, irrespective of the form of payment, the amount paid therefor
must be equal to the aggregate Purchase Price of the Common Stock being
purchased pursuant to such exercise.
(c) In the event of the purchase of less than all of the shares
of Common Stock purchasable under this Warrant, the Company shall execute and
deliver a replacement Warrant of like tenor for the balance of the shares of
Common Stock purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this
Warrant shall be issued as soon as practicable after the exercise of this
Warrant in accordance with Section 2 hereof, but in no event later than 10 days
after the date of delivery to the Company of this
4
<PAGE> 140
Warrant for exercise, without charge to the Holder, including, without
limitation, any tax that may be payable in respect thereof, and such
certificates shall be issued and registered in the name of, or, subject to
Section 1.1, in such names as may be directed by, the Holder; provided, however,
that the Company shall not be required to pay any income tax to which the Holder
may be subject in connection with the issuance of this Warrant or the shares of
Common Stock upon exercise of this Warrant; provided, further, that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a name
other than that of the Holder and the Company shall not be required to issue or
deliver such certificate unless or until the person or persons requesting the
issuance thereof shall have paid to the Company for payment by it of the amount
of such tax or shall have established to the satisfaction of the Company that
such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at
any time or from time to time, the number of shares of Common Stock outstanding
is increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would have received if (A) this Warrant had
been exercised into Common Stock on the date of such event and (B) it had
thereafter retained such securities and all rights and distributions relating to
them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event, the
Holder of this Warrant shall have the right thereafter to convert its Warrant
Shares into the kind and amount of shares of stock and other securities and
Assets receivable upon such reorganization, reclassification, or other change.
If, at any time or from time to time, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date for such combination, the Purchase Price
shall appropriately increase and the number of Warrant Shares shall be
appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time or from
time to time after the date hereof, the Company issues shares of Common Stock
for a price per share less than the then applicable Purchase Price per share
(other than for Exempt Issuances (as hereinafter defined)) ("Lower Price"), on
the date such additional shares are issued, the Purchase Price shall be reduced
to such Lower Price. This subsection does not apply to (the "Exempt Issuances")
(i) any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of
5
<PAGE> 141
subsection (b) or the issuance of Common Stock upon the exercise of such rights
described therein, (ii) the issuance by the Company's or any of its
Subsidiaries' of preferred stock issued in lieu of cash dividends on the
preferred stock as provided for under the terms of the applicable designations
or provisions of the Company's certificate of incorporation on the date hereof,
(iii) upon the exercise of rights under securities issued before the date hereof
to convert, exchange or exercise such securities into shares of Common Stock,
(iv) the issuance of shares of Common Stock upon the exercise of rights or
warrants issued by the Company prior to the date hereof, or (v) the issuance of
shares of Common Stock upon the exercise of options granted, either prior to the
date hereof or in the future, to employees and directors of the Company pursuant
to employee benefit plans or employee stock option plans available for grants to
the Company's executives in general.
(b) Adjustment for Convertible Securities Issue. If at any
time after the date hereof, the Company issues any securities convertible,
exchangeable or exercisable into shares of Common Stock for a price per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities less than the then applicable Purchase Price per share (other than
for Exempt Derivatives (as hereinafter defined)) (a "Lower Payment"), on the
date of issuance of such securities, the Purchase Price shall be reduced to such
Lower Payment.
This subsection does not apply to (the "Exempt Derivatives") to
(i) any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of subsection (a) or (ii) the rights, warrants or options described in
Section 5(a)(iv) and (v).
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of like
tenor.
7. Accelerated Expiration of Warrants. Notwithstanding anything in this
Warrant to the contrary, this Warrant and the terms and provisions hereunder
shall immediately expire without further action by the Company or the Holder (a)
upon the closing of an underwritten public offering pursuant to an effective
registration statement on Form S-1 or successor form under the Securities Act
covering the offering and sale of Common Stock for the account of the Company at
a per share price of at least $9.00 (as currently configured) in which the
aggregate proceeds (net of offering expenses and underwriters' discounts or
commissions) received by the Company equals or exceeds $10,000,000 (an "Initial
Public Offering") (provided that the Company shall have given notice of the
initial filing of such registration statement promptly after the date of such
filing); or (b) on the day prior to the effective date of any Extraordinary
Transaction.
6
<PAGE> 142
8. Notices.
8.1 Notices for Adjustments under Section 4 and Section 5.
In the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or Assets, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Capital Stock of the Company or the
occurrence of any Extraordinary Transaction; or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company; or
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities (other than the issuance of Warrant Shares); or
(e) any action by the Company pursuant to Section 5(a) or
(b); then, and in each such event, the Company will send to the Holders a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, Extraordinary Transaction,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other Assets
deliverable on such reorganization, reclassification, recapitalization,
Extraordinary Transaction, dissolution, liquidation or winding up, and (iii) the
amount and character of any stock or other securities, or rights or options with
respect thereto, proposed to be issued or granted, the date of such proposed
issue or grant the persons or class of persons to whom such proposed issue or
grant is to be offered or made, and the consideration to be received by the
Company therefor.
All notices to be given pursuant to subsection (a) of this Section 8.1
shall be sent at least fifteen (15) days prior to the record date of such events
described therein, and in any event at least twenty-five (25) days prior to the
actual event. All notices to be given pursuant to subsections (b) through (d) of
this Section 8.1 shall be sent at least thirty (30) days prior to the record
date of such events described therein.
7
<PAGE> 143
8.2 Other Notices.
(a) In the event of an Initial Public Offering, the Company will
send a notice of the initial filing of the registration statement for the
Initial Public Offering. Any notice to be given pursuant to this Section 8.2(a)
shall be sent the date of such filing.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, or mailed by
certified or registered mail, return receipt requested, or nationwide overnight
delivery service (with charges prepaid) as follows:
(i) if to the Company or any Subsidiary, at Intracel
Corporation, 2005 NW Sammamish Road, Suite 107,
Issaquah, Washington 98027, Attn: Chief Executive
Officer, Fax Number (425) 392-2992, Confirm Number
(425) 557-1894, with a copy to Joseph W. Bartlett,
Esq., Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, NY 10104, Fax Number (212)
468-7900, Confirm Number (212) 468-8240; and
(ii) if to the Holders, at their respective addresses
set forth on Schedule 2.1 to the Securities
Purchase Agreement, with a copy to Karen Weidemann,
Esq., Reboul, MacMurry, Hewitt, Maynard & Kristol,
45 Rockefeller Plaza, New York, New York 10111, Fax
Number (212) 841-5725, Confirm Number (212)
841-5781.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered when delivered in person, or three days
after mailing by mail or one day after delivery to an overnight express service
for next day delivery, as the case may be.
9. Consent to Amendments. This Agreement may not be amended or modified
and no provisions hereof may be waived, without the written consent of the
Company, each Subsidiary and each Holder. However, this Agreement may be
amended, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company shall
obtain the written consent to such amendment, action or omission to act, of the
Required Holders, except that, without the prior written consent of one hundred
percent (100%) of the Holders, no amendment to this Agreement shall change the
Expiration Time of this Warrant, the Purchaes Price of this Warrant or the
number of shares issuable hereunder or change the percentage specified in the
definition of Required Holders or consent to the assignment or transfer by the
Company or any of its Subsidiaries of their respective rights and obligations
under this Agreement or the Ancillary Agreements. Each Holder of the Warrants
shall be bound by any consent authorized by this Section 9 whether or not such
Warrant shall have been marked to indicate such consent, but any Warrants issued
thereafter may bear notation referring to any such consent. Any amendment or
waiver of any provision of any Warrant shall be effective only for the purposes
and period of time expressly set forth therein and shall not entitle the Company
to any other waiver or amendment in similar or other circumstances. No
8
<PAGE> 144
course of dealing between the Company and any Holder of any Warrant, nor any
failure to exercise or any delay in exercising on the part of the holder of any
Warrant any right, remedy, power or privilege under any Warrant shall or operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege under any Warrant preclude any other right, remedy,
power or privilege. The rights, remedies, powers and privileges under the
Warrants are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by Law. As used herein and in the Warrants, the term "this
Agreement and the Ancillary Agreements" and references thereto shall mean this
Agreement and the Ancillary Agreements as they may from time to time be amended
or supplemented.
10. Governing Law; Submission to Jurisdiction. This Warrant shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as permitted by Section 5-401 of the New York General Obligations Law
(or any similar successor provision) without giving effect to any choice of law
rule that would cause the application of the laws of any jurisdiction other than
the State of New York. The Company hereby irrevocably and unconditionally:
(a) submits itself and its properties in any legal action or
proceeding relating to this Agreement and the Ancillary Agreements to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to it
at its address set forth in or determined pursuant to Section 8.2 or at
such other address of which the Holders shall have been notified
pursuant thereto;
(d) waives, to the maximum extent not prohibited by Law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this Section 10 any punitive or exemplary damages and any
damages which are not proximately caused by or the reasonably
foreseeable result of the breach which is the subject of such action or
proceeding.
The Company hereby acknowledges that:
(e) it has been advised by counsel in the negotiation, execution
and delivery of this Warrant, the Securities Purchase Agreement and the
Ancillary Agreements;
9
<PAGE> 145
(f) the Holders do not have any fiduciary relationship with or duty
to the Company arising out of or in connection with this Agreement, or
the Ancillary Agreements; and
(g) no joint venture or partnership exists between the Holders, on
the one hand, and the Company, on the other hand, and the relationship
of the Company and the Holders is that of, inter alia, debtor and
creditor.
THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE
ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
11. Stock to be Reserved. The Company will, at all times reserve and
keep available out of its authorized Common Stock or its treasury shares solely
for the purpose of issue upon the exercise of this Warrant as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Company covenants that all shares of Common Stock
which shall be so issued shall be duly and validly issued and fully paid and
nonassesable and free from all taxes, Liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the Company
covenants that it will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Purchase Price. The Company will take
all such action as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable Law, or any
requirements of any national securities exchange upon which the Common Stock of
the Company may be listed. The Company will not take any action which results in
any adjustment of the Purchase Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation. The Company has not granted and will not
grant any right of first refusal with respect to shares issuable upon exercise
of this Warrant, and there are no preemptive rights associated with such shares.
12. Issue Tax. The issuance of certificates for shares of Common Stock
upon exercise of the Warrants shall be made without charge to the Holder of such
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of the Warrant.
10
<PAGE> 146
13. Miscellaneous. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Warrant is being executed as an instrument under seal. All nouns and
pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
14. Expiration. This Warrant shall expire, and be without further force
and effect, at 5:00 P.M., New York time, on August 25, 2003.
[see attached signature page]
11
<PAGE> 147
Date: August 25, 1998 INTRACEL CORPORATION
(Corporate Seal) By: /s/ SIMON R. McKENZIE
------------------------------------
Simon R. McKenzie, President and
Chief Executive Officer
12
<PAGE> 148
FORM OF SUBSCRIPTION
(To be signed upon exercise of Warrant)
To Intracel Corporation:
The undersigned, pursuant to the provisions of the Warrant issued by
Intracel Corporation and amended on August 25, 1998 and held by the undersigned,
hereby subscribes for and purchases at the price per share provided in such
Warrant __________ shares of Common Stock issuable upon exercise of such
Warrant, and
(i) makes cash payment herewith in an amount equal to
[__%] of the aggregate purchase price therefor;
(ii) surrenders to the Company its Notes due __________
or such other promissory notes or other obligations
issued by the Company, in accordance with Section
2(b)(ii) of such Warrant, as payment herewith in an
amount equal to [__%] of the aggregate purchase
price therefor;
(iii) delivers to the Company other securities issued by
the Company, in accordance with Section 2(b)(iii)
of such Warrant, as payment herewith in an amount
equal to [__%] of the aggregate purchase price
therefor; and/or
(iv) elects Net Issue Exercise as provided in Section
2(b)(iv) of such Warrant as to an amount equal to
[__%] of the aggregate purchase price therefor.
The combination of (i) through (iv) above shall equal 100%
of the purchase price of the shares being issued upon
exercise of the Warrant.
Dated:
-----------------------------------------------
(Name must conform in all respects to name of
holder as specified on the face of the Warrant)
HOLDER:
By:
-------------------------------------------
Name:
Title:
Address:
<PAGE> 149
EXHIBIT B-4
AMENDED AND RESTATED SERIES III WARRANT
<PAGE> 150
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
AMENDED AND RESTATED SERIES A-III COMMON STOCK WARRANT
Void after Right to purchase 47,722
August 25, 2003 shares of Common Stock
(subject to adjustment)
of Intracel Corporation
No. A-III-2
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Northstar High Yield Fund (the "Holder") or
its registered assigns, is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time before 5:00 P.M. New
York time, on August 25, 2003 (or such earlier date as provided in Section 7
hereof) (the "Expiration Time"),up to Forty Seven Thousand Seven Hundred
Twenty-Two (47,722) fully paid and nonassessable shares of the Company's Common
Stock, $.0001 par value per share, at a purchase price per share of $7.00 (the
"Purchase Price"). The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein.
This Amended and Restated Warrant (this "Warrant") amends, as of August
25, 1998 the warrant issued on June 11, 1996 pursuant to a Note and Warrant
Purchase Agreement dated as of June 11, 1996, a copy of which is on file at the
principal office of the Company. This Warrant has been amended and restated in
accordance with the terms of a certain Securities Purchase Agreement, dated as
of August 25, 1998, between, among other parties, the Company and the Holder, a
copy of which is on file at the principal office of the Company (the "Securities
Purchase Agreement"). This Warrant was not issued as part of any unit. As used
herein, all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Securities Purchase Agreement.
This warrant is subject to the rights and obligations set forth in that
certain Registration Rights Agreement dated as of August 25, 1998, between,
among other parties, the Company and the Holder, a copy of which is on file at
the principal office of the Company (the "Registration Rights Agreement.")
<PAGE> 151
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"Affiliate" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Assets" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Common Stock" means the Company's common stock, $.0001 par
value per share, in existence on the date of this Warrant, or any class or
classes (however designated) replacing such Common Stock as a result of any
recapitalization, reorganization or other reclassification of the Company's
capital stock which affects the holders of Common Stock.
"Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the
Company with or the merger of the Company into any other corporation or entity
(other than a merger in which the Company is the continuing entity) or the sale
or transfer of all or substantially all of the Assets of the Company to another
person or entity.
"Fair Market Value" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Initial Public Offering" means an underwritten public offering
pursuant to an effective registration statement on Form S-1 or successor form
under the Securities Act covering the offering and sale of Common Stock for the
account of the Company with an aggregate purchase price of at least $40,000,000
and aggregate net proceeds to the Company of at least $35,000,000.
"Qualified Institutional Buyer" means shall have the meaning
specified in Rule 144A of the Securities Act.
"Required Holders" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"Securities and Exchange Commission" or "Commission" refers to
the Securities and Exchange Commission or any other Federal agency then
administering the Securities Act.
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
1. Restricted Stock.
1.1 This Warrant and all rights hereunder may not be transferred
by the Holder unless (i) the transferee is an Affiliate of the Holder; or (ii)
the transferee is a Qualified Institutional Buyer or an Accredited Investor,
and, after giving effect to the transfer, the aggregate unpaid principal amount
of all Notes then held by the Holder and its Affiliates, exceeds $10,000,000, or
(iii) the Company gives its prior written consent to the transfer, which consent
will not be unreasonably withheld.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or exchange,
and in the case of an exercise of this Warrant if the Warrant Shares to be
issued thereupon are not registered pursuant to the Securities Act, the Company
may require a written statement that such Warrant or Warrant Shares, as the case
may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at the
time of exercise such Warrant Shares are registered under the Securities Act,
bear a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
2. Exercise of Warrant.
(a) The Holder may exercise this Warrant in whole or in part (but
not as to fractional shares of Common Stock) by delivering this Warrant prior to
the Expiration Time,
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with the form of subscription at the end hereof duly executed by the Holder, to
the Company at its principal office.
(b) The Holder may make payment of the Purchase Price (as such
may be adjusted as provided herein) in respect of the exercise of this Warrant
as follows:
(i) Cash Exercise. By payment to the Company of the
Purchase Price in cash or official bank check;
(ii) Notes Exercise. By surrender to the Company of any
of the Notes issued pursuant to the Securities
Purchase Agreement as of the date hereof, with all
such Notes or other Obligations of the Company so
surrendered being credited against the Purchase
Price in an amount equal to the principal amount
thereof plus the amount of any accrued unpaid
interest thereon to the date of such surrender;
(iii) Securities Exercise. By delivery to the Company of
any other securities issued by the Company, with
such securities being credited against the Purchase
Price in an amount equal to the Fair Market Value
thereof;
(iv) Net Issue Exercise. By an election to receive
shares of the Company's Common Stock, without
payment of additional cash consideration in an
amount equal to the number of shares as to which
this Warrant is so exercised, less the number of
shares having a Fair Market Value on the date of
exercise equal to the aggregate Purchase Price then
in effect for the number of shares as to which this
Warrant is so exercised;
(v) Combined Payment Method. By satisfaction of the
Purchase Price for each share being acquired in any
combination of the methods described in sections
(i) through (iv);
provided that, irrespective of the form of payment, the amount paid therefor
must be equal to the aggregate Purchase Price of the Common Stock being
purchased pursuant to such exercise.
(c) In the event of the purchase of less than all of the shares
of Common Stock purchasable under this Warrant, the Company shall execute and
deliver a replacement Warrant of like tenor for the balance of the shares of
Common Stock purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this
Warrant shall be issued as soon as practicable after the exercise of this
Warrant in accordance with Section 2 hereof, but in no event later than 10 days
after the date of delivery to the Company of this
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<PAGE> 154
Warrant for exercise, without charge to the Holder, including, without
limitation, any tax that may be payable in respect thereof, and such
certificates shall be issued and registered in the name of, or, subject to
Section 1.1, in such names as may be directed by, the Holder; provided, however,
that the Company shall not be required to pay any income tax to which the Holder
may be subject in connection with the issuance of this Warrant or the shares of
Common Stock upon exercise of this Warrant; provided, further, that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a name
other than that of the Holder and the Company shall not be required to issue or
deliver such certificate unless or until the person or persons requesting the
issuance thereof shall have paid to the Company for payment by it of the amount
of such tax or shall have established to the satisfaction of the Company that
such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at
any time or from time to time, the number of shares of Common Stock outstanding
is increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would have received if (A) this Warrant had
been exercised into Common Stock on the date of such event and (B) it had
thereafter retained such securities and all rights and distributions relating to
them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event, the
Holder of this Warrant shall have the right thereafter to convert its Warrant
Shares into the kind and amount of shares of stock and other securities and
Assets receivable upon such reorganization, reclassification, or other change.
If, at any time or from time to time, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date for such combination, the Purchase Price
shall appropriately increase and the number of Warrant Shares shall be
appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time or from
time to time after the date hereof, the Company issues shares of Common Stock
for a price per share less than the then applicable Purchase Price per share
(other than for Exempt Issuances (as hereinafter defined)) ("Lower Price"), on
the date such additional shares are issued, the Purchase Price shall be reduced
to such Lower Price. This subsection does not apply to (the "Exempt Issuances")
(i) any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of
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subsection (b) or the issuance of Common Stock upon the exercise of such rights
described therein, (ii) the issuance by the Company's or any of its
Subsidiaries' of preferred stock issued in lieu of cash dividends on the
preferred stock as provided for under the terms of the applicable designations
or provisions of the Company's certificate of incorporation on the date hereof,
(iii) upon the exercise of rights under securities issued before the date hereof
to convert, exchange or exercise such securities into shares of Common Stock,
(iv) the issuance of shares of Common Stock upon the exercise of rights or
warrants issued by the Company prior to the date hereof, or (v) the issuance of
shares of Common Stock upon the exercise of options granted, either prior to the
date hereof or in the future, to employees and directors of the Company pursuant
to employee benefit plans or employee stock option plans available for grants to
the Company's executives in general.
(b) Adjustment for Convertible Securities Issue. If at any
time after the date hereof, the Company issues any securities convertible,
exchangeable or exercisable into shares of Common Stock for a price per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities less than the then applicable Purchase Price per share (other than
for Exempt Derivatives (as hereinafter defined)) (a "Lower Payment"), on the
date of issuance of such securities, the Purchase Price shall be reduced to such
Lower Payment.
This subsection does not apply to (the "Exempt Derivatives") to
(i) any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of subsection (a) or (ii) the rights, warrants or options described in
Section 5(a)(iv) and (v).
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of like
tenor.
7. Accelerated Expiration of Warrants. Notwithstanding anything in this
Warrant to the contrary, this Warrant and the terms and provisions hereunder
shall immediately expire without further action by the Company or the Holder (a)
upon the closing of an underwritten public offering pursuant to an effective
registration statement on Form S-1 or successor form under the Securities Act
covering the offering and sale of Common Stock for the account of the Company at
a per share price of at least $9.00 (as currently configured) in which the
aggregate proceeds (net of offering expenses and underwriters' discounts or
commissions) received by the Company equals or exceeds $10,000,000 (an "Initial
Public Offering") (provided that the Company shall have given notice of the
initial filing of such registration statement promptly after the date of such
filing); or (b) on the day prior to the effective date of any Extraordinary
Transaction.
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<PAGE> 156
8. Notices.
8.1 Notices for Adjustments under Section 4 and Section 5.
In the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or Assets, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Capital Stock of the Company or the
occurrence of any Extraordinary Transaction; or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company; or
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities (other than the issuance of Warrant Shares); or
(e) any action by the Company pursuant to Section 5(a) or
(b); then, and in each such event, the Company will send to the Holders a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, Extraordinary Transaction,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other Assets
deliverable on such reorganization, reclassification, recapitalization,
Extraordinary Transaction, dissolution, liquidation or winding up, and (iii) the
amount and character of any stock or other securities, or rights or options with
respect thereto, proposed to be issued or granted, the date of such proposed
issue or grant the persons or class of persons to whom such proposed issue or
grant is to be offered or made, and the consideration to be received by the
Company therefor.
All notices to be given pursuant to subsection (a) of this Section 8.1
shall be sent at least fifteen (15) days prior to the record date of such events
described therein, and in any event at least twenty-five (25) days prior to the
actual event. All notices to be given pursuant to subsections (b) through (d) of
this Section 8.1 shall be sent at least thirty (30) days prior to the record
date of such events described therein.
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<PAGE> 157
8.2 Other Notices.
(a) In the event of an Initial Public Offering, the Company will
send a notice of the initial filing of the registration statement for the
Initial Public Offering. Any notice to be given pursuant to this Section 8.2(a)
shall be sent the date of such filing.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, or mailed by
certified or registered mail, return receipt requested, or nationwide overnight
delivery service (with charges prepaid) as follows:
(i) if to the Company or any Subsidiary, at Intracel
Corporation, 2005 NW Sammamish Road, Suite 107,
Issaquah, Washington 98027, Attn: Chief Executive
Officer, Fax Number (425) 392-2992, Confirm Number
(425) 557-1894, with a copy to Joseph W. Bartlett,
Esq., Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, NY 10104, Fax Number (212)
468-7900, Confirm Number (212) 468-8240; and
(ii) if to the Holders, at their respective addresses
set forth on Schedule 2.1 to the Securities
Purchase Agreement, with a copy to Karen Weidemann,
Esq., Reboul, MacMurry, Hewitt, Maynard & Kristol,
45 Rockefeller Plaza, New York, New York 10111, Fax
Number (212) 841-5725, Confirm Number (212)
841-5781.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered when delivered in person, or three days
after mailing by mail or one day after delivery to an overnight express service
for next day delivery, as the case may be.
9. Consent to Amendments. This Agreement may not be amended or modified
and no provisions hereof may be waived, without the written consent of the
Company, each Subsidiary and each Holder. However, this Agreement may be
amended, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company shall
obtain the written consent to such amendment, action or omission to act, of the
Required Holders, except that, without the prior written consent of one hundred
percent (100%) of the Holders, no amendment to this Agreement shall change the
Expiration Time of this Warrant, the Purchaes Price of this Warrant or the
number of shares issuable hereunder or change the percentage specified in the
definition of Required Holders or consent to the assignment or transfer by the
Company or any of its Subsidiaries of their respective rights and obligations
under this Agreement or the Ancillary Agreements. Each Holder of the Warrants
shall be bound by any consent authorized by this Section 9 whether or not such
Warrant shall have been marked to indicate such consent, but any Warrants issued
thereafter may bear notation referring to any such consent. Any amendment or
waiver of any provision of any Warrant shall be effective only for the purposes
and period of time expressly set forth therein and shall not entitle the Company
to any other waiver or amendment in similar or other circumstances. No
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<PAGE> 158
course of dealing between the Company and any Holder of any Warrant, nor any
failure to exercise or any delay in exercising on the part of the holder of any
Warrant any right, remedy, power or privilege under any Warrant shall or operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege under any Warrant preclude any other right, remedy,
power or privilege. The rights, remedies, powers and privileges under the
Warrants are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by Law. As used herein and in the Warrants, the term "this
Agreement and the Ancillary Agreements" and references thereto shall mean this
Agreement and the Ancillary Agreements as they may from time to time be amended
or supplemented.
10. Governing Law; Submission to Jurisdiction. This Warrant shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as permitted by Section 5-401 of the New York General Obligations Law
(or any similar successor provision) without giving effect to any choice of law
rule that would cause the application of the laws of any jurisdiction other than
the State of New York. The Company hereby irrevocably and unconditionally:
(a) submits itself and its properties in any legal action or
proceeding relating to this Agreement and the Ancillary Agreements to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to it
at its address set forth in or determined pursuant to Section 8.2 or at
such other address of which the Holders shall have been notified
pursuant thereto;
(d) waives, to the maximum extent not prohibited by Law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this Section 10 any punitive or exemplary damages and any
damages which are not proximately caused by or the reasonably
foreseeable result of the breach which is the subject of such action or
proceeding.
The Company hereby acknowledges that:
(e) it has been advised by counsel in the negotiation, execution
and delivery of this Warrant, the Securities Purchase Agreement and the
Ancillary Agreements;
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<PAGE> 159
(f) the Holders do not have any fiduciary relationship with or duty
to the Company arising out of or in connection with this Agreement, or
the Ancillary Agreements; and
(g) no joint venture or partnership exists between the Holders, on
the one hand, and the Company, on the other hand, and the relationship
of the Company and the Holders is that of, inter alia, debtor and
creditor.
THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE
ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
11. Stock to be Reserved. The Company will, at all times reserve and
keep available out of its authorized Common Stock or its treasury shares solely
for the purpose of issue upon the exercise of this Warrant as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Company covenants that all shares of Common Stock
which shall be so issued shall be duly and validly issued and fully paid and
nonassesable and free from all taxes, Liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the Company
covenants that it will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Purchase Price. The Company will take
all such action as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable Law, or any
requirements of any national securities exchange upon which the Common Stock of
the Company may be listed. The Company will not take any action which results in
any adjustment of the Purchase Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation. The Company has not granted and will not
grant any right of first refusal with respect to shares issuable upon exercise
of this Warrant, and there are no preemptive rights associated with such shares.
12. Issue Tax. The issuance of certificates for shares of Common Stock
upon exercise of the Warrants shall be made without charge to the Holder of such
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of the Warrant.
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<PAGE> 160
13. Miscellaneous. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Warrant is being executed as an instrument under seal. All nouns and
pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
14. Expiration. This Warrant shall expire, and be without further force
and effect, at 5:00 P.M., New York time, on August 25, 2003.
[see attached signature page]
11
<PAGE> 161
Date: August 25, 1998 INTRACEL CORPORATION
(Corporate Seal) By: /s/ SIMON R. McKENZIE
------------------------------------
Simon R. McKenzie, President and
Chief Executive Officer
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<PAGE> 162
FORM OF SUBSCRIPTION
(To be signed upon exercise of Warrant)
To Intracel Corporation:
The undersigned, pursuant to the provisions of the Warrant issued by
Intracel Corporation and amended on August 25, 1998 and held by the undersigned,
hereby subscribes for and purchases at the price per share provided in such
Warrant __________ shares of Common Stock issuable upon exercise of such
Warrant, and
(i) makes cash payment herewith in an amount equal to
[__%] of the aggregate purchase price therefor;
(ii) surrenders to the Company its Notes due __________
or such other promissory notes or other obligations
issued by the Company, in accordance with Section
2(b)(ii) of such Warrant, as payment herewith in an
amount equal to [__%] of the aggregate purchase
price therefor;
(iii) delivers to the Company other securities issued by
the Company, in accordance with Section 2(b)(iii)
of such Warrant, as payment herewith in an amount
equal to [__%] of the aggregate purchase price
therefor; and/or
(iv) elects Net Issue Exercise as provided in Section
2(b)(iv) of such Warrant as to an amount equal to
[__%] of the aggregate purchase price therefor.
The combination of (i) through (iv) above shall equal 100%
of the purchase price of the shares being issued upon
exercise of the Warrant.
Dated:
-----------------------------------------------
(Name must conform in all respects to name of
holder as specified on the face of the Warrant)
HOLDER:
By:
--------------------------------------------
Name:
Title:
Address:
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<PAGE> 163
EXHIBIT B-5
AMENDED AND RESTATED SERIES V WARRANT
<PAGE> 164
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
AMENDED AND RESTATED SERIES A-V COMMON STOCK WARRANT
Void after Right to purchase 49,066
August 25, 2003 shares of Common Stock
(subject to adjustment)
of Intracel Corporation
No. A-V-1
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Northstar High Yield Fund (the "Holder") or
its registered assigns, is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time before 5:00 P.M. New
York time, on August 25, 2003 (the "Expiration Time"), up to Forty Nine Thousand
Sixty-Six (49,066) fully paid and nonassessable shares of the Company's Common
Stock, $.0001 par value per share, at a purchase price per share of $7.64 (the
"Purchase Price"). The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein.
This Amended and Restated Warrant (this "Warrant") amends, as of August
25, 1998, the warrant issued on April 1, 1998 pursuant to a Note and Warrant
Purchase Agreement dated as of April 1, 1998, a copy of which is on file at the
principal office of the Company. This Warrant has been amended and restated in
accordance with the terms of a certain Securities Purchase Agreement, dated as
of August 25, 1998, between, among other parties, the Company and the Holder, a
copy of which is on file at the principal office of the Company (the "Securities
Purchase Agreement"). This Warrant was not issued as part of any unit. As used
herein, all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Securities Purchase Agreement.
This warrant is subject to the rights and obligations set forth in that
certain Registration Rights Agreement dated as of August 25, 1998, between,
among other parties, the Company and the Holder, a copy of which is on file at
the principal office of the Company (the "Registration Rights Agreement.")
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
<PAGE> 165
"Accredited Investor" has the meaning set forth in Rule
501 of Regulation D promulgated under the Securities Act.
"Affiliate" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Assets" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Common Stock" means the Company's common stock, $.0001
par value per share, in existence on the date of this Warrant, or any class or
classes (however designated) replacing such Common Stock as a result of any
recapitalization, reorganization or other reclassification of the Company's
capital stock which affects the holders of Common Stock.
"Company" includes any corporation which shall succeed to
or assume the obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the
Company with or the merger of the Company into any other corporation or entity
(other than a merger in which the Company is the continuing entity) or the sale
or transfer of all or substantially all of the Assets of the Company to another
person or entity.
"Fair Market Value" has the meaning specified in Section
1.1 of the Securities Purchase Agreement.
"Initial Public Offering" means an underwritten public
offering pursuant to an effective registration statement on Form S-1 or
successor form under the Securities Act covering the offering and sale of Common
Stock for the account of the Company with an aggregate purchase price of at
least $40,000,000 and aggregate net proceeds to the Company of at least
$35,000,000.
"Qualified Institutional Buyer" means shall have the
meaning specified in Rule 144A of the Securities Act.
"Required Holders" has the meaning specified in Section
1.1 of the Securities Purchase Agreement.
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities and Exchange Commission" or "Commission"
refers to the Securities and Exchange Commission or any other Federal agency
then administering the Securities Act.
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"Warrant Shares" means the Common Stock issued or issuable
upon exercise of this Warrant.
1. Restricted Stock.
1.1 This Warrant and all rights hereunder may not be transferred
by the Holder unless (i) the transferee is an Affiliate of the Holder; or (ii)
the transferee is a Qualified Institutional Buyer or an Accredited Investor,
and, after giving effect to the transfer, the aggregate unpaid principal amount
of all Notes then held by the Holder and its Affiliates, exceeds $10,000,000, or
(iii) the Company gives its prior written consent to the transfer, which consent
will not be unreasonably withheld.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or exchange,
and in the case of an exercise of this Warrant if the Warrant Shares to be
issued thereupon are not registered pursuant to the Securities Act, the Company
may require a written statement that such Warrant or Warrant Shares, as the case
may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of Law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at the
time of exercise such Warrant Shares are registered under the Securities Act,
bear a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
2. Exercise of Warrant.
(a) The Holder may exercise this Warrant in whole or in part (but
not as to fractional shares of Common Stock) by delivering this Warrant prior to
the Expiration Time, with the form of subscription at the end hereof duly
executed by the Holder, to the Company at its principal office.
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(b) The Holder may make payment of the Purchase Price (as such
may be adjusted as provided herein) in respect of the exercise of this Warrant
as follows:
(i) Cash Exercise. By payment to the Company of the
Purchase Price in cash or official bank check;
(ii) Notes Exercise. By surrender to the Company of any
of the Notes issued pursuant to the Securities
Purchase Agreement as of the date hereof, with all
such Notes or other Obligations of the Company so
surrendered being credited against the Purchase
Price in an amount equal to the principal amount
thereof plus the amount of any accrued unpaid
interest thereon to the date of such surrender;
(iii) Securities Exercise. By delivery to the Company of
any other securities issued by the Company, with
such securities being credited against the Purchase
Price in an amount equal to the Fair Market Value
thereof;
(iv) Net Issue Exercise. By an election to receive
shares of the Company's Common Stock, without
payment of additional cash consideration in an
amount equal to the number of shares as to which
this Warrant is so exercised, less the number of
shares having a Fair Market Value on the date of
exercise equal to the aggregate Purchase Price then
in effect for the number of shares as to which this
Warrant is so exercised;
(v) Combined Payment Method. By satisfaction of the
Purchase Price for each share being acquired in any
combination of the methods described in sections
(i) through (iv);
provided that, irrespective of the form of payment, the amount paid therefor
must be equal to the aggregate Purchase Price of the Common Stock being
purchased pursuant to such exercise.
(c) In the event of the purchase of less than all of the shares
of Common Stock purchasable under this Warrant, the Company shall execute and
deliver a replacement Warrant of like tenor for the balance of the shares of
Common Stock purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this
Warrant shall be issued as soon as practicable after the exercise of this
Warrant in accordance with Section 2 hereof, but in no event later than 10 days
after the date of delivery to the Company of this Warrant for exercise, without
charge to the Holder, including, without limitation, any tax that may be payable
in respect thereof, and such certificates shall be issued and registered in the
name of, or, subject to Section 1.1, in such names as may be directed by, the
Holder; provided,
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however, that the Company shall not be required to pay any income tax to which
the Holder may be subject in connection with the issuance of this Warrant or the
shares of Common Stock upon exercise of this Warrant; provided, further, that
the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificate unless or until the person or persons
requesting the issuance thereof shall have paid to the Company for payment by it
of the amount of such tax or shall have established to the satisfaction of the
Company that such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at
any time or from time to time, the number of shares of Common Stock outstanding
is increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would have received if (A) this Warrant had
been exercised into Common Stock on the date of such event and (B) it had
thereafter retained such securities and all rights and distributions relating to
them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event, the
Holder of this Warrant shall have the right thereafter to convert its Warrant
Shares into the kind and amount of shares of stock and other securities and
Assets receivable upon such reorganization, reclassification, or other change.
If, at any time or from time to time, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date for such combination, the Purchase Price
shall appropriately increase and the number of Warrant Shares shall be
appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time or from
time to time after the date hereof, the Company issues shares of Common Stock
for a price per share less than the then applicable Purchase Price per share
(other than for Exempt Issuances (as hereinafter defined)) ("Lower Price"), on
the date such additional shares are issued, the Purchase Price shall be reduced
to such Lower Price. This subsection does not apply to (the "Exempt Issuances")
(i) any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of subsection (b) or the issuance of Common Stock upon the exercise of
such rights described therein, (ii) the issuance by the Company or any of its
Subsidiaries of preferred stock issued in lieu of cash dividends on the
preferred stock as provided for under the terms of the applicable
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designations or provisions of the Company's certificate of incorporation on the
date hereof, (iii) upon the exercise of rights under securities issued before
the date hereof to convert, exchange or exercise such securities into shares of
Common Stock, (iv) the issuance of shares of Common Stock upon the exercise of
rights or warrants issued by the Company prior to the date hereof, or (v) the
issuance of shares of Common Stock upon the exercise of options granted, either
prior to the date hereof or in the future, to employees and directors of the
Company pursuant to employee benefit plans or employee stock option plans
available for grants to the Company's executives in general.
(b) Adjustment for Convertible Securities Issue. If at any
time after the date hereof, the Company issues any securities convertible,
exchangeable or exercisable into shares of Common Stock for a price per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities less than the then applicable Purchase Price per share (other than
for Exempt Derivatives (as hereinafter defined)) (a "Lower Payment"), on the
date of issuance of such securities, the Purchase Price shall be reduced to such
Lower Payment.
This subsection does not apply to (the "Exempt Derivatives") (i) any of
the transactions described in Sections 4.1 and 4.2 and the first paragraph of
subsection (a) or (ii) the rights, warrants or options described in Section
5(a)(iv) and (v).
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of like
tenor.
7. Notices.
7.1 Notices for Adjustments under Section 4 and Section 5.
In the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or Assets, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Capital Stock of the Company or the
occurrence of any Extraordinary Transaction; or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company; or
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<PAGE> 170
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities (other than the issuance of Warrant Shares); or
(e) any action by the Company pursuant to Section 5(a) or
(b); then, and in each such event, the Company will send to the Holders, a
notice specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date on which any
such reorganization, reclassification, recapitalization, Extraordinary
Transaction, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other Assets deliverable on such reorganization, reclassification,
recapitalization, Extraordinary Transaction, dissolution, liquidation or winding
up, and (iii) the amount and character of any stock or other securities, or
rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant the persons or class of persons to whom
such proposed issue or grant is to be offered or made, and the consideration to
be received by the Company therefor.
All notices to be given pursuant to subsection (a) of this Section 7.1
shall be sent at least fifteen (15) days prior to the record date of such events
described therein, and in any event at least twenty-five (25) days prior to the
actual event. All notices to be given pursuant to subsections (b) through (d) of
this Section 7.1 shall be sent at least thirty (30) days prior to the record
date of such events described therein.
7.2 Other Notices. (a) In the event of an Initial Public
Offering, the Company will send a notice of the initial filing of the
registration statement for the Initial Public Offering. Any notice to be given
pursuant to this Section 7.2(a) shall be sent on the date of such filing.
(b) All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
or mailed by certified or registered mail, return receipt requested, or
nationwide overnight delivery service (with charges prepaid) as follows:
(i) if to the Company or any Subsidiary, at Intracel
Corporation, 2005 NW Sammamish Road, Suite 107,
Issaquah, Washington 98027, Attn: Chief Executive
Officer, Fax Number (425) 392-2992, Confirm Number
(425) 557-1894, with a copy to Joseph W. Bartlett,
Esq., Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, NY 10104, Fax Number (212)
468-7900, Confirm Number (212) 468-8240; and
(ii) if to the Holders, at their respective addresses
set forth on Schedule 2.1 to the Securities
Purchase Agreement, with a copy to Karen Weidemann,
Esq., Reboul, MacMurry, Hewitt, Maynard &
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Kristol, 45 Rockefeller Plaza, New York, New
York 10111, Fax Number (212) 841-5725, Confirm
Number (212) 841-5781.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered when delivered in person, or three days
after mailing by mail or one day after delivery to an overnight express service
for next day delivery, as the case may be.
8. Consent to Amendments. This Agreement may not be amended or modified
and no provisions hereof may be waived, without the written consent of the
Company and each Holder. However, this Agreement may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holders, except
that, without the prior written consent of one hundred percent (100%) of the
Holders, no amendment to this Agreement shall change the Expiration Time of this
Warrant, the Purchase Price of this Warrant or the number of shares issuable
hereunder or change the percentage specified in the definition of Required
Holders or consent to the assignment or transfer by the Company of its rights
and obligations under this Agreement or the Ancillary Agreements. Each Holder of
the Warrants shall be bound by any consent authorized by this Section 8 whether
or not such Warrant shall have been marked to indicate such consent, but any
Warrants issued thereafter may bear notation referring to any such consent. Any
amendment or waiver of any provision of any Warrant shall be effective only for
the purposes and period of time expressly set forth therein and shall not
entitle the Company to any other waiver or amendment in similar or other
circumstances. No course of dealing between the Company and any Holder of any
Warrant, nor any failure to exercise or any delay in exercising on the part of
the holder of any Warrant any right, remedy, power or privilege under any
Warrant shall or operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under any Warrant preclude any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges under the Warrants are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by Law. As used herein and in the
Warrants, the term "this Agreement and the Ancillary Agreements" and references
thereto shall mean this Agreement and the Ancillary Agreements as they may from
time to time be amended or supplemented.
9. Governing Law; Submission to Jurisdiction. This Warrant shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as permitted by Section 5-401 of the New York General Obligations Law
(or any similar successor provision) without giving effect to any choice of law
rule that would cause the application of the laws of any jurisdiction other than
the State of New York. The Company hereby irrevocably and unconditionally:
(a) submits itself and its properties in any legal action or
proceeding relating to this Agreement and the Ancillary Agreements to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the general jurisdiction of the Courts of the
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State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to it
at its address set forth in or determined pursuant to Section 7.2 or at
such other address of which the Holders shall have been notified
pursuant thereto;
(d) waives, to the maximum extent not prohibited by Law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this Section 9 any punitive or exemplary damages and any
damages which are not proximately caused by or the reasonably
foreseeable result of the breach which is the subject of such action or
proceeding.
The Company hereby acknowledges that:
(e) it has been advised by counsel in the negotiation, execution
and delivery of this Warrant, the Securities Purchase Agreement and the
Ancillary Agreements;
(f) the Holders do not have any fiduciary relationship with or duty
to the Company arising out of or in connection with this Agreement, or
the Ancillary Agreements; and
(g) no joint venture or partnership exists between the Holders, on
the one hand, and the Company, on the other hand, and the relationship
of the Company and the Holders is that of, inter alia, debtor and
creditor.
THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE
ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
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10. Stock to be Reserved. The Company will, at all times reserve and
keep available out of its authorized Common Stock or its treasury shares solely
for the purpose of issue upon the exercise of this Warrant as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Company covenants that all shares of Common Stock
which shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, Liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the Company
covenants that it will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Purchase Price. The Company will take
all such action as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable Law, or any
requirements of any national securities exchange upon which the Common Stock of
the Company may be listed. The Company will not take any action which results in
any adjustment of the Purchase Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation. The Company has not granted and will not
grant any right of first refusal with respect to shares issuable upon exercise
of this Warrant, and there are no preemptive rights associated with such shares.
11. Issue Tax. The issuance of certificates for shares of Common Stock
upon exercise of the Warrants shall be made without charge to the Holder of such
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of the Warrant.
12. Miscellaneous. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Warrant is being executed as an instrument under seal. All nouns and
pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
13. Expiration. This Warrant shall expire, and be without further force
and effect, at 5:00 P.M., New York time, on August 25, 2003.
[see attached signature page]
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<PAGE> 174
Dated: August 25, 1998 INTRACEL CORPORATION
(Corporate Seal) By: /s/ SIMON R. McKENZIE
-----------------------------------
Simon R. McKenzie, Chief
Executive Officer
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<PAGE> 175
FORM OF SUBSCRIPTION
(To be signed upon exercise of Warrant)
To Intracel Corporation:
The undersigned, pursuant to the provisions of the Warrant issued by
Intracel Corporation and amended on August 25, 1998 and held by the undersigned,
hereby subscribes for and purchases at the price per share provided in such
Warrant __________ shares of Common Stock issuable upon exercise of such
Warrant, and
(i) makes cash payment herewith in an amount equal to
[___%] of the aggregate purchase price therefor;
(ii) surrenders to the Company its Notes due __________
or such other promissory notes or other obligations
issued by the Company, in accordance with Section
2(b)(ii) of such Warrant, as payment herewith in an
amount equal to [___%] of the aggregate purchase
price therefor;
(iii) delivers to the Company other securities issued by
the Company, in accordance with Section 2(b)(iii)
of such Warrant, as payment herewith in an amount
equal to [___%] of the aggregate purchase price
therefor; and/or
(iv) elects Net Issue Exercise as provided in Section
2(b)(iv) of such Warrant as to an amount equal to
[___%] of the aggregate purchase price therefor.
The combination of (i) through (iv) above shall equal 100%
of the purchase price of the shares being issued upon
exercise of the Warrant.
Dated:
-----------------------------------------------
(Name must conform in all respects to name of
holder as specified on the face of the Warrant)
HOLDER:
By:
--------------------------------------------
Name:
Title:
Address:
<PAGE> 176
EXHIBIT B-6
AMENDED AND RESTATED SERIES V WARRANT
<PAGE> 177
THIS SECURITY HAS NOT BEEN RESTRICTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSE
OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
AMENDED AND RESTATED SERIES A-V COMMON STOCK WARRANT
----------------------------------------------------
Void after Right to purchase 49,066
August 25, 2003 shares of Common Stock
(subject to adjustment)
of Intracel Corporation
No. A-V-2
INTRACEL CORPORATION
Common Stock Warrant
Intracel Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Northstar High Total Return Fund II (the
"Holder") or its registered assigns, is entitled, subject to the terms set
forth below, to purchase from the Company at any time or from time to time
before 5:00 P.M. New York time, on August 25, 2003 (the "Expiration Time"), up
to Forty Nine Thousand Sixty-Six (49,066) fully paid and nonassessable shares
of the Company's Common Stock, $.0001 par value per share, at a purchase price
per share of $7.64 (the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Amended and Restated Warrant (this "Warrant") amends, as of August
25, 1998, the warrant issued on April 1, 1998 pursuant to a Note and Warrant
Purchase Agreement dated as of April 1, 1998, a copy of which is on file at the
principal office of the Company. This Warrant has been amended and restated in
accordance with the terms of a certain Securities Purchase Agreement, dated as
of August 25, 1998, between, and among other parties, the Company and the
Holder, a copy of which is on file at the principal office of the Company (the
"Securities Purchase Agreement"). This Warrant was not issued as part of any
unit. As used herein, all capitalized terms not otherwise defined herein shall
have the meanings set forth in the Securities Purchase Agreement.
This warrant is subject to the rights and obligations set forth in that
certain Registration Rights Agreement dated as of August 25, 1998, between,
among other parties, the Company and the Holder, a copy of which is on file at
the principal office of the Company (the "Registration Rights Agreement.")
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
<PAGE> 178
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"Affiliate" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Assets" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Common Stock" means the Company's common stock, $.0001 par value per
share, in existence on the date of this Warrant, or any class or classes
(however designated) replacing such Common Stock as a result of any
recapitalization, reorganization or other reclassification of the Company's
capital stock which affects the holders of Common Stock.
"Company" includes any corporation which shall succeed to or assume the
obligations of the Company hereunder.
"Extraordinary Transaction" means any consolidation of the Company with
or the merger of the Company into any other corporation or entity (other than a
merger in which the Company is the continuing entity) or the sale or transfer
of all or substantially all of the Assets of the Company to another person or
entity.
"Fair Market Value" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Initial Public Offering" means as underwritten public offering
pursuant to an effective registration statement on Form S-1 or successor form
under the Securities Act covering the offering and sale of Common Stock for the
account of the Company with an aggregate purchase price of at least $40,000,000
and aggregate net proceeds to the Company of at least $35,000,000.
"Qualified Institutional Buyer" means shall have the meaning specified
in Rule 144A of the Securities Act.
"Required Holders" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Securities Act" means the Securities Act of 1933, or any successor
Federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
"Securities and Exchange Commission" or "commission" refers to the
Securities and Exchange Commission or any other Federal agency then
administering the Securities Act.
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<PAGE> 179
"Warrant Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
1. RESTRICTED STOCK.
1.1 This Warrant and all rights hereunder may not be
transferred by the Holder unless (i) the transferee is an Affiliate of the
Holder; or (ii) the transferee is a Qualified Institutional Buyer or an
Accredited Investor, and, after giving effect to the transfer, the aggregate
unpaid principal amount of all Notes then held by the Holder and its
Affiliates, exceeds $10,000,000, or (iii) the Company gives its prior written
consent to the transfer, which consent will not be unreasonably withheld.
1.2 If, at the time of any transfer or exchange pursuant to
Section 1.1 (other than a transfer or exchange not involving a change in the
beneficial ownership of this Warrant) of this Warrant or Warrant Shares, such
Warrant or Warrant Shares shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such transfer or exchange, that
the Holder or transferee of such Warrant or Warrant Shares, as the case may be,
furnish to the Company an opinion of counsel reasonably acceptable to the
Company or a "no action" or similar letter from the Securities and Exchange
Commission to the effect that such transfer or exchange may be made without
registration under the Securities Act. In the case of such transfer or
exchange, and in the case of an exercise of this Warrant if the Warrant Shares
to be issued thereupon are not registered pursuant to the Securities Act, the
Company may require a written statement that such Warrant or Warrant Shares, as
the case may be, are being acquired for investment and not with a view to the
distribution thereof (subject, however, to any requirement of Law that the
disposition thereof shall at all times be within the control of such Holder or
transferee, as the case may be).
1.3 Certificates evidencing Warrant Shares shall, unless at
the time of exercise such Warrant Shares are registered under the Securities
Act, bear a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS IT HAS BEEN REGISTERED UNDER THAT
ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE."
2. EXERCISE OF WARRANT
(a) The Holder may exercise this Warrant in whole or in
part (but not as to fractional shares of Common Stock) by delivering this
Warrant prior to the Expiration Time, with the form of subscription at the end
hereof duly executed by the Holder, to the Company at its principal office,
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(b) The Holder may make payment of the Purchase Price (as such may
be adjusted as provided herein) in respect of the exercise of this Warrant as
follows:
(i) Cash Exercise. By payment to the Company of the Purchase
Price in cash or official bank check;
(ii) Notes Exercise. By surrender to the Company of any of the
Notes issued pursuant to the Securities Purchase
Agreement as of the date hereof, with all such Notes or
other Obligations of the Company so surrendered being
credited against the Purchase Price in an amount equal to
the principal amount thereof plus the amount of any
accrued unpaid interest thereon to the date of such
surrender;
(iii) Securities Exercise. By delivery to the Company of any
other securities issued by the Company, with such
securities being credited against the Purchase Price in
an amount equal to the Fair Market Value thereof;
(iv) Net Issue Exercise. By an election to receive shares of
the Company's Common Stock, without payment of additional
cash consideration in an amount equal to the number of
shares as to which this Warrant is so exercised, less the
number of shares having a Fair Market Value on the date
of exercise equal to the aggregate Purchase Price then in
effect for the number of shares as to which this Warrant
is so exercised;
(v) Combined Payment Method. By satisfaction of the Purchase
Price for each share being acquired in any combination of
the methods described in sections (i) through (iv);
provided that, irrespective of the form of payment, the amount paid therefor
must be equal to the aggregate Purchase Price of the Common Stock being
purchased pursuant to such exercise.
(c) In the event of the purchase of less than all of the shares of
Common Stock purchasable under this Warrant, the Company shall execute and
deliver a replacement Warrant of like tenor for the balance of the shares of
Common Stock purchasable thereunder.
3. Delivery of Stock Certificates on Exercise.
Certificates for shares of Common Stock purchased under this Warrant
shall be issued as soon as practicable after the exercise of this Warrant in
accordance with Section 2 hereof, but in no event later than 10 days after the
date of delivery to the Company of this Warrant for exercise, without charge to
the Holder, including, without limitation, any tax that may be payable in
respect thereof, and such certificates shall be issued and registered in the
name of, or, subject to Section 1.1, in such names as may be directed by, the
Holder; provided,
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however, that the Company shall not be required to pay any income tax to which
the Holder may be subject in connection with the issuance of this Warrant or
the shares of Common Stock upon exercise of this Warrant; provided, further,
that the Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificate in a name other than that of the Holder and the Company shall not
be required to issue or deliver such certificate unless or until the person or
persons requesting the issuance thereof shall have paid to the Company for
payment by it of the amount of such tax or shall have established to the
satisfaction of the Company that such taxes have been paid.
4. Adjustments to Warrants.
4.1 Adjustment for Certain Dividends and Distributions. If, at any
time or from time to time, the number of shares of Common Stock outstanding is
increased (i) by a stock dividend payable in shares of Common Stock or in any
other security exchangeable for or convertible into Common Stock or (ii) by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split-up, provision shall be made so that
the Holder of this Warrant shall receive upon exercise thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Company that it would have received if (A) this Warrant had
been exercised into Common Stock on the date of such event and (B) it had
thereafter retained such securities and all rights and distributions relating to
them.
4.2 Adjustment for Capital Reorganization, Reclassification,
Exchange, or Substitution. If Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, then and in each such event,
the Holder of this Warrant shall have the right thereafter to convert its
Warrant Shares into the kind and amount of shares of stock and other securities
and Assets receivable upon such reorganization, reclassification, or other
change. If, at any time or from time to time, the number of shares of Common
Stock outstanding is decreased by a combination of the outstanding shares of
Common stock, then, following the record date for such combination, the
Purchase Price shall appropriately increase and the number of Warrant Shares
shall be appropriately decreased.
5. Anti-Dilution Adjustment.
(a) Adjustment for Common Stock Issue. If at any time or from time
to time after the date hereof, the Company issues shares of Common stock for a
price per share less than the then applicable Purchase Price per share (other
than for Exempt Issuances (as hereinafter defined)) ("Lower Price"), on the date
such additional shares are issued, the Purchase Price shall be reduced to such
Lower Price. This subsection does not apply to (the "Exempt Issuances") (i) any
of the transactions described in Sections 4.1 and 4.2 and the first paragraph of
subsection (b) or the issuance of Common Stock upon the exercise of such rights
described therein, (ii) the issuance by the Company or any of its Subsidiaries
of preferred stock issued in lieu of cash dividends on the preferred stock as
provided for under the terms of the applicable
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designations or provisions of the Company's certificate of incorporation on the
date hereof, (iii) upon the exercise of rights under securities issued before
the date hereof to convert, exchange or exercise such securities into shares
Common Stock, (iv) the issuance of shares of Common Stock upon exercise of
rights or warrants issued by the Company prior to the date hereof, or (v) the
issuance of shares of Common Stock upon the exercise of options granted, either
prior to the date hereof or in the future, to employees and directors of the
Company pursuant to employee benefit plans or employee stock option plans
available for grants to the Company's executives in general.
(b) Adjustment for Convertible Securities Issue. If at any
time after the date hereof, the Company issues any securities convertible,
exchangeable or exercisable into shares of Common Stock for a price per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities less than the then applicable Purchase Price per share (other than
for Exempt Derivatives (as hereinafter defined)) (a "Lower Payment"), on the
date of issuance of such securities, the Purchase Price shall be reduced to such
Lower Payment.
This subsection does not apply to (the "Exempt Derivatives") (i)
any of the transactions described in Sections 4.1 and 4.2 and the first
paragraph of subsection (a) or (ii) the rights, warrants or options described
in Section 5(a)(iv) and (v).
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on delivery and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a replacement Warrant of
like tenor.
7. Notices.
7.1 Notices for Adjustments under Section 4 and Section 5. In the
event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or Assets, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Capital Stock of the Company or the
occurrence of any Extraordinary Transaction; or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company; or
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(d) any proposed issue or grant by the Company of any shares of stock of
any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issuance of Warrant Shares); or
(e) any action by the Company pursuant to Section 5(a) or (b);
then, and in each such event, the Company will send to the Holders, a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character
of such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, Extraordinary Transaction,
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
Assets deliverable on such reorganization, reclassification, recapitalization,
Extraordinary Transaction, dissolution, liquidation or winding up, and (iii)
the amount and character of any stock or other securities, or rights or options
with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant the persons or class of persons to whom such proposed
issue or grant is to be offered or made, and the consideration to be received
by the Company therefor.
All notices to be given pursuant to subsection (a) of this Section 7.1
shall be sent at least fifteen (15) days prior to the record date of such
events described therein, and in any event at least twenty-five (25) days prior
to the actual event. All notices to be given pursuant to subsections (b)
through (d) of this Section 7.1 shall be sent at least thirty (30) days prior
to the record date of such events described therein.
7.2 Other Notices. (a) In the event of an Initial Public Offering, the
Company will send a notice of the initial filing of the registration statement
for the Initial Public Offering. Any notice to be given pursuant to this
Section 7.2(a) shall be sent on the date of such filing.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered in person, or mailed by certified or
registered mail, return receipt requested, or nationwide overnight delivery
service (with charges prepaid) as follows:
(i) if to the Company or any Subsidiary, at Intracel Corporation,
2005 NW Sammamish Road, Suite 107, Issaquah, Washington 98027,
Attn: Chief Executive Officer, Fax Number (425) 392-2992,
Confirm Number (425) 557-1894, with a copy to Joseph W.
Bartlett, Esq., Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, NY 10104, Fax Number (212) 468-7900,
Confirm Number (212) 468-8240; and
(ii) if to the Holders, at their respective addresses set forth on
Schedule 2.1 to the Securities Purchase Agreement, with a copy
to Karen Weidemann, Esq., Reboul, MacMurry, Hewitt, Maynard &
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Kristol, 45 Rockefeller Plaza, New York, New York 10111, Fax
Number (212) 841-5725, Confirm Number (212) 841-5781.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered when delivered in person, or three days
after mailing by mail or one day after delivery to an overnight express service
for next day delivery, as the case may be.
8. Consent to Amendments. This Agreement may not be amended or
modified and no provisions hereof may be waived, without the written consent of
the Company and each Holder. However, this Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Required Holders,
except that, without the prior written consent of one hundred percent (100%) of
the Holders, no amendment to this Agreement shall change the Expiration Time of
this Warrant, the Purchase Price of this Warrant or the number of shares
issuable hereunder or change the percentage specified in the definition of
Required Holders or consent to the assignment or transfer by the Company of its
rights and obligations under this Agreement or the Ancillary Agreements. Each
Holder of the Warrants shall be bound by any consent authorized by this Section
8 whether or not such Warrant shall have been marked to indicate such consent,
but any Warrants issued thereafter may bear notation referring to any such
consent. Any amendment or waiver of any provision of any Warrant shall be
effective only for the purposes and period of time expressly set forth therein
and shall not entitle the Company to any other waiver or amendment in similar or
other circumstances. No course of dealing between the Company and any Holder of
any Warrant, nor any failure to exercise or any delay in exercising on the part
of the holder of any Warrant any right, remedy, power or privilege under any
Warrant shall or operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under any Warrant preclude
any other right, remedy, power or privilege. The rights, remedies, powers and
privileges under the Warrants are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by Law. As used herein and in the
Warrants, the term "this Agreement and the Ancillary Agreements" and
references thereto shall mean this Agreement and the Ancillary Agreements as
they may from time to time be amended or supplemented.
9. Governing Law; Submission to Jurisdiction. This Warrant shall be
construed in accordance with, and governed by, the internal laws of the State
of New York as permitted by Section 5-401 of the New York General Obligations
Law (or any similar successor provision) without giving effect to any choice of
law rule that would cause the application of the laws of any jurisdiction other
than the State of New York. The Company hereby irrevocably and unconditionally:
(a) submits itself and its properties in any legal action or
proceeding relating to this Agreement and the Ancillary Agreements to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the general jurisdiction of the Courts of the
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State of New York, the courts of the United States of America for the Southern
District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any obligation that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to it at its
address set forth in or determined pursuant to Section 7.2 or at such other
address of which the Holders shall have been notified pursuant thereto;
(d) waives, to the maximum extent not prohibited by Law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 9 any punitive or exemplary damages and any damages which
are not proximately caused by or the reasonably foreseeable result of the
breach which is subject of such action or proceeding.
The Company hereby acknowledges that:
(e) it has been advised by counsel in the negotiation, execution and
delivery of this Warrant, the Securities Purchase Agreement and the
Ancillary Agreements;
(f) the Holders do not have any fiduciary relationship with or duty
to the Company arising out of or in connection with this Agreement, or the
Ancillary Agreements; and
(g) no joint venture or partnership exists between the Holders, on
the one hand, and the Company, on the other hand, and the relationship of
the Company and the Holders is that of, inter alia, debtor and creditor.
THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE
ANCILLARY AGREEMENTS AND FOR ANY COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
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10. Stock to be Reserved. The Company will, at all times reserve
and keep available out of its authorized Common Stock or its treasury shares
solely for the purpose of issue upon the exercise of this Warrant as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the exercise of this Warrant. The Company covenants that all shares of Common
Stock which shall be so issued shall be duly and validly issued and fully paid
and nonassessable and free from all taxes, Liens and charges with respect to
the issue thereof, and without limiting the generality of the foregoing, the
Company covenants that it will from time to time take all such action as may be
requisite to assure that the par value per share of the Common Stock is all at
all times equal to or less than the effective Purchase Price. The Company will
take all such action as may be necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable Law, or any
requirements of any national securities exchange upon which the Common Stock of
the Company may be listed. The Company will not take any action which results
in any adjustment of the Purchase Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation. The Company has not granted and will not
grant any right of first refusal with respect to shares issuable upon exercise
of this Warrant, and there are no preemptive rights associated with such shares.
11. Issue Tax. The issuance of certificates for shares of Common
Stock upon exercise of the Warrants shall be made without charge to the Holder
of such Warrant for any issuance tax in respect thereof provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the Holder of the Warrant.
12. Miscellaneous. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms
hereof. This Warrant is being executed as an instrument under seal. All nouns
and pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
13. Expiration. This Warrant shall expire, and be without further
force and effect, at 5:00 P.M., New York time, on August 25, 2003.
[see attached signature page]
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Dated: August 25, 1998 INTRACEL CORPORATION
(Corporate Seal) By: /s/ SIMON R. MCKENZIE
--------------------------------
Simon R. McKenzie, President and
Chief Executive Officer
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FORM OF SUBSCRIPTION
(To be signed upon exercise of Warrant)
To Intracel Corporation:
The undersigned, pursuant to the provisions of the Warrant issued by
Intracel Corporation and amended on August 25, 1998 and held by the
undersigned, hereby subscribes for and purchases at the price per share
provided in such Warrant ______ shares of Common Stock issuable upon exercise
of such Warrant, and
(i) makes cash payment herewith in an amount equal to [___%] of
the aggregate purchase price therefor;
(ii) surrenders to the Company its Notes due __________ or such
other promissory notes or other obligations issued by the
Company, in accordance with Section 2(b)(ii) of such Warrant,
as payment herewith in an amount equal to [____%] of the
aggregate purchase price therefor;
(iii) delivers to the Company other securities issued by the
Company, in accordance with Section 2(b)(iii) of such Warrant,
as payment herewith in an amount equal to [____%] of the
aggregate purchase price therefor; and/or
(iv) elects Net Issue Exercise as provided in Section 2(b)(iv) of
such Warrant as to an amount equal to [____%] of the aggregate
purchase price therefor.
The combination of (i) through (iv) above shall equal 100% of the
purchase price of the shares being issued upon exercise of the
Warrant.
Dated: ______________________________________________
(Name must conform in all respects to name of
holder as specified on the face of the Warrant)
HOLDER:
By: _________________________________________
Name:
Title:
Address:
<PAGE> 189
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
<PAGE> 190
EXHIBIT 4.3
INTRACEL CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of August 25, 1998, by and among Intracel
Corporation, a Delaware corporation (the "Company"), and the persons and
entities listed on the signature pages hereof (the "Holders"), who are (a)
holders of the Company's Series A-VI Common Stock Warrants (the "Series A-VI
Warrants") to purchase the Company's Common Stock, par value $.0001 per share
("Common Stock"); (b) holders of the Company's Amended and Restated Series A-V
Common Stock Warrants (the "Series A-V Warrants"); (c) holders of the Company's
Amended and Restated Series A-II Common Stock Warrants (the "Series A-II
Warrants"); (d) holders of certain Amended and Restated Series A-III Warrants
(the "Series A-III Warrants") and (e) holders of an aggregate of 381,296 shares
of the Company's Common Stock ("Existing Common Stock") and 259,568 shares of
Series A-1 Preferred Stock which is convertible into shares of the Company's
Common Stock. ("Existing Preferred Stock").
PREAMBLE
The Company desires to extend registration rights to the Holders of the
Warrants.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the Company and the Holders agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission, or any other Federal agency at the time administering the Securities
Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Holders" shall have the meaning set forth in the
preamble.
(d) "Initiating Holders" shall mean any Holder or Holders who
initiate a registration pursuant to the terms of this Agreement.
(e) "Register," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registrable Securities.
<PAGE> 191
(f) "Registrable Securities" shall mean all of the following
to the extent the same have not been sold to the public: (i) any and all shares
of Common Stock of the Company issuable upon exercise of the Series A-II
Warrants, the Series A-V Warrants, the Series A-VI Warrants and the Series A-III
Warrants; (ii) Existing Common Stock and shares issuable upon conversion of
Existing Preferred Stock, or (iii) stock issued in respect of securities
referred to in (i) or (ii) above in any reorganization; or (iv) stock issued in
respect of the securities referred to in (i), (ii) or (iii) as a result of a
stock split, stock dividend, recapitalization or combination or upon the
exercise of any rights, options, warrants or similar rights to purchase any
Common Stock. Notwithstanding the foregoing, Registrable Securities shall not
include otherwise Registrable Securities (i) sold by a person in a transaction
in which his rights under this Agreement are not properly assigned; or (ii) (A)
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction, (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale or
(C) the registration rights associated with such securities have been terminated
pursuant to Section 12 of this Agreement.
(g) "Rule 144" shall mean Rule 144 under the Securities Act or
any successor or similar rule as may be enacted by the Commission from time to
time, but shall not include Rule 144A.
(h) "Rule 144A" shall mean Rule 144A under the Securities Act
or any successor or similar rule as may be enacted by the Commission from time
to time, but shall not include Rule 144.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(j) "Warrants" shall mean collectively, the Series A-II
Warrants, the Series A-V Warrants, the Series A-VI Warrants and the Series A-III
Warrants.
As used herein, all capitalized terms not otherwise defined herein
shall have the meanings set forth in the Securities Purchase Agreement.
Section 2. Demand Registration.
(a) If the Company shall receive from Initiating Holders a
written request that the Company effect any registration with respect to not
less than 20% of the shares of Common Stock which are Registrable Securities,
the Company shall:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable use its best efforts to
register (including, without limitation, the execution of an
undertaking to file post-effective amendments and
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any other governmental requirements) all Registrable Securities which
the Initiating Holders request to be registered within twenty (20) days
after receipt of such written notice from the Company; provided, that
the Company shall not be obligated to file a registration statement
pursuant to this Section 2(a):
(A) prior to the date which is 180 days from
the date the Company consummates its initial offering of
Common Stock to the public pursuant to a registration
statement filed under the Securities Act, which offering
requires such Common Stock to become registered under the
Exchange Act; provided however that, in the event the Company
receives a written request pursuant hereto to effect a
registration prior to the date which is six (6) months from
the date of the consummation of the Company's initial public
offering, the Company shall prepare the registration statement
covering the Registrable Securities so that it may be filed as
soon as practicable upon the expiration of such six (6) month
period;
(B) in any particular state in which the
Company would be required to execute a general consent to
service of process in effecting such registration;
(C) within 120 days following the effective
date of any registered offering of the Company's securities to
the general public in which the Holders of Registrable
Securities shall have been able effectively to register all
Registrable Securities as to which registration shall have
been requested;
(D) in any registration having an aggregate
offering price (before deduction of underwriting discounts and
expenses of sale) of less than $5.0 million; or
(E) after the Company has effected one such
registration pursuant to this Section 2(a).
Subject to the foregoing clauses (A) through (E), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders and shall use reasonable best efforts to have such
registration statement promptly declared effective by the Commission whether or
not all Registrable Securities requested to be registered can be included;
provided, however, that if the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its shareholders for such registration statement to be filed
within such ninety-day (90-day) period and it is therefore essential to defer
the filing of such registration statement, the Company shall have an additional
period of not more than ninety (90) days after the expiration of the initial
ninety-day (90-day) period within which to file such registration statement;
provided, that (i) during such time the Company may not file a registration
statement for securities to be issued and sold for its own account and (ii) the
Company shall not utilize this right more than once in any twelve (12) month
period. Notwithstanding anything to the contrary contained herein, the
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obligation of the Company under this Section 2(a) shall be deemed satisfied only
when a registration statement covering all Registrable Securities specified in
notices received as aforesaid, for sale in accordance with the method of
disposition specified by the Required Holders, shall have become effective and,
if such method of disposition is a firm commitment underwritten public offering,
all such Registrable Securities shall have been sold pursuant thereto.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request. In such event, the
Company shall include such information in the written notice referred to in
subsection 2(a)(i). If so requested in writing by the Company, the Initiating
Holders shall negotiate with an underwriter selected by the Company with regard
to the underwriting of such requested registration. The right of any Holder to
registration pursuant to Section 2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 2(a), if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the securities
of the Company held by directors, officers or employees and by shareholders
other than the Initiating Holders shall be excluded from such registration pro
rata (based on the number of securities each wishes to so register) to the
extent so required by such limitation, and if a limitation of the number of
shares is still required, then the managing underwriter may limit the number of
Registrable Securities to be included in the registration, provided that no such
reduction may reduce the securities being offered by the Holders to less than
twenty-five percent (25%) of the total securities requested to be included in
such registration and underwriting, allocated pro rata among the Initiating
Holders based on the number of Registrable Securities otherwise requested to be
included in such registration (and, in event such reduction results in less than
twenty-five percent (25%) of the total securities requested to be included in
such underwriting actually being included, such registration shall be cancelled
and shall not count as a registration request under this Section 2). If any
Holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter.
(c) In addition to all other rights of the Holders set forth
herein, the Company shall be obligated to, without any prior demand from the
Holders, file a Registration Statement to register the Registrable Securities
and use its best efforts to cause such Registration Statement to become
effective as soon as practicable following 180 days after the Company
consummates its initial offering of Common Stock to the public.
Section 3. Piggyback Registration.
(a) If at any time, or from time to time, the Company shall
determine to register any of its securities for its own account or the account
of any of its shareholders, other than a registration relating solely to
employee benefit plans, or a registration relating solely to an
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SEC Rule 145 transaction, a transaction relating solely to the sale of debt or
convertible debt instruments or a registration on any form (other than Form S-1,
S-2 or S-3, or their successor forms) which does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(i) give to each Holder written notice thereof as
soon as practicable prior to filing the registration statement; and
(ii) include in such registration and in any
underwriting involved therein, all the Registrable Securities specified
in a written request or requests, made within fifteen (15) days after
receipt of such written notice from the Company, by any Holder or
Holders, except as set forth in subsection (b) below.
(b) If the registration is for a registered public offering
involving an underwriting, the Company shall so advise the Holders as a part of
the written notice given pursuant to subsection 3(a)(i). In such event, the
right of any Holder to registration pursuant to Section 3 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
3, if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the number of Registrable Securities to be included in the
registration and underwriting and the number of Registrable Securities to be
included in such offering shall be reduced to zero before any reduction in any
securities to be offered by the Company on its own behalf. The Company shall so
advise all Holders and the other Holders distributing their securities through
such underwriting pursuant to piggy-back registration rights similar to this
Section 3, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among all Holders (and any other selling shareholders), pro rata, as
nearly as practicable, based on the numbers of Registrable Securities and other
shares held by selling shareholders, each such party wishes to register pursuant
to this Section 3. If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. If, by the withdrawal of such Registrable
Securities, a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the limit imposed by the underwriters),
the Company shall offer to all Holders who have included Registrable Securities
in the registration the right to include additional Registrable Securities. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
Section 4. Form S-3. The Company shall use its best efforts to qualify
for registration on Form S-3 or its successor form. After the Company has
qualified for the use of Form S-3, Initiating Holders shall have the right at
any time to request registrations on Form S-3
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(such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended method of disposition
of shares by such Initiating Holders), subject to the following:
(a) The Company shall not be required to file a registration
statement pursuant to this Section 4 within ninety (90) days of the effective
date of any registration referred to in Sections 2 and 3 above;
(b) The Company shall not be required to file a registration
statement pursuant to this Section 4 unless the Initiating Holder or Holders
requesting registration propose to dispose of shares of Registrable Securities
having an aggregate disposition price (before deduction of underwriting
discounts and expenses of sale) of at least $250,000; and
(c) The Company shall not be required to file more than two
(2) registration statements pursuant to this Section 4 within any twelve (12)
month period.
The Company shall give written notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this Section
4 and shall provide a reasonable opportunity for other Holders to participate in
the registration; provided, that if the registration is for an underwritten
offering, the right of any Holder to registration pursuant to Section 4 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other Holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 4, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting. The Company
shall so advise all Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among the Holders and any other selling shareholders pro rata, as
nearly as practicable, based on the number of Registrable Securities and shares
held by selling shareholders, such Holder and any selling shareholders wish to
include in a registration pursuant to this Section 4. If any Holder disapproves
of the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. If, by the withdrawal of such
Registrable Securities, a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the limit imposed by the
underwriters), the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the limitation
as set forth above. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. Registrations effected
pursuant to this Section 4 shall not be counted as requests for registration
pursuant to Section 2.
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Section 5. Expenses of Registration. In addition to the fees and
expenses contemplated by Section 6 hereof, all expenses incurred in connection
with one registration pursuant to Section 2 hereof, and all registrations
pursuant to Sections 3 and 4 hereof, including without limitation all
registration, filing and qualification fees, printing expenses, fees and
disbursements of counsel for the Company and expenses of any special audits of
the Company's financial statements incidental to or required by such
registration, shall be borne by the Company, except that the Company shall not
be required to pay underwriters' fees, discounts or commissions relating to
Registrable Securities or fees of legal counsel for the Holders.
Section 6. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder participating therein advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense the Company will:
(a) keep such registration pursuant to Sections 2, 3 or 4
continuously effective until the date on which the Holder or Holders have
completed the distribution described in the registration statement relating
thereto;
(b) promptly prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act; and to keep such registration statement effective for
that period of time specified in Section 6(a) above;
(c) furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(d) use reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of a registration statement, or the
lifting of any suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction, at the earliest possible moment;
(e) subject to Section 2(a)(ii)(B), register or qualify such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions as any Holder or underwriter reasonably requires, and keep
such registration or qualification effective during the period set forth in
Section 6(a) above;
(f) cause all Registrable Securities covered by such
registrations to be listed on each securities exchange, including NASDAQ, on
which similar securities issued by the Company are then listed;
(g) cause its accountants to issue to the underwriter, if any,
or the Holders, if there is no underwriter, comfort letters and updates thereof,
in customary form and covering matters of the type customarily covered in such
letters with respect to underwritten offerings;
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<PAGE> 197
(h) cause its counsel to issue to the underwriter, if any, or
to the Holders, if there is no underwriter, opinions in customary form and
covering matters of the type customarily covered in such opinions with respect
to underwritten offerings;
(i) enter into such customary agreements (including
underwriting agreements in customary form);
(j) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(k) immediately notify each Holder, at any time a prospectus
covered by such registration statement is required to be delivered under the
Securities Act, of the happening of any event of which it has knowledge 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 a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; and
(l) take such other actions as shall be reasonably requested
by any Holder.
For purposes of Sections 2, 6(a) and 6(b) above, the period of
distribution of Registrable Securities in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Registrable Securities in any other registration shall be deemed to extend
until the earlier of the sale of all Registrable Securities covered thereby and
six (6) months after the effective date thereof.
Section 7. Indemnification.
(a) In the event of a registration, qualification or
compliance of any of the Registrable Securities under the Securities Act
pursuant to Sections 2, 3 or 4, the Company will indemnify and hold harmless
each Holder of such Registrable Securities thereunder, each underwriter of such
Registrable Securities thereunder and each other person, if any, who controls
such Holder or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such Holder,
underwriter or controlling person may become subject under the Securities Act,
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 Registrable Securities was registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, any offering circular or other offering document 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
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<PAGE> 198
statements therein not misleading, or any violation by the Company of any rule
or regulation promulgated under the Securities Act or any state securities law
or rule or regulation promulgated under the Securities Act or any state
securities law applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any
reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action; provided, that, not withstanding the foregoing, the Company will not be
liable in any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder or underwriter specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold
harmless the Company, each of its directors and officers, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company and each underwriter within the meaning of the
Securities Act, and each other Holder, each of such other Holder's officers,
directors and partners and each person controlling such other Holder, against
all claims, losses, expenses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other offering document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other offering document in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder specifically for use therein; provided, however, the total amount for
which any Holder, its officers, directors and partners, and any person
controlling such Holder, shall be liable under this Section 7(b) shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of shares sold
by such Holder under such registration statement bears to the total public
offering price of all securities sold thereunder but not to exceed, in any
event, the aggregate proceeds received by such Holder from the sale of
Registrable Securities sold by such Holder in such registration, qualification
or compliance.
(c) Each party entitled to indemnification under this Section
7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the
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Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, unless such failure resulted in
actual detriment to the Indemnifying Party. The Indemnifying Party shall not be
liable to indemnify any Indemnified Party for any settlement of any such action
effected without the Indemnifying Party's consent. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that the
provisions on indemnification contained in the underwriting agreements entered
into among the selling Holders, the Company and the underwriters in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall be controlling as
to the Registrable Securities included in the public offering.
(e) If the indemnification provided for in this Section 7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Holder shall be obligated to
contribute pursuant to this Section 7(e) shall be limited to an amount equal to
the proceeds to such Holder of the Registrable Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute.
(f) The indemnification provided by this Section 7 shall be a
continuing right to indemnification and shall survive the registration and sale
of any securities by any definition entitled to indemnification hereunder and
the expiration or termination of this Agreement.
Section 8. Lockup Agreement. In consideration for the Company agreeing
to its obligations under this Agreement, each Holder agrees in connection with
any underwritten registration of the Company's securities (whether or not such
Holder is participating in such registration) upon the request of the Company
and the underwriters managing the underwritten
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offering of the Company's securities, not to publicly sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities (other than those included in the registration) without
the prior written consent of the Company and such underwriters for such period
of time (not to exceed 180 days in the case of the Company's initial public
offering) from the effective date of such registration as the Company and the
underwriters may specify.
Section 9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration' referred to herein.
Section 10. Rule 144 and 144A Reporting. With a view to making
available to Holders of Registrable Securities the benefits of certain rules and
regulations of the Commission which may permit the sale of the Registrable
Securities to the public without registration, the Company agrees at all times
after ninety (90) days after the effective date of the first registration filed
by the Company for an offering of its securities to the general public to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 and Rule 144A;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Holder so long as such Holder owns any
Registrable Securities forthwith, upon written request, a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act (to the extent that it is then subject
to any such reporting requirements), a copy of the most recent annual and
quarterly report of the Company, and such other reports and documents filed by
the Company under the Exchange Act as may be reasonably requested by such Holder
in connection with availing the Holder of any rule or regulation of the
Commission permitting the selling of such securities without registration.
Section 11. Transfer of Registration Rights. The rights to cause the
Company to register Registrable Securities of a Holder and keep information
available granted to a Holder by the Company under Sections 2, 3, and 4, may be
assigned by a Holder to any partner or shareholder of such Holder, to one or
more affiliated partnerships managed by such Holder, any other Holder, to any
"Affiliate" of the Holder as that term is defined by the Securities Purchase
Agreement; to any "Qualified Institutional Buyer" as that term is defined by the
Note executed as of the date hereof; or to a transferee or assignee who receives
at least 50% of the shares of Common Stock which are Registrable Securities;
provided, that the Company is given written notice by the Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned, and that said transferee or
assignee agrees in
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writing to be bound by the terms and provisions of this Agreement as if an
original signatory thereto.
Section 12. Termination of Rights.
(a) The rights of any particular Holder to cause the Company
to register securities under Sections 2, 3 and 4 shall terminate with respect to
such Holder at such time as such Holder is able to dispose of all of his
Registrable Securities in one twelve-month period pursuant to the provisions of
Rule 144.
(b) Notwithstanding the provisions of paragraph (a) of this
Section 12, all rights of any particular Holder under this Agreement shall
terminate at 5:00 p.m. Eastern time on August 25, 2003.
Section 13. Miscellaneous.
(a) Amendments. This Agreement constitutes the entire
agreement of the parties within respect to the subject matter hereof and may be
amended or modified only by a writing signed by the Company and the Required
Holders of the Registrable Securities (as the term is defined in the Securities
Purchase Agreement), as constituted from time to time. The Holders hereby
consent to future amendments to this Agreement that permit future investors to
be made parties hereto and to become Holders of Registrable Securities.
(b) Counterparts. This Agreement may be executed in any number
of counterparts, all of which shall constitute a single instrument.
(c) Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and may be sent initially by
facsimile transmission and shall be mailed by registered or certified mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (i)
if to a Holder, at such Holder's address set forth on the books of the Company,
or at such other address as such Holder shall have furnished to the Company in
writing, or (ii) if to any other holder of any Registrable Securities, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such securities who has so furnished an address to
the Company, or (iii) if to the Company, one copy should be sent to the
Company's current address at 1871 N.W. Gilman Blvd., Issaquah, Washington, or at
such other address as the Company shall have furnished to the Holders. All such
notices shall be effective and deemed duly given when received or when attempted
delivery is refused.
(d) Non-Public Information. Any other provisions of this
agreement to the contrary notwithstanding, the Company's obligation to file a
registration statement, or cause such registration statement to become and
remain effective, shall be suspended for a period not to exceed 30 days (and for
periods not exceeding, in the aggregate, 60 days in any 24-month period) if
there exists at the time material non-public information relating to the Company
which, in the reasonable opinion of the Company, should not be disclosed.
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(e) Severability. If any provision of this Agreement shall be
held to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
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(f) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York without regard to principles
of conflict of law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
Investors
Northstar High Total Return Fund
By: /s/ MICHAEL A. GRAVES
------------------------------
Name: Michael A. Graves
Title: Vice President
Northstar High Total Return Fund II
By: /s/ MICHAEL A. GRAVES
------------------------------
Name: Michael A. Graves
Title: Vice President
Northstar High Yield Fund
By: /s/ MICHAEL A. GRAVES
------------------------------
Name: Michael A. Graves
Title: Vice President
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Northstar Strategic Income Fund
By: /s/ MICHAEL A. GRAVES
--------------------------------
Name: Michael A. Graves
Title: Vice President
Northstar Balance Sheet Opportunities
By: /s/ MICHAEL A. GRAVES
--------------------------------
Name: Michael A. Graves
Title: Vice President
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EXHIBIT D
INTEREST ESCROW SECURITY AGREEMENT
<PAGE> 206
EXHIBIT 10.30
INTEREST ESCROW SECURITY AGREEMENT
This INTEREST ESCROW SECURITY AGREEMENT (the "Agreement"),
dated as of August 25, 1998, among Northwestern Trust and Investors Advisory
Company, as Depositary (in such capacity, the "Depositary"), the holders set
forth on Schedule A attached hereto (the "Holders") of the certain promissory
notes (the "Notes") dated the date hereof, of Intracel Corporation, a Delaware
corporation (the "Company"), and the Company. All references herein to the "UCC"
shall mean the Uniform Commercial Code as in effect on the date hereof in the
State of New York, and all references herein to the "Revised UCC" shall mean the
1994 Official Text of Article 8 of the Uniform Commercial Code with conforming
amendments to Article 9.
RECITALS
A. Pursuant to that certain Securities Purchase Agreement
dated as of August 25, 1998 (the "Securities Purchase Agreement"), between the
Company, its Subsidiaries and the Holders, the Company is issuing the Notes (as
that term is defined in the Securities Purchase Agreement).
B. Pursuant to the Securities Purchase Agreement, the Company
shall initially deposit in the Securities Account (as defined in Section 2(a)
hereof) Four Million Nine Hundred and Twenty Thousand Dollars ($4,920,000) in
cash (which amount will be sufficient to pay, together with the proceeds from
the investment thereof, a minimum of twelve months interest on the Notes) to be
held in the Securities Account subject to the terms and conditions of this
Agreement.
C. Pursuant to the Securities Purchase Agreement, the Company
shall be required to deposit certain additional amounts in the Securities
Account in cash.
D. As security for its Obligations (as such term is defined in
the Security Agreement, dated as of the date hereof among the Company and the
Holders (the "Securities Agreement")) under the Securities Purchase Agreement,
the Notes and the Ancillary Agreements, the Company hereby grants to the
Holders, a first priority perfected Security Interest in and Lien upon the
Securities Account.
E. The parties have entered into this Agreement in order to
(i) create the Security Interest in favor of the Holders of the Securities
Account, (ii) obtain certain assurances herein from the Depositary, including,
without limitation, establishing the Holders' control (within the meaning of the
Revised UCC) over the Securities Account, and (iii) set forth the manner in
which funds will be disbursed from the Securities Account and released from the
Security Interest and Lien described above.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants, agreements and other consideration
contained and
<PAGE> 207
exchanged herein, the receipt and sufficiency of which are hereby acknowledged
and intending to be legally bound, the parties hereto covenant and otherwise
agree as follows:
1. Defined Terms. For all purposes of this Agreement, all
capitalized terms not otherwise defined below, shall have the same meaning set
forth in the Securities Purchase Agreement.
"Affiliate" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Available Funds" means (A) the sum of (i) the cash equal to
the Initial Deposit Amount, (ii) subsequent cash amounts deposited, if any, into
the Securities Account, (iii) cash interest or dividends paid into the
Securities Account with respect to the funds in the Securities Account from time
to time and (iv) the Fair Market Value of holdings of Marketable Securities in
the Securities Account, less (B) the aggregate cash disbursements previously
made pursuant to this Agreement.
"Business Day" means any day of the week other than Saturday,
Sunday and days on which banking institutions in Seattle, Washington are closed.
"Collateral" shall have the meaning given in Section 5(a)
hereof.
"Default" shall have the meaning ascribed to it in the Notes.
"Eligible Institution" has the meaning specified in Section
1.1 of the Securities Purchase Agreement.
"Event of Default" shall have the meaning ascribed to it in
the Notes.
"Initial Deposit Amount" shall mean $4,920,000
"Interest Payment Date" means, for any year, November 25,
February 25, May 25 and August 25, beginning with the Interest Payment Date of
November 25, 1998.
"Issue Date" means August 25, 1998.
"Marketable Securities" means the following securities or
financial Assets maturing not later than 180 days after their acquisition: (i)
U.S. Treasury Bills, notes and bonds payable thereby and agreements to
repurchase such instruments; (ii) any certificate of deposit issued by, or time
deposit of, an Eligible Institution; (iii) commercial paper issued by a
corporation (other than an Affiliate of the Company) with a rating, at the time
as of which any investment therein is made, of "A-1" (or higher) according to
S&P or "P-1" (or higher) according to Moody's; (iv) any banker's acceptances or
money market deposit accounts issued or offered by an Eligible Institution; and
(v) any Investment Company (as such term is defined by the Investment Company
Act of 1940) fund investing exclusively in investments of the types described in
clauses (i) through (iv) above.
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"Payment Notice and Disbursement Request" means a notice sent
by the Required Holders to the Depositary, which may be in the form of Exhibit A
hereto.
"Qualified Equity Transaction" means the sale by the Company
of its securities, whether in a public offering registered under the Securities
Act of 1933, as amended, or otherwise, which sale has an aggregate offering
price of not less than $40,000,000 and results in aggregate proceeds to the
Company (net of selling expenses and underwriters' discount or selling agent's
commission) of not less than $35,000,000.
"Required Holders" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Securities Account" shall have the meaning given in Section
2(a).
"Security Interest" has the meaning specified in Section 1(a)
of the Security Agreement.
2. Securities Account.
(a) Establishment of Securities Account. The Depositary hereby
confirms and agrees that (i) the Depositary has established account number
"000398" under the name "Escrow A/C" (such account and any successor account,
the "Securities Account"), (ii) the Securities Account is a "securities account"
as such term is defined in Section 8-501(a) of the Revised UCC, (iii) the
Depositary shall, subject to the terms of this Agreement, treat the Holders as
the parties entitled to exercise the rights that comprise any financial Asset
credited to the Securities Account, (iv) all Assets delivered to, and actually
received by, the Depositary pursuant, to this Agreement will be promptly
credited to the Securities Account, and (v) all securities or other Assets
underlying any financial Assets credited to the Securities Account shall be
registered in the name of the Depositary or one of its agents or nominees,
indorsed to the Depositary or in blank or credited to another securities account
maintained in the name of the Depositary and in no case will any financial Asset
credited to the Securities Account be registered in the name of the Company,
payable to the order of the Company or specially indorsed to the Company except
to the extent the foregoing have been specially indorsed to the Depositary or in
blank.
(b) Investment of Funds in Securities Account. Funds deposited
in the Securities Account shall be invested and reinvested only upon the
following terms and conditions:
(i) Acceptable Investments. All funds deposited or
held in the Securities Account at any time shall be invested
in cash or Marketable Securities. Unless a Default or Event of
Default or any event that with the lapse of time or the giving
of notice, or both, would constitute an Event of Default has
occurred or would result therefrom or the Required Holders
have otherwise notified the Depositary, the Company may
instruct the Depositary in writing with respect to the
Marketable Securities in which the funds will be invested. The
Depositary shall have the right with acquittance and without
liability to rely on any such instructions from the Company
unless the Depositary shall have been notified otherwise in
writing by the Required Holders.
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(ii) Security Interest in Investments. No investment
of funds in the Securities Account shall be made unless the
Company has certified to the Required Holders, with a copy of
the certification being sent to the Depositary, that, upon
such investment, the Holders will have a first priority
perfected security interest in the applicable investment.
(iii) Interest and Dividends. All interest earned and
dividends paid on funds invested in cash or Marketable
Securities shall be deposited in the Securities Account as
additional Collateral for the exclusive benefit of the Holders
of the Notes and shall be reinvested in accordance with the
terms hereof at the Company's direction, unless a Default or
Event of Default or an event that with the lapse of time or
the giving of a notice or both, would constitute an Event of
Default has occurred and the Required Holders have notified
the Depositary in writing that it should only take direction
from the Required Holders or should no longer take further
written direction from the Company.
3. Funding Requirements. The Company shall direct the
Purchasers to and the Purchasers shall deposit by wire transfer in accordance
with the written instruction received from the Depositary on the Closing Date in
the Securities Account the Initial Deposit Amount. Thereafter, the Company shall
be required to replenish the funds in the Securities Account to the extent
necessary on each Interest Payment Date at such times when the Available Funds
in the Securities Account are less than the appropriate amounts as specified in
clauses (A) and (B) of this Section 3 (the "Shortfall"), and such replenishment
shall be made in the amount of such Shortfall within five (5) Business Days
after such notification of the Shortfall has been provided. The Company shall be
entitled to rely conclusively in making the foregoing determination on
information provided to it by the Depositary. The balance in the Securities
Account shall be maintained, as of each Interest Payment Date, at an amount
sufficient to provide (A) for the period prior to the date on which the Company
notifies the Depositary in writing of the consummation of a Qualified Equity
Transaction (the "Effective Date") (and thereafter if the Effective Date is not
on or before July 1, 1999), for the next four successive payments of interest on
the then Outstanding Notes on the applicable Interest Payment Dates, and, if
necessary, (B) provided the Effective Date is on or before July 1, 1999,
thereafter, the funds in the Securities Account shall be replenished to an
amount sufficient to pay the next four successive payments of interest, and,
after two successive full payments of interest thereafter, the funds shall
thereafter be maintained at a level sufficient to pay the next two successive
payments of interest on the then Outstanding Notes on the applicable Interest
Payment Dates. The Company's obligation to provide such funds and to maintain
such balance as described in either clause (A) or (B) above shall, in all
respects, terminate on the date on which the Company shall have fully paid all
interest accrued through and including the twelfth successive Interest Payment
Date (the "Termination Date"). The Depositary agrees to send a statement not
less frequently than quarterly by the fifteenth day of each month in which the
Depositary provides such statement, a statement of the balance and activity in
the Securities Account for the period covered by such statement.
4. Disbursements.
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(a) Payment Notice and Disbursement Requests; Disbursements.
Prior to the disbursement of any funds from the Securities Account by the
Depositary, the Company must deliver to the Depositary the written consent of
the Holders to such disbursement. The Company shall obtain such written consent
by delivering notice (the "Disbursement Notice") to the Holders of a proposed
disbursement five (5) Business Days prior to such date on which such
disbursement is to be made (the "Disbursement Date"), which Disbursement Notice
shall contain the time period to which such payment applies and the amount of
the disbursement. Promptly after receipt of the Disbursement Notice from the
Company, the Holders shall notify the Depositary of their consent, if any, to
the disbursement of funds on the Disbursement Date by delivery of a Payment
Notice and Disbursement Request substantially in the form of Exhibit A attached
hereto. No disbursements of funds from the Securities Account shall be made by
the Depositary without receipt of the Payment Notice and Disbursement Request
from the Holders authorizing such disbursement.
(b) All disbursements from the Securities Account must be made
in cash and shall apply solely to the payment of interest due under the Notes,
except in the event of a Default, an Event of Default, or an event that with the
lapse of time or the giving of notice, or both, would constitute an Event of
Default, or termination of this Agreement in accordance with the provisions of
Section 6 hereof, in which case written notice thereof shall be provided to the
Depositary by the Required Holders and disbursements of amounts from the
Securities Account shall be made in accordance with the provisions of Section
6(b)(v) of the Notes.
(c) Notwithstanding the provisions contained in Section 4(a)
above, the Holders may, at any time or from time to time, issue a written
payment demand to the Depositary without any prior notice to or from the Company
if: (i) there shall be interest due under the Notes which is five (5) or more
days past due; or (ii) in their reasonable judgment, the Required Holders have
concluded that a Default, Event of Default or event that with the lapse of time
or the giving of notice, or both, would constitute an Event of Default has
occurred and is continuing, or would result therefrom under Section 6(a)(vi) of
the Notes and written notice thereof shall be provided to the Depositary by the
Required Holders. The Depositary shall pay to the Holders promptly after receipt
of their payment demand, the sums specified therein with respect to any payments
due pursuant to the provisions of this Section 4(c).
(d) Retired Notes. In the event that the funds held in the
Securities Account exceed the respective amounts provided for in Section 3
hereof (or, in the event an interest payment or payments have been made, an
amount sufficient to provide for payment in full of any interest payment
remaining, up to and including such scheduled interest payments), the Required
Holders will be permitted to release to the Company any such excess amount if no
Default or Event of Default or event that with the lapse of time, or the giving
of notice, or both, would constitute an Event of Default, then exists under the
Notes.
5. Grant of Security Interest.
(a) The Company hereby irrevocably grants a first priority
perfected security interest in and pledges, assigns and sets over to the Holders
all of the Company's right, title and interest in the Securities Account, and
all Assets now or hereafter placed or deposited in, or delivered to the
Depositary for placement or deposit in, the Securities Account, including,
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without limitation, all cash and other funds held therein, all Marketable
Securities in the Securities Account established by (or otherwise maintained in
the name of) the Depositary pursuant to Section 2 and security entitlements
credited to or held in the Securities Account, and all proceeds thereof as well
as all rights of the Company under this Agreement (collectively, the
"Collateral"), in order to secure all Obligations (as defined in the Security
Agreement) of the Company under the Securities Purchase Agreement, the Notes and
the Ancillary Agreements.
The Depositary and the Company hereby acknowledge the Holders' security
interest as set forth above. The Company shall take all actions necessary on its
part to perfect, protect, maintain and insure the continuance of a first
priority perfected Security Interest in the Collateral in favor of the Holders
in order to secure all Obligations.
The rights and powers granted herein to the Holders have been granted
in order to perfect their Security Interest in the Securities Account, are
powers coupled with an interest and shall neither be affected by the bankruptcy
of the Company nor by the lapse of time.
(b) Upon demand, the Company will execute and deliver to the
Holders such instruments and documents as the Holders may reasonably deem
necessary or advisable to confirm or perfect their rights under this Agreement
and their interest in the Collateral. The Holders shall be entitled to take all
necessary action to preserve and protect the Security Interest created hereby as
a Lien and encumbrance upon the Collateral.
(c) The Company hereby appoints the Holders as its
attorney-in-fact with full power of substitution to do any act which the Company
is obligated hereunder to do, and the Holders may exercise such rights as the
Company might exercise with respect to the Collateral and take any action in the
Company's name to protect the Holders' Security Interest hereunder.
(d) In addition to the rights provided in this Agreement upon
a Default or an Event of Default, and for so long as such Default or Event of
Default or event that with the lapse of time or the giving of notice, or both,
would constitute an Event of Default continues or would result therefrom, the
Holders may exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party under the UCC, the Revised UCC (if applicable)
or other applicable Law, including, without limitation, collecting payment from
the Company of any attorney fees incurred by the Holders in exercising such
rights and remedies. The Holders may also, upon a Default or an Event of Default
or event that with the lapse of time or the giving of notice, or both, would
constitute an Event of Default, without notice to the Company except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of the
Holders' offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Required Holders may deem commercially reasonable.
The Company acknowledges and agrees that any such private sale may result in
prices and other terms less favorable to the seller than if such sale were a
public sale. The Company agrees that, to the extent notice of sale shall be
required by law, ten (10) days' notice to the Company of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification within the meaning of the UCC, the Revised
UCC, or any other applicable law. The Required Holders shall not be obligated to
make any sale
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regardless of notice of sale having been given. The Required Holders may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
6. Termination. (a) On the Termination Date, all funds remaining in the
Securities Account shall be disbursed by wire transfer as follows:
(i) to the Holders, in an amount equal to all accrued unpaid
past due interest on the Notes;
(ii) to the Holders in an amount equal to all accrued unpaid
interest due on the Notes;
(iii) to the Holders in an amount equal to all accrued unpaid
and past due amounts under the Securities Purchase Agreement, the Notes
and any of the Ancillary Agreements;
(iv) to the Holders in an amount equal to all other accrued
unpaid amounts under the Securities Purchase Agreement, the Notes and
any of the Ancillary Agreements;
(v) to the Holders in an amount equal to the aggregate
principal amount Outstanding under the Notes; and
(vi) any surplus of such cash or cash proceeds held by the
Holders through the Depositary and remaining on or after the
Termination Date shall be paid over to the Company or to whosoever may
be lawfully entitled to receive such surplus or as a court of competent
jurisdiction may direct.
(b) The Company and the Required Holders shall provide the
Depositary with written instructions regarding the disbursements to be made
pursuant to Section 6(a) on the Termination Date at least five (5) Business Days
prior to the Termination Date.
(c) This Agreement shall terminate automatically ten (10) days
following disbursement of all funds remaining in the Securities Account
(including proceeds from the sale of Marketable Securities), unless sooner
terminated by agreement of the parties hereto (in accordance with the terms
hereof, not in violation of the Notes, and provided that the Holders may not
agree to such earlier termination unless they have received the consent of all
Holders of all of the Notes then outstanding); provided, however, that until
such tenth day, the Company will cause this Agreement (or any permitted
successor agreement) to remain in effect and will cause the Depositary
(including any permitted successor thereto) to continue to act hereunder (or
under any such permitted successor agreement).
7. "Financial Assets" Election. The Depositary hereby agrees that each
item of property (whether investment property, financial Asset, security,
instrument or cash) comprising the Initial Deposit Amount, Available Funds,
Collateral, or any other property otherwise credited to the Securities Account
shall be treated as a "financial asset" within the meaning of Section
8-102(a)(9) of the Revised UCC.
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8. Entitlement Orders. If at any time the Depositary shall receive an
"entitlement order" (within the meaning of Section 8-102(a)(8) of the Revised
UCC) issued by the Holders and relating to the Securities Account, the
Depositary shall comply with such entitlement order without further consent by
the Company or any other person.
9. Subordination of Lien; Waiver of Setoff. In the event that the
Depositary has or subsequently obtains by agreement, operation of law or
otherwise a security interest in the Securities Account or any security
entitlement credited thereto, the Depositary hereby agrees that such security
interest shall be subordinate to the Security Interest of the Holders. The
financial Assets and other items deposited to the Securities Account shall not
be subject to deduction, set-off, banker's Lien, or any other right in favor of
any person other than the Holders (except that the Depositary may set off (a)
all amounts due to the Depositary in respect of the Depositary's customary fees
and expenses for the routine maintenance and operation of the Securities Account
and (b) the face amount of any checks which have been credited to the Securities
Account but are subsequently returned unpaid because of uncollected or
insufficient funds).
10. Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants that this Agreement has been duly
authorized, executed and delivered on its behalf and constitutes the legal,
valid and binding obligation of the Company. The execution, delivery and
performance of this Agreement by the Company does not violate any applicable Law
to which the Company is subject and does not require the consent of any
governmental or other regulatory body to which the Company is subject, except
for such consents and approvals as have been obtained and are in full force and
effect.
11. Representations, Warranties and Covenants of the Depositary. The
Depositary hereby makes the following representations, warranties and covenants:
(a) The Securities Account has been established as set forth
in Sections 2 through 4 above and shall be maintained in the manner set forth
herein until termination of this Agreement. The Depositary shall not change the
name or account number of the Securities Account without the prior written
consent of the Required Holders.
(b) No financial Asset is or shall be registered in the name
of the Company, payable to the Company's order, or specially endorsed to the
Company, except to the extent such financial asset has been endorsed to the
Depositary or in blank.
(c) This Agreement is the valid and legally binding obligation
of the Depositary duly authorized, executed and enforceable in accordance with
its terms.
(d) The Depositary has not entered into, and until the
termination of this Agreement shall not enter into, any agreement with any other
Person relating to any of the Securities Account and/or any financial Assets
credited thereto pursuant to which it has agreed to comply with entitlement
orders (as defined in Section 8-102(a)(8) of the Revised UCC) of such person.
The Depositary has not entered into any other agreement with the Company or the
Holders purporting to limit or condition the obligation of the Depositary to
comply with entitlement orders as set forth in Section 8 hereof.
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(e) The Depositary shall at all times act as a "financial
intermediary" (within the meaning of Section 8-313(4) of the UCC) or as a
"securities intermediary" (within the meaning of Section 8-102(a)(14) of the
Revised UCC), and as a custodian of funds, as applicable, and will comply with
all applicable regulations.
12. Automatic Stay. If the Company becomes the subject of a bankruptcy
or a reorganization case under the United States Bankruptcy Code, the automatic
stay imposed by section 362 of the United States Bankruptcy Code will be deemed
lifted (or, in the event that a court does not recognize the validity of such
deemed lifting of the automatic stay, the parties will use their best efforts to
seek relief from the stay), insofar as such stay affects enforcement of the
security interest in the Securities Account granted thereby.
13. Fees and Expenses. The Company agrees to pay the Depositary
reasonable compensation for its basic services rendered pursuant to this
Agreement. The fees shall be paid within 30 days after the Company has been
billed by the Depositary, except for the document review and set-up fee of $1000
plus out-of-pocket legal review expenses which shall be paid by the Company upon
establishment of the Securities Account. In the event the Depositary renders any
material service not contemplated in this Agreement, or there is any assignment
of interest in the subject matter of this Agreement, or any material
modification hereof, or if any material controversy arises hereunder, or the
Depositary is made a party to any litigation pertaining to this Agreement, or
the subject matter hereof, then the Depositary shall also be reasonably
compensated by the Company for such extraordinary services and reimbursed by the
Company for all costs and expenses, including reasonable attorneys' fees,
occasioned by any controversy, litigation or event.
14. Resignation or Removal of the Depositary. The Depositary may resign
upon 30 days' advance written notice of resignation to the Company and the
Holders. The Company and the Holders may also jointly at any time remove the
Depositary by giving written notice to the Depositary. If the Depositary shall
resign or be removed, a successor Depositary, which shall be either a bank,
trust company or other financial institution constituting an Eligible
Institution (as that term is defined in Section 1.1 of the Securities Purchase
Agreement) having an office in the State of Washington and satisfactory to the
Company and the Holders, shall be appointed by written instrument executed and
delivered by the Company and the Holders to the Depositary and to such successor
depositary, and upon the resignation or removal of the predecessor Depositary,
the successor depositary shall, without any further act, deed or conveyance,
become vested with all the right, title and interest to all property held
hereunder, of such predecessor Depositary; provided that such predecessor
Depositary shall, on the written request of the Company and the Holders, execute
and deliver to such successor depositary an instrument transferring to such
successor depositary all right, title and interest hereunder in and to the
Securities Account and all other rights hereunder, of such predecessor
Depositary. If no successor depositary has been appointed at the end of 30 days
after notice of resignation by the Depositary, the Depositary hereunder may
petition any court of competent jurisdiction to name a successor depositary.
15. Depositary Not a Party to Other Agreement. By entering into this
Agreement, the Depositary is a party only to this Agreement and the Depositary
does not become a party to any other agreement, including, but not limited to,
the Securities Purchase Agreement.
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16. Reliance. The Depositary may act upon any instrument or other
writing believed by it in good faith to be genuine and to be signed or presented
by the proper person or persons and shall not be liable in connection with the
performance by it of its duties pursuant to the previsions hereof, except for
its own willful default or gross negligence. The Company and the Holders shall,
jointly and severally, indemnify and save harmless the Depositary for all
claims, losses, costs, damages, liabilities and expenses which may be incurred
on the part of the Depositary, arising out of or in connection with its entering
into this Agreement and carrying out its duties hereunder due to:
(a) The Depositary's failure to ascertain or comply with the
terms of any document, other than this Agreement, and all Exhibits and Schedules
attached hereto, unless that document is filed and the Depositary is expressly
instructed by this Agreement to comply with a specified paragraph or provision
of that document. The Company agrees to indemnify and pay the Holders for any of
the Holders' losses, costs, damages, liabilities and expenses ("Holders'
Losses") which may be incurred by the Holders as a result of the indemnity
provided to the Depositary under this Section 16 except for any Holders' Losses
paid to the Depositary by the Holders as a result of the Holders' gross
negligence or willful misconduct.
(b) Forgeries or false impersonations.
(c) Exercise of the Depositary's discretion in any particular
manner in any situation in which the Depositary is authorized by this Agreement
to exercise its discretion.
(d) Any reason other than the Depositary's gross negligence or
willful misconduct in following this Agreement and acting as Depositary
hereunder.
17. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach
of this Agreement by any other party (provided, in the case of any such waiver
by a Holder, that it shall first have obtained the written consent of the
Required Holders, but no such waiver shall be deemed to have been given unless
such waiver is in writing, signed by the waiving party and specifically
designating the breach waived, nor shall any such waiver constitute a continuing
waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more
of the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties
hereto, and the rights and duties of any party hereunder shall not be assignable
except with the prior written consent of the Company and the Holders.
Notwithstanding the foregoing, this Agreement shall inure to and be binding upon
the parties and their successors and permitted assigns.
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(d) Benefit. The parties hereto and their successors and
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof and to enforce this Agreement.
(e) Time. Time is of the essence with respect to each
provision of this Agreement.
(f) Entire Agreement; Amendments. This Agreement, the
Securities Purchase Agreement, the Notes and the other Ancillary Agreements
identified in the Securities Purchase Agreement contain the entire agreement
among the parties with respect to the subject matter hereof and supersede any
and all prior agreements, understandings and commitments, whether oral or
written. This Agreement may be amended only with the consent of the Company and
the Required Holders, and in the case of any provision referring to the rights
and duties of the Depositary, the Depositary.
(g) Notices. All notices and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received, either: (a) on the day of hand delivery; (b) three Business Days
following the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as set forth
below; or (c) one Business Day following the day timely delivered to a next-day
air courier addressed as set forth below:
To the Company:
Intracel Corporation
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
Attention: Simon R. McKenzie
Telecopy: 425-392-2992
Telephone: 425-557-1894
To the Holders:
300 Stamford Place
Stamford, Connecticut 06902
Attention: Michael Graves
Telecopy: 203-862-8601
Telephone:203-863-6224
To the Depositary:
1201 Third Avenue, 20th Floor
Seattle, Washington 98101
Attention: Robert T. Leighton
Telecopy: (206) 442-6401
Telephone: (206) 442-6409
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or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(j) Choice of Law. The existence, validity, construction,
operation and effect of any and all terms and provisions of this Agreement shall
be determined in accordance with and governed by the Laws of the State of New
York, without regard to principles of conflicts of Laws that would result in the
application of the Law of any jurisdiction other than the State of New York.
Regardless of any provision in any other agreement, for purposes of the UCC or
the Revised UCC, New York shall be deemed to be the Depositary's location and
the Securities Account (as well as the securities entitlements related thereto)
shall be governed by the Laws of the State of New York. The parties to this
Agreement hereby agree that jurisdiction over such parties and over the subject
matter of any action or proceeding arising under this Agreement may be exercised
by a competent Court of the State of New York, or by a United States Court,
sitting in New York City. The Company hereby submits to the personal
jurisdiction of such courts, hereby waives personal service of process upon it
and consents that any such service of process may be made by certified or
registered mail, return-receipt requested, directed to the Company at its
address last specified for notices hereunder, and service so made shall be
deemed completed five (5) days after the same shall have been so mailed, and
hereby waives the right to a trial by jury in any action or proceeding with the
Depositary.
(k) Each of the Depositary and the Holders hereby represents
and warrants that this Agreement has been duly authorized, executed and
delivered on its behalf and constitutes its legal, valid and binding obligation.
(l) Conflict With Other Agreements. There are no other
agreements entered into between the Depositary and the Company with respect to
the Securities Account. In the event of any conflict between this Agreement (or
any portion thereof) and any other agreement now existing or hereafter entered
into, the terms of this Agreement shall prevail.
(m) Notice of Adverse Claims. Except for the claims and
interest of the Holders and of the Company in the Securities Account, the
Depositary does not know of any claim to, or interest in, the Securities Account
or in any "financial Asset" (as defined in Section 8-102(a) of the Revised UCC)
credited thereto. If any Person asserts any Lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against the Securities Account or in any financial Asset
carried therein, the Depositary shall promptly notify the Holders and the
Company thereof.
(n) Execution of Agreement. The execution of this Agreement by
the Depositary shall conclusively evidence its acceptance and agreement to the
terms hereof.
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IN WITNESS WHEREOF, the parties have executed and delivered
this Interest Escrow Security Agreement as of the day first above written.
COMPANY: Intracel Corporation
By: /s/ SIMON McKENZIE
------------------------------------
Name: Simon McKenzie
Title: President and Chief
Executive Officer
HOLDERS: NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
------------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
------------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
------------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
------------------------------------
Name: Michael A. Graves
Title: Vice President
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DEPOSITARY: NORTHWESTERN TRUST AND INVESTORS
ADVISORY COMPANY, as Depositary
By: /s/ DAVID C. WILLIAMS
----------------------------------
Name: David C. Williams
Title: President & CEO
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<PAGE> 220
EXHIBIT A
Form of Payment Notice and Disbursement Request
[Date]
___________________
___________________
___________________
Attention: Corporate Agent
Administration Department
Re: Disbursement Request No. ____
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Interest Escrow Security Agreement, dated as of
_________ (the "Interest Escrow Security Agreement") among you (the
"Depositary"), the undersigned as Holders, and Intracel Corporation, a Delaware
corporation (the "Company"). Capitalized terms used herein shall have the
meaning given in the Interest Escrow Security Agreement.
This letter constitutes a Payment Notice and Disbursement Request
under the Interest Escrow Security Agreement.
The undersigned hereby directs that you make a disbursement of
funds contained in the Securities Account in the amount of $________ to the
Holders for payment of _________.
The Depositary is entitled to rely on the foregoing in disbursing
funds relating to this Payment Notice and Disbursement Request.
_________, as Holders
By: __________________________________
Name:
Title:
15
<PAGE> 221
EXHIBIT B
Investment Instructions
All sums on deposit shall be invested
in cash or Marketable Securities.
<PAGE> 222
EXHIBIT C
Depositary Fees
<PAGE> 223
EXHIBIT 10.30
Schedule A
See attached.
<PAGE> 224
SCHEDULE A
INTELLECTUAL PROPERTY SECURITY AGREEMENT
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Monoclonal Antibodies
Tumor specific monoclonal antibodies US 4,828,991
Tumor associated monoclonal antibodies derived from US 4,997,762
human B-cell line 5,180,814
AT E71410
AU 589,351
635,511
BE 0151030
CA ??3130
CH 0151030
DE P3585093
DK 408/85
EP 0151030
ES 539,987
FR 0151030
GB 0151030
GR 850,179
HU 209,519
IE 58,859
IL 74,156
91,045
IT 0151030
JP 2021518 269230/93
LU 0151030
NL 0151030
NZ 210,867
PT 79,894
SE 0151030
ZA 8,500,689
</TABLE>
<PAGE> 225
Schedule A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Tumor specific monoclonal antibodies US 5,106,738
Tumor associated monoclonal antibody 81AV78 US 5,348,880
AU 656785
CA 2108767
EP 92913154.8
FI 935038
JP 500176/93
KR 93/703412
WO US92/04023
Tumor associated monoclonal antibodies US 5,474,755
Monoclonal Antibody 88BV59 US 08/341469
AU 651,261
CA 2083542
EP 92203827.8
FI 925638
HU 9203932
ID P-005142
IL 103758
JP 331961/92
KR 92/23925
NO 924803
NZ 245443
TW 81109353
ZA 92/8880
Monoclonal antibody 88BV59, subclones and method of making US 08/192069
AU 17425/95
CA 2158572
EP 95909472.3
FI 954700
JP 52078/95
</TABLE>
<PAGE> 226
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
KR 95/?Q4282
WO US95/01440
Tumor associated monoclonal antibody 123AV16 US 5,495,002
ID P-950285
WO EP95/00581
ZA 95/1113
In-vitro method for producing antigen specific human US 5,229,275
monoclonal antibodies
AT E123,311
AU 647,112
BE 0,454,225
CA 2,041,213
CH 0,454,225
DE 69,110,084.5
555
DK 0,454,225
EP 0,454,225
ES 0,454,225
FI 912,016
FR 0,454,225
GB 0,454,225
GR 3,017,162
IE 66,523
IT 0,454,225
JP 191343/91
KR 91/6661
NL 0,454,225
SE 0,454,225
ZA 91/2998
Imaging infectious foci with human IgM 16.88 US 08/346,988
</TABLE>
<PAGE> 227
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Chelators
Method for purifying chelator conjugated
compounds US 5,244,816
AU 656,717
CA 2,069,303
DK 0488/92
EP 90915696.0
FI 921,579
IE 3585/90
JP 514572/90
KR 92/700833
NZ 235,618
PT 95574
WO US90/05772
ZA 90/8095
Chelating agents for attaching metal ions
to proteins US 5,292,868 08/430657
5,488,126
AT E128035
AU 638,757
BE 0429644
CA 2,033,086
CH 0429644
DE 69022542.3
DK 0429644
EP 0429644 95200465.3
ES 0429644
FI 910,329
FR 0429644
GB 0429644
DE 1867/90
</TABLE>
<PAGE> 228
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0429644
JP 513354/90
KR 91/700100
NL 0429644
SE 0429644
WO US90/02910
ZA 90/4047
Technetium-99M labelling
of proteins US 5,317,091
AU 658,403
CA 2104943
EP 92907824.4
FI 933760
JP 507406/92
KR 93/702561
WO US92/01577
Chelator IDAC-2 and methods
for purifying chelator US 08/278721
conjugated compounds 08/442856
WO US95/09285
New Polyaminocarboxylate
chelators US 95/00068
WO US95/00068
Pre-Targeting
Site specific in vivo
activation of therapeutic
drugs US 5,433,955 07/300999
08/382469
AT E123414
AU 648,015
BE 0454783
CA 2025899
CH 0454783
DE 69019959.7
DK 0454783
</TABLE>
<PAGE> 229
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
EP 0454783
ES 0454783
FI 913,511
FR 0454783
GB 0454783
IT 0454783
JP 503116/90
KR 90/702129
LU 0454783
NL 0454783
NO 912,864
SE 0454783
WO 90/00503
In Vivo Binding Pair Pretargeting US 08/146186 08/452938
08/461267
AU 663,582
CA 2,107,558
EP 93906276 6
FI 934,857
ID P-005991
JP 515830/93
KR 93/703311
WO US93/01?58
ZA 93/3035
High yield preparation of dimene to
decamene chitin oligomers US 08/397464
IL 117052
WO US96/02705
</TABLE>
<PAGE> 230
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Polymer affinity systems in the delivery US 08/471264
of cytotoxic materials and other components
in the site of disease
Immunotherapy
Active specific immunotherapy US 5,484,596 08/540298
CTAA 28A32, the antigen recognized by
MCA 28A32 US 08/041529
AT 0537168
AU 660,927
BE 0537168
CA 2079601
CH 0537168
DE 0537168
DK 0537168
EP 0537168
ES 0537168
FI 924576
FR 0537168
GB 0537168
GR 0537168
IT 0537168
JP 508604/91
KR 92/702530
LU 0537168
NL 0537168
</TABLE>
<PAGE> 231
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
SE 0537168
WO US91/02459
Antigen recognized by MCA 16.88 US 5,338,832
AT E137674
AU 618,209
BE 0328578
CA 5?1,017
CH 0328578
DE P3855290.9
DK 1025/89
EP 0328578
FR 0328578
GB 0328578
HU 4187/88
IE 2034/88
IL 86,958
IT 0328578
JP 505983/89
LU 0328578
NL 0328578
NZ 225,280
SE 0328578
WO US88/02245
ZA 88/4777
Keyhole ? hemocyanin composition with enhanced US 5,407,912 08/343808
immunogenic activity
AS 09/009,121
AU 60519/94
CA 2121296
EP 94200997.8
</TABLE>
<PAGE> 232
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
FI 941725
ID P-940578
JP 104838/94
KR 94/8063
ZA 94/2510
Tumor associated epitope US 08/478591
CTAA 8IAV78, the antigen recognized
by human monoclonal US 08/150036
antibody 81AV78
AU 20085/92
CA 2102422
EP 92912470.9
FI 934,963
JP 500223/93
KR 93/703413
WO US92/04108
Others
Leukoregulin, an antitumor
lymphokine and its therapeutic uses US 4,849,506
5,082,657
AT E48617
AU 592,529
641,386
BE 0179127
CA 478,987
CH 0179127
DE P3574710.2
DK 170,781
170,423
EP 0179127
FI 85,867
FR 0179127
GB 0179127
</TABLE>
<PAGE> 233
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0179127
JP 501862/85
300409/93
LU 0179127
NL 0179127
NO 170423
SE 0179127
WO US85/00626
Urethral catheter and catheterization process US 5,120,316
Immunoreactive peptides of apo(2) US 08/266407
08/456840
08/457449
08/172461
AU 81,606/94
CA 2138605
EP 942036534
FI 945976
ID P-942209
JP 318892/94
KR 94/35809
ZA 94/10145
An alignment system to overlay abdominal
computer aided tomography and magnetic US 5,299,253
resonance anatomy with single photon
emulsion tomography
</TABLE>
<PAGE> 234
Schedule B
INTELLECTUAL PROPERTY SECURITY AGREEMENT
TRADEMARKS
OncoSpect(TM)
Oncovax(TM)
Onconostika(TM)
Oncoscan(TM)
Oncoselect(TM)
Apo-Tek Lp(a)*
Apo-Tek Apo E*
KLH Immune Activator*
* Final name and registration to be completed
<PAGE> 235
Schedule B
See attached.
<PAGE> 236
INTRACEL CORPORATION
EQUIPMENT LIST
<TABLE>
<CAPTION>
Vendor Equipment Description Total Cost
<S> <C> <C>
Osmonics, Inc. Steam Generator $ 48,670.00
PS. VSG-500/50TI
Kuhlmann Technologies, Inc. Pharmapro Sterilizer $133,460.00
PP263648D
Scientek Glassware Washer $ 61,135.00
Taylor Boiler & Equipment Parker Steam Boiler $ 22,310.00
Serial #48270
Inova Pao-Systeme Auto Filling, Inserting & Screw $180,671.00
Capping Machine
VFVM 4031 031 163
Urania Engineering Co. PouchPro System with $102,472.00
Desiccant Dispenser
Telenet, Inc. Phone System $ 72,264.62
Accraply, Inc. Infeed/Outfeed Turntable $ 13,295.00
Urania Engineering Co. Rotary Band Heat Sealer $ 16,060.00
with Ink Jet Printer Interface
Model 3500P
VWR Scientific Masterpro Balance with $ 4,176.31
2 Stat Data Printers
Model 620G X 001G
VWR Scientific Branson Sonifier with $ 3,232.08
1/4" micro tip
Model 450
Bio Rad Prep Cell with Power Pac $ 11,808.50
Model 491
Bio Rad Mini Protein II Cell/Power $ 5,423.00
Pac 3000 system
VWR Eppondorf Micro-centrifuge $ 2,395.00
Model 5417C
Ismaca USA, Inc. Bio-Line Dispensing System $ 35,958.00
Total $713,330.49
</TABLE>
<PAGE> 237
Schedule C
1. Certain patents, patent applications and trademarks serve as collateral under
that certain Intellectual Property Security Agreement, dated August 8, 1996,
among PerImmune Holdings, Inc., PerImmune, Inc., Akzo Nobel Pharma
International, B.V. and Organon Teknika Corporation.
2. Pursuant to an Assignment Agreement, dated December 27, 1995, by and among
Intracel Corporation, Northstar Advantage High Total Return Fund and Dade
International Inc. ("Dade"), Dade assigned all its rights, title and interest
in and to a Secured Promissory Note in the amount of $4,667,000 of Intracel,
dated November 16, 1995, issued to Dade and the Related Agreements (as
defined therein) to Northstar.
3. CoreStates obtained a security interest in all the Company's assets now owned
or hereinafter acquired, which was junior to that of Credianstalt and
Northstar, pursuant to the transactions contemplated by the Note and
Series A-III Warrant Purchase Agreement between the Company and CoreStates,
dated as of June 11, 1996 ("CoreStates Agreement").
4. The Company also has certain other short-term liabilities incurred in the
ordinary course of the Company's business.
5. Pursuant to a Loan and Security Agreement, dated September 30, 1997, by
Washington Economic Development Finance Authority, Intracel Corporation, and
Transamerica Business Credit Corporation, Transamerica Business Credit
Corporation obtained a security interest in certain equipment. The first
drawdown list is attached.
6. See Schedule 3.10 to the Purchase Agreement for Leasehold Interests.
<PAGE> 238
Schedule D
Principal Place of Business
INTRACEL CORPORATION
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
1871 NW Gilman Boulevard
Issaquah, Washington 98027
1330 Piccard Drive
Rockville, Maryland 20850
13351 Commerce Parkway
Richmond, British Columbia
V6V 2W3, Canada
BARTELS, INC.
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
PERIMMUNE, INC.
1330 Piccard Drive
Rockville, Maryland 20850
PERIMMUNE HOLDINGS, INC.
1330 Piccard Drive
Rockville, Maryland 20850
LOCATION OF ASSETS
See attached.
<PAGE> 239
LOCATION OF BARTELS, INC.'S ASSETS
<TABLE>
<CAPTION>
Ter # Rep Customer Address
<S> <C> <C> <C>
2 Stephen Harrison Steve Harrison demo
3 Michelle Brooks University of Louisville 530 South Jackson, Louisville, KY 40202
3 Michelle Brooks University of Kentucky 800 Rose Street, Lexington, KY 40536
3 Michelle Brooks Cleveland Metrohealth Mch 2500 Metrohealth Drive, Cleveland, OH 44109
3 Michelle Brooks Michelle Brooks
3 Michelle Brooks Children's Hospital Medical Center 3333 Bienel Avenue, Cincinnati, OH 45229
3 Michelle Brooks St. Elizabeth Medical Center 1054 Belmont Avenue, 1st FL, Youngstown, OH 44501
3 Michelle Brooks Lutheran Hospital 7950 ???? Blvd., Ft. Wayne, IN 48804
3 Michelle Brooks Thomas Memorial Hospital 4605 MacCorkle Ave SW, S. Charleston, WV 25309
3 Michelle Brooks Covance 8211 Scicor Dr., Indianapolis, IN 48214
4 Bruce Weissman William Jennings Bryan Dorm VAMC 5439 Garners Ferry Road, Columbia, SC 29209
4 Bruce Weissman Lab South, Inc. 3221 3rd Ave South, Burmingham, AL 35222
4 Bruce Weissman St. Francis Hospital One St. Francis Drive, Greenville, SC 29601
4 Bruce Weissman Erlanger Medical Center 975 E Third Street, Chatanooga, TN 37403
4 Bruce Weissman Quest Diagnostics 210 12th Ave South, Nashville, TN 37203
4 Bruce Weissman Floyd Medical Center Turner McCall Blvd, Rome, GA 30162
4 Bruce Weissman Bruce Weissman
4 Bruce Weissman ARL/Labrouth 536 S. Decatur Street, Montgomery, AL 35134
4 Bruce Weissman University of Alabama Hospital 521 14th St South, Birmingham, AL 35233
4 Bruce Weissman Sarasota Memorial Hospital 1700 South Tarntami Trail, Sarasota, FL 34239
4 Bruce Weissman ???? Hospital 110 Longwood Ave, Rockridge, FL 32955
4 Bruce Weissman to John Kota printer only inoperative/replaced by AAA0153981
Karen Trowartha
4 Bruce Weissman HCA W. FL Regional Medical Center 8383 N. Davis Hwy., Pensacola, FL 32514
5 Judy Houston Children's Medical Center Dallas, TX
6 Mark Forosisky Dakota Heartland Hospital 1720 S University, Fargo, ND 58103
6 Mark Forosisky St Johns Hospital 800 E Carpenter St, Springfield, IL 62769
6 Mark Forosisky The Pathology Center 8303 Dodge St, Omaha, NE 68144
6 Mark Forosisky Marian Health Center 801 5th Street, Sioux City, IA
6 Mark Forosisky Arkansas Children's Hospital 800 Marshall Street, Little Rock, AR 72202
6 Mark Forosisky McAlester Regional Hospital One Clark Bass Ave, McAlester, OK 74501
6 Mark Forosisky Med Center One/Q&R Clinic 222 N. 7th Street, Barrick, ND 58501
6 Mark Forosisky Midwest City Regional Hospital 2825 Parklawn Dr, Midwest City, OK 73110
6 Mark Forosisky in-house
8 Chuck La Croix Childrens Hospital 3020 Children's Way, San Diego, CA 92123
8 Chuck La Croix San Bern Community Hospital 1805 Medical Center Drive, San Bern, CA 92411
8 Chuck La Croix San Bern County Medical Center 780 E Gilbert, San Bernardino, CA 92401
8 Chuck La Croix Physicians Automated Lab 2101 H Street, Bakersfield, CA 90301
8 Chuck La Croix Bio Clinical Ref Lab 17420 Gridley Road, Artesia, CA 90701
8 Chuck La Croix Cottage Hospital Pueblo Bath St., Santa Barbara, CA 93102
<CAPTION>
Date
Ter # Rep Customer Reader Printer Plate Shipped
<S> <C> <C> <C> <C> <C> <C>
2 Steve Harrison Steve Harrison 137073 134441 6/30/97
3 Michelle Brooks University of Louisville 136763 AAA0118810 130699 10/27/97
3 Michelle Brooks University of Kentucky 136754 130753 10/31/97
3 Michelle Brooks Cleveland Metrohealth Mch 136751 130756 10/23/97
3 Michelle Brooks Michelle Brooks 136812 AAA0124094 130787 11/13/97
3 Michelle Brooks Children's Hospital Medical Cente 136881 AAA0151961 131373 12/12/97
3 Michelle Brooks St. Elizabeth Medical Center 136883 AAA153871 131388 12/8/97
3 Michelle Brooks Lutheran Hospital 138880 AAA0159250 131363 6/15/98
3 Michelle Brooks Thomas Memorial Hospital 137074 AAA0153965 131439 7/10/98
3 Michelle Brooks Covance 137064 AAA0153858 131429 7/16/98
4 Bruce Weissman William Jennings Bryan Dorm VAMC 136790 AAA0118792 130768 11/4/97
4 Bruce Weissman Lab South, Inc.
4 Bruce Weissman St. Francis Hospital 136744 130752 10/6/97
4 Bruce Weissman Erlenger Medical center 136745 130750 10/18/97
4 Bruce Weissman Quest Diagnostics 136749 130751 10/16/97
4 Bruce Weissman Floyd Medical Center 136751 130758 10/18/97
4 Bruce Weissman Bruce Weissman 136813 AAA0134445 130786 11/12/97
4 Bruce Weissman ARL/Labrouth 136791 AAA0118794 130758 10/25/97
4 Bruce Weissman University of Alabama Hospital 136884 AAA0133868 111376 12/4/97
4 Bruce Weissman Sarasota Memorial Hospital 136748 130755 10/7/97
4 Bruce Weissman Wueshalft Hospital 10/7/97
4 Bruce Weissman to John Kota AAA0159220 6/25/98
Karen Trowartha 136811 AAA0124306 130768 11/11/97
12/22/97
4 Bruce Weissman HCA W. FL Regional Medical Center 136898 AAA0153981* 131374 6/9/98*
5 Judy Houston Children's Medical Center 137092 AAA0159232 131432 7/30/98
6 Mark Forosisky Dakota Heartland Hospital 136888 AAA0153985 131359 12/4/97
6 Mark Forosisky St Johns Hospital 14362 AH8810767 11/19/97
6 Mark Forosisky The Pathology Center 136889 AAA0159242 131384 11/19/97
6 Mark Forosisky Marian Health Center 12/8/97
6 Mark Forosisky Arkansas Children's Hospital 136750 130757 10/22/97
6 Mark Forosisky McAleister Regional Hospital 136894 AAA0153860 131367 11/16/97
6 Mark Forosisky Med Center One/Q&R Clinic 137071 AAA0153980 131440 4/15/98
6 Mark Forosisky Midwest City Regional Hospital 136579 AAA0159221 131371 5/12/98
6 Mark Forosisky in-house 137065 131428 5/12/98
8 Chuck La Croix Childrens Hospital 136885 AAA0124097 131399 11/21/97
8 Chuck La Croix San Bern Community Hospital 136796 AAA0118791 130762 10/29/97
8 Chuck La Croix San Bern County Medical Center 136752 AAA8006075 130760 10/29/97
8 Chuck La Croix Physicians Automated Lab 10/20/97
8 Chuck La Croix Bio Clinical Ref Lab 136746 130749 10/24/97
8 Chuck La Croix Coltige Hospital 136892 AAA0153957 131361 11/25/97
</TABLE>
<PAGE> 240
<TABLE>
<CAPTION>
Date
Tsr # Rep Customer Address Reader Printer Plate Stripped
- ----- ------------------ ------------------------ ------------------------------ -------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
8 Chuck La Croix St. Mary's Hospital 1050 Linden Ave., 136896 AAA0153867 131364 12/19/97
Long Beach, CA 90813
8 Chuck La Croix Samaritan Health Services 101 Civic Center Ln, 136893 AAA0153976 131366 3/1/96
Lake Havasu City, AZ
? Chuck La Croix Chuck La Croix demo 137079 AAA0159211 131424 6/25/98
9 Jon ??? Pathology Associates E 11604 Indiana, 136891 ELX800??? 13168? 12/5/97
Spokane, WA 99208
9 Jan ??? Infectious Limited 1624 South I Street, Suite 307, 136814 AAA0118786 130874 11/10/97
Laboratory Tacoma, WA
10 Linda Pickholtz Linda Pickholtz for demo 137061 AAA0153960 ?? ??
10 Linda Pickholtz Central PA Alliance Lab 1803 ?? Rose Ave., York, PA 17403 137067 AAA0153959 131126 6/27/98
Debbie Zumerling For SmithKline Beecham sent to DZ 136876 AAA0152978 131370 12/11/97
13 Bobbi Johnson Associated Pathology Labs ??? 136795 AAA0153968 130761 ??
John Kohl Florida Hospital ??? 137060 AAA0159246 137438 ??
John Kohl Omega Medical Labs ??? 136899 AAA0153974 131362 12/9/97
John Kohl MedLabs 212 Cherry Lane, ??? 136880 AAA0151952 131372 12/9/97
John Kohl Allegheny Valley Hospital ??? 136882 AAA0153817 131375 12/9/97
John Kohl ??? Medical Center 323 Jefford St., 137099 AAA0153814 131445 2/11/98
Clearwater, FL 34617
John Kohl Mount Sinai Hospital ?? Street, 9th Floor, NY NY 10029 137099 AAA0159225 131446 1/7/98
</TABLE>
<PAGE> 241
EXHIBIT E
GLOBAL SECURITY AGREEMENT
<PAGE> 242
EXHIBIT 10.31
- --------------------------------------------------------------------------------
SECURITY AGREEMENT
among
Intracel Corporation,
Bartels, Inc.,
PerImmune Holdings, Inc.,
PerImmune, Inc.
and
the holders of the 12%
Guaranteed Senior Secured Primary Promissory Notes
due August 25, 2003 of
Intracel Corporation
and
the holders of the 12%
Guaranteed Senior Secured Escrow Promissory Notes
due August 25, 2003 of
Intracel Corporation
-----------------
Dated as of August 25, 1998
-----------------
- --------------------------------------------------------------------------------
<PAGE> 243
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of August 25, 1998, among
Intracel Corporation, a Delaware corporation (together with its successors and
assigns, the "Company"), the Company's wholly-owned subsidiaries Bartels, Inc.
("Bartels"), PerImmune Holdings, Inc. ("Holdings") and PerImmune, Inc.
("PerImmune" and, together with Bartels and Holdings, the "Subsidiaries") and
the holders (collectively, the "Holders") of the 12% Guaranteed Senior Secured
Primary Promissory Notes (the "Guaranteed Senior Secured Primary Notes") of the
Company and the holders of the 12% Guaranteed Senior Secured Escrow Promissory
Notes (the "Guaranteed Senior Secured Escrow Notes") of the Company
(collectively, the "Notes") issued pursuant to that certain Securities Purchase
Agreement, dated as of the date hereof, by and among the Company and the other
parties thereto (the "Purchase Agreement"). As used herein, all capitalized
terms not otherwise defined herein shall have the meanings set forth in the
Purchase Agreement.
W I T N E S S E T H:
WHEREAS, the Company is to issue 12% Guaranteed Senior Secured
Primary Promissory Notes in the aggregate original principal amount of
$35,000,000 and 12% Guaranteed Senior Secured Escrow Promissory Notes in the
aggregate original principal amount of $6,000,000; and
WHEREAS, in order to secure the performance of the obligations
of the Company under the Purchase Agreement, the Notes and the Ancillary
Agreements (the "Obligations") and the guaranties relating to the Obligations
executed on the date hereof by each of the Subsidiaries, the parties hereto are
entering into this Security Agreement regarding the terms and conditions of the
Company's and Subsidiaries' (together, the "Company Parties") grant of a
security interest in the Collateral (as defined below) to the holders of the
Notes (the "Holders"); and
WHEREAS, the Company and the Holders of the Notes have entered
into the Intellectual Property Security Agreement as of the date hereof (the
"Intellectual Property Security Agreement") to secure the performance of the
Obligations, the representations, warranties, covenants, terms and provisions of
which are hereby incorporated by reference and made a part hereof; and
WHEREAS, the Company and the Holders of the Notes have entered
into an Interest Escrow Security Agreement as of the date hereof relating to the
payment of certain interest due on the Notes (the "Interest Escrow Security
Agreement"), the terms and provisions of which are hereby incorporated herein by
reference and made a part hereof, and the Company has agreed to grant to the
Holders a first priority perfected security interest in the accounts established
pursuant to the Interest Escrow Security Agreement (the "Interest Escrow
Accounts") which comprise a portion of the Collateral (as defined below); and
<PAGE> 244
WHEREAS, the Company and the Holders of the Notes have entered
into a Funded Commitment Facility Escrow Agreement as of the date hereof
relating to certain segregated escrowed funds in connection with the issuance of
the Guaranteed Senior Secured Escrow Notes (the "Funded Commitment Facility
Escrow Agreement"), the terms and provisions of which are hereby incorporated
herein by reference and made a part hereof, and the Company has agreed to grant
the Holders a first priority perfected security interest in the accounts
established pursuant to the Funded Commitment Facility Escrow Agreement (the
"Funded Commitment Facility Escrow Accounts") which comprise a portion of the
Collateral (as defined below).
NOW, THEREFORE, in consideration of the premises and other
benefits to the Company Parties, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Security Interest.
(a) Grant of Security Interest.
As collateral security for the payment and performance in full
of the Obligations in accordance with their respective terms, the Company
Parties hereby pledge, assign, transfer and grant to the Holders as to all
Collateral, a first priority perfected continuing security interest (except with
respect to certain Collateral listed on Schedule A hereto in which Akzo Nobel
Pharma International, B.V., as Collateral Agent under the Intellectual Property
Security Agreement dated August 8, 1996 (the "Collateral Agent") has a first
priority security interest (the "Akzo Security Interest Collateral") and with
respect to the Akzo Security Interest Collateral, a second priority perfected
security interest until such time as payment in full of the Debt underlying the
Akzo Security Interest Collateral has been made and at such time, a first
priority perfected security interest in the Akzo Security Interest Collateral)
(collectively, the "Security Interests") in all of the right, title and interest
of the Company Parties in and to all of the Assets, real or personal, tangible
or intangible of the Company Parties, now owned or hereafter acquired (the
"After Acquired Collateral"), wherever located, including, without limitation,
the following:
(i) All equipment in all of its forms, wherever
located, now or hereafter existing, and all
parts thereof and all accessions thereto,
with the exception of the Excluded Equipment
(any and all such equipment, parts and
accessions being the "Equipment");
(ii) All inventory in all of its forms, wherever
located, now or hereafter existing,
(including, but not limited to (i) raw
materials and work in process therefor,
finished goods thereof, and materials used
or consumed in the manufacture or
production, (ii) goods in which the Company
has an interest in mass or a joint or other
interest or right of any kind and (iii)
goods which are returned to or repossessed
by the Company, and all accessions thereto
and products thereof (any and all such
inventory, accessions and products being the
"Inventory");
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(iii) All accounts, accounts receivable, contract
rights, chattel paper, instruments,
securities (including, without limitation,
all Investment Property (as such term is
defined in the Uniform Commercial Code (the
"UCC")), general intangibles (as such term
is defined in the UCC) and other obligations
of any kind now or hereafter existing
whether or not arising out of or in
connection with the sale or lease of goods
or the rendering of services, and all rights
now or hereafter existing in and to all
options to acquire real or personal property
("Property Options"), security agreements,
leases and other contracts securing or
otherwise relating to any such accounts,
contract rights, chattel paper, instruments,
general intangibles or obligations (any and
all such accounts, contract rights, chattel
paper, instruments, general intangibles and
obligations being the "Receivables," and any
and all such options, leases, security
agreements and other contracts being the
"Related Contracts");
(iv) All real Assets and interests in real
property, now or hereafter existing wherever
located, together with all buildings,
towers, structures and other improvements
erected, situated or placed thereon and all
attachments used in connection therewith
(collectively, the "Real Property
Collateral");
(v) All Financial Accounts, including, but not
limited to the Interest Escrow Accounts, the
Funded Commitment Facility Escrow Accounts
and the Collateral Account (collectively,
the "Financial Accounts") and all sums of
money, from any source whatsoever, now or
hereafter transferred to and comprising the
Financial Accounts, including, without
limitation, all proceeds of the Collateral
paid into the Financial Accounts and any and
all interest and dividends and other income
dividend from any such moneys and all
certificates and instruments in or
representing the Financial Accounts now or
hereafter existing;
(vi) All documents (as such term is defined in
the UCC) or other receipts covering,
evidencing or representing goods, now owned
or hereafter acquired by the Company; and
(vii) All patents, patent applications and
patentable inventions now or hereafter
existing, including, without limitation,
each patent and patent application
identified in Schedule I to the Intellectual
Property Security Agreement and made a part
hereof, and including without limitation (A)
all inventions and improvements described
and claimed therein, (B) the right to sue or
otherwise recover for any and all past,
present and future infringements and
misappropriations thereof, (C) all income,
royalties, damages and other payments now
and hereafter due and/or payable with
respect
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thereto (including, without limitation,
payments under all licenses entered into in
connection therewith, and damages and
payments for the past and future
infringements thereof), and (D) all rights
corresponding thereto throughout the world
and all reissues, divisions, continuations,
continuations-in-part, provisionals,
substitutes, renewals, and extensions
thereof, all improvements thereon and all
other rights of any kind whatsoever of the
Company accruing thereunder or pertaining
thereto (the "Patents");
(viii) All trademarks, service marks, trade names,
trade dress or other indicia of trade
origin, trademark and service mark
registrations, and applications for
trademark or service mark registrations and
any renewals thereof now or hereafter
existing, including, without limitation,
each registration and application identified
in Schedule II to the Intellectual Property
Security Agreement and made a part hereof,
and including without limitation (A) the
right to sue or otherwise recover for any
and all past, present and future
infringements and misappropriations thereof
(B) all income, royalties, damages and other
payments now and hereafter due and/or
payable with respect thereto (including,
without limitation, payments under all
licenses entered into in connection
therewith, and damages and payments for past
or future infringements thereof), and (C)
all rights corresponding thereto throughout
the world and all other rights of any kind
whatsoever of the Company or accruing
thereunder or pertaining thereto, together
in each cash with the good will of the
business connected with the use of, and
symbolized by, each such trademark, service
mark, trade name, trade dress or other
indicia of trade origin (the "Trademarks");
(ix) All copyrights, whether statutory or common
law, and whether or not the underlying works
of authorship have been published, and all
works of authorship and other intellectual
property rights therein, all copyrights of
works based on, incorporated in, derived
from or relating to works covered by such
copyrights, all right, title and interest to
make and exploit all derivative works based
on or adopted from works covered by such
copyrights, and all copyright registrations
and copyright applications, and any renewals
or extensions thereof, including, without
limitation, each copyright registration and
copyright application, if any, identified in
Schedule I to the Intellectual Property
Security Agreement and made a part hereof,
and including now or hereafter existing,
without limitation, (A) the right to print,
publish and distribute any of the foregoing,
(B) the right to sue or otherwise recover
for any and all past, present and future
infringements and misappropriations thereof,
(C) all income, royalties, damages and other
payments now and hereafter due and/or
payable with respect thereto (including,
without limitation, payments under all
licenses
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<PAGE> 247
entered into in connection therewith, and
damages and payments for past or future
infringements thereof), and (D) all rights
corresponding thereto throughout the world
and all other rights and any kind whatsoever
of the Company accruing thereunder or
pertaining thereto (the "Copyrights");
(x) All license agreements with any other person
in connection with any of the Patents,
Trademarks or Copyrights, or such other
person's patents, trade names, trademarks,
service marks or copyrights, whether the
Company is a licensor or licensee under any
such license agreement, including now or
hereafter existing, without limitation, the
license agreements listed on Schedule II to
the Intellectual Property Agreement Security
attached hereto and made a part hereof,
subject, in each case to the terms of such
license agreements, including, without
limitation, terms requiring consent to a
grant of security interest, and any right to
prepare for sale, sell and advertise for
sale, all Inventory (as defined in the
Security Agreement) now or hereafter owned
by the Company and now or hereafter covered
by such licenses (the "Intangible
Licenses"); and
(xi) All products and proceeds of any and all of
the foregoing Collateral now or hereafter
existing including without limitation,
proceeds which constitute Assets of the type
described in clauses (i) through and
including (x) and to the extent not
otherwise included, all (A) payments under
insurance (whether or not the Secured Party
is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise
with respect to any of the foregoing
Collateral, license royalties and (B) cash.
(b) The Security Interests and Liens granted hereunder shall
be treated as (i) a first priority perfected security interest in all the
existing and future Assets of the Company, and its Subsidiaries (including but
not limited to the Collateral set forth in Section 1(a) and any Assets or After
Acquired Collateral), other than (A) the Akzo Security Interest Collateral set
forth on Schedule A attached hereto and with respect thereto, a second priority
perfected security interest until such time as payment in full of the Debt
underlying the Akzo Security Interest Collateral has been made and at such time,
a first priority perfected security interest in the Akzo Security Interest
Collateral, (B) the Excluded Equipment subject to (y) the receipt of the consent
(which the Company shall use its best efforts to obtain) of Transamerica
Business Credit Corporation ("Transamerica") to the grant of a second priority
perfected Security Interest therein and (z) upon termination of any Security
Interest by Transamerica, in which case the Holders shall automatically retain a
first priority perfected Security Interest in the Excluded Equipment,, and (C)
the Receivables secured by the Receivables Facility, but only during such time
as the Receivables Facility is existing, and a second priority perfected
Security Interest in all such Receivables, and a first priority perfected
security interest in all other Receivables; and (ii) a pledge of all the issued
and outstanding Capital Stock of the Subsidiaries of the Company. For
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<PAGE> 248
purposes of this Section 1(b) the "Receivables Facility" and "Subsidiaries"
shall have the meanings set forth in the Purchase Agreement.
(c) Until the Obligations shall have been satisfied in full
and this Agreement shall have been terminated, the Company and its Subsidiaries
(as defined in the Purchase Agreement), shall not, without the Holders' prior
written consent, which consent will not be unreasonably withheld, create, incur
or assume any pledge, sale, license or assignment of any of the Collateral or
the After Acquired Collateral, or grant, convey or hypothecate any interest in
the Collateral or the After Acquired Collateral, or take any action the effect
of which is to have created any Lien, encumbrance, claim, charge, preference,
priority or other restriction on the Collateral or the After Acquired
Collateral.
(d) Certain Definitions.
All terms not otherwise defined in this Section 1 or the
Purchase Agreement, or the Notes or any Ancillary Agreement shall have their
respective meanings, if any, in the UCC as in effect in the State of New York.
"Accounts Receivable" has the meaning specified in Section
1(a)(iii) and, to the extent not otherwise described therein, (i) all accounts
(other than accounts generated from the sale or other disposition of any
Collateral of the type described in Section 1(a) clauses (i), (iv), (vi), (vii),
(viii), (ix) and (x)), (ii) all of the rights of the Company Parties to payment
for any goods or services sold by it, whether now in existence or arising from
time to time hereafter, including, without limitation, rights evidenced by an
account, note, contract, security agreement, chattel paper or other evidence of
indebtedness or security (in each case in respect of such goods or services) and
rights to payment of any interest, finance charges or other obligations with
respect thereto (all of the foregoing payments for the purposes of this
paragraph, "Payments"), in each case together with (A) all security pledged,
assigned, hypothecated or granted to or held by the Company Parties (in each
case in respect of such goods or services) to secure Payments, (B) all of the
right, title and interest of the Company Parties in and to any goods, the sale
of which gave rise to Payments to the extent of the Company Parties' interest in
such goods after such sale, (C) all proceeds thereof, (D) all insurance and
claims for insurance effected or held for the Company Parties in respect of
Payments or such goods, (E) all guarantees of any of the foregoing, (F) all
records, ledger cards and invoices of the Company Parties relating to any of the
foregoing, and (G) all credit information, reports and memoranda relating to any
of the foregoing) and (iii) all documents, books, log books, records, ledger
cards, invoices, correspondence, files, tapes, cards, and computer programs,
computer runs, computer stored data, computer print-outs, disks, data processing
software and relating to all Assets and rights of the type described above in
this definition.
"Assets" has the meaning specified in the Purchase Agreement.
"Collateral Account" means a separate custodial account or
accounts maintained by the Holders of the Notes pursuant to this Agreement.
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"Contracts" has the meaning specified in Section 1(a)(iii) and
(vi), and to the extent not otherwise described therein, all those contracts and
agreements (including, without limitation, insurance policies, franchise,
management and employment agreements) to which any Company Party is a party or
is bound or from which any Company Party is a party or is bound or from which
such Company Party derives a benefit, and shall include, without limitation, all
rights to terminate, perform, compel performance, exercise remedies and all
rights to receive Inventory, Equipment, services and proceeds of any insurance,
indemnity, warranty or guaranty.
"Copyrights" has the meaning specified in Section 1(a)(ix) and
includes the items listed under "Copyrights" on Schedule I to the Intellectual
Property Security Agreement.
"Equipment" has the meaning specified in Section 1(a)(i), and
to the extent not otherwise described therein, all goods, other than Inventory,
and, in any event, shall include, but shall not be limited to, all equipment,
machinery, furniture, furnishings, fixtures, aircraft, computer equipment,
computer hardware, tools and vehicles, together with all attachments,
components, parts, accessories and accessions installed thereon or affixed
thereto, but excluding all Excluded Equipment.
"Excluded Equipment" means the equipment listed on Schedule B,
together with all attachments, components, parts, accessories and accessions
installed thereon or affixed thereto.
"Financial Accounts" has the meaning specified in Section
1(a)(v), and to the extent not otherwise described therein, all right, title and
interest of Company Parties in all deposit, investment or other accounts
maintained with any bank, savings and loan association, broker, brokerage, or
any other financial institution, together with all monies and other Assets
deposited or held therein, including, without limitation, any checking account,
NOW account, savings account, escrow account, savings certificate and margin
account, the Interest Escrow Accounts, the Funded Commitment Facility Escrow
Accounts and the Collateral Accounts. The Company Parties hereby grant a lien on
and assigns to the Holders each such Financial Account, whether or not such lien
or assignment is subject to the UCC.
"Funded Commitment Facility Escrow Accounts" means a separate
custodial escrow account or accounts maintained by the Company for the benefit
of the Holders of the Notes pursuant to the Funded Commitment Facility Escrow
Agreement.
"General Intangibles" has the meaning specified in Section
1(a)(iii), (vii), (viii), (ix) and (x) and to the extent not otherwise described
therein, all general intangibles, and, in any event, shall include, but not be
limited to, all rights to receive Inventory or goods that will become Inventory,
all general intangibles arising from the sale, loan, exchange or other
disposition of goods or general intangibles and all general intangibles arising
from the furnishing of services, all rights under or to any franchises, Patents,
Patent applications, know-how, inventions (whether or not patentable), Marks and
the goodwill of the business symbolized thereby, copyrights and any registration
or application relating thereto, all licenses (whether any Company Party is
licensee or licensor thereunder) but only to the extent that such licenses do
not
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<PAGE> 250
prohibit the Company Parties' granting of a security interest therein or a valid
written consent to assignment or pledge has been obtained from the licensor
thereunder, all tax refunds, tax refund claims, guaranty claims, all judgments,
chooses in action and all computer software, computer programs and all general
intangibles which represent the right to receive money and all interests of the
Company Parties in any partnerships in which any of them is a general or limited
partner.
"Interest Escrow Accounts" mean a separate custodial escrow
account or accounts maintained by the Company, for the benefit of the Holders of
the Notes pursuant to the Interest Escrow Security Agreement.
"Inventory" has the meaning specified in Section 1(a)(ii) and
to the extent not otherwise described therein, all inventory of every type or
description (other than inventory subject to purchase money security interests)
and all documents covering such inventory, including, but not limited to, all
goods, merchandise and other personal Assets, held for sale, lease or exchange,
or which are furnished or are to be furnished under contracts of service, in
each case whether such goods, merchandise or other personal Assets are on
consignment, or which constitute raw materials, work in process or materials
used or consumed or to be used or consumed in the Company Parties' businesses,
or in the processing, packaging or shipping of the same, and all finished goods.
"Leases" has the meaning specified in Section 1(a) (iv) and to
the extent not otherwise described therein, any and all leasehold interests of
the Company Parties in real or personal Assets, whether any Company Party is
lessor or lessee thereunder, and any other such leasehold interests created
hereafter.
"Patents" has the meaning specified in Section 1(a)(vii) and
includes the items listed under the heading "patents" on Schedule I to the
Intellectual Property Security Agreement.
"Permitted Lien" means (i) Liens for taxes, assessments or
governmental charges or levies not delinquent or which any Company Party is in
good faith and by appropriate proceedings contesting and for which an adequate
reserve has been established in accordance with GAAP, (ii) deposits, pledges or
other items to secure obligations under workers' compensation, social security
or similar laws, or under employment insurance, (iii) indemnity, performance or
other similar bonds or deposits, pledges or other items to secure bids, tenders,
contracts (other than contracts for the payment of money), statutory
obligations, surety and appeal bonds and other obligations of like nature, in
each case arising in the ordinary course of business, (iv) interests of
landlords or other lessors under leases of real or personal Assets, (v)
statutory Liens of landlords and mechanics', workmen's, materialmen's, carrier's
or warehousemen's or other like Liens arising in the ordinary course of business
with respect to obligations which are not due or which any Company Party is in
good faith and by appropriate proceedings contesting and for which an adequate
reserve has been established in accordance with GAAP, (vi) Liens securing
purchase money Debt incurred to finance the acquisition of the Assets encumbered
by such Liens, (vii) rights of tenants, subtenants, franchisees or parties in
possession (other than a debtor-in-possession, trustee in bankruptcy or
receiver) if such rights were granted in the ordinary course of business and
vested on or before the date hereof or created
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thereafter in the ordinary course of business, (viii) interests of any customer
who has purchased goods that are held by any Company Party until delivery is
requested by such customer, (ix) Liens of any third party in insurance premiums
returned to any Company Party, which Liens secure loans by such third party to
the Company for the purpose of purchasing the insurance to which such premium
relates, (x) extensions, renewals or replacements of any Lien referred to in
paragraphs (i) through (ix) above, provided that any such extension, renewal or
replacement is granted in the ordinary course of business and limited to the
Assets originally encumbered thereby and (xi) Laws with respect to any Company
Parties' Assets and any amendments thereto now or at any time hereafter adopted
by any governmental or quasi-governmental authority having jurisdiction.
"Real Property" has the meaning specified in Section 1(a)(iv).
"Required Holders" has the meaning specified in the Purchase
Agreement.
"Trademarks" has the meaning specified in Section 1(a)(viii),
and to the extent not otherwise described therein, all trademarks, tradenames
and service marks, including, without limitation, those listed on Schedule II to
the Intellectual Property Security Agreement, which are registered in the United
States Patent and Trademark Office, any office of any state or any other
governmental authority, or in any country and all licenses of trademarks,
tradenames and service marks, as well as any unregistered marks used by any
Company Party in the United States and elsewhere, including any logos and/or
designs used in connection with any such trademarks, tradenames or service marks
and all registrations, recordings and applications for registration thereof;
Section 2. Representations, Warranties and Covenants. Each Company
Party hereby represents and warrants, covenants and agrees, with respect to
itself, that:
(a) Each Company Party owns each item of Collateral pledged by
it hereunder, and such Collateral is and shall at all times be free and clear of
any security interest, mortgage, hypothecation, pledge, lien or encumbrance or
restriction on the transfer thereof, except for (i) the Security Interests
created under this Security Agreement and the other Security Documents, (ii) the
Liens and encumbrances listed on Schedule C attached hereto (the "Existing
Liens") and (iii) Permitted Liens. Each Company Party shall pay and discharge,
or cause to be paid and discharged, when due and payable, all amounts secured by
any of the Existing Liens or Permitted Liens. Each Company Party shall maintain,
preserve and protect the security interests granted by it hereunder for as long
as this Security Agreement shall remain in full force and effect.
(b) Schedule D hereto sets forth as of the date hereof each
city, state and county where each Company Party has a place of business
(including each Company Party's chief executive office and principal place of
business) and each additional county and state where any Asset of each Company
Party is located.
(c) The information set forth in Schedules C and D attached
hereto is true, complete and correct as of the date hereof.
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(d) Each Company Party will not (i) keep Collateral or After
Acquired Collateral in any State in which financing statements have not
theretofore been filed in a manner sufficient to perfect under the UCC of such
State the Security Interests in the Collateral and the After Acquired Collateral
granted hereby, or (ii) change its name or change its chief executive office or
places of business from that shown in Schedule D, unless the Company Party (A)
gives notice to the Required Holders of such event, (B) does the appropriate
filing or other action necessary to perfect the Liens of the Holders on the
Collateral and the After Acquired Collateral and (C) delivers an Officers'
Certificate to the Required Holders stating that its obligations under Section
2(d)(B) have been fulfilled and setting forth the actions taken to comply with
such section.
(e) Each Company Party will maintain or cause to be maintained
at its expense, with financially sound and reputable insurers having a claims
paying ability of "A" or better by Standard & Poor's ("S&P") or Moody's Investor
Service, Inc. ("Moody's") insurance with respect to the Collateral and After
Acquired Collateral against loss or damage of the kinds customarily insured
against by corporations of established reputations engaged in the same or
similar business and similarly situated as such Company Party, of such types and
in such amounts as are customarily carried under similar circumstances by such
other corporations and with such deductible amounts as are customary for
companies in similar businesses similarly situated. Each Company Party will
cause the Holders to be named as an additional insured and loss payee, as its
interests may appear, under all present or future policies of insurance that
insure any of the Collateral or After Acquired Collateral. Each Company Party
will cause all policies of insurance to (i) provide that insurance proceeds with
respect to the Collateral or After Acquired Collateral shall be adjusted with
such Company Party (which shall give notice of any such loss to the Holders)
prior to a Default in payment of any Note or an Event of Default, other than an
Event of Default related to the failure to pay principal of any Note, and, on
and after a Default in payment of principal of any Note or an Event of Default,
other than an Event of Default related to the failure to pay principal of any
Note, shall be adjusted with, and payable to, the Holders and (ii) include
waivers by the insurer of all claims for insurance premiums against the Holders.
Each Company Party shall use its best efforts to obtain insurance that provides
that any losses shall be payable to the Holders, notwithstanding any act,
failure to act or negligence of, or violation of warranties, declarations or
conditions contained in such policy by, such Company Party or Holders. Insurance
policies required to be obtained hereunder shall contain an agreement by the
insurer that it will not cancel such policy except after 30 days' prior notice
to the Required Holders. Each Company Party shall deliver to the Holders
originals of such policies of insurance or certificates evidencing such
policies, together with the evidence of payment (which evidence may be an
Officers' Certificate of such Company) of all premiums then due thereon and such
Company Party shall, at least five days prior to the expiration of any such
insurance, deliver other original policies or other certificates of the insurers
evidencing the renewal of such insurances. Should any Company Party fail to
effect, maintain or renew any insurance provided for in this Section, or to pay
the premium therefor, or to deliver to the Holders any of such policies or
certificates, then in any of said events each Holder, at its option, but without
obligation so to do, may, upon 10 days' notice to such Company Party procure
such insurance. Any sums expended by the Holders to procure such insurance shall
be repaid by such Company Party within 10 days following the date on which such
expenditure shall be made by the Holders. Each Company Party annually will
deliver to the Holders a letter from an insurance broker with whom such Company
Party regularly conducts its business with respect to insurance
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setting forth the insurance obtained pursuant to this Section 2(e) and then in
effect and stating whether, as to amounts, coverage and provisions, such
insurance protects such Company Party against any and all risks that are
customarily insured against by companies in similar businesses similarly
situated. Such letter shall also set forth any recommendation of such
independent insurance broker as to additional insurance, if any, required in
order to make insurance coverage of the Collateral consistent with practice
regarding insurance coverage in the Company Party's industry. Upon notice of a
Default in payment of principal of any Note or an Event of Default, other than
an Event of Default in payment of principal of any Note, the Holders, (i) may,
(ii) upon notice from the Required Holders shall and (iii) shall, in any event,
upon acceleration of the Obligations in accordance with Section 6 of the Notes,
send written notice to all insurers for which it has received policies of
insurance or certificates evidencing such policies informing them of the
occurrence of such Default or Event of Default and instructing them to adjust
all claims as set forth above until such insurers are notified to the contrary
by the Required Holders. If such Event of Default is cured or waived prior to
acceleration of any Obligations, the Required Holders shall advise such insurers
to adjust claims with the Company Party.
(f) Each Company Party, at its own expense: (i) will do all
acts and things, and will make, execute, acknowledge and deliver, and file and
record in the proper filing and recording places all such instruments
(including, without limitation, mortgages, assignments, security agreements,
financing statements and continuation statements), required (and any that are
reasonably requested by the Holders) to establish, perfect, maintain and
continue the perfection and priority of the Security Interests of the Holders in
the Collateral and the After Acquired Collateral, in the order of priority as
described in Section 1(b), and, in addition, authorizes the Holders to execute
and file in the name of the Holders any financing or continuation statements
that the Holders may determine to be necessary or advisable to protect their
security interests with respect to the Collateral and the After Acquired
Collateral; (ii) will make all searches necessary (and any deemed necessary by
the Holders) to establish and determine the validity and priority of such
Security Interests of the Holders; provided, however, that, so long as no Event
of Default has occurred and is continuing, the Company Party shall not be
required to make any search in any location more frequently than once a year;
and (iii) will satisfy all claims and charges, other than Permitted Liens and
Existing Liens, that might reasonably be expected to materially prejudice,
imperil or otherwise adversely affect the Collateral or the After Acquired
Collateral or affect the existence, perfection or priority of such Security
Interests. A carbon, photographic or other reproduction of this Security
Agreement or a financing statement shall be sufficient as a financing statement
and may be filed in lieu of the original in any or all jurisdictions which
accept such reproductions. Each Company Party, at its own expense, will cause
any New Subsidiaries (as defined in the Purchase Agreement), to do all acts and
things required to comply with the protection and perfection of the Holders'
Security Interest under this Section 2(f), in accordance with the provisions of
Section 1(b).
(g) Neither the execution and delivery of this Security
Agreement by the Company Party, the consummation of the transactions herein
contemplated nor the fulfillment of the terms hereof violate the terms of any
agreement, indenture, mortgage, deed of trust, equipment lease, instrument or
other document to which any Company Party is a party, or conflict with any Law,
applicable to such Company Party of any court or any government, regulatory body
or administrative agency or other governmental body having jurisdiction over
such Company Party or its Assets, to the extent that such violation or conflict
would have a
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material adverse effect on the financial condition, business, assets,
liabilities or prospects of such Company Party, or on the value of the
Collateral, the After Acquired Collateral or the Security Interests.
(h) No consent or approval that has not been obtained prior to
the date hereof of any governmental body, regulatory authority or securities
exchange was or is necessary as a condition to the validity of the Security
Interests granted hereunder in the Collateral and the After Acquired Collateral
and this Security Agreement is effective to vest in the Holders the rights of
the Holders in the Collateral and the After Acquired Collateral as set forth
herein.
(i) For so long as any of the Notes shall remain outstanding,
the Company Party shall not take any action discharging, canceling,
extinguishing or otherwise impairing the Company Party's right, title and
interest in and to any of the Collateral in contravention of the terms of the
Purchase Agreement, the Notes or any of the Ancillary Agreements.
(j) The Company Party shall pay and discharge any taxes,
assessments and governmental charges and levies against any Collateral and the
After Acquired Collateral prior to delinquency thereof and shall keep all
Collateral and the After Acquired Collateral free of any unpaid charges
whatsoever, unless such charges are being contested in.
Section 3. Administration of the Collateral. The Holders shall
administer the Collateral and the After Acquired Collateral in accordance with
the provisions hereof.
Section 4. Release and Substitution of Collateral. The Collateral and
the After Acquired Collateral shall not be released from the Security Interests
created hereunder and no Assets shall be substituted for any of the Collateral
except in accordance with the provisions of Article V of the Purchase Agreement,
which provisions are hereby incorporated herein by reference.
Section 5. Default; Remedies.
(a) Defined. For purposes of this Security Agreement, the
terms "Default" and "Event of Default" shall have the respective meanings
provided in the Notes and shall include an event that with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
(b) Exercise of Remedies Under the Security Agreement. If a
Default in payment of any Obligations shall have occurred or any Event of
Default shall have occurred and be continuing, or would result therefrom, the
Holders may commence the taking of such actions (or refrain from taking actions)
toward collection or enforcement of this Security Agreement and the Collateral
or After Acquired Collateral (or any portion thereof), including, without
limitation, action toward foreclosure upon any Collateral or After Acquired
Collateral, as it deems appropriate in its sole discretion or as instructed by
the Required Holders. If any such Default or Event of Default that was the basis
for the commencement of such action shall have been cured or waived, and, in the
case where there has been an acceleration, recession of such acceleration shall
have occurred, in each case in accordance with the terms of the Purchase
Agreement, the Notes, or any of the Ancillary Agreements, as applicable, any
direction to the Holders to take
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any action in connection with the aforementioned notice shall be deemed
rescinded upon notification by the Holders of such cure, waiver or rescission of
acceleration, as the case may be.
(c) Remedies Generally. If a Default in the payment of any Obligations shall
have occurred or any Event of Default shall have occurred and be continuing or
would result therefrom, the Holders or by agents or attorneys may exercise in
respect of the Collateral or After Acquired Collateral all of the rights and
remedies set forth herein or otherwise available to a secured party upon Default
under any applicable provision of the UCC or any other applicable jurisdiction
and, in conjunction with or in addition to such rights and remedies, may
themselves or by agents or attorneys retain the Collateral or the After Acquired
Collateral or sell, assign, transfer, or dispose of, endorse and deliver the
whole or, from time to time, any part of the Collateral or the After Acquired
Collateral at public or private sale, for cash, upon credit or for other Assets,
for immediate or future delivery, and for such price or prices and on such other
terms as are satisfactory to the Holders (in their discretion) without liability
for loss or damage. Upon consummation of any such sale, the Holders shall have
the right to assign, transfer, endorse and deliver to the purchaser or
purchasers thereof the Collateral or After Acquired Collateral so sold. Each
such purchaser at any such sale shall hold the Assets sold absolutely free from
any claim or right on the part of any Company Party, and each Company Party
hereby waives (to the full extent permitted by law) all rights of redemption,
stay or appraisal which such Company Party now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Holders shall give such Company Party ten days' written notice (which each
Company Party agrees shall be deemed to be reasonable notification within the
meaning of Section 9-504(3) of the relevant UCC) of the Holder's intention to
make any such public or private sale. Any such sale shall be held at such time
or times and at such place or places as the Holders may fix. At any such sale,
the Collateral or After Acquired Collateral, or portion thereof to be sold, may
be sold as an entirety or in separate portions, as the Holders may, in their
discretion, determine. The Holders shall not be obligated to make any sale of
the Collateral or After Acquired Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of the Collateral or After Acquired
Collateral may have been given. The Holders may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case sale of all or any part of the Collateral or After Acquired
Collateral is made on credit or for future delivery, the Collateral or After
Acquired Collateral so sold may be retained by the Holders until the sale price
is paid by the purchaser or purchasers thereof, but the Holders shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral or After Acquired Collateral so sold and, in case of any
such failure, such Collateral may or After Acquired Collateral be sold again
upon like notice. As an alternative to exercising the power of sale herein
conferred upon it, the Holders may proceed by suit or suits at law or in equity
to foreclose this Security Agreement and sell the Collateral or After Acquired
Collateral or any portion thereof pursuant to judgment or decree of a court or
courts having competent jurisdiction. Any of the Collateral or After Acquired
Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Holders or after any overhaul or repair
that the Holders shall determine to be commercially reasonable. If, under
mandatory requirements of applicable law, the Holders shall be required to make
disposition of the Collateral or After Acquired Collateral within a period of
time that does not permit the giving of notice to a Company Party as provided
herein, the Holders need give
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<PAGE> 256
such Company Party only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of law.
(d) Remedies; Obtaining the Collateral Upon Default. Each
Company Party agrees that, if a Default or Event of Default shall have occurred
and be continuing, or would result therefrom then and in every such case, and in
addition to the rights and remedies available to a secured party under any
applicable provisions of the Uniform Commercial Code, or any other applicable
law, the Holders, may:
(i) personally, or by agents or attorneys,
immediately take possession of the
Collateral or After Acquired Collateral or
any part thereof from such Company Party or
any other person who then has possession of
any part thereof, with or without notice or
process of law, and for that purpose may
enter upon such Company Party's premises
where any of the Collateral or After
Acquired Collateral is located and remove
the same and use in connection with such
removal any and all services, supplies, aids
and other facilities of such Company Party;
(ii) instruct the obligor or obligors on any
agreement, instrument or other obligation
constituting Collateral or After Acquired
Collateral to make any payment or render any
performance required by the terms of such
agreement, instrument or obligation directly
to the Holders or their designee;
(iii) withdraw all monies, securities and
instruments held by the Holders in any
Financial Account (including but not limited
to the Collateral Account, the Interest
Escrow Accounts or the Funded Commitment
Facility Escrow Accounts), or otherwise for
application to the Obligations;
(iv) sell or otherwise liquidate, or direct such
Company Party to sell or otherwise
liquidate, any or all investments made in
whole or in part with the Collateral or
After Acquired Collateral or any part
thereof, and take possession of the proceeds
of any such sale or liquidation; and
(v) take possession of the Collateral or After
Acquired Collateral or any part thereof by
directing such Company Party in writing to
deliver the same to the Holders at any place
or places designated by the Required
Holders, in which event such Company Party
shall at its own expense:
(A) forthwith cause the same to be
moved to the place or places so
designated by the Agent and there
delivered to the Holders;
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(B) store and keep any Collateral or
After Acquired Collateral so
delivered to the Holders at such
place or places pending further
action by the Required Holders as
provided in this Section 5(d); and
(C) while any such Collateral or After
Acquired Collateral shall be so
stored and kept, provide such guard
and maintenance services as shall
be necessary to protect the same
and to preserve and maintain such
Collateral or After Acquired
Collateral in good condition;
it being understood that such Company Party's obligation so to deliver
the Collateral or the After Acquired Collateral is of the essence of
this Security Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Holders shall be entitled to a
decree requiring specific performance by such Company Party of such
obligation.
(e) Collateral Account. The Required Holders shall deposit the
proceeds of any Collateral or the After Acquired Collateral obtained or disposed
of pursuant to this Section 5 in the Collateral Account.
(f) Intellectual Property Collateral. The Holders may exercise
in respect of the Intellectual Property Collateral (as that term is defined in
the Intellectual Property Security Agreement), in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party upon Default under the N.Y. Uniform Commercial Code,
and may also (i) require the Company or any of its Subsidiaries to, and the
Company and each of its Subsidiaries hereby agree that they will, at their
expense, and upon the request of any Holder forthwith, assemble all or part of
the documents and things embodying all or any part of the Intellectual Property
Collateral as directed by the Holders and make them available to the Holders at
a place and time to be designated by the Holders which is reasonably convenient
to the parties and (ii) without notice, except as specified below, sell the
Intellectual Property Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Holder's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Holders may
deem commercially reasonably. In the event of any sale, assignment, or other
disposition of any of the Intellectual Property Collateral of the Companies or
any of its Subsidiaries, the goodwill of the business connected with and
symbolized by any Trademarks subject to such disposition shall be included and
the Company and its Subsidiaries, as the case may be, shall supply to the
Holders the Company's and its Subsidiaries', as the case may be, know-how and
expertise, and documents and things embodying the same, relating to the
manufacture, distribution, advertising and sale of the products or the provision
of services relating to any Intellectual Property Collateral subject to such
disposition, and the Company's and its Subsidiaries', as the case may be,
customer lists and other records and documents relating to the Intellectual
Property Collateral and to the manufacture, distribution, advertising and sale
of such products and services. The Company and its Subsidiaries agree that, to
the extent notice of sale shall be required by law, at least ten days' notice to
the Company and its Subsidiaries, as the case may be, of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Holders shall not be obligated to make
any
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sale of the Intellectual Property Collateral regardless of notice having been
given. The Holders may adjourn the public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(g) Preventing Impairment of the Collateral. Regardless of
whether there shall have occurred any Default or Event of Default, the Holders
may institute and maintain or cause in the name of each Company Party or of the
Required Holders, or both, to be instituted or maintained, such suits and
proceedings as the Required Holders may be advised by counsel shall be necessary
or expedient to prevent any impairment of the Collateral or After Acquired
Collateral in contravention of the terms hereof or of the Purchase Agreement,
the Notes or any Ancillary Agreements.
Section 6. Holders Appointed Attorney-in-Fact. Each Company Party
hereby constitutes and appoints the Holders their attorney-in-fact for all
Collateral for the purpose of carrying out the provisions, but subject to the
terms and conditions, of this Security Agreement and taking any action and
executing any instrument, including, without limitation, any financing
statements or continuation statements, and taking any other action to maintain
the validity, perfection and enforcement of the Security Interests intended to
be created hereunder, that the Holders may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest.
Section 7. Purchase of Collateral by Required Holders. At any sale of
the Collateral or After Acquired Collateral, whether pursuant to power of sale
or otherwise hereunder, any Holder of the Notes may, to the extent permitted by
applicable law, bid for and purchase, free from any right of redemption, stay or
appraisal (all such rights being hereby waived and released by each Company
Party to the extent permitted by law), the Collateral or After Acquired
Collateral or any party thereof or any interest therein and upon compliance with
the terms of such sale may hold, retain, exploit, resell or otherwise dispose of
such Assets without further accountability to the Company Party for the proceeds
of such sale. Each Company Party will execute and deliver, or cause to be
executed and delivered, such instruments, endorsements, assignments, waivers,
certificates and other documents and take such further action as the Holder of
the Notes shall reasonably request in connection with any such sale.
Section 8. Disposition of Proceeds. The proceeds of any sale or other
disposition of the whole or any part of the Collateral or After Acquired
Collateral by the Holders pursuant to this Security Agreement, together with any
other monies held by the Holders pursuant to this Security Agreement, shall be
applied by the Holders in accordance with the provisions of the Notes.
Section 9. Waiver of Claims. Except as otherwise provided in this
Security Agreement, EACH COMPANY PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NOTICE OF JUDICIAL HEARING IN CONNECTION WITH THE REQUIRED
HOLDERS' TAKING POSSESSION OR THE REQUIRED HOLDERS' DISPOSITION OF ANY OF THE
COLLATERAL IN ACCORDANCE WITH THE TERMS HEREOF. THE PURCHASE AGREEMENT, THE
NOTES, AND ANY ANCILLARY AGREEMENTS INCLUDING, WITHOUT LIMITATION, ANY AND ALL
PRIOR NOTICES
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AND HEARINGS FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT THE
COMPANY PARTY WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE
UNITED STATES OR OF ANY STATE, and, to the fullest extent permitted by
applicable law, each Company Party hereby further waives:
(a) all damages occasioned by such taking of possession except
any damages that are the direct result of the Holders' gross negligence, bad
faith or willful misconduct; and
(b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the Holders'
rights and powers hereunder.
Any sale of, or the exercise of any options to purchase, or
any other realization upon, any Collateral or After Acquired Collateral shall
operate to divest all right, title, interest, claim and demand, at law or in
equity, of the Company Party therein and thereto, and shall be a perpetual bar
both at law and in equity against the Company Party and against any and all
persons claiming or attempting to claim the Collateral or After Acquired
Collateral so sold, optioned or realized upon, or any part thereof, through and
under such Company Party.
Section 10. Remedies Cumulative; No Waiver. Each right, power and
remedy of the Holders provided for herein, in the Purchase Agreement, the Notes
and any Ancillary Agreement or in another agreement pursuant to which a Lien is
created in favor of any Holder, or now or hereafter existing at Law or in
equity, by statute or otherwise, shall be cumulative and concurrent and shall be
in addition to every other right, power or remedy of any Holder provided for
herein, in the Purchase Agreement, the Note or in any other Ancillary Agreement
or in another agreement pursuant to which a Lien is created in favor of any
Holder or now or hereafter existing at Law or in equity, by statute or
otherwise. No failure on the part of any Holder to exercise, and no delay in
exercising, any right, power or remedy hereunder or under any such other
agreement or now or hereafter existing at Law or in equity, by statute or
otherwise, shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. No notice
to or demand on any Company Party hereunder shall, of itself, entitle it to any
other or further notice or demand in the same, similar or other circumstances.
Section 11. Additional Collateral. Without notice or consent of any
Company Party and without impairment of the Security Interests and rights
created by this Security Agreement, the Holders may accept from any person or
persons additional Collateral or other security for the Obligations. The
creation of the security interest created hereunder shall not prevent the
Holders from resorting to such additional Collateral or security without
affecting the Holders' rights hereunder. The Holders' acceptance of any such
additional Collateral or security shall not prevent the Holders from resorting
to the Collateral without affecting the Holders' rights in and to such
additional Collateral or the After Acquired Collateral or security.
Section 12. Further Assurances. Each Company Party agrees (a) that it
shall, at its own expense, file or record such notices, financing statements,
continuation statements or other documents as may be necessary to perfect the
Security Interests, and as the Holders may reasonably request, such instruments
to be in form and substance satisfactory to the Holders and (b) that each
Company Party shall, and shall cause all new Subsidiaries (as that term is
defined in
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<PAGE> 260
the Purchase Agreement), at its own expense, do such further acts and things and
execute and deliver to the Holders such additional conveyances, assignments,
agreements and instruments as the Holders may at any time reasonably request in
connection with the administration and enforcement of this Security Agreement or
relative to the Collateral or the After Acquired Collateral or any part thereof
or in order to assure and confirm unto the Holders, their rights, powers and
remedies hereunder.
Section 13. Expenses and Indemnification.
(a) Expenses. The Company Parties agree to pay to the Holders
from time to time upon demand, all reasonable fees, costs and expenses of the
Holders (including, without limitation, the reasonable fees and disbursements of
counsel) (i) arising in connection with the preparation, execution, delivery,
modification or termination of this Security Agreement or the enforcement of any
of the provisions hereof or (ii) incurred or required to be advanced in
connection with the sale or other disposition of any Collateral or After
Acquired Collateral pursuant to this Security Agreement and the preservation,
protection or defense of the Holders' rights under this Security Agreement or in
and to the Collateral or After Acquired Collateral.
(b) Stamp and Other Taxes. The Company Parties hereby agree to
indemnify each Holder for, and hold each of them harmless against, any present
or future claim for liability for any stamp or other similar tax and any
penalties or interest with respect thereto, which may be assessed, levied or
collected by any jurisdiction in connection with this Security Agreement or any
Collateral or After Acquired Collateral.
(c) Filing Fees, Excise Taxes, Etc. The Company Parties hereby
agree to pay or to reimburse the Holders for any and all amounts in respect of
all search, filing, recording and registration fees, taxes, excise taxes and
other similar imposts which may be payable or determined to be payable in
respect of the execution, delivery, performance and enforcement of this Security
Agreement.
(d) Survival of Obligations. The Obligations of the Company
Parties set forth in this Section 13 shall survive the execution, delivery and
termination of this Security Agreement and the payment of all other Obligations.
Section 14. Obligations Absolute. The liability of the Company Parties
under this Security Agreement shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by (a) any change in the time, place or manner of payment of
all or any of the Obligations, or in any other term of this Agreement or the
Purchase Agreement, any Ancillary Agreement or the Notes, any waiver,
indulgence, renewal, extension, amendment or modification of or addition,
consent or supplement to or deletion from or any other action or inaction under
or in respect of this Agreement or the Purchase Agreement, the Notes or any
Ancillary Agreement or any assignment or transfer thereof; (b) any lack of
validity or enforceability, in whole or in part, of this Agreement or the
Purchase Agreement, any Ancillary Agreement or the Notes; (c) any furnishing of
any additional security for the Obligations or any acceptance thereof or any
release or non-perfection of any Security Interests in the Assets other than the
Collateral or After Acquired Collateral; (d) any limitation on any party's
liability or obligations under this
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<PAGE> 261
Agreement or the Purchase Agreement, any Ancillary Agreement or the Notes; (e)
any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to any Company Party,
or any action taken with respect to this Security Agreement by any trustee or
receiver, or by any court, in any such proceeding, whether or not the Company
Party shall have notice or knowledge of any of the foregoing; (f) any exchange,
release or amendment or waiver of or consent to departure from this Agreement,
the Purchase Agreement, the Notes, any Ancillary Agreement or any other
agreement pursuant to which a Lien is created in favor of any Holder, pursuant
to which a person other than the respective Company Party has granted a security
interest; or (g) any other circumstance that might otherwise constitute a
defense available to, or discharge of, any Company Party.
Section 15. Waiver. To the extent permitted by applicable law, each
Company Party hereby waives promptness, diligence, notice of acceptance and any
other notice with respect to any of the Obligations and this Security Agreement
and any requirement that the Holders protect, secure, perfect or insure any
security interest or any Assets subject thereto or exhaust any right or take any
action against the Company Party or any other person or entity; provided,
however, that the Holders shall in any event take such care in the handling of
any Collateral or After Acquired Collateral in its possession as it takes with
respect to the Assets of a similar nature in its possession.
Section 16. Termination. Upon payment in full and satisfaction of all
of the Obligations, this Security Agreement shall terminate and the Holders
shall reassign and redeliver to each Company Party all Collateral and After
Acquired Collateral hereunder that has not been sold, disposed of, retained or
applied by the Holders in accordance with the terms hereof and the Notes. Such
reassignment and redelivery shall be without warranty by or recourse to the
Holders, and shall be at the expense of such Company Party. At such time, this
Security Agreement shall no longer constitute a Lien upon or grant any Security
Interest in any of the Collateral and After Acquired Collateral; and the Holders
shall, at such Company Party's expense, deliver to the Company Party written
acknowledgment thereof and of cancellation of this Security Agreement in a form
as reasonably requested by the Company Party and adequate for proper filing or
recording in such offices and such jurisdictions as the Company Party reasonably
deems necessary to release the Security Interests granted hereby. This Security
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned upon the insolvency, bankruptcy or reorganization of any
Company Party, all as though such payment had not been made.
Section 17. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery or by registered or certified mail, postage prepaid, return
receipt requested or by nationwide overnight delivery service (with charges
prepaid) addressed as follows:
If to any Company Party:
Intracel Corporation
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
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Attention: Chief Executive Officer
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
cc: Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Joseph W. Bartlett, Esq.
If to the Holders:
Northstar High Yield Fund
Northstar High Total Return Fund
Northstar High Total Return Fund II
Northstar Strategic Income Fund
300 First Stamford Place
Stamford, Connecticut 06902
Attention: Mr. Michael A. Graves
Fax Number: (203) 862-8601
Confirm Number: (203) 863-6224
cc: Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Karen C. Wiedemann, Esq.
Each party hereto may by notice to the other party designate such additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; and three calendar days after
mailing if sent by registered or certified mail (except that a notice of change
of address shall not be deemed to have been given until actually received by the
addressee) or one day after delivery to an overnight express service for next
day delivery, as the case may be. The Company Parties may give notice to the
Holders at the address set forth above, or any different address as shall be
specified for them in the Company's records.
Section 18. Binding Agreement; Assignment. This Security Agreement
shall be binding upon and inure to the benefit of the Company Parties and the
Holders and their respective successors and permitted assigns. Neither this
Security Agreement nor any Interest herein or in the Collateral or After
Acquired Collateral, or any part thereof, may be assigned by the Company
Parties; provided, however, that this Security Agreement may be assigned by a
Company Party and shall be deemed to be automatically assigned by a Company
Party to any person who succeeds to the Company Party, provided however, that
the Company Parties shall not as a result of such assignment be relieved of any
Obligations hereunder or under the Purchase Agreement, the Notes or any
Ancillary Agreements. This Security Agreement shall be deemed to be
automatically assigned by the Holders to any person who succeeds to or replaces
the
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Holders in accordance with the terms hereof, and its assignee shall have all
rights and powers of, and act as, the Holder hereunder.
Section 19. Governing Law. THE PARTIES HERETO EXPRESSLY ACKNOWLEDGE AND
AGREE THAT, IN ACCORDANCE WITH THE PROVISIONS OF NEW YORK GENERAL OBLIGATIONS
LAW SECTION 5-1401 GOVERNING AGREEMENTS RELATING TO ANY OBLIGATION ARISING OUT
OF A TRANSACTION COVERING IN THE AGGREGATE NOT LESS THAN $250,000, THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR THE PERFECTION OF
THE SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN NEW
YORK. TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THE
PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK
STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY
AGREEMENT, AND IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE PARTIES
HERETO IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 20. Amendments. This Security Agreement may not be amended or
modified except by a written agreement signed by the Company and the required
Holders.
Section 21. Severability. In the event that any provision contained in
this Security Agreement shall for any reason be held to be illegal or invalid
under the Laws of any jurisdiction, such illegality or invalidity shall in no
way impair the effectiveness of any other provision hereof, or of such provision
under the laws of any other jurisdiction; provided, that in the construction and
enforcement of such provision under the laws of the jurisdiction in which such
holding of illegality or invalidity exists, and to the extent only of such
illegality or invalidity, this Security Agreement shall be construed and
enforced as though such illegal or invalid provision had not been contained
herein.
Section 22. Headings. Section headings used herein are inserted for
convenience only and shall not in any way affect the meaning or construction of
this Security Agreement.
Section 23. Counterparts. This Security Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be an original, and all of
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which shall together constitute but one and the same instrument. A complete set
of counterparts shall be lodged with the Holders.
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<PAGE> 265
IN WITNESS WHEREOF, the Company Parties and the Holders have caused
this Security Agreement to be executed and delivered by their respective
officers thereunto duly authorized as of the date first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
BARTELS, INC.
By: /s/ SIMON R. McKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
PERIMMUNE HOLDINGS, INC.
By: /s/ SIMON R. McKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
PERIMMUNE, INC.
By: /s/ SIMON R. McKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
----------------------------------
Name: Michael A. Graves
Title: Vice President
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NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
----------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
----------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
----------------------------------
Name: Michael A. Graves
Title: Vice President
24
<PAGE> 267
Schedule A
See attached.
<PAGE> 268
SCHEDULE A
INTELLECTUAL PROPERTY SECURITY AGREEMENT
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Monoclonal Antibodies
Tumor specific monoclonal antibodies US 4,828,991
Tumor associated monoclonal antibodies derived from US 4,997,762
human B-cell line 5,180,814
AT E71410
AU 589,351
635,511
BE 0151030
CA ??3130
CH 0151030
DE P3585093
DK 408/85
EP 0151030
ES 539,987
FR 0151030
GB 0151030
GR 850,179
HU 209,519
IE 58,859
IL 74,156
91,045
IT 0151030
JP 2021518 269230/93
LU 0151030
NL 0151030
NZ 210,867
PT 79,894
SE 0151030
ZA 8,500,689
</TABLE>
<PAGE> 269
Schedule A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Tumor specific monoclonal antibodies US 5,106,738
Tumor associated monoclonal antibody 81AV78 US 5,348,880
AU 656785
CA 2108767
EP 92913154.8
FI 935038
JP 500176/93
KR 93/703412
WO US92/04023
Tumor associated monoclonal antibodies US 5,474,755
Monoclonal Antibody 88BV59 US 08/341469
AU 651,261
CA 2083542
EP 92203827.8
FI 925638
HU 9203932
ID P-005142
IL 103758
JP 331961/92
KR 92/23925
NO 924803
NZ 245443
TW 81109353
ZA 92/8880
Monoclonal antibody 88BV59, subclones and method of making US 08/192069
AU 17425/95
CA 2158572
EP 95909472.3
FI 954700
JP 52078/95
</TABLE>
<PAGE> 270
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
KR 95/?Q4282
WO US95/01440
Tumor associated monoclonal antibody 123AV16 US 5,495,002
ID P-950285
WO EP95/00581
ZA 95/1113
In-vitro method for producing antigen specific human US 5,229,275
monoclonal antibodies
AT E123,311
AU 647,112
BE 0,454,225
CA 2,041,213
CH 0,454,225
DE 69,110,084.5
555
DK 0,454,225
EP 0,454,225
ES 0,454,225
FI 912,016
FR 0,454,225
GB 0,454,225
GR 3,017,162
IE 66,523
IT 0,454,225
JP 191343/91
KR 91/6661
NL 0,454,225
SE 0,454,225
ZA 91/2998
Imaging infectious foci with human IgM 16.88 US 08/346,988
</TABLE>
<PAGE> 271
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Chelators
Method for purifying chelator conjugated
compounds US 5,244,816
AU 656,717
CA 2,069,303
DK 0488/92
EP 90915696.0
FI 921,579
IE 3585/90
JP 514572/90
KR 92/700833
NZ 235,618
PT 95574
WO US90/05772
ZA 90/8095
Chelating agents for attaching metal ions
to proteins US 5,292,868 08/430657
5,488,126
AT E128035
AU 638,757
BE 0429644
CA 2,033,086
CH 0429644
DE 69022542.3
DK 0429644
EP 0429644 95200465.3
ES 0429644
FI 910,329
FR 0429644
GB 0429644
DE 1867/90
</TABLE>
<PAGE> 272
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0429644
JP 513354/90
KR 91/700100
NL 0429644
SE 0429644
WO US90/02910
ZA 90/4047
Technetium-99M labelling
of proteins US 5,317,091
AU 658,403
CA 2104943
EP 92907824.4
FI 933760
JP 507406/92
KR 93/702561
WO US92/01577
Chelator IDAC-2 and methods
for purifying chelator US 08/278721
conjugated compounds 08/442856
WO US95/09285
New Polyaminocarboxylate
chelators US 95/00068
WO US95/00068
Pre-Targeting
Site specific in vivo
activation of therapeutic
drugs US 5,433,955 07/300999
08/382469
AT E123414
AU 648,015
BE 0454783
CA 2025899
CH 0454783
DE 69019959.7
DK 0454783
</TABLE>
<PAGE> 273
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
EP 0454783
ES 0454783
FI 913,511
FR 0454783
GB 0454783
IT 0454783
JP 503116/90
KR 90/702129
LU 0454783
NL 0454783
NO 912,864
SE 0454783
WO 90/00503
In Vivo Binding Pair Pretargeting US 08/146186 08/452938
08/461267
AU 663,582
CA 2,107,558
EP 93906276 6
FI 934,857
ID P-005991
JP 515830/93
KR 93/703311
WO US93/01?58
ZA 93/3035
High yield preparation of dimene to
decamene chitin oligomers US 08/397464
IL 117052
WO US96/02705
</TABLE>
<PAGE> 274
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Polymer affinity systems in the delivery US 08/471264
of cytotoxic materials and other components
in the site of disease
Immunotherapy
Active specific immunotherapy US 5,484,596 08/540298
CTAA 28A32, the antigen recognized by
MCA 28A32 US 08/041529
AT 0537168
AU 660,927
BE 0537168
CA 2079601
CH 0537168
DE 0537168
DK 0537168
EP 0537168
ES 0537168
FI 924576
FR 0537168
GB 0537168
GR 0537168
IT 0537168
JP 508604/91
KR 92/702530
LU 0537168
NL 0537168
</TABLE>
<PAGE> 275
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
SE 0537168
WO US91/02459
Antigen recognized by MCA 16.88 US 5,338,832
AT E137674
AU 618,209
BE 0328578
CA 5?1,017
CH 0328578
DE P3855290.9
DK 1025/89
EP 0328578
FR 0328578
GB 0328578
HU 4187/88
IE 2034/88
IL 86,958
IT 0328578
JP 505983/89
LU 0328578
NL 0328578
NZ 225,280
SE 0328578
WO US88/02245
ZA 88/4777
Keyhole ? hemocyanin composition with enhanced US 5,407,912 08/343808
immunogenic activity
AS 09/009,121
AU 60519/94
CA 2121296
EP 942009978
</TABLE>
<PAGE> 276
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
FI 941725
ID P-940578
JP 104838/94
KR 94/8063
ZA 94/2510
Tumor associated epitope US 08/478591
CTAA 8IAV78, the antigen recognized
by human monoclonal US 08/150036
antibody 81AV78
AU 20085/92
CA 2102422
EP 92912470.9
FI 934,963
JP 500223/93
KR 93/703413
WO US92/04108
Others
Leukoregulin, an antitumor
lymphokine and its therapeutic uses US 4,849,506
5,082,657
AT E48617
AU 592,529
641,386
BE 0179127
CA 478,987
CH 0179127
DE P3574710.2
DK 170,781
170,423
EP 0179127
FI 85,867
FR 0179127
GB 0179127
</TABLE>
<PAGE> 277
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0179127
JP 501862/85
300409/93
LU 0179127
NL 0179127
NO 170423
SE 0179127
WO US85/00626
Urethral catheter and catheterization process US 5,120,316
Immunoreactive peptides of apo(2) US 08/266407
08/456840
08/457449
08/172461
AU 81,606/94
CA 2138605
EP 942036534
FI 945976
ID P-942209
JP 318892/94
KR 94/35809
ZA 94/10145
An alignment system to overlay abdominal
computer aided tomography and magnetic US 5,299,253
resonance anatomy with single photon
emulsion tomography
</TABLE>
<PAGE> 278
Schedule B
INTELLECTUAL PROPERTY SECURITY AGREEMENT
TRADEMARKS
OncoSpect(TM)
Oncovax(TM)
Onconostika(TM)
Oncoscan(TM)
Oncoselect(TM)
Apo-Tek Lp(a)*
Apo-Tek Apo E*
KLH Immune Activator*
* Final name and registration to be completed
<PAGE> 279
Schedule B
See attached.
<PAGE> 280
INTRACEL CORPORATION
EQUIPMENT LIST
<TABLE>
<CAPTION>
Vendor Equipment Description Total Cost
<S> <C> <C>
Osmonics, Inc. Steam Generator $ 48,670.00
PS. VSG-500/50TI
Kuhlmann Technologies, Inc. Pharmapro Sterilizer $133,460.00
PP263648D
Scientek Glassware Washer $ 61,135.00
Taylor Boiler & Equipment Parker Steam Boiler $ 22,310.00
Serial #48270
Inova Pao-Systeme Auto Filling, Inserting & Screw $180,671.00
Capping Machine
VFVM 4031 031 163
Urania Engineering Co. PouchPro System with $102,472.00
Desiccant Dispenser
Telenet, Inc. Phone System $ 72,264.62
Accraply, Inc. Infeed/Outfeed Turntable $ 13,295.00
Urania Engineering Co. Rotary Band Heat Sealer $ 16,060.00
with Ink Jet Printer Interface
Model 3500P
VWR Scientific Masterpro Balance with $ 4,176.31
2 Stat Data Printers
Model 620G X 001G
VWR Scientific Branson Sonifier with $ 3,232.08
1/4" micro tip
Model 450
Bio Rad Prep Cell with Power Pac $ 11,808.50
Model 491
Bio Rad Mini Protein II Cell/Power $ 5,423.00
Pac 3000 system
VWR Eppondorf Micro-centrifuge $ 2,395.00
Model 5417C
Ismaca USA, Inc. Bio-Line Dispensing System $ 35,958.00
Total $713,330.49
</TABLE>
<PAGE> 281
Schedule C
1. Certain patents, patent applications and trademarks serve as collateral under
that certain Intellectual Property Security Agreement, dated August 8, 1996,
among PerImmune Holdings, Inc., PerImmune, Inc., Akzo Nobel Pharma
International, B.V. and Organon Teknika Corporation.
2. Pursuant to an Assignment Agreement, dated December 27, 1995, by and among
Intracel Corporation, Northstar Advantage High Total Return Fund and Dade
International Inc. ("Dade"), Dade assigned all its rights, title and interest
in and to a Secured Promissory Note in the amount of $4,667,000 of Intracel,
dated November 16, 1995, issued to Dade and the Related Agreements (as
defined therein) to Northstar.
3. CoreStates obtained a security interest in all the Company's assets now owned
or hereinafter acquired, which was junior to that of Credianstalt and
Northstar, pursuant to the transactions contemplated by the Note and
Series A-III Warrant Purchase Agreement between the Company and CoreStates,
dated as of June 11, 1996 ("CoreStates Agreement").
4. The Company also has certain other short-term liabilities incurred in the
ordinary course of the Company's business.
5. Pursuant to a Loan and Security Agreement, dated September 30, 1997, by
Washington Economic Development Finance Authority, Intracel Corporation, and
Transamerica Business Credit Corporation, Transamerica Business Credit
Corporation obtained a security interest in certain equipment. The first
drawdown list is attached.
6. See Schedule 3.10 to the Purchase Agreement for Leasehold Interests.
<PAGE> 282
Schedule D
Principal Place of Business
INTRACEL CORPORATION
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
1871 NW Gilman Boulevard
Issaquah, Washington 98027
1330 Piccard Drive
Rockville, Maryland 20850
13351 Commerce Parkway
Richmond, British Columbia
V6V 2W3, Canada
BARTELS, INC.
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
PERIMMUNE, INC.
1330 Piccard Drive
Rockville, Maryland 20850
PERIMMUNE HOLDINGS, INC.
1330 Piccard Drive
Rockville, Maryland 20850
LOCATION OF ASSETS
See attached.
<PAGE> 283
LOCATION OF BARTELS, INC.'S ASSETS
<TABLE>
<CAPTION>
Ter # Rep Customer Address
<S> <C> <C> <C>
2 Stephen Harrison Steve Harrison demo
3 Michelle Brooks University of Louisville 530 South Jackson, Louisville, KY 40202
3 Michelle Brooks University of Kentucky 800 Rose Street, Lexington, KY 40536
3 Michelle Brooks Cleveland Metrohealth Mch 2500 Metrohealth Drive, Cleveland, OH 44109
3 Michelle Brooks Michelle Brooks
3 Michelle Brooks Children's Hospital Medical Center 3333 Bienel Avenue, Cincinnati, OH 45229
3 Michelle Brooks St. Elizabeth Medical Center 1054 Belmont Avenue, 1st FL, Youngstown, OH 44501
3 Michelle Brooks Lutheran Hospital 7950 ???? Blvd., Ft. Wayne, IN 48804
3 Michelle Brooks Thomas Memorial Hospital 4605 MacCorkle Ave SW, S. Charleston, WV 25309
3 Michelle Brooks Covance 8211 Scicor Dr., Indianapolis, IN 48214
4 Bruce Weissman William Jennings Bryan Dorm VAMC 5439 Garners Ferry Road, Columbia, SC 29209
4 Bruce Weissman Lab South, Inc. 3221 3rd Ave South, Burmingham, AL 35222
4 Bruce Weissman St. Francis Hospital One St. Francis Drive, Greenville, SC 29601
4 Bruce Weissman Erlanger Medical Center 975 E Third Street, Chatanooga, TN 37403
4 Bruce Weissman Quest Diagnostics 210 12th Ave South, Nashville, TN 37203
4 Bruce Weissman Floyd Medical Center Turner McCall Blvd, Rome, GA 30162
4 Bruce Weissman Bruce Weissman
4 Bruce Weissman ARL/Labrouth 536 S. Decatur Street, Montgomery, AL 35134
4 Bruce Weissman University of Alabama Hospital 521 14th St South, Birmingham, AL 35233
4 Bruce Weissman Sarasota Memorial Hospital 1700 South Tarntami Trail, Sarasota, FL 34239
4 Bruce Weissman ???? Hospital 110 Longwood Ave, Rockridge, FL 32955
4 Bruce Weissman to John Kota printer only inoperative/replaced by AAA0153981
Karen Trowartha
4 Bruce Weissman HCA W. FL Regional Medical Center 8383 N. Davis Hwy., Pensacola, FL 32514
5 Judy Houston Children's Medical Center Dallas, TX
6 Mark Forosisky Dakota Heartland Hospital 1720 S University, Fargo, ND 58103
6 Mark Forosisky St Johns Hospital 800 E Carpenter St, Springfield, IL 62769
6 Mark Forosisky The Pathology Center 8303 Dodge St, Omaha, NE 68144
6 Mark Forosisky Marian Health Center 801 5th Street, Sioux City, IA
6 Mark Forosisky Arkansas Children's Hospital 800 Marshall Street, Little Rock, AR 72202
6 Mark Forosisky McAlester Regional Hospital One Clark Bass Ave, McAlester, OK 74501
6 Mark Forosisky Med Center One/Q&R Clinic 222 N. 7th Street, Barrick, ND 58501
6 Mark Forosisky Midwest City Regional Hospital 2825 Parklawn Dr, Midwest City, OK 73110
6 Mark Forosisky in-house
8 Chuck La Croix Childrens Hospital 3020 Children's Way, San Diego, CA 92123
8 Chuck La Croix San Bern Community Hospital 1805 Medical Center Drive, San Bern, CA 92411
8 Chuck La Croix San Bern County Medical Center 780 E Gilbert, San Bernardino, CA 92401
8 Chuck La Croix Physicians Automated Lab 2101 H Street, Bakersfield, CA 90301
8 Chuck La Croix Bio Clinical Ref Lab 17420 Gridley Road, Artesia, CA 90701
8 Chuck La Croix Cottage Hospital Pueblo Bath St., Santa Barbara, CA 93102
<CAPTION>
Date
Ter # Rep Customer Reader Printer Plate Shipped
<S> <C> <C> <C> <C> <C> <C>
2 Steve Harrison Steve Harrison 137073 134441 6/30/97
3 Michelle Brooks University of Louisville 136763 AAA0118810 130699 10/27/97
3 Michelle Brooks University of Kentucky 136754 130753 10/31/97
3 Michelle Brooks Cleveland Metrohealth Mch 136751 130756 10/23/97
3 Michelle Brooks Michelle Brooks 136812 AAA0124094 130787 11/13/97
3 Michelle Brooks Children's Hospital Medical Cente 136881 AAA0151961 131373 12/12/97
3 Michelle Brooks St. Elizabeth Medical Center 136883 AAA153871 131388 12/8/97
3 Michelle Brooks Lutheran Hospital 138880 AAA0159250 131363 6/15/98
3 Michelle Brooks Thomas Memorial Hospital 137074 AAA0153965 131439 7/10/98
3 Michelle Brooks Covance 137064 AAA0153858 131429 7/16/98
4 Bruce Weissman William Jennings Bryan Dorm VAMC 136790 AAA0118792 130768 11/4/97
4 Bruce Weissman Lab South, Inc.
4 Bruce Weissman St. Francis Hospital 136744 130752 10/6/97
4 Bruce Weissman Erlenger Medical center 136745 130750 10/18/97
4 Bruce Weissman Quest Diagnostics 136749 130751 10/16/97
4 Bruce Weissman Floyd Medical Center 136751 130758 10/18/97
4 Bruce Weissman Bruce Weissman 136813 AAA0134445 130786 11/12/97
4 Bruce Weissman ARL/Labrouth 136791 AAA0118794 130758 10/25/97
4 Bruce Weissman University of Alabama Hospital 136884 AAA0133868 111376 12/4/97
4 Bruce Weissman Sarasota Memorial Hospital 136748 130755 10/7/97
4 Bruce Weissman Wueshalft Hospital 10/7/97
4 Bruce Weissman to John Kota AAA0159220 6/25/98
Karen Trowartha 136811 AAA0124306 130768 11/11/97
12/22/97
4 Bruce Weissman HCA W. FL Regional Medical Center 136898 AAA0153981* 131374 6/9/98*
5 Judy Houston Children's Medical Center 137092 AAA0159232 131432 7/30/98
6 Mark Forosisky Dakota Heartland Hospital 136888 AAA0153985 131359 12/4/97
6 Mark Forosisky St Johns Hospital 14362 AH8810767 11/19/97
6 Mark Forosisky The Pathology Center 136889 AAA0159242 131384 11/19/97
6 Mark Forosisky Marian Health Center 12/8/97
6 Mark Forosisky Arkansas Children's Hospital 136750 130757 10/22/97
6 Mark Forosisky McAleister Regional Hospital 136894 AAA0153860 131367 11/16/97
6 Mark Forosisky Med Center One/Q&R Clinic 137071 AAA0153980 131440 4/15/98
6 Mark Forosisky Midwest City Regional Hospital 136579 AAA0159221 131371 5/12/98
6 Mark Forosisky in-house 137065 131428 5/12/98
8 Chuck La Croix Childrens Hospital 136885 AAA0124097 131399 11/21/97
8 Chuck La Croix San Bern Community Hospital 136796 AAA0118791 130762 10/29/97
8 Chuck La Croix San Bern County Medical Center 136752 AAA8006075 130760 10/29/97
8 Chuck La Croix Physicians Automated Lab 10/20/97
8 Chuck La Croix Bio Clinical Ref Lab 136746 130749 10/24/97
8 Chuck La Croix Coltige Hospital 136892 AAA0153957 131361 11/25/97
</TABLE>
<PAGE> 284
<TABLE>
<CAPTION>
Date
Tsr # Rep Customer Address Reader Printer Plate Stripped
- ----- ------------------ ------------------------ ------------------------------ -------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
8 Chuck La Croix St. Mary's Hospital 1050 Linden Ave., 136896 AAA0153867 131364 12/19/97
Long Beach, CA 90813
8 Chuck La Croix Samaritan Health Services 101 Civic Center Ln, 136893 AAA0153976 131366 3/1/96
Lake Havasu City, AZ
? Chuck La Croix Chuck La Croix demo 137079 AAA0159211 131424 6/25/98
9 Jon ??? Pathology Associates E 11604 Indiana, 136891 ELX800??? 13168? 12/5/97
Spokane, WA 99208
9 Jan ??? Infectious Limited 1624 South I Street, Suite 307, 136814 AAA0118786 130874 11/10/97
Laboratory Tacoma, WA
10 Linda Pickholtz Linda Pickholtz for demo 137061 AAA0153960 ?? ??
10 Linda Pickholtz Central PA Alliance Lab 1803 ?? Rose Ave., York, PA 17403 137067 AAA0153959 131126 6/27/98
Debbie Zumerling For SmithKline Beecham sent to DZ 136876 AAA0152978 131370 12/11/97
13 Bobbi Johnson Associated Pathology Labs ??? 136795 AAA0153968 130761 ??
John Kohl Florida Hospital ??? 137060 AAA0159246 137438 ??
John Kohl Omega Medical Labs ??? 136899 AAA0153974 131362 12/9/97
John Kohl MedLabs 212 Cherry Lane, ??? 136880 AAA0151952 131372 12/9/97
John Kohl Allegheny Valley Hospital ??? 136882 AAA0153817 131375 12/9/97
John Kohl ??? Medical Center 323 Jefford St., 137099 AAA0153814 131445 2/11/98
Clearwater, FL 34617
John Kohl Mount Sinai Hospital ?? Street, 9th Floor, NY NY 10029 137099 AAA0159225 131446 1/7/98
</TABLE>
<PAGE> 285
EXHIBIT F
INTELLECTUAL PROPERTY SECURITY AGREEMENT
<PAGE> 286
EXHIBIT 10.32
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Among
Intracel Corporation,
Bartels, Inc.,
PerImmune Holdings, Inc. and
PerImmune, Inc.
and
the holders of the 12%
Guaranteed Senior Secured Primary Notes
due August 1, 2003 of
Intracel Corporation
and
the holders of the 12%
Guaranteed Senior Escrow Notes
due August 1, 2003 of
Intracel Corporation
Dated August 25, 1998
<PAGE> 287
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT dated August 25, 1998,
among Intracel Corporation, a Delaware corporation (together with its successors
and assigns, the "Company"), the Company's wholly-owned subsidiaries, Bartels,
Inc. ("Bartels"), PerImmune Holdings, Inc. ("Holdings") and PerImmune, Inc.
("PerImmune" and, together with Bartels and Holdings, the "Subsidiaries") and
the holders of the 12% Guaranteed Senior Secured Promissory Notes of the Company
(the "Guaranteed Senior Secured Primary Notes") and the holders of the 12%
Guaranteed Senior Secured Escrow Promissory Notes ("Guaranteed Senior Secured
Escrow Notes") of the Company (collectively, the "Notes") issued pursuant to
that certain Securities Purchase Agreement, dated as of the date hereof, by and
among the Company and the other parties thereto (the "Purchase Agreement"). As
used herein, all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement.
WITNESSETH:
WHEREAS, the Company is to issue 12% Guaranteed Senior Secured
Primary Promissory Notes in the aggregate original principal amount of
$35,000,000 and 12% Guaranteed Senior Secured Escrow Promissory Notes in the
aggregate original principal amount of $6,000,000;
WHEREAS, in order to secure the performance of the obligations of
the Company under the Purchase Agreement, the Notes and the Ancillary Agreements
(the "Obligations") and the guaranties relating to the Obligations executed on
the date hereof by each of the Subsidiaries, the parties hereto entered into a
Security Agreement as of the date hereof ("Security Agreement") regarding the
terms and conditions of the Company's and Subsidiaries' (together the "Company
Parties") grant of a security interest in the certain Collateral (as defined
therein), including the Intellectual Property Collateral (as defined below) to
the Holders;
WHEREAS, pursuant to and in connection with the Security
Agreement, and also in order to secure the performance of the Obligations and
the guaranties relating to the Obligations, the parties hereto are entering into
this Intellectual Property Security Agreement to confirm and supplement the
terms and conditions of the Company Parties' grant of security interest, as set
forth in the Security Agreement, in the Intellectual Property Collateral (as
defined below) to the Holders;
WHEREAS, unless otherwise defined in this Agreement or in the
Credit Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code
in effect in the State of New York ("N.Y. Uniform Commercial Code") are used in
this Agreement as such terms are defined in such Article 8 or 9.
<PAGE> 288
NOW, THEREFORE, in consideration of the premises and other
benefits to the Company Parties, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Grant of Security. As collateral security for the
payment and performance in full of the Obligations in accordance with their
respective terms, the Company Parties hereby pledge, assign, transfer and grant
to the Holders as to all Intellectual Property Collateral (defined below), a
first priority perfected continuing security interest, except with respect to
certain Intellectual Property Collateral listed on Exhibit A-1 to the Security
Agreement in which Akzo Nobel Pharma International, B.V., as Collateral Agent
under the Intellectual Property Security Agreement dated August 13, 1996 (the
"Collateral Agent"), has a first priority security interest (the "Akzo Security
Interest Collateral"), and with respect to the Akzo Security Interest
Collateral, a second priority perfected security interest until such time as
payment in full of the Debt underlying the Akzo Security Interest Collateral has
been made and, at such time, a first priority perfected security interest in the
Akzo Security Interest Collateral, in all of such Company Party's right, title
and interest in and to the following, whether now owned or hereafter acquired by
such Company Party and whether now or hereafter existing (collectively, the
"Intellectual Property Collateral"):
(a) all patents, patent applications and patentable inventions,
including, without limitation, each patent and patent application
identified in Schedule I attached hereto and made a part hereof, and
including without limitation (i) all inventions and improvements
described and claimed therein, (ii) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriations thereof, (iii) all income, royalties, damages and
other payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past and future
infringements thereof), and (iv) all rights corresponding thereto
throughout the world and all reissues, divisions, continuations,
continuations-in-part, provisionals, substitutes, renewals, and
extensions thereof, all improvements thereon and all other rights of any
kind whatsoever of such Company Party accruing thereunder or pertaining
thereto (the "Patents");
(b) all trademarks, service marks, trade names, trade dress or
other indicia of trade origin, trademark and service mark registrations,
and applications for trademark or service mark registrations and any
renewals thereof, including, without limitation, each registration and
application identified in Schedule II attached hereto and made a part
hereof, and including without limitation (i) the right to sue or
otherwise recover for any and all past, present and future infringements
and misappropriations thereof, (ii) all income, royalties, damages and
other payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past or future
infringements thereof), and (iii) all rights corresponding thereto
throughout the
-2-
<PAGE> 289
world and all other rights of any kind whatsoever of such Company Party
accruing thereunder or pertaining thereto, together in each case with
the goodwill of the business connected with the use of, and symbolized
by, each such trademark, service mark, trade name, trade dress or other
indicia of trade origin (the "Trademarks");
(c) all copyrights, whether statutory or common law, and whether
or not the underlying works of authorship have been published, and all
works of authorship and other intellectual property rights therein, all
copyrights of works based on, incorporated in, derived from or relating
to works covered by such copyrights, all right, title and interest to
make and exploit all derivative works based on or adopted from works
covered by such copyrights, and all copyright registrations and
copyright applications, and any renewals or extensions thereof,
including, without limitation, each copyright registration and copyright
application, if any, identified in Schedule III attached hereto and made
a part hereof, and including, without limitation, (i) the right to
print, publish and distribute any of the foregoing, (ii) the right to
sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (iii) all income,
royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including, without limitation, payments
under all licenses entered into in connection therewith, and damages and
payments for past or future infringements thereof), and (iv) all rights
corresponding thereto throughout the world and all other rights of any
kind whatsoever of such Company Party accruing thereunder or pertaining
thereto (the "Copyrights");
(d) all license agreements with any other person in connection
with any of the Patents, Trademarks or Copyrights, or such other
person's patents, trade names, trademarks, service marks or copyrights,
whether such Company Party is a licensor or licensee under any such
license agreement, including, without limitation, the license agreements
listed on Schedule IV attached hereto and made a part hereof, subject,
in each case, to the terms of such license agreements, including,
without limitation, terms requiring consent to a grant of a security
interest, and any right to prepare for sale, sell and advertise for
sale, all Inventory (as defined in the Security Agreement) now or
hereafter owned by such Company Party and now or hereafter covered by
such licenses (the "Licenses"); and
(e) all proceeds of any and all of the foregoing Intellectual
Property Collateral (including, without limitation, proceeds that
constitute property of the types described in clauses (a) - (d) of this
Section 1) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Holders are the loss payees
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Intellectual Property Collateral, and (ii) cash.
Until the Obligations shall have been satisfied in full and this Agreement shall
have been terminated, the Company and its Subsidiaries (as defined in the
Purchase Agreement), shall
-3-
<PAGE> 290
not, without the Holders' prior written consent, which consent will not be
unreasonably withheld, create, incur or assume any pledge, sale, license or
assignment of any of the Intellectual Property Collateral, or grant, convey or
hypothecate any interest in the Intellectual Property Collateral, or take any
action the effect of which is to have created any Lien, encumbrance, claim,
charge, preference, priority or other restriction on the Intellectual Property
Collateral.
SECTION 2. Security Agreement. The security interest granted
hereby has been granted in conjunction with the security interest granted to the
Holders under the Security Agreement, which this Intellectual Property Security
Agreement supplements. Except as supplemented hereby, the Security Agreement
shall remain in full force and effect in accordance with its terms.
SECTION 3. Confirmation of Security Interest. The Company Parties
hereby confirm that pursuant to the Security Agreement, for good and valuable
consideration, the Company Parties have granted to the Holders a continuing
security interest in and to the Company Parties' entire right, title and
interest in all of the Collateral, including the Intellectual Property
Collateral, that the Company Parties' right, title and interest in the
Collateral is subject to such interest of the Holders and that such security
interest therein shall continue unimpaired by the security interest of the
Collateral granted hereby which serves as evidence of the continuing nature of
such interest in favor of the Holders.
SECTION 4. Representations and Warranties. Each Company Party
represents and warrants as to itself and its Intellectual Property Collateral as
follows:
(a) Such Company Party is the legal and beneficial owner of the
entire right, title and interest in and to the Intellectual Property
Collateral of such Company Party free and clear of any Lien, claim,
option or right of others, except for the liens and security interests
created by this Agreement and the lien created in favor of the
Collateral Agent. No effective financing statement or other instrument
similar in effect covering all or any part of such Intellectual Property
Collateral or listing such Company Party or any trade name of such
Company Party as debtor is on file in any recording office (including,
without limitation, the United States Patent and Trademark Office and
the United States Copyright Office), except such as may have been filed
in favor of the Holders relating to the Loan Documents and such as have
been filed in favor of the Collateral Agent.
(b) Set forth in Schedule I is a complete and accurate list of
all patents and all patent applications owned by the Company Parties.
Set forth in Schedule II is a complete and accurate list of all
trademark and service mark registrations and all trademark and service
mark applications owned by the Company Parties. Set forth in Schedule
III is a complete and accurate list of all copyright registrations and
copyright applications owned by the Company Parties. Set forth in
Schedule IV is a complete and accurate list of all Licenses owned by the
Company Parties in which a Company
-4-
<PAGE> 291
Party is (i) a licensor with respect to any of the Patents, Trademarks
or Copyrights, or (ii) a licensee of any other person's patents, trade
names, trademarks, service marks or copyrights. Except as set forth in
Schedule II, all necessary filings and recordations have been made to
protect and maintain the patents, patent applications, trademark and
service mark registrations, trademark and service mark applications,
copyright registrations, copyright applications and Licenses set forth
in Schedules I, II, III and IV.
(c) Each patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright
registration and copyright application of such Company Party set forth
in Schedules I, II and III is subsisting and has not been adjudged
invalid, unregistrable or unenforceable, in whole or in part. Each
License of such Company Party identified in Schedule IV is validly
subsisting and has not been adjudged invalid or unenforceable, in whole
or in part, and is valid and enforceable. Such Company Party is not
aware of any uses of any item of Intellectual Property Collateral which
could be expected to lead to such item becoming invalid or
unenforceable, including unauthorized uses by third parties and uses
which were not supported by the goodwill of the business connected with
such Intellectual Property Collateral.
(d) Such Company Party has not made a previous assignment,
transfer or agreement constituting a present or future assignment,
transfer or encumbrance of any of the Intellectual Property Collateral
other than the Intellectual Property Security Agreement dated August 13,
1996 with respect to the Akzo Security Interest Collateral. Such Company
Party has not granted any license (other than those listed on Schedule
IV hereto), release, covenant not to sue, or non-assertion assurance to
any person with respect to any part of the Intellectual Property
Collateral.
(e) Such Company Party has used proper statutory notice in
connection with its use of each patent, each registered trademark and
service mark and each copyright contained in Schedules I, II and III.
(f) This Agreement creates in favor of the Holders a valid first
priority security interest in the Intellectual Property Collateral of
the Company Parties, except with respect to the Akzo Security Interest
Collateral and, with respect thereto, a second priority continuing
security interest until such time as payment in full of the Debt
underlying the Akzo Security Interest Collateral has been made and, at
such time, a first priority security interest in the Akzo Security
Interest Collateral, securing the payment of the Obligations, and all
filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.
(g) With the exception of the consent of the Collateral Agent,
no consent of any other Person and no authorization, approval or other
action by, and no notice to or filing with, any governmental authority
or regulatory body or other Person is
-5-
<PAGE> 292
required (i) for the assignment and grant by such Company Party of the
security interest assigned and granted hereby or for the execution,
delivery or performance of this Agreement by such Company Party, (ii)
for the perfection or maintenance of the security interest created
hereunder (including the first priority nature of such security
interest), except for the filing of financing and continuation
statements under the Uniform Commercial Code, which financing statements
have been duly filed, and the filing and recordal of this Agreement
with the United States Patent and Trademark Office and the United States
Copyright Office or (iii) for the exercise by the Holders of their
rights provided for in this Agreement or the remedies in respect of the
Intellectual Property Collateral pursuant to this Agreement.
(h) Except for the Licenses set forth in Schedule IV, the
Company Parties are not aware of any claims that are likely to be made
by any third party relating to any item of Intellectual Property
Collateral.
(i) Except as set forth in Schedule 3.13 of the Securities
Purchase Agreement, no claim has been made and is continuing or
threatened that any item of Intellectual Property Collateral is invalid
or unenforceable or that the use by such Company Party of any
Intellectual Property Collateral does or may violate the rights of any
Person. The Company Parties are not aware of any infringement of any
item of Intellectual Property Collateral.
(j) Such Company Party has taken all necessary steps to use
consistent standards of quality in the manufacture, distribution and
sale of all products sold and the provision of all services provided
under or in connection with any of the Trademarks and has taken all
reasonably necessary steps to ensure that all licensed users of any of
the Trademarks use such consistent standards of quality.
SECTION 5. Further Assurances. (a) Each Company Party agrees that
from time to time, at the expense of such Company Party, such Company Party will
promptly execute and deliver, and use its best efforts to cause to be executed
and delivered, all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Holders may request, in
order to perfect and protect any security interest assigned and granted or
purported to be assigned and granted hereby or to enable the Holders to exercise
and enforce its rights and remedies hereunder with respect to any part of the
Intellectual Property Collateral. Without limiting the generality of the
foregoing, each Company Party will execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Holders may request, in
order to perfect and preserve the security interest assigned and granted or
purported to be assigned and granted hereunder.
(b) Each Company Party hereby authorizes the Holders to file one
or more financing or continuation statements, and amendments thereto, relating
to all or any part of
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<PAGE> 293
the Intellectual Property Collateral without the signature of such Company Party
where permitted by law. A photocopy or other reproduction of this Agreement or
any financing statement covering the Intellectual Property Collateral or any
part thereof shall be sufficient as a financing statement where permitted by
law.
(c) Each Company Party will furnish to the Holders from time to
time statements and schedules further identifying and describing the
Intellectual Property Collateral and such other reports in connection with the
Intellectual Property Collateral as the Holders may reasonably request, all in
reasonable detail.
(d) Each Company Party agrees that, should it obtain an ownership
interest in any patent, patent application, patentable invention, trademark,
service mark, trade name, trade dress, other indicia of trade origin, trademark
or service mark registration, trademark or service mark application, copyright,
work of authorship, copyright registration, copyright application or license,
which is not now a part of the Intellectual Property Collateral, (i) the
provisions of Section 1 shall automatically apply thereto, (ii) any such patent,
patent application, patentable invention, trademark, service mark, trade name,
trade dress, indicia of trade origin, trademark or service mark registration or
trademark or service mark application (together with the goodwill of the
business connected with the use of same and symbolized by same), copyright, work
of authorship, copyright registration, copyright application or license shall
automatically become part of the Intellectual Property Collateral, and (iii)
with respect to any ownership interest in any patent, patent application,
trademark or service mark registration, trademark or service mark application,
copyright registration, copyright application or license that such Company Party
should obtain, it shall give prompt written notice thereof to the Holders in
accordance with the provisions of the Security Agreement. Each Company Party
authorizes the Holders to modify this Agreement by amending Schedules I, II, III
and IV (and will cooperate with the Holders in effecting any such amendment) to
include any patent, patent application, trademark or service mark registration,
trademark or service mark application, copyright registration, copyright
application or license which becomes part of the Intellectual Property
Collateral under this Section.
(e) With respect to each patent, patent application, trademark or
service mark registration, trademark or service mark application, copyright
registration, copyright application and License, such Company Party agrees to
take all necessary steps, including, without limitation, in the United States
Patent and Trademark Office, the United States Copyright Office or in any court,
to (i) maintain each such patent, trademark or service mark registration,
copyright registration and License of such Company Party, and (ii) pursue each
such patent application, trademark or service mark application, and copyright
application now or hereafter included in the Intellectual Property Collateral of
such Company Party, including, without limitation, the filing of responses to
office actions issued by the United States Patent and Trademark Office and the
United States Copyright Office, the filing of applications for renewal or
extension, the filing of affidavits under Sections 8 and 15 of the United States
Trademark Act, the filing of divisional, continuation, continuation-in-part and
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<PAGE> 294
substitute applications, the filing of applications for re-issue, renewal or
extensions, the payment of maintenance fees, and the participation in
interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings. Each Company Party agrees to take corresponding
steps with respect to each new or acquired patent, patent application, trademark
or service mark registration, trademark or service mark application, copyright
registration, copyright application or License to which it is now or later
becomes entitled. Any expenses incurred in connection with such activities shall
be borne by such Company Party. No Company Party shall, without the written
consent of the Holders, which consent will not be unreasonably withheld,
discontinue use of or otherwise abandon any patent or patentable invention,
trademark or service mark, or copyright identified in Schedules I, II and III,
or abandon any right to file an application for letters patent, trademark or
service mark registration, or copyright registration, or abandon any pending
application for a letters patent, trademark or service mark registration, or
copyright registration identified in Schedules I, II and III.
(f) Each Company Party agrees to notify the Holders promptly and
in writing if it learns (i) that any item of the Intellectual Property
Collateral may be determined to have become abandoned or dedicated or (ii) of
any adverse determination or the institution of any proceeding (including,
without limitation, the institution of any proceeding in the United States
Patent and Trademark Office or any court) regarding any item of the Intellectual
Property Collateral.
(g) In the event that any Company Party becomes aware that any
item of the Intellectual Property Collateral is infringed or misappropriated by
a third party, such Company Party shall promptly notify the Holders and shall
take such actions as such Company Party or the Holders deems reasonable and
appropriate under the circumstances to protect such Intellectual Property
Collateral, including, without limitation, suing for infringement or
misappropriation and for an injunction against such infringement or
misappropriation. Any expense incurred in connection with such activities shall
be borne by such Company Party.
(h) Each Company Party shall continue to use proper statutory
notice in connection with its use of each of its patents, registered trademarks
and service marks, and copyrights contained in Schedules I, II and III.
(i) Each Company Party shall take all steps which it or the
Holders deem reasonable and appropriate under the circumstances to preserve and
protect each item of its Intellectual Property Collateral, including, without
limitation, maintaining the quality of any and all products or services used or
provided in connection with any of the Trademarks, consistent with the quality
of the products and services as of the date hereof, and taking all steps
necessary to ensure that all licensed users of any of the Trademarks use such
consistent standards of quality.
-8-
<PAGE> 295
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. MCKENZIE
------------------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
BARTELS, INC.
By: /s/ SIMON R. MCKENZIE
------------------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
PERIMMUNE HOLDINGS, INC.
By: /s/ SIMON R. MCKENZIE
-----------------------------------------
Name: Simon R. McKenzie
Tide: President & Chief Executive Officer
PERIMMUNE, INC.
By: /s/ SIMON R. MCKENZIE
-----------------------------------------
Name: Simon R. McKenzie
Tide: President & Chief Executive officer
-9-
<PAGE> 296
NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
-10-
<PAGE> 297
STATE OF WA )
) ss.:
COUNTY OF KING )
On the 20th day of August, 1998, before me personally came Simon McKenzie
to me known, who, being by me duly sworn, did depose and say he resides at 1411
1st St. North, Seattle, WA and that he is the Pres/CEO of INTRACEL CORPORATION,
the corporation described in and which executed the above instrument; that he
has been authorized to execute said instrument on behalf of said corporation;
and that he signed said instrument on behalf of said corporation pursuant to
said authority.
/s/ GWENDOLYN C. MCCLURE-DOUGLAS
--------------------------------
Notary Public
------------------------------------
Notary Public
State of Washington
[Notarial Seal] GWENDOLYN C. MCCLURE-DOUGLAS
My Appointment Expires Jan. 15, 2002
------------------------------------
STATE OF WA )
) ss.:
COUNTY OF KING )
On the 20th day of August, 1998, before me personally came Simon McKenzie
to me known, who, being by me duly sworn, did depose and say he resides at 1411
1st St. North, Seattle, WA and that he is the Pres/CEO of BARTELS, INC., the
corporation described in and which executed the above instrument; that he has
been authorized to execute said instrument on behalf of said corporation; and
that he signed said instrument on behalf of said corporation pursuant to said
authority.
/s/ GWENDOLYN C. MCCLURE-DOUGLAS
--------------------------------
Notary Public
------------------------------------
Notary Public
State of Washington
[Notarial Seal] GWENDOLYN C. MCCLURE-DOUGLAS
My Appointment Expires Jan. 15, 2002
------------------------------------
<PAGE> 298
STATE OF WA )
) ss.:
COUNTY OF KING )
On the 20th day of August, 1998, before me personally came Simon McKenzie
to me known, who, being by me duly sworn, did depose and say he resides at 1411
1st St. North, Seattle, WA and that he is the Pres/CEO of PERIMMUNE HOLDINGS,
INC., the corporation described in and which executed the above instrument; that
he has been authorized to execute said instrument on behalf of said corporation;
and that he signed said instrument on behalf of said corporation pursuant to
said authority.
/s/ GWENDOLYN C. MCCLURE-DOUGLAS
--------------------------------
Notary Public
------------------------------------
Notary Public
State of Washington
[Notarial Seal] GWENDOLYN C. MCCLURE-DOUGLAS
My Appointment Expires Jan. 15, 2002
------------------------------------
STATE OF WA )
) ss.:
COUNTY OF KING )
On the 20th day of August, 1998, before me personally came Simon McKenzie
to me known, who, being by me duly sworn, did depose and say he resides at 1411
1st St. North, Seattle, WA and that he is the Pres/CEO of PERIMMUNE, INC., the
corporation described in and which executed the above instrument; that he has
been authorized to execute said instrument on behalf of said corporation; and
that he signed said instrument on behalf of said corporation pursuant to said
authority.
/s/ GWENDOLYN C. MCCLURE-DOUGLAS
--------------------------------
Notary Public
------------------------------------
Notary Public
State of Washington
[Notarial Seal] GWENDOLYN C. MCCLURE-DOUGLAS
My Appointment Expires Jan. 15, 2002
------------------------------------
<PAGE> 299
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of August, 1998, before me personally came Michael Graves
to me known, who, being by me duly sworn, did depose and say he resides at
Fairfield County, CT and that he is the Vice President of NORTHSTAR HIGH YIELD
FUND, the institution described in and which executed the above instrument; that
he has been authorized to execute said instrument on behalf of said institution;
and that he signed said instrument on behalf of said institution pursuant to
said authority.
/s/ MARY FRANCES ENNIS
----------------------
Notary Public
MARY FRANCES ENNIS
[Notarial Seal] NOTARY PUBLIC
MY COMMISSION EXPIRES FEB. 23, 2003
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of August, 1998, before me personally came Michael Graves
to me known, who, being by me duly sworn, did depose and say he resides at
Fairfield County, CT and that he is the Vice President of NORTHSTAR HIGH TOTAL
RETURN FUND, the institution described in and which executed the above
instrument; that he has been authorized to execute said instrument on behalf of
said institution; and that he signed said instrument on behalf of said
institution pursuant to said authority.
/s/ MARY FRANCES ENNIS
----------------------
Notary Public
MARY FRANCES ENNIS
[Notarial Seal] NOTARY PUBLIC
MY COMMISSION EXPIRES FEB. 23, 2003
<PAGE> 300
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of August, 1998, before me personally came Michael Graves
to me known, who, being by me duly sworn, did depose and say he resides at
Fairfield County, CT and that he is the Vice President of NORTHSTAR HIGH TOTAL
REFUND FUND II, the institution described in and which executed the above
instrument; that he has been authorized to execute said instrument on behalf of
said institution; and that he signed said instrument on behalf of said
institution pursuant to said authority.
/s/ MARY FRANCES ENNIS
----------------------
Notary Public
MARY FRANCES ENNIS
[Notarial Seal] NOTARY PUBLIC
MY COMMISSION EXPIRES FEB. 23, 2003
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of August, 1998, before me personally came Michael Graves
to me known, who, being by me duly sworn, did depose and say he resides at
Fairfield County, CT and that he is the Vice President of NORTHSTAR STRATEGIC
INCOME FUND, the institution described in and which executed the above
instrument; that he has been authorized to execute said instrument on behalf of
said institution; and that he signed said instrument on behalf of said
institution pursuant to said authority.
/s/ MARY FRANCES ENNIS
----------------------
Notary Public
MARY FRANCES ENNIS
[Notarial Seal] NOTARY PUBLIC
MY COMMISSION EXPIRES FEB. 23, 2003
<PAGE> 301
SCHEDULE I
to
Intellectual Property Security Agreement
Patents and Patent Applications
<PAGE> 302
SCHEDULE I
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Monoclonal Antibodies
Tumor specific monoclonal antibodies US 4,828,991
Tumor associated monoclonal antibodies derived from US 4,997,762
human B-cell line 5,180,814
AT E71410
AU 589,351
635,511
BE 0151030
CA 473130
CH 0151030
DE P3585093
DK 408/85
EP 0151030
ES 539,987
FR 0151030
GB 0151030
GR 850,179
HU 209,519
IE 58,859
IL 74,156
91,045
IT 0151030
JP 2021518 269230/93
LU 0151030
NL 0151030
NZ 210,867
PT 79,894
SC 0131030
ZA 8,500,689
</TABLE>
<PAGE> 303
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Tumor specific monoclonal antibodies US 5,106,738
Tumor associated monoclonal antibody 81AV78 US 5,348,880
AU 656785
CA 2108767
EP 92913154.8
FI 935038
JP 500176/93
KR 93/703412
WO US92/04023
Tumor associated monoclonal antibodies US 5,474,755
Monoclonal Antibody 88BV59 US 08/341469
AU 651,261
CA 2083542
EP 92203827.8
FI 925638
HU 9203932
ID P-005142
IL 103758
JP 331961/92
KR 92/23925
NO 924803
NZ 245443
TW 81109353
ZA ?2/8880
Monoclonal antibody 88BV59, subclones and method of making US 08/192069
AU 17425/95
CA 2158572
EP 95909472.3
FI 954700
JP 52078/95
</TABLE>
<PAGE> 304
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
KR 95/7Q4282
WO US95/01440
Tumor associated monoclonal antibody 123AV16 US 5,495,002
ID P-950285
WO EP95/00581
ZA 95/1113
In-vitro method for producing antigen specific human US 5,229,275
monoclonal antibodies
AT E123,311
AU 657,112
BE 0,454,225
CA 2,041,213
CH 0,454,225
DE 69,110,084.5
555
DK 0,454,225
EP 0,454,225
ES 0,454,225
FI 912,016
FR 0,454,225
GB 0,454,225
GR 3,017,162
IE 66,523
IT 0,454,225
JP 191343/91
KR 91/6661
NL 0,454,225
SE 0,454,225
ZA 91/2?98
Imaging infectious ????????????? US 5,549,882
</TABLE>
<PAGE> 305
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Chelators
Method for purifying chelator conjugated
compounds US 5,244,816
AU 656,717
CA 2,069,303
DK 0488/92
EP 90915696.0
FI 921579
IE 3585/90
JP 514572/90
KR 92/700833
NZ 235,618
PT 95574
WO US90/05772
ZA 90/8095
Chelating agents for attaching metal ions
to proteins US 5,292,868
5,488,126
5,583,219
AT E128035
AU 638,757
BE 0429644
CA 2,033,086
CH 0429644
DE 69022542.3
DK 0429644
EP 0429644 952004?5.0
ES 0429644
FI 910.329
FR 0429644
GB 0429644
IE 1867/90
</TABLE>
<PAGE> 306
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0429644
JP 513354/90
KR 91/700100
NL 0429644
SE 0429644
WO US90/02910
ZA 90/4047
Technetium-99M labelling
of proteins US 5,317,091
AU 658,403
CA 2104943
EP 92907824.4
FI 933760
JP 507406/92
KR 93/702561
WO US92/01577
Chelator IDAC-2 and methods
for purifying chelator
conjugated compounds US 08/278721
08/442856
WO US95/09285
New Polyaminocarboxylate
chelators US 08/178875
WO US95/00068
Pre-Targeting
Site specific in vivo
activation of therapeutic
drugs US 5,433,955 07/300999
AT E123414
AU 648,015
BE 0454783
CA 2025599
CH 0454783
DE 69019959.7
DK 0454753
</TABLE>
<PAGE> 307
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
EP 0454783
ES 0454783
FI 913,511
FR 0454783
GB 0454783
IT 0454783
JP 503116/90
KR 90/702129
LU 0454783
NL 0454783
NO 912,864
SE 0454783
WO 90/00503
In Vivo Binding Pair Pretargeting US 5,578,289 08/452938
08/451267
AU 663,582
CA 2,107,558
EP 93906276 6
FI 934,857
ID P-005991
JP 515830/93
KR 93/703311
WO US93/01858
ZA 93/3035
High yield preparation of dimene to
decamene chitin oligomers US US/397464
IL 117052
WO US96/02705
</TABLE>
<PAGE> 308
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Polymer affinity systems in the delivery US 5,686,071
of cytotoxic materials and other compounds
in the site of disease Immunotherapy
Active specific immunotherapy US 5,484,596 08/540298
CTAA 28A32, the antigen recognized by
MCA 28A32 US 5,521,285
AT 0537168
AU 660,927
BE 0537168
CA 2079601
CH 0537168
DE 0537168
DK 0537168
EP 0537168
ES 0537168
FI 924576
FR 0537168
GB 0537168
GR 0537168
IT 0537168
JP 508604/91
KR 92/702530
LU 0537168
NL 0537168
</TABLE>
<PAGE> 309
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
SE 0537168
WO US91/02459
Antigen recognized by MCA 16.88 US 5,338,832
AT E137674
AU 618,209
BE 0328578
CA 571,017
CH 0328578
DE P3855290.9
DK 1025/89
EP 0328578
FR 0328578
GB 0328578
HU 4187/88
IE 2034/88
IL 86,958
IT 0328578
JP 505583/89
LU 0328578
NL 0328578
NZ 225,280
SE 0328578
WO US88/02245
ZA 88/4777
Keyhole limpet hemocyanin composition with enhanced US 5,407,912 08345808
immunogenic activity
US 09/009,121
AU 60519/94
CA 2121298
EP 94200997.8
</TABLE>
<PAGE> 310
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
FI 941725
ID P-940578
JP 104838/94
KR 94/8063
ZA 94/2510
Tumor associated epitope US 08/478591
CTAA 8IAV78, the antigen recognized
by human monoclonal US 5,595,738
antibody 81AV78
AU 20085/92
CA 2102422
EP 92912470.9
FI 934,963
JP 500223/93
KR 93/703413
Others WO US92/04108
Loukoregulin, an antitumor
lymphokine and its therapeutic uses US 4,849,506
5,082,657
AT E48617
AU 592,529
641,386
BE 0179127
CA 478,937
CH 0179127
DE P3574710.2
DK 170.781
170.423
E 0179127
FI 85,867
FR 0179127
GB 0179127
</TABLE>
<PAGE> 311
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0179127
JP 501862/85
300400/93
LU 0179127
NL 0179127
NQ 170423
SE 0179127
WO US85/00626
Urethral catheter and catherization process US 5,120,316
Immunoreactive peptides of apo(2) US 08/266407
5,597,908 08/457449
08/172461
08/892544
AU 81,606/94
CA 2138605
EP 942036534
FI 945976
ID P-942209
JP 318892/94
KR 94/35809
ZA 94/10145
An alignment system to overlay abdominal
computer aided tomography and magnetic US 5,299,253
resonance anatomy with single photon
emulsion tomography
</TABLE>
<PAGE> 312
<TABLE>
<CAPTION>
Application Patent
Title Country No. No.
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Methods, Reagents and Test Kits for Determinations US 5256532
of Subpopulations of Biological Entities
Methods for Detection and Quantification of Cell US 5385822
Subsets within Subpopulations of a Mixed Cell
Population
Methods, Reagents and Test Kits for Determinations CA 2051373
of Subpopulations of Biological Entities
Methods, Reagents and Test Kits for Determinations EP 909088684
of Subpopulations of Biological Entities
Methods for Detection and Quantification of Cell CA 2095237
Subsets within Subpopulations of a Mixed Cell
Population
Methods for Detection and Quantification of Cell EP 9290033564
Subsets within Subpopulations of a Mixed Cell
Population
Methods for Detection and Quantification of Cell JP 0501274
Subsets within Subpopulations of a Mixed Cell
Population
Immunoassay for Determination of Cells US 5374531
Immunoassay for Determination of Cells US 08/569100
Immunoassay for Determination of Cells AU 63678/94
Immunoassay for Determination of Cells CA 2158839
Immunoassay for Determination of Cells EP 949109797
Immunoassay for Determination of Cells JP 06521300
Immunoassay for Determination of Cells IL 109008
Intracellular Immunization US 08/099870
Detection Reagent, Article and Immunoassay US 08/177,732
Method
Detection Reagent, Article and Immunoassay BR PI95064455
Method 9
</TABLE>
<PAGE> 313
<TABLE>
<CAPTION>
Application Patent
Title Country No. No.
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Detection Reagent, Article and Immunoassay CA 2180428
Method
Detection Reagent, Article and Immunoassay CN 951914774
Method
Detection Reagent, Article and Immunoassay EP 959061565
Method
Radial Flow Assay, Deliverying Member, US 08/177733
Test Kit and Methods
Radial Flow Assay, Deliverying Member, BR PI95064540
Test Kit and Methods
Radial Flow Assay, Deliverying Member, CA 2180429
Test Kit and Methods
Radial Flow Assay, Deliverying Member, CN 95191473
Test Kit and Methods
Radial Flow Assay, Deliverying Member, EP 959067588
Test Kit and Methods
Neutralizing Antibodies to Respiratory US 09/043522
Syncytial Virus
Neutralizing Antibodies to Respiratory US 09/043522
Syncytial Virus
Neutralizing Antibodies to Respiratory CA 2230127
Syncytial Virus
Neutralizing Antibodies to Respiratory EP 969316330
Syncytial Virus
Neutralizing Antibodies to Respiratory CA 2230116
Syncytial Virus
Neutralizing Antibodies to Respiratory EP 969338102
Syncytial Virus
</TABLE>
<PAGE> 314
SCHEDULE II
to
Intellectual Property Security Agreement
Trademark Registrations and Applications
<PAGE> 315
SCHEDULE II
AccuDx
HumaSPECT(TM)* - Ser. No. 75/170,170, Filed 9/23/96
OncoSPECT(TM)**
Oncovax(TM)*** - Ser. No. 75/084,485, Filed 4/5/96
Onconostika(TM)*
Oncoscan(TM)*
Oncoselect(TM)*
Oncotice(TM)*
Oncostat(TM)*
Apo-Tek Lp(a)***
Apo-Tek Apo E***
KLH Immune Activator***
Zymmune***
* In October 1997, PerImmune, Inc. changed the trademark name of
"OncoSPECT(TM)/CR" to "HumaSPECT(TM)"
** Registration has been applied for.
*** Final name and registration to be completed.
* Assignment to be completed.
<PAGE> 316
Item A. TRADMARKS
INTRACEL
<TABLE>
<CAPTION>
Registration
County No. Date Filed Status
- --------------- ------------ ---------- -----------------------------------
<S> <C> <C> <C>
Australia 608813 08/09/93 Pending
Benelux 537216 08/11/93 Registered
817640487 08/01/93 Pending; reg'n fee paid 6/19/95
Brazil
Canada 734,661 08/09/93 Pending; response to OA due 12/7/95
China 93073886 08/26/93 Pending; published in OG 11/21/94
France 93479055 08/03/93 Registered
Germany Z 11488/10 Wz 08/11/93 Pending; published in OG 10/31/91
Greece 116498/93 09/29/93 Pending
Israel 88567 08/12/93 Pending
Italy RM93C/002727 08/18/93 Pending
Japan 82,893/1993 08/10/93 Pending
Mexico 175,387 08/13/93 Registered 4/28/94; Reg. No. 458,743
South Korea 93-28412 08/11/93 Registered 11/2/94; Reg. No. 301304
Spain 1,779,240 09/09/93 Pending
Switzerland 2857/1994.7 04/27/94 Pending
Taiwan 82039743 08/13/93 Registered 8/16/94; Reg. No. 649265
Thailand 253401 10/08/93 Pending; published in OG 4/21/95
United Kingdom 1,544,180 08/09/93 Registered 12/16/94; Reg. No. 1,544,180
United States
TRADEMARK LICENSES
Item B.
None.
</TABLE>
<PAGE> 317
Item A. Trademarks
1. BIOVITRO
<TABLE>
<CAPTION>
Country Registration No. Date Filed Status
- ---------------- ------------------ ------------ --------
<S> <C> <C> <C>
United States 1,930,690
</TABLE>
2. FLEX-TRANS
<TABLE>
<CAPTION>
Country Registration No. Date Filed Status
- ---------------- ------------------ ------------ --------
<S> <C> <C> <C>
United States App 74/429821 Pending
2,049,370
</TABLE>
Item B. Trademark Licenses
None.
<PAGE> 318
SCHEDULE III
to
Intellectual Property Security Agreement
Copyright Registrations and Applications
<PAGE> 319
SCHEDULE III
None
<PAGE> 320
SCHEDULE IV
to
Intellectual Property Security Agreement
Licenses
<PAGE> 321
SCHEDULE IV
1. Research Collaboration and Distribution Agreement, dated December 22, 1997,
by and between PerImmune, Inc. and Mentor Corporation, pursuant to which
Mentor will fund the costs of implementing and carrying out a clinical
testing program and submitting an application to the United States Food and
Drug Administration for the Company's keyhole limpet hemocyanin composition
product (as described therein) and act as the exclusive distributor of such
product.
2. Letter of Agreement, dated September 12, 1997, by and between Bio-Tek
Instruments, Inc. and Bartels, Inc., pursuant to which Bio-Tek will act as a
distributor of certain Company products (as defined therein).
3. Distribution Agreement, dated August 1, 1997, by and between Organon
Teknika, B.V. and PerImmune, Inc., pursuant to which Organon will grant
PerImmune an exclusive right to promote, distribute and sell the Products
(as defined therein) within the Territory (as defined therein).
4. Exclusive Distribution Agreement, dated June 16, 1997, by and between
PerImmune, Inc. and Mentor Corporation, pursuant to which Mentor will act as
the exclusive distributor of the Company's bladder diagnostic product.
5. Exclusive Distribution Agreement, dated as of April 1, 1997, by and between
Syncor International Corporation and PerImmune, Inc., pursuant to which
Syncor will act as the exclusive distributor of the Company's HumaSPECT/CR.
6. Distribution Agreement, dated as of March 14, 1997, by and between Intracel
Corporation and Seradyn, Inc., pursuant to which Seradyn will act as
distributor of the Company's Zymmune CD4/CD8 test kit within the United
States.
7. Agreement, dated April 1, 1997, by and between Zeus Scientific, Inc. and
Intracel Corporation, pursuant to which Zeus Scientific grants Intracel a
nonexclusive worldwide right to distribute the ELISA products (as defined
therein).
8. Exclusive Distributor Agreement, dated as of February 1, 1997, by and
between Bartels, Inc. and HIT Medikal Tibbi Urunler Sanayii ve Ticaret A.S.,
pursuant to which HIT will act as the exclusive distributor of the Company's
INSTI HIV I/I1 components in Turkey and North Cyprus.
9. Exclusive Distributor Agreement, dated as of July 25, 1996, by and between
Bartels, Inc. and Finn-Vita, S.A., pursuant to which Finn-Vita will act as
the exclusive distributor of the Company's INSTI HIV I/II components in
Chile.
10. Exclusive Distributor Agreement, dated as of July 1, 1996, by and between
Bartels, Inc. and DSL Diagnostic Products Incorporated COB "Intermedico,"
pursuant to which DSL will act as the exclusive distributor of various
Company products (as defined therein) in Canada.
<PAGE> 322
11. Exclusive Distributor Agreement, dated as of May 8, 1996, by and between
Bartels, Inc. and AMAR Immunodiagnostics, pursuant to which AMAR will act
as the exclusive distributor of the Company's INSTI HIV I/II components in
India.
12. Distributorship Agreement, dated September 20, 1991, between Bartels
Diagnostics, division of Baxter Diagnostic Inc. and Biotrin International
Ltd., pursuant to which Biotrin will act as a non-exclusive distributor of
various Company products (as defined therein) within the territory of
Europe.
13. Material Transfer Agreement for Hepatitis C Virus Recombinant
RNA-Dependent RNA Polymerase, dated March 10, 1998, by and between Emory
University and Intracel Corporation.
14. Product Development and License Agreement, dated as of June 30, 1997, by
and between PerImmune and Sigma Diagnostics, Inc., pursuant to which Sigma
is licensing a cell line to be used in a marketable product.
15. Development Agreement and License Agreement, dated December 4, 1996, by
and between Intracel Corporation and its affiliates and subsidiaries and
Alexon Biomedical, Inc., pursuant to which Alexon and Intracel will
develop certain technology relating to a rapid, member-based enzyme-linked
immunoabsorbent assay for the detection of C. difficile Toxin A.
16. Patent License Agreement -- Exclusive, dated December 4, 1996, between
Public Health Service and Intracel Corporation, pursuant to which Public
Health Service grants Intracel an exclusive license under the Licensed
Patent Rights (as defined therein) in the Licensed Territory (as defined
therein).
17. Intellectual Property Security Agreement, dated as of August 8, 1996, by
and among PerImmune Holdings, Inc., PerImmune, Inc., Akzo Nobel Pharma
International, B.V. and Organon Teknika Corporation.
18. Intellectual Property Agreement, dated August 2, 1996, by and between Akzo
Nobel Pharma International, B.V. and PerImmune Holdings, Inc.
19. CMV Antigenemia Agreement, dated May 9, 1996, by and between Bartels, Inc.
and Argene SA, Biosoft Department, pursuant to which Argene grants Bartels
exclusive distribution rights to the Assay Kit or Components (as defined
therein) in the United States and a non-exclusive distribution right to
the Assay Kit or Components (as defined therein) in Asia, Australia, South
Africa, Antilles, South America and Central America.
20. Research Collaboration and License Agreement, dated as of January 1, 1996,
by and between PerImmune, Inc. and Baxter Healthcare Corporation, pursuant
to which PerImmune will perform research and development services for the
benefit of Baxter in accordance with the Research Plans (as defined
therein).
<PAGE> 323
21. Pursuant to an Agreement dated July 14, 1995, the Company has agreed to
make certain Vpr peptides from HIV-1 available to the University of
Minnesota in return for the option to obtain a royalty-bearing exclusive
license to any patent or patent application which the University of
Minnesota or its scientists may be granted in respect of an invention
arising out of the use of the Vpr peptides.
22. License Agreement, dated July 25, 1994, by and between Arch Development
Corporation and Organon Teknika Corporation, pursuant to which Arch grants
Organon an exclusive license to make, have made, use and sell Licensed
Products (as defined therein) within the Territory (as defined therein).
23. Agreement, dated July 18, 1994, between Intracel Corporation and the World
Health Organization, pursuant to which Intracel will engage in the
development of an INSTI diagnostic test for detection of the measles
virus.
24. License Agreement, dated June 1, 1994, by and between Thomas Jefferson
University and Intracel Corporation, pursuant to which Thomas Jefferson
grants Intracel an exclusive worldwide license to manufacture, market and
distribute the Products (as defined therein).
25. Assignment, dated September 28, 1993, by and between Alexander Klibanov
and Intracel Corporation, pursuant to which Alexander Klibanov will sell,
assign, transfer and deliver to Intracel all of his right, title and
interest in the Future Intellectual Rights (as defined therein) and all
proceeds of, and rights associated with the Future Intellectual Rights.
26. Research Agreement, dated April 9, 1993, as amended, between Intracel
Corporation and Thomas Jefferson University, pursuant to which Thomas
Jefferson will pursue a research project in accordance with the Protocol
(as defined therein).
27. Licensing Agreement, dated as of April 16, 1991, between American
Bio-Technologies, Inc. ("ABT") and the Medical Reseach Council, pursuant
to which the Medical Research Council grants ABT a nonexclusive worldwide
right and license to make, have made, lease and sell the Licensed Products
(as defined therein).
28. License Agreement, dated June 14, 1990, by and between ABT and Hoffman-La
Roche, Inc., pursuant to which Hoffman-La Roche grants ABT a nonexclusive
license in the United States to make and sell for research purposes only
the Licensed Products (as defined therein).
29. Licensing Agreement, dated May 18, 1990, as amended, by and between Baxter
Healthcare Corporation, Bartels Diagnostic Division, and Virginia Tech
Intellectual Properties, Inc., pursuant to which Virginia Tech grants
Bartels a nonexclusive license to manufacture, have made for it, use,
lease, and/or sell Licensed Product(s) (as defined therein).
<PAGE> 324
EXHIBIT G
PLEDGE AGREEMENT
<PAGE> 325
EXHIBIT 10.33
================================================================================
PLEDGE AGREEMENT
Intracel Corporation and PerImmune Holdings, Inc.
as Pledgors
to
Holders of the 12% Guaranteed
Senior Secured Primary Promissory Notes
due August 25, 2003 of
Intracel Corporation
and
Holders of the 12%
Guaranteed Senior Secured
Escrow Promissory Notes
due August 25, 2003 of
Intracel Corporation
-----------
Dated as of August 25, 1998
-----------
================================================================================
<PAGE> 326
PLEDGE AGREEMENT
PLEDGE AGREEMENT (the "Pledge Agreement"), dated August 25, 1998,
between Intracel Corporation and PerImmune Holdings, Inc., a wholly-owned
subsidiary of Intracel Corporation (together with their successors and assigns,
the "Pledgors") and Northstar High Total Return Fund, Northstar High Total
Return Fund II, Northstar High Yield Fund, and Northstar Strategic Income Fund
(collectively, the "Holders"), the holders of 12% Guaranteed Senior Secured
Primary Promissory Notes of the Company and the holders of 12% Guaranteed Senior
Secured Escrow Promissory Notes of the Company (collectively, the "Notes")
issued pursuant to that certain Securities Purchase Agreement, dated as of the
date hereof, by and among the Company and the other parties thereto (the
"Purchase Agreement"). As used herein, all capitalized terms not otherwise
defined herein shall have the meanings set forth in the Purchase Agreement.
W I T N E S S E T H:
WHEREAS, the Pledgors have entered into the Securities Purchase
Agreement, the Notes and the Ancillary Agreements as of the date hereof,
pursuant to which the Pledgors are subject to the Obligations (as defined
herein);
WHEREAS, in order to secure the performance of such Obligations of
the Company and its Subsidiaries under the Securities Purchase Agreement, the
Notes and the Ancillary Agreements (the "Obligations"), the parties hereto
desire to set forth their mutual understanding and certain agreement regarding
the terms and conditions of the pledge of the Pledged Collateral (as defined
below) made by the Pledgors to the Holders of the Notes (the "Holders").
NOW, THEREFORE, in consideration of the premises and other benefits
to the Pledgors, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
Section 1. Pledge. As collateral security for the payment and
performance in full of the Obligations, the Pledgors hereby pledge, assign,
transfer and set over unto the Holders and hereby grant upon the Holders and
unto their respective successors and assigns, a continuing security interest
(the "Security Interests") in all of the right, title and interest of the
Pledgors in, to and under any and all of the following described property,
rights and interests (collectively, the "Pledged Collateral"):
(a) all issued and outstanding shares of Capital Stock now
or hereafter owned by the Pledgors of (i) the companies identified on Schedule A
(the "Identified Companies"), including, without limitation, the shares of
Capital Stock set forth on Schedule A, and (ii) any New Subsidiary of the
Pledgors or any other company (the "Additional Companies");
<PAGE> 327
(b) all securities of the Identified Companies and the
Additional Companies now or hereafter owned or acquired by the Pledgors; any
present or future options, warrants or other rights to subscribe for or purchase
any shares of Capital Stock of any of the Identified Companies or the Additional
Companies now or hereafter owned by the Pledgors; and any notes bonds,
debentures or other evidences of Debt now or hereafter owned by the Pledgors
that (i) are at any time convertible into Capital Stock of any of the Identified
Companies or the Additional Companies, or (ii) have or at any time could by
their terms have voting rights with respect to any matter affecting any of the
Identifying Companies or the Additional Companies; and all securities,
certificates and instruments representing or evidencing ownership or any of the
property described in subsections 1(a) and (b) hereof (the property described in
subsections 1(a) and (b) being referred to herein collectively as the "Pledged
Securities");
(c) all proceeds and products of the Pledged Securities,
including, without limitation, dividends and distributions payable in cash,
Assets or securities, now or hereafter at any time or from time to time received
or receivable or otherwise distributed or distributable in respect of or in
exchange for any or all of the Pledged Securities; and
(d) any additional property of the kind or type described
in this Section 1 required to be supplied under the terms of this Pledge
Agreement;
TO HAVE AND TO HOLD the Pledged Collateral, together with all rights,
titles, interests, powers, privileges and preferences pertaining or incidental
thereto, unto the Holders and unto their respective successors and assigns;
subject, however, to the terms, covenants and conditions hereinafter set forth.
Section 2. Representations, Warranties and Covenants of Pledgors. The
Pledgors hereby represent and warrant, covenant and agree that:
(a) As of the date hereof, and except for the Security
Interests granted hereunder to the Holders, the Pledgors are the legal and
equitable owners of the Pledged Collateral, hold the Pledged Collateral free and
clear of all Liens, charges, claims, encumbrances and Security Interests of
every kind and nature. Until the Obligations under this Agreement, the
Securities Purchase Agreement, the Notes and any Ancillary Agreement shall have
been satisfied in full and this Agreement shall have been terminated, the
Pledgors will not, without the prior written consent of the Required Holders,
make any other pledge, assignment, sale, mortgage, hypothecation or transfer of,
or create, or permit to exist any Lien, Security Interest or other charge or
encumbrance on, the Pledged Collateral.
(b) The Pledgors have the valid right and legal authority
to pledge or cause to be pledged the Pledged Collateral in the manner hereby
done or contemplated and will defend its title thereto against the claims of all
persons whomsoever and shall maintain and preserve the Security Interests
granted hereunder with respect to the Pledged Collateral as long as this Pledge
Agreement shall remain in full force and effect.
(c) Neither the execution and delivery of this Pledge
Agreement by Pledgors, nor the consummation of the transactions herein
contemplated nor the fulfillment of the terms hereof violate the terms of any
agreement, indenture, mortgage, deed of trust, equipment lease,
2
<PAGE> 328
instrument or other document to which Pledgors are parties, or conflict with any
Law, applicable to the Pledgors of any court or any government, regulatory body
or administrative agency or other governmental body having jurisdiction over
Pledgors or their Assets, to the extent that such violation or conflict would
have a material adverse effect on the financial condition, business, Assets,
liabilities or prospects of Pledgors or on the value of the Pledged Collateral
or on the Security Interests.
(d) The Pledged Collateral as described in Schedule A
attached hereto includes all of the issued and outstanding shares of Capital
Stock of the Identified Companies and Additional Companies beneficially owned by
the Pledgors on the date hereof; and all outstanding options, warrants or other
rights to subscribe for or purchase shares of the Capital Stock of the
Identified Companies and the Additional Companies beneficially owned by Pledgors
on the date hereof; and all notes, bonds, debentures or other evidences of Debt
beneficially owned by the Pledgors on the date hereof that (i) are at any time
convertible into Capital Stock of the Identified Companies or the Additional
Companies or (ii) have or at any time could by their terms have voting rights
with respect to any matters affecting the Identified Companies or the Additional
Companies.
(e) No consent or approval that has not been obtained prior
to the date hereof of any governmental body, regulatory authority or securities
exchange was or is necessary as a condition to the validity of the pledge
hereunder of the Pledged Collateral, and such pledge is effective to vest in the
Holders the rights of the Holders in the Pledged Collateral as set forth herein.
(f) If, while this Pledge Agreement is in effect, any
securities of the type described in Section 1 are hereafter acquired by
Pledgors, or any stock dividend, stock split, reclassification, readjustment,
reorganization, merger, consolidation, exchange offer, tender offer or other
change in the capital structure, including the creation of any subscription or
other rights or other Pledged Collateral, is declared or made, or proposed to be
declared or made, by the Identified Companies or any Additional Companies, all
substituted and additional securities or interests, if evidenced by
certificates, shall be endorsed in blank by Pledgors promptly upon receipt
thereof and, if not so evidenced, shall be otherwise appropriately transferred
to the Holders in negotiable form, and all certificates or instruments
evidencing such securities shall be delivered to the Holders to be held under
the terms of this Pledge Agreement in the same manner as, and as part of, the
Pledged Collateral. The Pledgors shall use best efforts to ensure that all
Pledged Securities shall be evidenced by one or more certificates. Any
securities that may be issued upon exercise of any subscription or other rights
relating to the Pledged Securities shall be endorsed in blank and delivered to
the Holders.
(g) Pledgors shall pay and discharge all taxes, assessments
and governmental charges or levies against any Pledged Collateral prior to
delinquency thereof and shall keep all Pledged Collateral free of all unpaid
charges whatsoever, unless such charges are being contested in good faith and
appropriate reserves have been set aside in accordance with GAAP.
Section 3. Administration of the Pledged Collateral. The Holders
shall administer the Pledged Collateral in accordance with the provisions
hereof.
3
<PAGE> 329
Section 4. Release and Substitution of Pledged Collateral. The
Pledged Collateral shall not be released from the Security Interests created
hereunder and no Assets shall be substituted for any of the Pledged Collateral,
except in accordance with the provisions of Article V of the Purchase Agreement,
which provisions are hereby incorporated herein by reference.
Section 5. Voting Rights, Dividends, Etc.
(a) So long as no Default or Event of Default or event that
with the lapse of time or the giving of notice or both, would constitute an
Event of Default (as defined below) shall have occurred and be continuing or
would result therefrom:
(i) except as otherwise provided in this Pledge
Agreement, Pledgors shall be entitled to exercise any and
all voting or consensual rights and powers, including
subscription rights, accruing to an owner of the Pledged
Collateral or any part thereof for any purpose not
inconsistent with, or otherwise impair any rights of the
Holders arising under, the terms of this Pledge Agreement
or any agreement giving rise to any of the Obligations;
(ii) Pledgors shall be entitled to retain and use
any and all dividends or distributions which are permitted
by the Purchase Agreement and paid on the Pledged
Collateral in cash or property (other than securities);
(iii) the Required Holders shall execute and
deliver to Pledgors or cause to be executed and delivered
to Pledgors, all such proxies, powers of attorney, dividend
orders and other instruments as Pledgors may reasonably
request for the purpose of enabling it to exercise the
voting or consensual rights and powers which Pledgors are
entitled to exercise pursuant to the foregoing subparagraph
(i) or to receive the dividends or cash or other Assets
which Pledgors are authorized to retain pursuant to the
foregoing subparagraph (ii).
(b) Upon the occurrence and during the continuance of a
Default, an Event of Default, or event that with the lapse of time or the giving
of notice or both, would constitute an Event of Default, all rights of Pledgors
to exercise the voting or consensual rights and powers which the Pledgors would
otherwise be entitled to exercise pursuant to subparagraph (i) of Section 5(a)
hereof and to receive the dividends and distributions which Pledgors would
otherwise be authorized to receive and retain pursuant to subparagraph (ii) of
Section 5(a) hereof shall cease, and all such rights shall thereupon become
vested in the Holders, which shall then have the sole and exclusive right and
authority to exercise all such voting or consensual rights and powers and to
receive and retain all such dividends and distributions. Any and all money and
other Assets paid over to or received by the Holders pursuant to the provisions
of this Section 5(b) shall be retained by the Holders in the account established
pursuant to that certain Interest Escrow Security Agreement, dated as of the
date hereof, by and among the Company and the other parties thereto (the
"Collateral Account") as additional Pledged Collateral hereunder and shall be
administered and applied in accordance with the provisions of the Notes.
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Section 6. Default; Remedies.
(a) Defined. For purposes of this Pledge Agreement, the
terms "Default" and "Event of Default" shall have the respective meanings
provided in the Notes and shall include any event that with the lapse of time or
the giving of notice or both, would constitute an Event of Default.
(b) Exercise of Remedies Under the Security Agreement. If a
Default or Event of Default or event that with the lapse of time or the giving
of notice or both, shall constitute an Event of Default in the payment of any
Obligations shall have occurred and be continuing or would result therefrom the
Holders may commence the taking of such actions (or refrain from taking actions)
toward collection or enforcement of this Pledge Agreement and the Pledged
Collateral (or any portion thereof), including, without limitation, action
toward foreclosure upon any Pledged Collateral, as it deems appropriate in their
sole discretion. If any Default or Event of Default or event that with the lapse
of time or the giving of notice or both, shall constitute an Event of Default
that was the basis for the commencement of such action shall have been cured or
waived, and, in the case where there has been an acceleration, rescission of
such acceleration shall have occurred, in each case in accordance with the terms
of the Securities Purchase Agreement, the Notes, or any of the Ancillary
Agreements, any direction by the Holders to take any action in connection with
the aforementioned notice shall be deemed rescinded upon notification by the
Required Holders of such cure, waiver or rescission of acceleration, as the case
may be.
(c) Remedies Generally. If a Default or Event of Default or
event that with the lapse of time or the giving of notice or both, in the
payment of any Obligation shall constitute an Event of Default shall have
occurred and be continuing or would result therefrom, the Required Holders or
their agents or attorneys may retain the Pledged Collateral or sell, assign,
transfer, or dispose of, endorse and deliver the whole or, from time to time,
any part of the Pledged Collateral at public or private sale, for cash, upon
credit or for other property, for immediate or future delivery, and for such
price or prices and on such other terms as are satisfactory to the Holders (in
their discretion) without liability for loss or damage. Pledgors agree that the
private sale or other private disposition of Pledged Collateral shall be deemed
commercially reasonable notwithstanding the possibility that a substantially
higher price might be realized if such sale or other disposition were public and
deferred until after registration under the Securities Act of 1933, as amended,
or after compliance with any other applicable securities laws. Upon consummation
of any such sale, the Holders shall have the right to assign, transfer, endorse
and deliver to the purchaser or purchasers thereof the Pledged Collateral so
sold. Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Pledgors, and
Pledgors hereby waive (to the full extent permitted by Law) all rights of
redemption, stay or appraisal which Pledgors now have or may have at any time in
the future have under any Law. The Holders shall give Pledgors five days'
written notice (which Pledgors agree shall be deemed to be reasonable
notification within the meaning of Section 9-504(3) of the relevant Uniform
Commercial Code) of the their intention to make any such public or private sale.
Any such sale shall be held at such time or times and at such place or places as
the Holders may fix. At any such sale, the Pledged Collateral, or portion
thereof to be sold, may be sold as an entirety or in separate portions, as the
Required Holders may, in their discretion, determine. The Holders shall not be
obligated to make any sale of the Pledged
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Collateral if they shall determine not to do so, regardless of the fact that
notice of sale of the Pledged Collateral may have been given. The Holders may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case sale of all or any part of
the Pledged Collateral is made on credit or for future delivery, the Pledged
Collateral so sold may be retained by the Holders until the sale price is paid
by the purchaser or purchasers thereof, but the Holders shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Collateral so sold and, in case of any such failure, such
Pledged Collateral may be sold again upon like notice. As an alternative to
exercising the power of sale herein conferred upon it, the Holders may proceed
by suit or suits at Law or in equity to foreclose this Pledge Agreement and sell
the Pledged Collateral or any portion thereof pursuant to judgment or decree of
a court or courts having competent jurisdiction. If, under mandatory
requirements of Law, the Holders shall be required to make disposition of the
Pledged Collateral within a period of time that does not permit the giving of
notice to Pledgors as provided herein, the Holders need give Pledgors only such
notice of disposition as shall be reasonably practicable in view of such Law.
(d) Remedies; Obtaining the Collateral Upon Default. The
Pledgors agrees that, if a Default, Event of Default or any event that with the
lapse of time or the giving of notice, or both, shall constitute an Event of
Default, in the payment of any Obligations shall have occurred and be
continuing, or would result therefrom, then and in every such case, and in
addition to the rights and remedies available to a secured party under any
applicable provisions of the Uniform Commercial Code, or any other Law, the
Holders may:
(i) personally or by Holders or attorneys,
immediately take possession of the Pledged Collateral or
any part thereof from Pledgors or any other person who then
has possession of any part thereof, with or without notice
or process of Law, and for that purpose may enter upon a
Pledgors' premises where any of the Pledged Collateral is
located and remove the same and use in connection with such
removal any and all services, supplies, aids and other
facilities of Pledgors;
(ii) instruct the obligor or obligors on any
agreement, instrument or other obligation constituting
Pledged Collateral to make any payment or render any
performance required by the terms of such agreement,
instrument or obligation directly to the Holders or their
designee;
(iii) withdraw all monies, securities and
instruments held by the Holders in the Financial Accounts
(as that term is defined in the Security Agreement) or
otherwise for application to the Obligations;
(iv) sell or otherwise liquidate or direct the
Pledgors to sell or otherwise liquidate, any or all
investments made in whole or in part with the Pledged
Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation; and
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(v) take possession of the Pledged Collateral or
any part thereof by directing Pledgors in writing to
deliver the same to the Holders at any place or places
designated by the Holders, in which event the Pledgors
shall at its own expense:
(A) forthwith cause the same to be
moved to the place or places so designated by the
Holders and there delivered to the Holders;
(B) store and keep any Pledged
Collateral so delivered to the Holders at such
place or places pending further action by the
Holders as provided in this Section 6(d); and
(C) while any such Pledged Collateral
shall be so stored and kept, provide such guard
and maintenance services as shall be necessary to
protect the same and to preserve and maintain
such Pledged Collateral in good condition;
it being understood that the Pledgors' obligation so to deliver the
Pledged Collateral is of the essence of this Pledge Agreement and
that, accordingly, upon application to a court of equity having
jurisdiction, the Holders shall be entitled to a decree requiring
specific performance by Pledgors of such obligation.
(e) Collateral Account. The Required Holders shall deposit
the proceeds of any Pledged Collateral obtained or disposed of pursuant to this
Section 6 in the Collateral Account (as defined in the Security Agreement).
(f) Preventing Impairment of the Pledged Collateral.
Regardless of whether or not there shall have occurred any Default or Event of
Default, the Holders may institute or maintain or cause in the name of Pledgors
or of the Holders, or both, to be instituted and maintained, such suits and
proceedings as the Holders may be advised by counsel shall be necessary or
expedient to prevent any impairment of the Security Interests in or perfection
of, the Pledged Collateral in contravention of the terms hereof or of the
Securities Purchase Agreement, the Notes or any of the Ancillary Agreements.
Section 7. Holders Appointed Attorney-in-Fact. Pledgors hereby
constitute and appoint the Holders their attorney-in-fact for the purpose of
carrying out the provisions, but subject to the terms and conditions, of this
Pledge Agreement and taking any action and executing any instrument, including,
without limitation, any financing statement or continuation statements, and
taking any other action to maintain validity, perfection and enforcement of the
Security Interests intended to be created hereunder, that the Holders may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest.
Section 8. Purchase of Pledged Collateral by Holder. At any sale of
the Pledged Collateral, whether pursuant to power of sale or otherwise
hereunder, any Holders may, to the extent permitted by Law, bid for and
purchase, free from any right or redemption, stay or
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<PAGE> 333
appraisal (all such rights being hereby waived and released by Pledgors to the
extent permitted by Law), the Pledged Collateral or any part thereof or any
interest therein and upon compliance with the terms of such sale may hold,
retain, exploit, resell or otherwise dispose of such Pledged Collateral without
further accountability to Pledgors for the proceeds of such sale. Pledgors will
execute and deliver, or cause to be executed and delivered, such instruments,
endorsements, assignments, waivers, certificates and other documents and take
such further action as the Holders shall reasonably request in connection with
any such sale.
Section 9. Disposition of Proceeds. The proceeds of any sale or other
disposition of the whole or any part of the Pledged Collateral by the Holders,
together with any other monies held by the Holders pursuant to this Pledge
Agreement, shall be applied by the Holders in accordance with the provisions of
the Notes.
Section 10. Waiver of Claims. Except as otherwise provided in the
Securities Purchase Agreement or this Pledge Agreement, THE PLEDGORS HEREBY
WAIVE, TO THE EXTENT PERMITTED BY LAW, NOTICE OF JUDICIAL HEARING IN CONNECTION
WITH THE HOLDERS' TAKING POSSESSION OR THE HOLDERS' DISPOSITION OF ANY OF THE
PLEDGED COLLATERAL BY THE HOLDERS IN ACCORDANCE WITH THE TERMS HEREOF,
INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICES AND HEARINGS FROM ANY
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT THE PLEDGORS WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF
ANY STATE, and, to the fullest extent permitted by applicable Law, Pledgors
hereby further waive:
(a) all damages occasioned by such taking of possession
except any damages that are the direct result of the Holders' gross negligence,
bad faith or willful misconduct; and
(b) all other requirements as to the time, place and terms
of sale or other requirements with respect to the enforcement of the Holders'
rights and powers hereunder.
Any sale of, or the exercise of any options to purchase, or any other
realization upon, any Pledged Collateral shall operate to divest all right,
title, interest, claim and demand, at Law or in equity, of the Pledgors therein
and thereto, and shall be perpetual bar both at Law and in equity against the
Pledgors and against any and all Persons claiming or attempting to claim the
Pledged Collateral so sold, optioned or realized upon, or any part thereof,
through and under Pledgors.
Section 11. Remedies Cumulative; No Waiver. Each right, power and
remedy of the Holders provided for herein, in the Securities Purchase Agreement,
the Notes and any other Ancillary Agreement pursuant to which a Lien is created
in favor of any Holder, or now or hereafter existing at Law, shall be cumulative
and concurrent and shall be in addition to every other right, power or remedy of
any Holder provided for herein, in the Securities Purchase Agreement, the Notes
and any other Ancillary Agreement pursuant to which a Lien is created in favor
of any Holder or now or hereafter existing at Law. No failure on the part of any
Holder to exercise, and no delay in exercising, any right, power or remedy
hereunder, or under the Securities Purchase Agreement, the Notes and any other
Ancillary Agreement pursuant to
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which a Lien is created in favor of any Holder or now or hereafter existing at
Law, shall operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. No notice to or
demand on Pledgors hereunder shall, of itself, entitle Pledgors to any other or
further notice or demand in the same, similar or other circumstances.
Section 12. Additional Collateral. Without notice or consent of
Pledgors and without impairment of the Security Interests and rights created by
this Pledge Agreement, the Holders may accept from any Person additional
Collateral or other security for the Obligations. Neither the creation of the
Security Interests created hereunder nor the acceptance of any such additional
Collateral or Security shall prevent the Holders from resorting to such
additional Collateral or Security or to the Pledged Collateral, in any order,
without affecting the Holders' rights hereunder.
Section 13. Further Assurances. The Pledgors agree (i) that they
shall, at their own expense, (and will cause their Subsidiaries and New
Subsidiaries to), file or record such notices, financing statements,
continuation statements or other documents as may be necessary to perfect the
Security Interests, and as the Holders may reasonably request, such instruments
to be in form and substance satisfactory to the Holders and (ii) Pledgors shall,
at their own expense, (and will cause their Subsidiaries and New Subsidiaries
to), do such further acts and things and execute and deliver to the Holders such
additional conveyances, assignments, agreements and instruments as the Holders
may at any time reasonably request in connection with the administration and
enforcement of this Pledge Agreement or relative to the Pledged Collateral or
any part thereof or in order to assure and confirm unto the Holders the Holders'
rights, powers and remedies hereunder.
Section 14. Pledgors' Obligations Absolute. The liability of the
Pledgors under this Pledge Agreement shall remain in full force and effect
without regard to, and shall not be released, suspended, discharged, terminated
or otherwise affected by (a) any change in the time, place or manner of payment
of all or any of the Obligations, or in any other term of the Securities
Purchase Agreement, any Ancillary Agreement or the Notes, any waiver,
indulgence, renewal, extension, amendment or modification of or addition,
consent or supplement to or deletion from or any other action or inaction under
or in respect of the Securities Purchase Agreement, the Notes or any Ancillary
Agreement or any assignment or transfer thereof; (b) any lack of validity or
enforceability, in whole or in part, of the Securities Purchase Agreement, any
Ancillary Agreement or the Notes; (c) any furnishing of any additional security
for the Obligations or any acceptance thereof or any release or non-perfection
of any security interests in the property other than the Pledged Collateral; (d)
any limitation on any party's liability or Obligations under the Securities
Purchase Agreement, any Ancillary Agreement or the Notes; (e) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to the Pledgors, or any action taken with respect
to this Pledge Agreement by any trustee or receiver, or by any court, in any
such proceeding, whether or not the Pledgors shall have notice or knowledge of
any of the foregoing; (f) any exchange, release or amendment or waiver of or
consent to departure from the Securities Purchase Agreement, the Notes and any
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Ancillary Agreement, or any other agreement pursuant to which a Lien is created
in favor of the Holders for the benefit of any Holder, pursuant to which a
person other than the Pledgors have been granted a Security Interest; or (g) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, the Pledgors.
Section 15. Waiver. To the extent permitted by Law, Pledgors hereby
waive promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations and this Pledge Agreement and any requirement
that the Holders protect, secure, perfect or insure any security interest or any
property subject thereto or exhaust any right or take any action against the
Pledgors or any other Person; provided, however, that the Holders shall in any
event take such care in the handling of any Pledged Securities in their
possession as they take with respect to the property of a similar nature in its
possession.
Section 16. Termination. Upon payment in full and satisfaction of all
of the Obligations under the Securities Purchase Agreement, the Notes, and any
Ancillary Agreements, this Pledge Agreement shall terminate and the Holders
shall reassign and redeliver to Pledgors all of the Pledged Collateral hereunder
that has not been sold, disposed of, retained or applied by the Holders in
accordance with the terms hereof and the Securities Purchase Agreement, the
Notes and any Ancillary Agreements. Such reassignment and redelivery shall be
without warranty by or recourse to the Holders, and shall be at the expense of
the Pledgors. At such time, this Pledge Agreement shall no longer constitute a
Lien upon or grant of any Security Interests in any of the Pledged Collateral,
and the Holders shall, at the Pledgors' expense, deliver to the Pledgors written
acknowledgement thereof and of cancellation of this Pledge Agreement in a form
as reasonably requested by the Pledgors and adequate for proper filing or
recording in such offices and such jurisdictions as the Pledgors reasonably deem
necessary to release the Security Interests granted hereby. This Pledge
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned upon the insolvency, bankruptcy or reorganization of the
Pledgors, all as though such payment had not been made.
Section 17. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
To the Pledgors:
Intracel Corporation
2005 NW Sammamish Road
Suite 107
Issaquah, Washington 98027
Attention: Chief Executive Officer
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
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To the Holders:
300 First Stamford Place
Stamford, Connecticut 06902
Attention: Mr. Michael Graves
Fax Number: (203) 862-8601
Confirm Number: (203) 863-6224
Either party hereto may by notice to the other party designate such
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to either party shall be deemed to have been
given or made as of the date so delivered, if personally delivered; and three
calendar days after mailing if sent by registered or certified mail (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee). The Pledgors will give notice to the
Holders at the addresses set forth above or, if the Company has been notified of
a change of address of Holders, to such address as set forth in the Company's
records.
Section 18. Binding Agreement; Assignment. This Pledge Agreement
shall be binding upon and inure to the benefit of the Pledgors, the Holders and
their respective successors and permitted assigns. Neither this Pledge Agreement
nor any interest herein or in the Pledged Collateral, or any part thereof, may
be assigned by the Pledgors; provided, however, that this Pledge Agreement may
be assigned by Pledgors and shall be deemed to be automatically assigned by the
Pledgors to any person who succeeds to the Pledgors, but nothing shall relieve
Pledgors of their Obligations hereunder. This Pledge Agreement shall be deemed
to be automatically assigned by the Holders to any person who succeeds to or
replaces any Holder in accordance with the terms hereof, and its assignee shall
have all rights and powers of, and act as, the Holders hereunder.
Section 19. Governing Law. THE PARTIES HERETO EXPRESSLY ACKNOWLEDGE
AND AGREE THAT, IN ACCORDANCE WITH THE PROVISIONS OF NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1401 GOVERNING AGREEMENTS RELATING TO ANY OBLIGATION
ARISING OUT OF A TRANSACTION COVERING IN THE AGGREGATE NOT LESS THAN $250,000,
THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR THE
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN NEW YORK. TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE
LAW, THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW
YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY OR ANY
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE
AGREEMENT, AND IRREVOCABLY AGREE
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THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH COURT. THE PARTIES HERETO IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY
AND ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 20. Amendments. This Pledge Agreement may not be amended or
modified except by a written agreement signed by the Company and the Holders.
Section 21. Severability. In the event that any provision contained
in this Pledge Agreement shall for any reason be held to be illegal or invalid
under the Laws of any jurisdiction, such illegality or invalidity shall in no
way impair the effectiveness of any other provision hereof, or of such provision
under the Laws of any other jurisdiction; provided, that in the construction and
enforcement of such provision under the Laws of the jurisdiction in which such
holding of illegality or invalidity exists, and to the extent only of such
illegality or invalidity, this Pledge Agreement shall be construed and enforced
as though such illegal or invalid provision had not been contained herein.
Section 22. Headings. Section headings used herein are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Pledge Agreement.
Section 23. Counterparts. This Pledge Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be an original, and all of which shall together constitute but one and the same
instrument. A complete set of counterparts shall be lodged with the Holders.
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IN WITNESS WHEREOF, the Pledgors and the Holders have caused this
Pledge Agreement to be executed and delivered by their respective officers
thereunto duly authorized as of the day and year first written above.
INTRACEL CORPORATION
as Pledgor
By: /s/ SIMON R. MCKENZIE
-----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
PERIMMUNE HOLDINGS, INC.
as Pledgor
By: /s/ SIMON R. MCKENZIE
-----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
-----------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN
FUND II
By: /s/ MICHAEL A. GRAVES
-----------------------------------
Name: Michael A. Graves
Title: Vice President
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NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
-----------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
-----------------------------------
Name: Michael A. Graves
Title: Vice President
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EXHIBIT H-1 THROUGH H-3
SUBSIDIARY GUARANTY
<PAGE> 341
GUARANTY
THIS GUARANTY ("Guaranty") dated as of August 25, 1998, by BARTELS,
INC., a Delaware corporation having its address at 2005 NW Sammamish Road, Suite
107, Issaquah, Washington 98027 ("Guarantor") in favor of the holders and their
successors and assigns (collectively, the "Holders"), of the Notes of the
Company (the "Notes") issued pursuant to that certain Securities Purchase
Agreement, dated as of the date hereof, by and among Intracel Corporation, the
parent company of the Guarantor ("Parent") and the parties thereto (the
"Purchase Agreement"). As used herein, all capitalized terms not otherwise
defined herein shall have the meanings set forth in the Purchase Agreement.
WHEREAS, Guarantor and Parent are to be liable for the obligations of
Parent under the Purchase Agreement, the Notes and the Ancillary Agreements (the
"Obligations"); and
WHEREAS, Guarantor, being a wholly-owned subsidiary of Parent, shall
derive substantial benefit and advantage from the financial accommodations to
Parent provided by the Notes, and it shall be to Guarantor's direct interest and
economic benefit to assist Parent in procuring the Note financing;
NOW, THEREFORE, for and in consideration of the premises and to induce
Holders to purchase the Notes, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby
agrees as follows:
1. Guaranty of Payment.
(a) Guarantor hereby unconditionally guarantees the full and
prompt payment, when due, whether at maturity or by reason of acceleration or
otherwise and at all times thereafter on demand, of any and all of the
Obligations.
(b) Guarantor acknowledges that valuable consideration supports
this Guaranty (including, without limitation, the consideration set forth in the
recitals above as well as any other financial accommodation, whether heretofore
or hereafter made to Parent, any extension, renewal or replacement of any of the
Obligations, any forbearance with respect to any of the Obligations or
otherwise, and any other valuable consideration).
(c) All payments under this Guaranty shall be made in United
States currency and in the same manner as provided for the Obligations.
(d) The term "Collateral" and "After Acquired Collateral" shall
have the meanings ascribed to such terms in the security agreement, dated as of
the date hereof by and among Parent, Guarantor and the Holders (the "Security
Agreement") and the Intellectual Property Security Agreement dated as of the
date hereof (the "Intellectual Property Security Agreement").
<PAGE> 342
2. Holders' Costs and Expenses.
Guarantor shall pay on demand, if not paid by Parent, all costs and
expenses of every kind incurred by Holders (a) in enforcing this Guaranty, (b)
in collecting any of the Obligations from Parent or Guarantor, (c) in realizing
upon or protecting any Collateral or After Acquired Collateral for this Guaranty
or for payment of any of the Obligations; and (d) for any other purpose related
to the Obligations or this Guaranty. "Costs and expenses" as used in the
preceding sentence shall include, without limitation, reasonable attorneys' fees
incurred by Holders in retaining counsel for advice, suit, appeal, any
insolvency or other proceedings under the United States Bankruptcy Code, 11
U.S.C. Sections 101-1330 (the "Bankruptcy Code") or otherwise, or for any
purpose specified in the preceding sentence.
3. Nature of Guaranty: Continuing, Absolute and Unconditional.
(a) This Guaranty is and is intended to be a continuing guaranty
of payment of the Obligations, independent of and in addition to any other
guaranty, endorsement, Collateral or other agreement held by Holders therefor or
with respect thereto, whether furnished by Guarantor or another Person. The
liability of Guarantor to repay the Obligations hereunder shall be unlimited.
Guarantor shall have no right of subrogation, indemnification, contribution,
reimbursement or other payment with respect to any payments made by Guarantor
hereunder, and hereby waives any benefit of, and any right to participate in,
any security or Collateral given to Holders to secure payment of the
Obligations, and Guarantor shall not take any action to enforce any
indebtedness, liabilities or obligations of Parent to Guarantor prior to the
Obligations being paid in full; provided that in the event of the bankruptcy or
insolvency of Parent, Holders shall be entitled, notwithstanding the foregoing,
to file in the name of Guarantor or in its own name a claim for any and all
indebtedness, liabilities and obligations owing to Guarantor by Parent, to vote
such claim and to apply the proceeds of any such claim to the Obligations.
(b) For the further security of the Holders and without in any
way diminishing the liability of Guarantor hereunder, following the occurrence
of a Default or an Event of Default (as defined in the Notes) or any event that
with the lapse of time, or the giving of notice, or both, would constitute an
Event of Default, all debts and liabilities, present or future of Parent to
Guarantor and all monies received from Borrower or for its account by Guarantor
shall be received in trust for Holders and forthwith upon receipt shall be paid
over to Holders until all of the Obligations have been paid in full. This
assignment and postponement is independent of and severable from this Guaranty
and shall remain in full force and effect whether Guarantor is liable for any
amount under this Guaranty.
(c) This Guaranty is absolute and unconditional and shall not be
changed or affected by any representation, oral agreement, act or thing
whatsoever, except as herein provided. This Guaranty is intended by Guarantor to
be the final, complete and exclusive expression of the guaranty agreement
between Guarantor and the Holders. No modification or amendment of any provision
of this Guaranty shall be effective unless in writing and signed by the Required
Holders.
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(d) If at any time all or any part of any payment theretofore
applied by Holders to any of the Obligations is or must be rescinded or returned
by Holders for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of Parent), such Obligations shall, for
the purposes of this Guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by Holders, and this Guaranty shall continue to be effective or
be reinstated, as the case may be, as to such Obligations, all as though such
application by Holders had not been made.
4. Certain Rights and Secured Obligations.
(a) Guarantor authorizes Holders, without notice, demand or any
reservation of rights against Guarantor and without affecting Guarantor's
obligations hereunder, from time to time: (i) to renew, extend, increase,
accelerate or otherwise change the time for payment of, the terms of or the
interest on the Obligations or any part thereof or grant other indulgences to
Parent or others; (ii) to accept from any Person and hold collateral (including
the Collateral (as defined in the Security Agreement and the Intellectual
Property Security Agreement)) for the payment of the Obligations or any part
thereof, and to modify, exchange, enforce or refrain from enforcing, or release,
compromise, settle, waive, subordinate or surrender, with or without
consideration, such Collateral or any part thereof; (iii) to accept and hold any
endorsement or guaranty of payment of the Obligations or any part thereof, and
to discharge, release or substitute any such obligation of any such endorser or
guarantor, or any Person who has given any security interest in any Collateral
as security for the payment of the Obligations or any part thereof, or any other
Person in any way obligated to pay the Obligations or any part thereof, and to
enforce or refrain from enforcing, or compromise or modify, the terms of any
obligation of any such endorser, guarantor, or Person; (iv) to dispose of any
and all Collateral securing the Obligations in any manner as Holders, in their
sole discretion, may deem appropriate, and to direct the order or manner of such
disposition and the enforcement of any and all endorsements and guaranties
relating to the Obligations or any part thereof as Holders in their sole
discretion may determine; (v) except as otherwise provided in the Purchase
Agreement or the Notes, to determine the manner, amount and time of application
of payments and credits, if any, to be made on all or any part of any component
or components of the Obligations (whether principal, interest, premium, fees,
costs, and expenses or otherwise) including, without limitation, the application
of payments received from any source to the payment of Debt other than the
Obligations even though Holders might lawfully have elected to apply such
payments to the Obligations and not to obligations that are not covered by this
Guaranty; and (vi) to take advantage or refrain from taking advantage of any
security or accept or make or refrain from accepting or making any compositions
or arrangements when and in such manner as Holders, in their sole discretion,
may deem appropriate and generally do or refrain from doing any act or thing
which might otherwise, at law or in equity, release the liability of Guarantor
as a guarantor or surety in whole or in part, and in no case shall Holders be
responsible or shall Guarantor be released in whole or in part for any act or
omission in connection with Holders having sold any security for less than its
value.
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(b) If any Default or Event of Default, or event that with the
lapse of time, or the giving of notice, or both, would constitute an Event of
Default, shall be made in the payment of any of the Obligations and any grace
period has expired with respect thereto, Guarantor shall pay the same in full to
the extent hereinafter provided: (i) without deduction by reason of any set-off,
defense (other than payment) or counterclaim of Parent; (ii) without requiring
presentment, protest or notice of nonpayment or notice of default to Guarantor,
to Parent or to any other Person; (iii) without demand upon Parent for payment
or proof of such demand or filing of claims with a court in the event of
receivership, bankruptcy or reorganization of Parent; (iv) without requiring
Holders to resort first or concurrently to Parent (this Guaranty being a
guaranty of payment and not of collection) or to any other guaranty or any
Collateral which Parent may hold; (v) without requiring notice of acceptance
hereof or assent hereto by Holders; and (vi) without requiring notice that any
of the Obligations has been incurred, extended or continued or of the reliance
by Holders upon this Guaranty all of which Guarantor hereby waives.
(c) Guarantor's obligation hereunder shall not be affected by any
of the following, all of which Guarantor hereby waives: (i) any failure to
perfect or continue the perfection of any security interest in or other Lien on
any Collateral or After Acquired Collateral securing payment of any of the
Obligations or Guarantor's obligation hereunder; (ii) the invalidity,
unenforceability, propriety of manner of enforcement of, or loss or change in
priority of any such security interest or other Lien or guaranty of the
Obligations; (iii) any failure to protect, preserve or insure any such
Collateral or After Acquired Collateral; (iv) failure of Guarantor to receive
notice of any intended disposition of such Collateral or After Acquired
Collateral; (v) any defense arising by reason of the cessation for any reason
whatsoever of liability of Parent (including, without limitation, any failure,
negligence or omission by Holders in enforcing their claims against Parent);
(vi) any release, settlement or compromise of any obligation of Parent; (vii)
the invalidity or unenforceability of any of the Obligations; (viii) any change
of ownership of Parent or insolvency, bankruptcy or any other change in the
legal status of Parent; (ix) any change in, or imposition of, any Law which
impairs or might impair, delay or in any way affect the validity or
enforceability or the payment when due of the Obligations; (x) the existence of
any claim, set-off or other right that Guarantor may have at any time against
Holders or Parent in connection herewith or any unrelated transaction; (xi)
Holders' election, in any case instituted under chapter 11 of the Bankruptcy
Code, of the application of section 1111(b)(2) of the Bankruptcy Code; (xii) any
borrowing, use of cash Collateral or grant of security interest by Parent, as
debtor in possession, under sections 363 or 364 of the Bankruptcy Code; (xiii)
the disallowance of all or any portion of any of Holders' claims for repayment
of the Obligations under sections 502 or 506 of the Bankruptcy Code or
otherwise; or (xiv) any other fact or circumstance which might otherwise
constitute grounds at law or in equity for the discharge or release of Guarantor
from its Obligations hereunder, all whether Guarantor shall have had notice or
knowledge of any act or omission referred to in the foregoing clauses (i)
through (xiv) of this paragraph.
(d) The Guarantor shall, at its own expense, do all acts and
things required to cause any New Subsidiaries (as defined in the Purchase
Agreement), to become a party to a
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<PAGE> 345
guaranty agreement in form and substance identical to this Guaranty Agreement
and to comply with the obligations of this Agreement.
5. Representations and Warranties.
Guarantor represents and warrants to Holders that: (a) it is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full power, authority and legal
right to own its Assets and to transact the business in which it is engaged; (b)
it has full power, authority and legal right to execute and deliver and to
perform its Obligations under this Guaranty and has taken all necessary action
to authorize the guaranty hereunder on the terms and conditions of this Guaranty
and to authorize the execution, delivery and performance of this Guaranty; and
(c) this Guaranty has been duly executed and delivered by Guarantor and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against Guarantor in accordance with its terms.
6. Security.
To secure payment of Guarantor's obligations under this Guaranty,
concurrently with the execution of this Guaranty, Guarantor is entering into the
Security Agreement granting to the Holders of the Notes, a first priority
perfected security interest (except as otherwise provided in the Security
Documents), in all tangible and intangible Assets wherever located in which
Guarantor now has or hereafter acquires any right or interest.
7. Termination.
This Guaranty shall remain in full force and effect until all of the
Obligations shall be finally and irrevocably paid in full. Payment of all of the
Obligations from time to time then Outstanding shall not operate as a
discontinuance of this Guaranty. To the extent that Parent makes a payment or
payments pursuant to the Notes, or Holders receive any proceeds of Collateral or
After Acquired Collateral securing the Obligations, which payment or receipt of
proceeds or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be returned or repaid to
Parent or its trustee, receiver, debtor in possession or any other Person
(including, without limitation, any guarantor, under any insolvency or
bankruptcy Law, or equitable cause), then to the extent of such payment, return
or repayment, the Obligation or part thereof that has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the date when such initial payment, reduction or satisfaction
occurred, and this Guaranty shall continue in full force notwithstanding any
contrary action that may have been taken by Holders in reliance upon such
payment, and any such contrary action so taken shall be without prejudice to
Holders' rights under this Guaranty and shall be deemed to have been conditioned
upon such payment having become final and irrevocable.
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<PAGE> 346
8. Taxes.
All payments hereunder shall be made without any counterclaim or
set-off, free and clear of, and without reduction by reason of, any taxes,
levies, imposts, charges and withholdings, restrictions or conditions of any
nature other than any income or franchise taxes imposed on the Holders of the
Notes ("Taxes"), which are now or may hereafter be imposed, levied or assessed
by any country, political subdivision or taxing authority, all of which will be
for the account of and paid by Guarantor. If for any reason, any such reduction
is made or any Taxes are paid by Holders, Guarantor shall pay to Holders, such
additional amounts as may be necessary to ensure that Holders receive the same
net amount which it would have received had no reduction been made or Taxes
paid.
9. Miscellaneous.
(a) The terms "Parent" and "Guarantor" as used in this Guaranty
shall include: (i) any successor Person (as defined in the Purchase Agreement)
to which all or a substantial part of the Assets of Parent or Guarantor, as the
case may be, shall have been transferred and (ii) any other Person into or with
which of Parent or Guarantor, as the case may be, shall have been merged,
consolidated, reorganized, or absorbed. The term "Guarantor" shall include all
Subsidiaries of the Company (as that term is defined in the Purchase Agreement).
(b) Guarantor's obligation hereunder is to pay the Obligations in
full when due according to the Purchase Agreement, the Notes and the Ancillary
Agreements to the extent provided herein and shall not be affected by any stay
or extension of time for payment by Parent or Guarantor resulting from any
proceeding under the Bankruptcy Code or any similar law.
(c) Holders shall not by any act, delay, omission or otherwise be
deemed to have waived any of its remedies hereunder, and no waiver by Holders
shall be valid unless in writing and signed by the Required Holders and then
only to the extent therein set forth. A waiver by the Required Holders of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Holders would otherwise have on any other occasion. No
course of dealing between Guarantor and Holders and no failure to exercise, nor
any delay in exercising on the part of Holders, any right, power or privilege
hereunder or under the Purchase Agreement, the Notes or the Ancillary Agreements
shall impair such right or remedy or operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies of Holders provided by law.
(d) This Guaranty shall inure to the benefit of the Holders.
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<PAGE> 347
(e) Section headings in this Guaranty are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose or be given any substantive effect.
(f) Governing Law; Submission to Jurisdiction. This Agreement
shall be construed in accordance with, and governed by, the internal laws of the
State of New York as permitted by Section 5-401 of the New York General
Obligations Law (or any similar successor provision) without giving effect to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the State of New York. The Guarantor hereby irrevocably
and unconditionally:
(i) submit itself and its properties in any legal action
or proceeding relating to this Agreement and the Ancillary
Agreements to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the general
jurisdiction of the Courts of the State of New York, the courts
of the United States of America for the Southern District of New
York, and appellate courts of any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to it at its address set forth in or
determined pursuant to Section 10 or at such other address of
which the Holders shall have been notified pursuant thereto;
(iv) waives, to the maximum extent not prohibited by Law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section 9(f) any punitive or
exemplary damages and any damages which are not proximately
caused by or the reasonably foreseeable result of the breach
which is the subject of such action or proceeding;
The Guarantor hereby acknowledges that:
(v) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Ancillary
Agreements;
(vi) the Holders do not have any fiduciary relationship
with or duty to the Guarantor arising out of or in connection
with this Agreement, or the Ancillary Agreements; and
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<PAGE> 348
(vii) no joint venture or partnership exists between the
Holders, on the one hand, and the Guarantor, on the other hand,
and the relationship of the Guarantor and the Holders is that of,
inter alia, debtor and creditor.
THE GUARANTOR, EACH SUBSIDIARY OF THE GUARANTOR AND THE HOLDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS AND FOR ANY
COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
THE GUARANTOR WILL CAUSE EACH NEW SUBSIDIARY TO TAKE SUCH ACTION AS IS
REQUIRED TO CONSENT TO, AND BE BOUND BY, THE PROVISIONS OF THIS SECTION 9(F) IN
THEIR ENTIRETY.
(g) Guarantor agrees that Holders shall have the right to proceed
against Guarantor in a court in any location to enable Agent to enforce a
judgment or other court order entered in favor of Holders. Guarantor waives any
objection that it may have to the location of the court in which a Holder has
commenced a proceeding described in this Section 9(g).
(h) Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
(i) This Guaranty shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New York, except that the filing, perfection, effect of perfection and
enforcement of security interests and Liens in other jurisdictions shall be
governed by the laws of the applicable jurisdictions in accordance with the UCC.
(j) Guarantor hereby represents and warrants to Holders that
Guarantor now has and shall continue to have independent means of obtaining
information concerning the affairs, financial condition and business of Parent.
Holders shall not have any duty or responsibility to provide Guarantor with any
credit or other information concerning the affairs, financial condition or
business of Parent which may come into Holders' possession.
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10. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Guaranty shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed by first-class, certified mail, return receipt, postage prepaid, or
(c) sent by next-day or overnight mail or delivery.
If to Guarantor:
Bartels, Inc.
c/o Intracel Corporation
2005 NW Sammamish Road
Suite 107
Issaquah, Washington 98027
Attn: Simon R. McKenzie
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
and
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett
Fax Number: (212) 468-7900
Confirm Number: (212) 468-8240
If to Holders:
300 First Stamford Place
Stamford, Connecticut
Attention: Michael A. Graves
Fax Number: (203) 862-8601
Confirm Number: (203) 863-6224
with a copy, which will
not constitute notice to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York
Attn: Karen Wiedemann
Fax Number: (212) 841-5725
Confirm Number: (212) 841-5781
or, in each case, at such other address as may be specified in writing to the
other parties.
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<PAGE> 350
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (a) if by personal delivery, on the date after such
delivery, (b) if by certified mail, on the third Business Day after the mailing
thereof, and (c) if by next-day or overnight mail or delivery, on the day
delivered.
11. Waivers.
(a) GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND
EXEMPTION LAWS.
(b) IN THE EVENT OF AN EVENT OF DEFAULT, DEFAULT, OR ANY EVENT THAT WITH
THE LAPSE OF TIME OR GIVING OF NOTICE, OR BOTH, WOULD CONSTITUTE AN EVENT OF
DEFAULT UNDER PURCHASE AGREEMENT, THE NOTES, OR ANY OF THE ANCILLARY AGREEMENTS,
GUARANTOR HEREBY WAIVES TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW ALL
RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY HOLDERS OF
THEIR RIGHTS TO REPOSSESS THE COLLATERAL OR AFTER ACQUIRED COLLATERAL WITHOUT
JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR
NOTICE OR HEARING. GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF
ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS GUARANTY.
(c) GUARANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY
JURY, ANY OBJECTION BASED ON FORUM NON CONVENIENS, ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF HOLDERS.
(d) TO THE EXTENT PERMITTED BY LAW, GUARANTOR HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT SUCH SERVICE OF PROCESS
BE MADE BY CERTIFIED MAIL (WITH RETURN RECEIPT) DIRECTED TO IT AT ITS ADDRESS
SET FORTH IN SECTION 10 HEREOF, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED THE THIRD BUSINESS DAY AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE
U.S. MAILS, POSTAGE PREPAID. GUARANTOR HEREBY WAIVES ANY RIGHT TO REQUIRE A
PROCEEDING FIRST OR CONCURRENTLY AGAINST PARENT OR RIGHT TO REQUIRE THE PRIOR OR
CONCURRENT DISPOSITION OF THE ASSETS OF PARENT TO MEET ITS SECURED OBLIGATIONS
AND COVENANTS THAT THIS GUARANTY WILL NOT BE DISCHARGED EXCEPT BY COMPLETE
PERFORMANCE OF THE OBLIGATIONS.
* * * * *
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IN WITNESS WHEREOF, this Guaranty has been executed as of the day first
written above.
BARTELS, INC.
--------------------------
By: Simon R. McKenzie
Its: Chief Executive Officer
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<PAGE> 352
GUARANTY
THIS GUARANTY ("Guaranty") dated as of August 25, 1998, by PERIMMUNE,
INC., a Delaware corporation having its address at 1330 Piccard Drive,
Rockville, Maryland 20850 ("Guarantor") in favor of the holders and their
successors and assigns (collectively, the "Holders"), of the Notes of the
Company (the "Notes") issued pursuant to that certain Securities Purchase
Agreement, dated as of the date hereof, by and among Intracel Corporation, the
parent company of the Guarantor ("Parent") and the parties thereto (the
"Purchase Agreement"). As used herein, all capitalized terms not otherwise
defined herein shall have the meanings set forth in the Purchase Agreement.
WHEREAS, Guarantor and Parent are to be liable for the obligations of
Parent under the Purchase Agreement, the Notes and the Ancillary Agreements (the
"Obligations"); and
WHEREAS, Guarantor, being a wholly-owned subsidiary of Parent, shall
derive substantial benefit and advantage from the financial accommodations to
Parent provided by the Notes, and it shall be to Guarantor's direct interest and
economic benefit to assist Parent in procuring the Note financing;
NOW, THEREFORE, for and in consideration of the premises and to induce
Holders to purchase the Notes, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby
agrees as follows:
1. Guaranty of Payment.
(a) Guarantor hereby unconditionally guarantees the full and
prompt payment, when due, whether at maturity or by reason of acceleration or
otherwise and at all times thereafter on demand, of any and all of the
Obligations.
(b) Guarantor acknowledges that valuable consideration supports
this Guaranty (including, without limitation, the consideration set forth in the
recitals above as well as any other financial accommodation, whether heretofore
or hereafter made to Parent, any extension, renewal or replacement of any of the
Obligations, any forbearance with respect to any of the Obligations or
otherwise, and any other valuable consideration).
(c) All payments under this Guaranty shall be made in United
States currency and in the same manner as provided for the Obligations.
(d) The term "Collateral" and "After Acquired Collateral" shall
have the meanings ascribed to such terms in the security agreement, dated as of
the date hereof by and among Parent, Guarantor and the Holders (the "Security
Agreement") and the Intellectual Property Security Agreement dated as of the
date hereof (the "Intellectual Property Security Agreement").
<PAGE> 353
2. Holders' Costs and Expenses.
Guarantor shall pay on demand, if not paid by Parent, all costs and
expenses of every kind incurred by Holders (a) in enforcing this Guaranty, (b)
in collecting any of the Obligations from Parent or Guarantor, (c) in realizing
upon or protecting any Collateral or After Acquired Collateral for this Guaranty
or for payment of any of the Obligations; and (d) for any other purpose related
to the Obligations or this Guaranty. "Costs and expenses" as used in the
preceding sentence shall include, without limitation, reasonable attorneys' fees
incurred by Holders in retaining counsel for advice, suit, appeal, any
insolvency or other proceedings under the United States Bankruptcy Code, 11
U.S.C. Sections 101-1330 (the "Bankruptcy Code") or otherwise, or for any
purpose specified in the preceding sentence.
3. Nature of Guaranty: Continuing, Absolute and Unconditional.
(a) This Guaranty is and is intended to be a continuing guaranty
of payment of the Obligations, independent of and in addition to any other
guaranty, endorsement, Collateral or other agreement held by Holders therefor or
with respect thereto, whether furnished by Guarantor or another Person. The
liability of Guarantor to repay the Obligations hereunder shall be unlimited.
Guarantor shall have no right of subrogation, indemnification, contribution,
reimbursement or other payment with respect to any payments made by Guarantor
hereunder, and hereby waives any benefit of, and any right to participate in,
any security or Collateral given to Holders to secure payment of the
Obligations, and Guarantor shall not take any action to enforce any
indebtedness, liabilities or obligations of Parent to Guarantor prior to the
Obligations being paid in full; provided that in the event of the bankruptcy or
insolvency of Parent, Holders shall be entitled, notwithstanding the foregoing,
to file in the name of Guarantor or in its own name a claim for any and all
indebtedness, liabilities and obligations owing to Guarantor by Parent, to vote
such claim and to apply the proceeds of any such claim to the Obligations.
(b) For the further security of the Holders and without in any
way diminishing the liability of Guarantor hereunder, following the occurrence
of a Default or an Event of Default (as defined in the Notes) or any event that
with the lapse of time, or the giving of notice, or both, would constitute an
Event of Default, all debts and liabilities, present or future of Parent to
Guarantor and all monies received from Borrower or for its account by Guarantor
shall be received in trust for Holders and forthwith upon receipt shall be paid
over to Holders until all of the Obligations have been paid in full. This
assignment and postponement is independent of and severable from this Guaranty
and shall remain in full force and effect whether Guarantor is liable for any
amount under this Guaranty.
(c) This Guaranty is absolute and unconditional and shall not be
changed or affected by any representation, oral agreement, act or thing
whatsoever, except as herein provided. This Guaranty is intended by Guarantor to
be the final, complete and exclusive expression of the guaranty agreement
between Guarantor and the Holders. No modification or amendment of any provision
of this Guaranty shall be effective unless in writing and signed by the Required
Holders.
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<PAGE> 354
(d) If at any time all or any part of any payment theretofore
applied by Holders to any of the Obligations is or must be rescinded or returned
by Holders for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of Parent), such Obligations shall, for
the purposes of this Guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by Holders, and this Guaranty shall continue to be effective or
be reinstated, as the case may be, as to such Obligations, all as though such
application by Holders had not been made.
4. Certain Rights and Secured Obligations.
(a) Guarantor authorizes Holders, without notice, demand or any
reservation of rights against Guarantor and without affecting Guarantor's
obligations hereunder, from time to time: (i) to renew, extend, increase,
accelerate or otherwise change the time for payment of, the terms of or the
interest on the Obligations or any part thereof or grant other indulgences to
Parent or others; (ii) to accept from any Person and hold collateral (including
the Collateral (as defined in the Security Agreement and the Intellectual
Property Security Agreement)) for the payment of the Obligations or any part
thereof, and to modify, exchange, enforce or refrain from enforcing, or release,
compromise, settle, waive, subordinate or surrender, with or without
consideration, such Collateral or any part thereof; (iii) to accept and hold any
endorsement or guaranty of payment of the Obligations or any part thereof, and
to discharge, release or substitute any such obligation of any such endorser or
guarantor, or any Person who has given any security interest in any Collateral
as security for the payment of the Obligations or any part thereof, or any other
Person in any way obligated to pay the Obligations or any part thereof, and to
enforce or refrain from enforcing, or compromise or modify, the terms of any
obligation of any such endorser, guarantor, or Person; (iv) to dispose of any
and all Collateral securing the Obligations in any manner as Holders, in their
sole discretion, may deem appropriate, and to direct the order or manner of such
disposition and the enforcement of any and all endorsements and guaranties
relating to the Obligations or any part thereof as Holders in their sole
discretion may determine; (v) except as otherwise provided in the Purchase
Agreement or the Notes, to determine the manner, amount and time of application
of payments and credits, if any, to be made on all or any part of any component
or components of the Obligations (whether principal, interest, premium, fees,
costs, and expenses or otherwise) including, without limitation, the application
of payments received from any source to the payment of Debt other than the
Obligations even though Holders might lawfully have elected to apply such
payments to the Obligations and not to obligations that are not covered by this
Guaranty; and (vi) to take advantage or refrain from taking advantage of any
security or accept or make or refrain from accepting or making any compositions
or arrangements when and in such manner as Holders, in their sole discretion,
may deem appropriate and generally do or refrain from doing any act or thing
which might otherwise, at law or in equity, release the liability of Guarantor
as a guarantor or surety in whole or in part, and in no case shall Holders be
responsible or shall Guarantor be released in whole or in part for any act or
omission in connection with Holders having sold any security for less than its
value.
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<PAGE> 355
(b) If any Default or Event of Default, or event that with the
lapse of time, or the giving of notice, or both, would constitute an Event of
Default, shall be made in the payment of any of the Obligations and any grace
period has expired with respect thereto, Guarantor shall pay the same in full to
the extent hereinafter provided: (i) without deduction by reason of any set-off,
defense (other than payment) or counterclaim of Parent; (ii) without requiring
presentment, protest or notice of nonpayment or notice of default to Guarantor,
to Parent or to any other Person; (iii) without demand upon Parent for payment
or proof of such demand or filing of claims with a court in the event of
receivership, bankruptcy or reorganization of Parent; (iv) without requiring
Holders to resort first or concurrently to Parent (this Guaranty being a
guaranty of payment and not of collection) or to any other guaranty or any
Collateral which Parent may hold; (v) without requiring notice of acceptance
hereof or assent hereto by Holders; and (vi) without requiring notice that any
of the Obligations has been incurred, extended or continued or of the reliance
by Holders upon this Guaranty all of which Guarantor hereby waives.
(c) Guarantor's obligation hereunder shall not be affected by any
of the following, all of which Guarantor hereby waives: (i) any failure to
perfect or continue the perfection of any security interest in or other Lien on
any Collateral or After Acquired Collateral securing payment of any of the
Obligations or Guarantor's obligation hereunder; (ii) the invalidity,
unenforceability, propriety of manner of enforcement of, or loss or change in
priority of any such security interest or other Lien or guaranty of the
Obligations; (iii) any failure to protect, preserve or insure any such
Collateral or After Acquired Collateral; (iv) failure of Guarantor to receive
notice of any intended disposition of such Collateral or After Acquired
Collateral; (v) any defense arising by reason of the cessation for any reason
whatsoever of liability of Parent (including, without limitation, any failure,
negligence or omission by Holders in enforcing their claims against Parent);
(vi) any release, settlement or compromise of any obligation of Parent; (vii)
the invalidity or unenforceability of any of the Obligations; (viii) any change
of ownership of Parent or insolvency, bankruptcy or any other change in the
legal status of Parent; (ix) any change in, or imposition of, any Law which
impairs or might impair, delay or in any way affect the validity or
enforceability or the payment when due of the Obligations; (x) the existence of
any claim, set-off or other right that Guarantor may have at any time against
Holders or Parent in connection herewith or any unrelated transaction; (xi)
Holders' election, in any case instituted under chapter 11 of the Bankruptcy
Code, of the application of section 1111(b)(2) of the Bankruptcy Code; (xii) any
borrowing, use of cash Collateral or grant of security interest by Parent, as
debtor in possession, under sections 363 or 364 of the Bankruptcy Code; (xiii)
the disallowance of all or any portion of any of Holders' claims for repayment
of the Obligations under sections 502 or 506 of the Bankruptcy Code or
otherwise; or (xiv) any other fact or circumstance which might otherwise
constitute grounds at law or in equity for the discharge or release of Guarantor
from its Obligations hereunder, all whether Guarantor shall have had notice or
knowledge of any act or omission referred to in the foregoing clauses (i)
through (xiv) of this paragraph.
(d) The Guarantor shall, at its own expense, do all acts and
things required to cause any New Subsidiaries (as defined in the Purchase
Agreement), to become a party to a
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<PAGE> 356
guaranty agreement in form and substance identical to this Guaranty Agreement
and to comply with the obligations of this Agreement.
5. Representations and Warranties.
Guarantor represents and warrants to Holders that: (a) it is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full power, authority and legal
right to own its Assets and to transact the business in which it is engaged; (b)
it has full power, authority and legal right to execute and deliver and to
perform its Obligations under this Guaranty and has taken all necessary action
to authorize the guaranty hereunder on the terms and conditions of this Guaranty
and to authorize the execution, delivery and performance of this Guaranty; and
(c) this Guaranty has been duly executed and delivered by Guarantor and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against Guarantor in accordance with its terms.
6. Security.
To secure payment of Guarantor's obligations under this Guaranty,
concurrently with the execution of this Guaranty, Guarantor is entering into the
Security Agreement granting to the Holders of the Notes, a first priority
perfected security interest (except as otherwise provided in the Security
Documents), in all tangible and intangible Assets wherever located in which
Guarantor now has or hereafter acquires any right or interest.
7. Termination.
This Guaranty shall remain in full force and effect until all of the
Obligations shall be finally and irrevocably paid in full. Payment of all of the
Obligations from time to time then Outstanding shall not operate as a
discontinuance of this Guaranty. To the extent that Parent makes a payment or
payments pursuant to the Notes, or Holders receive any proceeds of Collateral or
After Acquired Collateral securing the Obligations, which payment or receipt of
proceeds or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be returned or repaid to
Parent or its trustee, receiver, debtor in possession or any other Person
(including, without limitation, any guarantor, under any insolvency or
bankruptcy Law, or equitable cause), then to the extent of such payment, return
or repayment, the Obligation or part thereof that has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the date when such initial payment, reduction or satisfaction
occurred, and this Guaranty shall continue in full force notwithstanding any
contrary action that may have been taken by Holders in reliance upon such
payment, and any such contrary action so taken shall be without prejudice to
Holders' rights under this Guaranty and shall be deemed to have been conditioned
upon such payment having become final and irrevocable.
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<PAGE> 357
8. Taxes.
All payments hereunder shall be made without any counterclaim or
set-off, free and clear of, and without reduction by reason of, any taxes,
levies, imposts, charges and withholdings, restrictions or conditions of any
nature other than any income or franchise taxes imposed on the Holders of the
Notes ("Taxes"), which are now or may hereafter be imposed, levied or assessed
by any country, political subdivision or taxing authority, all of which will be
for the account of and paid by Guarantor. If for any reason, any such reduction
is made or any Taxes are paid by Holders, Guarantor shall pay to Holders, such
additional amounts as may be necessary to ensure that Holders receive the same
net amount which it would have received had no reduction been made or Taxes
paid.
9. Miscellaneous.
(a) The terms "Parent" and "Guarantor" as used in this Guaranty
shall include: (i) any successor Person (as defined in the Purchase Agreement)
to which all or a substantial part of the Assets of Parent or Guarantor, as the
case may be, shall have been transferred and (ii) any other Person into or with
which of Parent or Guarantor, as the case may be, shall have been merged,
consolidated, reorganized, or absorbed. The term "Guarantor" shall include all
Subsidiaries of the Company (as that term is defined in the Purchase Agreement).
(b) Guarantor's obligation hereunder is to pay the Obligations in
full when due according to the Purchase Agreement, the Notes and the Ancillary
Agreements to the extent provided herein and shall not be affected by any stay
or extension of time for payment by Parent or Guarantor resulting from any
proceeding under the Bankruptcy Code or any similar law.
(c) Holders shall not by any act, delay, omission or otherwise be
deemed to have waived any of its remedies hereunder, and no waiver by Holders
shall be valid unless in writing and signed by the Required Holders and then
only to the extent therein set forth. A waiver by the Required Holders of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Holders would otherwise have on any other occasion. No
course of dealing between Guarantor and Holders and no failure to exercise, nor
any delay in exercising on the part of Holders, any right, power or privilege
hereunder or under the Purchase Agreement, the Notes or the Ancillary Agreements
shall impair such right or remedy or operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies of Holders provided by law.
(d) This Guaranty shall inure to the benefit of the Holders.
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<PAGE> 358
(e) Section headings in this Guaranty are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose or be given any substantive effect.
(f) Governing Law; Submission to Jurisdiction. This Agreement
shall be construed in accordance with, and governed by, the internal laws of the
State of New York as permitted by Section 5-401 of the New York General
Obligations Law (or any similar successor provision) without giving effect to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the State of New York. The Guarantor hereby irrevocably
and unconditionally:
(i) submit itself and its properties in any legal action
or proceeding relating to this Agreement and the Ancillary
Agreements to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the general
jurisdiction of the Courts of the State of New York, the courts
of the United States of America for the Southern District of New
York, and appellate courts of any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to it at its address set forth in or
determined pursuant to Section 10 or at such other address of
which the Holders shall have been notified pursuant thereto;
(iv) waives, to the maximum extent not prohibited by Law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section 9(f) any punitive or
exemplary damages and any damages which are not proximately
caused by or the reasonably foreseeable result of the breach
which is the subject of such action or proceeding;
The Guarantor hereby acknowledges that:
(v) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Ancillary
Agreements;
(vi) the Holders do not have any fiduciary relationship
with or duty to the Guarantor arising out of or in connection
with this Agreement, or the Ancillary Agreements; and
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<PAGE> 359
(vii) no joint venture or partnership exists between the
Holders, on the one hand, and the Guarantor, on the other hand,
and the relationship of the Guarantor and the Holders is that of,
inter alia, debtor and creditor.
THE GUARANTOR, EACH SUBSIDIARY OF THE GUARANTOR AND THE HOLDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS AND FOR ANY
COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
THE GUARANTOR WILL CAUSE EACH NEW SUBSIDIARY TO TAKE SUCH ACTION AS IS
REQUIRED TO CONSENT TO, AND BE BOUND BY, THE PROVISIONS OF THIS SECTION 9(F) IN
THEIR ENTIRETY.
(g) Guarantor agrees that Holders shall have the right to proceed
against Guarantor in a court in any location to enable Agent to enforce a
judgment or other court order entered in favor of Holders. Guarantor waives any
objection that it may have to the location of the court in which a Holder has
commenced a proceeding described in this Section 9(g).
(h) Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
(i) This Guaranty shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New York, except that the filing, perfection, effect of perfection and
enforcement of security interests and Liens in other jurisdictions shall be
governed by the laws of the applicable jurisdictions in accordance with the UCC.
(j) Guarantor hereby represents and warrants to Holders that
Guarantor now has and shall continue to have independent means of obtaining
information concerning the affairs, financial condition and business of Parent.
Holders shall not have any duty or responsibility to provide Guarantor with any
credit or other information concerning the affairs, financial condition or
business of Parent which may come into Holders' possession.
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<PAGE> 360
10. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Guaranty shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed by first-class, certified mail, return receipt, postage prepaid, or
(c) sent by next-day or overnight mail or delivery.
If to Guarantor:
PerImmune, Inc.
1330 Piccard Drive
Rockville, Maryland 20850
Attn: Michael G. Hanna
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
and
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett
Fax Number: (212) 468-7900
Confirm Number: (212) 468-8240
If to Holders:
300 First Stamford Place
Stamford, Connecticut
Attention: Michael A. Graves
Fax Number: (203) 862-8601
Confirm Number: (203) 863-6224
with a copy, which will
not constitute notice to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York
Attn: Karen Wiedemann
Fax Number: (212) 841-5725
Confirm Number: (212) 841-5781
or, in each case, at such other address as may be specified in writing to the
other parties.
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<PAGE> 361
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (a) if by personal delivery, on the date after such
delivery, (b) if by certified mail, on the third Business Day after the mailing
thereof, and (c) if by next-day or overnight mail or delivery, on the day
delivered.
11. Waivers.
(a) GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND
EXEMPTION LAWS.
(b) IN THE EVENT OF AN EVENT OF DEFAULT, DEFAULT, OR ANY EVENT THAT WITH
THE LAPSE OF TIME OR GIVING OF NOTICE, OR BOTH, WOULD CONSTITUTE AN EVENT OF
DEFAULT UNDER PURCHASE AGREEMENT, THE NOTES, OR ANY OF THE ANCILLARY AGREEMENTS,
GUARANTOR HEREBY WAIVES TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW ALL
RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY HOLDERS OF
THEIR RIGHTS TO REPOSSESS THE COLLATERAL OR AFTER ACQUIRED COLLATERAL WITHOUT
JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR
NOTICE OR HEARING. GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF
ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS GUARANTY.
(c) GUARANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY
JURY, ANY OBJECTION BASED ON FORUM NON CONVENIENS, ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF HOLDERS.
(d) TO THE EXTENT PERMITTED BY LAW, GUARANTOR HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT SUCH SERVICE OF PROCESS
BE MADE BY CERTIFIED MAIL (WITH RETURN RECEIPT) DIRECTED TO IT AT ITS ADDRESS
SET FORTH IN SECTION 10 HEREOF, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED THE THIRD BUSINESS DAY AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE
U.S. MAILS, POSTAGE PREPAID. GUARANTOR HEREBY WAIVES ANY RIGHT TO REQUIRE A
PROCEEDING FIRST OR CONCURRENTLY AGAINST PARENT OR RIGHT TO REQUIRE THE PRIOR OR
CONCURRENT DISPOSITION OF THE ASSETS OF PARENT TO MEET ITS SECURED OBLIGATIONS
AND COVENANTS THAT THIS GUARANTY WILL NOT BE DISCHARGED EXCEPT BY COMPLETE
PERFORMANCE OF THE OBLIGATIONS.
* * * * *
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<PAGE> 362
IN WITNESS WHEREOF, this Guaranty has been executed as of the day first
written above.
PERIMMUNE, INC.
--------------------------
By: Simon R. McKenzie
Its: Chief Executive Officer
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<PAGE> 363
GUARANTY
THIS GUARANTY ("Guaranty") dated as of August 25, 1998, by PERIMMUNE
HOLDINGS, INC., a Delaware corporation having its address at 1330 Piccard Drive,
Rockville, Maryland 20850 ("Guarantor") in favor of the holders and their
successors and assigns (collectively, the "Holders"), of the Notes of the
Company (the "Notes") issued pursuant to that certain Securities Purchase
Agreement, dated as of the date hereof, by and among Intracel Corporation, the
parent company of the Guarantor ("Parent") and the parties thereto (the
"Purchase Agreement"). As used herein, all capitalized terms not otherwise
defined herein shall have the meanings set forth in the Purchase Agreement.
WHEREAS, Guarantor and Parent are to be liable for the obligations of
Parent under the Purchase Agreement, the Notes and the Ancillary Agreements (the
"Obligations"); and
WHEREAS, Guarantor, being a wholly-owned subsidiary of Parent, shall
derive substantial benefit and advantage from the financial accommodations to
Parent provided by the Notes, and it shall be to Guarantor's direct interest and
economic benefit to assist Parent in procuring the Note financing;
NOW, THEREFORE, for and in consideration of the premises and to induce
Holders to purchase the Notes, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby
agrees as follows:
1. Guaranty of Payment.
(a) Guarantor hereby unconditionally guarantees the full and
prompt payment, when due, whether at maturity or by reason of acceleration or
otherwise and at all times thereafter on demand, of any and all of the
Obligations.
(b) Guarantor acknowledges that valuable consideration supports
this Guaranty (including, without limitation, the consideration set forth in the
recitals above as well as any other financial accommodation, whether heretofore
or hereafter made to Parent, any extension, renewal or replacement of any of the
Obligations, any forbearance with respect to any of the Obligations or
otherwise, and any other valuable consideration).
(c) All payments under this Guaranty shall be made in United
States currency and in the same manner as provided for the Obligations.
(d) The term "Collateral" and "After Acquired Collateral" shall
have the meanings ascribed to such terms in the security agreement, dated as of
the date hereof by and among Parent, Guarantor and the Holders (the "Security
Agreement") and the Intellectual Property Security Agreement dated as of the
date hereof (the "Intellectual Property Security Agreement").
<PAGE> 364
2. Holders' Costs and Expenses.
Guarantor shall pay on demand, if not paid by Parent, all costs and
expenses of every kind incurred by Holders (a) in enforcing this Guaranty, (b)
in collecting any of the Obligations from Parent or Guarantor, (c) in realizing
upon or protecting any Collateral or After Acquired Collateral for this Guaranty
or for payment of any of the Obligations; and (d) for any other purpose related
to the Obligations or this Guaranty. "Costs and expenses" as used in the
preceding sentence shall include, without limitation, reasonable attorneys' fees
incurred by Holders in retaining counsel for advice, suit, appeal, any
insolvency or other proceedings under the United States Bankruptcy Code, 11
U.S.C. Sections 101-1330 (the "Bankruptcy Code") or otherwise, or for any
purpose specified in the preceding sentence.
3. Nature of Guaranty: Continuing, Absolute and Unconditional.
(a) This Guaranty is and is intended to be a continuing guaranty
of payment of the Obligations, independent of and in addition to any other
guaranty, endorsement, Collateral or other agreement held by Holders therefor or
with respect thereto, whether furnished by Guarantor or another Person. The
liability of Guarantor to repay the Obligations hereunder shall be unlimited.
Guarantor shall have no right of subrogation, indemnification, contribution,
reimbursement or other payment with respect to any payments made by Guarantor
hereunder, and hereby waives any benefit of, and any right to participate in,
any security or Collateral given to Holders to secure payment of the
Obligations, and Guarantor shall not take any action to enforce any
indebtedness, liabilities or obligations of Parent to Guarantor prior to the
Obligations being paid in full; provided that in the event of the bankruptcy or
insolvency of Parent, Holders shall be entitled, notwithstanding the foregoing,
to file in the name of Guarantor or in its own name a claim for any and all
indebtedness, liabilities and obligations owing to Guarantor by Parent, to vote
such claim and to apply the proceeds of any such claim to the Obligations.
(b) For the further security of the Holders and without in any
way diminishing the liability of Guarantor hereunder, following the occurrence
of a Default or an Event of Default (as defined in the Notes) or any event that
with the lapse of time, or the giving of notice, or both, would constitute an
Event of Default, all debts and liabilities, present or future of Parent to
Guarantor and all monies received from Borrower or for its account by Guarantor
shall be received in trust for Holders and forthwith upon receipt shall be paid
over to Holders until all of the Obligations have been paid in full. This
assignment and postponement is independent of and severable from this Guaranty
and shall remain in full force and effect whether Guarantor is liable for any
amount under this Guaranty.
(c) This Guaranty is absolute and unconditional and shall not be
changed or affected by any representation, oral agreement, act or thing
whatsoever, except as herein provided. This Guaranty is intended by Guarantor to
be the final, complete and exclusive expression of the guaranty agreement
between Guarantor and the Holders. No modification or amendment of any provision
of this Guaranty shall be effective unless in writing and signed by the Required
Holders.
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<PAGE> 365
(d) If at any time all or any part of any payment theretofore
applied by Holders to any of the Obligations is or must be rescinded or returned
by Holders for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of Parent), such Obligations shall, for
the purposes of this Guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by Holders, and this Guaranty shall continue to be effective or
be reinstated, as the case may be, as to such Obligations, all as though such
application by Holders had not been made.
4. Certain Rights and Secured Obligations.
(a) Guarantor authorizes Holders, without notice, demand or any
reservation of rights against Guarantor and without affecting Guarantor's
obligations hereunder, from time to time: (i) to renew, extend, increase,
accelerate or otherwise change the time for payment of, the terms of or the
interest on the Obligations or any part thereof or grant other indulgences to
Parent or others; (ii) to accept from any Person and hold collateral (including
the Collateral (as defined in the Security Agreement and the Intellectual
Property Security Agreement)) for the payment of the Obligations or any part
thereof, and to modify, exchange, enforce or refrain from enforcing, or release,
compromise, settle, waive, subordinate or surrender, with or without
consideration, such Collateral or any part thereof; (iii) to accept and hold any
endorsement or guaranty of payment of the Obligations or any part thereof, and
to discharge, release or substitute any such obligation of any such endorser or
guarantor, or any Person who has given any security interest in any Collateral
as security for the payment of the Obligations or any part thereof, or any other
Person in any way obligated to pay the Obligations or any part thereof, and to
enforce or refrain from enforcing, or compromise or modify, the terms of any
obligation of any such endorser, guarantor, or Person; (iv) to dispose of any
and all Collateral securing the Obligations in any manner as Holders, in their
sole discretion, may deem appropriate, and to direct the order or manner of such
disposition and the enforcement of any and all endorsements and guaranties
relating to the Obligations or any part thereof as Holders in their sole
discretion may determine; (v) except as otherwise provided in the Purchase
Agreement or the Notes, to determine the manner, amount and time of application
of payments and credits, if any, to be made on all or any part of any component
or components of the Obligations (whether principal, interest, premium, fees,
costs, and expenses or otherwise) including, without limitation, the application
of payments received from any source to the payment of Debt other than the
Obligations even though Holders might lawfully have elected to apply such
payments to the Obligations and not to obligations that are not covered by this
Guaranty; and (vi) to take advantage or refrain from taking advantage of any
security or accept or make or refrain from accepting or making any compositions
or arrangements when and in such manner as Holders, in their sole discretion,
may deem appropriate and generally do or refrain from doing any act or thing
which might otherwise, at law or in equity, release the liability of Guarantor
as a guarantor or surety in whole or in part, and in no case shall Holders be
responsible or shall Guarantor be released in whole or in part for any act or
omission in connection with Holders having sold any security for less than its
value.
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<PAGE> 366
(b) If any Default or Event of Default, or event that with the
lapse of time, or the giving of notice, or both, would constitute an Event of
Default, shall be made in the payment of any of the Obligations and any grace
period has expired with respect thereto, Guarantor shall pay the same in full to
the extent hereinafter provided: (i) without deduction by reason of any set-off,
defense (other than payment) or counterclaim of Parent; (ii) without requiring
presentment, protest or notice of nonpayment or notice of default to Guarantor,
to Parent or to any other Person; (iii) without demand upon Parent for payment
or proof of such demand or filing of claims with a court in the event of
receivership, bankruptcy or reorganization of Parent; (iv) without requiring
Holders to resort first or concurrently to Parent (this Guaranty being a
guaranty of payment and not of collection) or to any other guaranty or any
Collateral which Parent may hold; (v) without requiring notice of acceptance
hereof or assent hereto by Holders; and (vi) without requiring notice that any
of the Obligations has been incurred, extended or continued or of the reliance
by Holders upon this Guaranty all of which Guarantor hereby waives.
(c) Guarantor's obligation hereunder shall not be affected by any
of the following, all of which Guarantor hereby waives: (i) any failure to
perfect or continue the perfection of any security interest in or other Lien on
any Collateral or After Acquired Collateral securing payment of any of the
Obligations or Guarantor's obligation hereunder; (ii) the invalidity,
unenforceability, propriety of manner of enforcement of, or loss or change in
priority of any such security interest or other Lien or guaranty of the
Obligations; (iii) any failure to protect, preserve or insure any such
Collateral or After Acquired Collateral; (iv) failure of Guarantor to receive
notice of any intended disposition of such Collateral or After Acquired
Collateral; (v) any defense arising by reason of the cessation for any reason
whatsoever of liability of Parent (including, without limitation, any failure,
negligence or omission by Holders in enforcing their claims against Parent);
(vi) any release, settlement or compromise of any obligation of Parent; (vii)
the invalidity or unenforceability of any of the Obligations; (viii) any change
of ownership of Parent or insolvency, bankruptcy or any other change in the
legal status of Parent; (ix) any change in, or imposition of, any Law which
impairs or might impair, delay or in any way affect the validity or
enforceability or the payment when due of the Obligations; (x) the existence of
any claim, set-off or other right that Guarantor may have at any time against
Holders or Parent in connection herewith or any unrelated transaction; (xi)
Holders' election, in any case instituted under chapter 11 of the Bankruptcy
Code, of the application of section 1111(b)(2) of the Bankruptcy Code; (xii) any
borrowing, use of cash Collateral or grant of security interest by Parent, as
debtor in possession, under sections 363 or 364 of the Bankruptcy Code; (xiii)
the disallowance of all or any portion of any of Holders' claims for repayment
of the Obligations under sections 502 or 506 of the Bankruptcy Code or
otherwise; or (xiv) any other fact or circumstance which might otherwise
constitute grounds at law or in equity for the discharge or release of Guarantor
from its Obligations hereunder, all whether Guarantor shall have had notice or
knowledge of any act or omission referred to in the foregoing clauses (i)
through (xiv) of this paragraph.
(d) The Guarantor shall, at its own expense, do all acts and
things required to cause any New Subsidiaries (as defined in the Purchase
Agreement), to become a party to a
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<PAGE> 367
guaranty agreement in form and substance identical to this Guaranty Agreement
and to comply with the obligations of this Agreement.
5. Representations and Warranties.
Guarantor represents and warrants to Holders that: (a) it is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full power, authority and legal
right to own its Assets and to transact the business in which it is engaged; (b)
it has full power, authority and legal right to execute and deliver and to
perform its Obligations under this Guaranty and has taken all necessary action
to authorize the guaranty hereunder on the terms and conditions of this Guaranty
and to authorize the execution, delivery and performance of this Guaranty; and
(c) this Guaranty has been duly executed and delivered by Guarantor and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against Guarantor in accordance with its terms.
6. Security.
To secure payment of Guarantor's obligations under this Guaranty,
concurrently with the execution of this Guaranty, Guarantor is entering into the
Security Agreement granting to the Holders of the Notes, a first priority
perfected security interest (except as otherwise provided in the Security
Documents), in all tangible and intangible Assets wherever located in which
Guarantor now has or hereafter acquires any right or interest.
7. Termination.
This Guaranty shall remain in full force and effect until all of the
Obligations shall be finally and irrevocably paid in full. Payment of all of the
Obligations from time to time then Outstanding shall not operate as a
discontinuance of this Guaranty. To the extent that Parent makes a payment or
payments pursuant to the Notes, or Holders receive any proceeds of Collateral or
After Acquired Collateral securing the Obligations, which payment or receipt of
proceeds or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be returned or repaid to
Parent or its trustee, receiver, debtor in possession or any other Person
(including, without limitation, any guarantor, under any insolvency or
bankruptcy Law, or equitable cause), then to the extent of such payment, return
or repayment, the Obligation or part thereof that has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the date when such initial payment, reduction or satisfaction
occurred, and this Guaranty shall continue in full force notwithstanding any
contrary action that may have been taken by Holders in reliance upon such
payment, and any such contrary action so taken shall be without prejudice to
Holders' rights under this Guaranty and shall be deemed to have been conditioned
upon such payment having become final and irrevocable.
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<PAGE> 368
8. Taxes.
All payments hereunder shall be made without any counterclaim or
set-off, free and clear of, and without reduction by reason of, any taxes,
levies, imposts, charges and withholdings, restrictions or conditions of any
nature other than any income or franchise taxes imposed on the Holders of the
Notes ("Taxes"), which are now or may hereafter be imposed, levied or assessed
by any country, political subdivision or taxing authority, all of which will be
for the account of and paid by Guarantor. If for any reason, any such reduction
is made or any Taxes are paid by Holders, Guarantor shall pay to Holders, such
additional amounts as may be necessary to ensure that Holders receive the same
net amount which it would have received had no reduction been made or Taxes
paid.
9. Miscellaneous.
(a) The terms "Parent" and "Guarantor" as used in this Guaranty
shall include: (i) any successor Person (as defined in the Purchase Agreement)
to which all or a substantial part of the Assets of Parent or Guarantor, as the
case may be, shall have been transferred and (ii) any other Person into or with
which of Parent or Guarantor, as the case may be, shall have been merged,
consolidated, reorganized, or absorbed. The term "Guarantor" shall include all
Subsidiaries of the Company (as that term is defined in the Purchase Agreement).
(b) Guarantor's obligation hereunder is to pay the Obligations in
full when due according to the Purchase Agreement, the Notes and the Ancillary
Agreements to the extent provided herein and shall not be affected by any stay
or extension of time for payment by Parent or Guarantor resulting from any
proceeding under the Bankruptcy Code or any similar law.
(c) Holders shall not by any act, delay, omission or otherwise be
deemed to have waived any of its remedies hereunder, and no waiver by Holders
shall be valid unless in writing and signed by the Required Holders and then
only to the extent therein set forth. A waiver by the Required Holders of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Holders would otherwise have on any other occasion. No
course of dealing between Guarantor and Holders and no failure to exercise, nor
any delay in exercising on the part of Holders, any right, power or privilege
hereunder or under the Purchase Agreement, the Notes or the Ancillary Agreements
shall impair such right or remedy or operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies of Holders provided by law.
(d) This Guaranty shall inure to the benefit of the Holders.
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<PAGE> 369
(e) Section headings in this Guaranty are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose or be given any substantive effect.
(f) Governing Law; Submission to Jurisdiction. This Agreement
shall be construed in accordance with, and governed by, the internal laws of the
State of New York as permitted by Section 5-401 of the New York General
Obligations Law (or any similar successor provision) without giving effect to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the State of New York. The Guarantor hereby irrevocably
and unconditionally:
(i) submit itself and its properties in any legal action
or proceeding relating to this Agreement and the Ancillary
Agreements to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the general
jurisdiction of the Courts of the State of New York, the courts
of the United States of America for the Southern District of New
York, and appellate courts of any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to it at its address set forth in or
determined pursuant to Section 10 or at such other address of
which the Holders shall have been notified pursuant thereto;
(iv) waives, to the maximum extent not prohibited by Law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section 9(f) any punitive or
exemplary damages and any damages which are not proximately
caused by or the reasonably foreseeable result of the breach
which is the subject of such action or proceeding;
The Guarantor hereby acknowledges that:
(v) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Ancillary
Agreements;
(vi) the Holders do not have any fiduciary relationship
with or duty to the Guarantor arising out of or in connection
with this Agreement, or the Ancillary Agreements; and
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<PAGE> 370
(vii) no joint venture or partnership exists between the
Holders, on the one hand, and the Guarantor, on the other hand,
and the relationship of the Guarantor and the Holders is that of,
inter alia, debtor and creditor.
THE GUARANTOR, EACH SUBSIDIARY OF THE GUARANTOR AND THE HOLDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS AND FOR ANY
COUNTERCLAIM THEREIN.
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
THE GUARANTOR WILL CAUSE EACH NEW SUBSIDIARY TO TAKE SUCH ACTION AS IS
REQUIRED TO CONSENT TO, AND BE BOUND BY, THE PROVISIONS OF THIS SECTION 9(F) IN
THEIR ENTIRETY.
(g) Guarantor agrees that Holders shall have the right to proceed
against Guarantor in a court in any location to enable Agent to enforce a
judgment or other court order entered in favor of Holders. Guarantor waives any
objection that it may have to the location of the court in which a Holder has
commenced a proceeding described in this Section 9(g).
(h) Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
(i) This Guaranty shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New York, except that the filing, perfection, effect of perfection and
enforcement of security interests and Liens in other jurisdictions shall be
governed by the laws of the applicable jurisdictions in accordance with the UCC.
(j) Guarantor hereby represents and warrants to Holders that
Guarantor now has and shall continue to have independent means of obtaining
information concerning the affairs, financial condition and business of Parent.
Holders shall not have any duty or responsibility to provide Guarantor with any
credit or other information concerning the affairs, financial condition or
business of Parent which may come into Holders' possession.
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<PAGE> 371
10. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Guaranty shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed by first-class, certified mail, return receipt, postage prepaid, or
(c) sent by next-day or overnight mail or delivery.
If to Guarantor:
PerImmune Holdings, Inc.
1330 Piccard Drive
Rockville, Maryland 20850
Attn: Simon R. McKenzie
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
and
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett
Fax Number: (212) 468-7900
Confirm Number: (212) 468-8240
If to Holders:
300 First Stamford Place
Stamford, Connecticut
Attention: Michael A. Graves
Fax Number: (203) 862-8601
Confirm Number: (203) 863-6224
with a copy, which will
not constitute notice to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York
Attn: Karen Wiedemann
Fax Number: (212) 841-5725
Confirm Number: (212) 841-5781
or, in each case, at such other address as may be specified in writing to the
other parties.
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<PAGE> 372
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (a) if by personal delivery, on the date after such
delivery, (b) if by certified mail, on the third Business Day after the mailing
thereof, and (c) if by next-day or overnight mail or delivery, on the day
delivered.
11. Waivers.
(a) GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND
EXEMPTION LAWS.
(b) IN THE EVENT OF AN EVENT OF DEFAULT, DEFAULT, OR ANY EVENT THAT WITH
THE LAPSE OF TIME OR GIVING OF NOTICE, OR BOTH, WOULD CONSTITUTE AN EVENT OF
DEFAULT UNDER PURCHASE AGREEMENT, THE NOTES, OR ANY OF THE ANCILLARY AGREEMENTS,
GUARANTOR HEREBY WAIVES TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW ALL
RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY HOLDERS OF
THEIR RIGHTS TO REPOSSESS THE COLLATERAL OR AFTER ACQUIRED COLLATERAL WITHOUT
JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR
NOTICE OR HEARING. GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF
ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS GUARANTY.
(c) GUARANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY
JURY, ANY OBJECTION BASED ON FORUM NON CONVENIENS, ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF HOLDERS.
(d) TO THE EXTENT PERMITTED BY LAW, GUARANTOR HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT SUCH SERVICE OF PROCESS
BE MADE BY CERTIFIED MAIL (WITH RETURN RECEIPT) DIRECTED TO IT AT ITS ADDRESS
SET FORTH IN SECTION 10 HEREOF, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED THE THIRD BUSINESS DAY AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE
U.S. MAILS, POSTAGE PREPAID. GUARANTOR HEREBY WAIVES ANY RIGHT TO REQUIRE A
PROCEEDING FIRST OR CONCURRENTLY AGAINST PARENT OR RIGHT TO REQUIRE THE PRIOR OR
CONCURRENT DISPOSITION OF THE ASSETS OF PARENT TO MEET ITS SECURED OBLIGATIONS
AND COVENANTS THAT THIS GUARANTY WILL NOT BE DISCHARGED EXCEPT BY COMPLETE
PERFORMANCE OF THE OBLIGATIONS.
* * * * *
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IN WITNESS WHEREOF, this Guaranty has been executed as of the day first
written above.
PERIMMUNE HOLDINGS, INC.
--------------------------
By: Simon R. McKenzie
Its: Chief Executive Officer
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<PAGE> 374
EXHIBITS I
AGREEMENT WITH CORESTATES ENTERPRISE FUND
<PAGE> 375
Exhibit 10.35
AGREEMENT
AGREEMENT dated as of August 20, 1998 by and between Intracel
Corporation, a Delaware corporation (the "Company") and First Union National
Bank (the successor-in-interest to CoreStates Enterprise Fund, a division of
CoreStates Bank, N.A.) (the "Noteholder").
WHEREAS, the Noteholder currently owns beneficially and of record (i) a
secured promissory note of the Company, dated June 11, 1996, in the original
principal amount of $4,000,000 (together with any "payment-in-kind" notes issued
pursuant thereto, in the aggregate, the "Note"), (ii) the Company's Series A-III
Common Stock Warrant, dated June 11, 1996 (the "Warrant"), to purchase up to
318,148 shares of the Company's Common Stock, $.0001 par value per share (the
"Common Stock"); and (iii) 318,148 shares of Common Stock.
WHEREAS, the Company is in the process of negotiating the terms of a
proposed financing transaction (the "Northstar Financing") with Northstar
Advantage High Total Return Fund and/or affiliates thereof ("Northstar"); and
WHEREAS, simultaneously with the closing of the Northstar Financing (the
"Northstar Closing"), the Company desires to repay the Note, to direct the
transfer of a portion of the Warrant representing the right to acquire 238,610
shares of Common Stock which may be acquired under the Warrant (the portion of
the Warrant to be transferred is hereinafter referred to as the "Securities") to
Northstar and to terminate all of the liens, pledges and security interests (the
"Security Interests") granted to the Noteholder in the assets and securities of
the Company in furtherance of the Security Documents (as defined under the Note)
in consideration for payment to the Noteholder of the amount specified herein to
be paid therefor (the "Purchase Price"), and the Noteholder desires that the
Note be so repaid, that the Securities be transferred and that the Security
Interests be so terminated, all on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements contained herein, intending to be legally bound hereby, the
parties hereto agree as follows:
1. Cancellation of the Securities; Payment of Purchase Price;
Termination of Security Interests.
1.1 Notice of Northstar Closing and Note Payoff Amount. The Company
hereby notifies the Noteholder that the closing (the "Closing") of the
transactions contemplated hereby shall occur (the "Closing Date") on August 21,
1998. The Noteholder has calculated the amount of principal and accrued interest
that will be due and owing under the Note and all other amounts due and payable
under the Note and the Note and Series A-III Warrant Purchase Agreement dated as
of June 11, 1996 between the Company and the Noteholder, as amended to date (the
"Original Agreement") as of the Closing Date (the "Purchase Price") and a copy
of the pay-off letter setting forth such calculation is attached hereto as
Exhibit A.
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<PAGE> 376
1.2 Cancellation of the Note and Security Interests and Transfer of
Securities. Upon receipt in immediately available funds of the Purchase Price,
subject to Paragraph 1.5 hereof: (a) the Noteholder shall, and hereby agrees to,
cancel the Note (subject to Paragraph 4.4 hereof), terminate the Security
Interests and sell and transfer all of its right, title and interest, legal and
equitable, in and to the Securities to Northstar, and the Company hereby agrees
to the foregoing; and
(b) all of the Noteholder's right, title and interest in, and lien on, the
property and assets of the Company and each of its Subsidiaries in which it was
granted a security interest pursuant to the Note shall be released and
terminated and all of the Company's obligations under the Note, including any
obligation under Section 15 of the Note, shall be deemed satisfied in full.
1.3 Deliveries at the Closing. (a) On the Closing Date, the Noteholder
shall deliver to counsel to Northstar in escrow pending the receipt of the
Purchase Price, (i) the certificate representing the Warrant to the Company,
together with such assignment documents attached thereto as shall be necessary
to transfer the Securities to Northstar; and (ii) the Note, and (B) such
executed releases and UCC-3 and other termination statements (collectively, the
"Termination Statements") as the Company reasonably deems sufficient to
terminate the Security Interests under the Uniform Commercial Code and
otherwise.
(b) On the Closing Date, the Company shall deliver (i) payment of the
Purchase Price by delivery of immediately available funds to Noteholder in the
amount of the Purchase Price and (ii) a new warrant certificate (the
"Replacement Warrant") registered in the name of the Noteholder evidencing the
right, which is not being purchased in connection with this Agreement, to
acquire 79,538 shares of the Company's Common Stock. The Replacement Warrant
shall embody the same terms and conditions of the Warrant other than the number
of shares of Common Stock with which it is exercisable.
1.4 Closing. The Closing with respect to the transactions provided for in
this Agreement shall be held at the offices of Morrison & Foerster LLP, 1290
Avenue of the Americas, New York, New York 10104 on the Closing Date.
1.5 Closing Date. The Noteholder and the Company hereby acknowledge and
agree that the obligation of the Noteholder to accept the Purchase Price and
perform its obligations under this agreement is contingent upon the Closing Date
taking place on or before August 21, 1998. The parties hereby agree that time is
of the essence hereunder. If the Noteholder shall not have received the Purchase
Price on or before August 21, 1998, the Noteholder shall be under no obligation
to perform its obligations hereunder.
2. Representations and Warranties of the Noteholder. The Noteholder hereby
represents and warrants as follows:
2.1 Ownership of Securities. The Noteholder has good and marketable title
to the Securities and the Note. Upon the consummation of the transactions
contemplated hereby, the Noteholder will have transferred to the Company, and
the Company will have acquired good and valid title to the Securities, free and
clear of all liens, claims and encumbrances.
2
<PAGE> 377
2.2. Authorization, etc. The Noteholder has full corporate power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Noteholder. This Agreement constitutes a valid and binding
agreement of the Noteholder, enforceable against the Noteholder in accordance
with its terms.
2.3. No Conflict. The execution and delivery of this Agreement by the
Noteholder and the consummation of the transactions contemplated hereby will not
conflict with, violate or constitute a breach or default under any of its
material agreements.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
3.1. Authorization, etc. The Company has full corporate power and
authority to execute and deliver this Agreement and the Replacement Warrant and
to carry out the transactions contemplated hereby. This Agreement and the
Replacement Warrant have been duly executed and delivered by the Company. This
Agreement and the Replacement Warrant constitute valid and binding agreements of
the Company, enforceable against the Company in accordance with their
respective terms.
3.2. No Conflict. The execution and delivery of this Agreement and the
Replacement Warrant by the Company and the consummation of the transactions
contemplated hereby will not conflict with, violate or constitute a breach or
default under any of its material agreements.
4. Miscellaneous.
4.1. Counterparts. This Agreement may be executed in one or more
counterparts, but all such counterparts shall constitute one and the same
instrument.
4.2 Amendments; Non-assignability of Rights. This Agreement may not be
amended or assigned without the prior written consent of the parties hereto.
4.3. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflicts of laws and rules thereof would result in the application of the laws
of a jurisdiction other than the State of New York.
4.4. Integration and Severability. The covenants and agreements of the
parties hereto (or their predecessor) set forth in the following agreements are
incorporated by reference as if set forth in full herein: (i) Section 5.1
through 5.4, Article VI and Sections 8.1 through 8.3 of the Original Agreement,
(ii) Section 14 of that certain Secured Promissory Note by the Company dated
June 11, 1996 (as amended to date, the "Note"). This Agreement (including such
incorporation by reference of the Original Agreement and the Notes set forth in
this Section 4.4) embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings,
relating to the subject matter hereof. In case any one or
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<PAGE> 378
more of the provisions contained in this Agreement or in any instrument
contemplated hereby, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, under the laws of any jurisdiction, the validity,
legality and enforceability of the remaining provisions contained herein and
therein, and any other application thereof, shall not in any way be affected or
impaired thereby or under the laws of any other jurisdiction.
4.5 Headings. The headings of the articles, sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part of this Agreement.
4
<PAGE> 379
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above stated.
INTRACEL CORPORATION
By:
-------------------------------
FIRST UNION NATIONAL BANK
By: [SIG]
-------------------------------
5
<PAGE> 380
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above stated.
INTRACEL CORPORATION
By: [SIG]
-------------------------------
FIRST UNION NATIONAL BANK
By:
-------------------------------
5
<PAGE> 381
EXHIBIT J
AKZO AGREEMENT
<PAGE> 382
Exhibit 10.36
[AKZO NOBEL LETTERHEAD]
July 31, 1998
Perimmune Holdings, Inc.
c/o Intracel Corporation
1871 N.W. Gillman Blvd.
Issaquah, Washington 98027
Re: Amendment No. 1
Dear Sirs:
The purpose of this letter is to effect an amendment (this "Amendment No. 1")
to each of the agreements set forth below relating to certain debts owed to the
Undersigned, including a note referred to below, in the original principal
amount of $9,234,935 (each such agreement, an "Agreement", and all terms used
herein as defined which are not otherwise defined herein shall be used as
defined in the respective Agreement), as follows:
A. Promissory Note of Perimmune Holdings, Inc. ("Holdings") to the order of
Organon Teknika Corporation ("Teknika") dated August 2, 1996 in the original
principal amount of $9,234,935 (the "Note").
1. The first sentence of the third paragraph of the Note is hereby
amended by deleting "paid in full" and inserting "the Public Date (as
defined below)".
2. The second sentence of the third paragraph of the Note is hereby
amended by adding the following clause at the end thereof: ":provided that
upon the consummation by Intracel Corporation, which is the sole
shareholder of Holdings ("Intracel") of an offering of its equity
securities which is registered pursuant to the Securities Act of 1933 (the
"Public Offering"), the principal amount of this Promissory Note shall be
calculated and all interest which has accrued on this Promissory Note but
has not been paid shall at such time be added to the principal amount of
this Promissory Note (the "IPO Principal Amount"), and from and after the
date of the consummation of the Public Offering (the "Public Date") until
paid in full, interest shall accrue on the IPO Principal Amount at the rate
of ten percent (10%) per annum, and shall be due and payable quarterly on
each November 1, February 1, May 1 and August 1 thereafter."
<PAGE> 383
July 31, 1998
Page 2
3. The first three sentences of the fourth paragraph of the Note are
hereby deleted in their entirety and replaced with the following:
"The maturity date of this Promissory Note is January 15, 2000 ("Maturity
Date") subject to Payee's right to accelerate final maturity as set forth
herein. On the Maturity Date, the principal amount shall be calculated and
all interest which has accrued on this Promissory Note but has not been
paid shall at such time be added to the principal amount of this Promissory
Note (the "Final Principal Amount"). Intracel shall as of December 31,
1999, but prior to the Maturity Date, calculate its cash and cash
equivalent balances (including any voluntary payments of amounts not yet
due or any payments classified as extraordinary transactions under
generally accepted accounting principles) as of such date in the same
manner that will be used for purposes of its audited financial statements
(the "Cash Position"). In the event that the Cash Position as determined
above does not exceed $15,000,000, the Final Principal Amount shall not be
payable at the Maturity Date, but shall be payable over the next twelve
month period, in equal quarterly payments (together with interest on the
unpaid amount of the Final Principal Amount on each such quarterly payment
date at a rate of ten percent (10%) per annum) designed to amortize the
Final Principal Amount in full at the end of such 12-month period. The
quarterly installments shall be due on April 15, 2000; July 15, 2000;
October 15, 2000 and January 15, 2001. In the event the Cash Position is
greater than $15,000,000 (such excess, the "Excess Cash Position"), an
amount of the Final Principal Amount equal to the Excess Cash Position (up
to an amount equal to the Final Principal Amount) shall be payable to the
Payee on the Maturity Date. In the event that the payment required by the
immediately preceding sentence is insufficient to pay the Final Principal
Amount in full on the Maturity date, any remainder (the "Remaining
Principal Amount") shall be payable in three equal quarterly payments
(together with interest on the unpaid amount of the Remaining Principal
Amount on each such quarterly payment date at a rate of ten percent (10%)
per annum), commencing on April 15, 2000 designed to amortize the Remaining
Principal Amount in full at the last payment on October 15, 2000. In
addition to the foregoing, from and after the Public Date, this Note shall
be convertible, at the option of the Payee, into that number of shares of
Intracel Common Stock, par value $.0001 per share, obtained by dividing the
sum of the then outstanding principal amount and all then accrued and
unpaid interest (if any) under this Promissory Note by the price set forth
as the per share price to the public on the final prospectus utilized in
the Public Offering."
<PAGE> 384
July 31, 1998
Page 3
B. Intellectual Property Security Agreement dated as of August 8, 1996 by and
among Holdings, Perlmmune, Inc. ("Perlmmune"), Akza Nobel Pharma International,
B.V. ("Pharma") and Teknika (the "Security Agreement"):
1. Upon representation by Holdings and its sole shareholder, Intracel
Corporation ("Intracel"), that a financing arrangement has been reached
between Intracel and Northstar High Yield Fund and its affiliates
(collectively "Northstar"), pursuant to the Commitment Letter entered into
by Intracel and Northstar as of June 8, 1998, it is agreed that Section 6
of the Security Agreement is hereby amended by adding the following to the
end of Section 6:
Notwithstanding anything in this Agreement to the contrary, the
Collateral Agent hereby consents to the granting of a security
interest in the Collateral in connection with the transactions
contemplated by the Commitment Letter dated as of June 8, 1998
between Intracel Corporation which is the sole shareholder of
Holdings, and Northstar High Yield Fund and its affiliates
(collectively, "Northstar") on the condition that Northstar's
security interest shall be subject to and secondary to the
Interests of the Secured Parties hereunder. The Collateral Agent
hereby agrees to provide Northstar with 45 days prior written
notice of the Collateral Agent's intent to take any action with
respect to the Collateral due to a default specified in this
Section 6; provided, however, that nothing herein shall prevent
the Collateral Agent from taking such action during the 45 day
notice period as it deems necessary to prevent a sale, pledge,
transfer or assignment of the Collateral prohibited under Section
5 hereof or, after the expiration of the 45 days prior, from
exercising any and all of its rights set forth in this Agreement
with respect to the Collateral including, within limitation, its
rights to sell, pledge, transfer, license or assign the
Collateral.
2. Section 9 of the Security Agreement is hereby amended by deleting the
first sentence and replacing it with the following: "This Security
Agreement shall terminate upon full and final payment of the Purchase Price
Note, as amended through the date hereof."
<PAGE> 385
July 31, 1998
Page 4
C. Intellectual Property Agreement dated August 2, 1996 by and among Holdings
and Akzo Nobel Pharma International B.V. ("Pharma") (the "Intellectual Property
Agreement").
1. Subsection 2.2(b) of the Intellectual Property Agreement is hereby
amended by adding the following paragraphs at the end thereof;
All Installment payments provided for under this Subsection 2.2(b)
shall be due no later than 30 days following the date on which the
required product approval is received (or the date on which first
commercial sale occurs in the second country outside the U.S.A., if
no product approval is required). All installment payments shall
accrue interest at the rate of eight percent (8%) per annum from the
date approval is granted by the FDA or the date of approval in the
second country as specified above outside the U.S.A., as applicable.
Holdings hereby agrees to promptly notify Pharma in writing of the
regulatory approval and first commercial sale of any Product in any
of the countries mentioned above, but in any event within seven (7)
days after the occurrence of each of such approval and first
commercial sale.
With respect to any notice, payment or other action becoming due
under this Subsection 2.2(b) upon or in response to regulatory
approval of a Product (including approval by FDA), if regulatory
approval is not required for commercial use of the Product, then
regulatory approval shall be deemed to have been given upon the date
of first commercial use of the Product.
2. Section 2.2 of the Intellectual Property Agreement is hereby amended
by adding a new subsection (g) at the end thereof, as follows: "(g)
Notwithstanding anything in this Section 2.2 to the contrary: (i) all
payments which are due and payable on July 21, 1998, or which would
otherwise become due and payable under the terms hereof from and after
such date (other than the $500,000 milestone payment currently payable
thereunder with respect to the United States introduction of ApoTek Lp(a)
(the "ApoTek Payment"), which shall be paid the day following the closing
of the transactions contemplated by the Commitment Letter dated as of
June 8, 1998 between Intracel Corporation ("Intracel"), which is the sole
shareholder of Holdings, and Northstar High Yield Fund and its
<PAGE> 386
July 31, 1998
Page 5
affiliates signatories thereto) and prior to the consummation of the
initial public offering by Intracel of its common stock, par value $.0001
per share, pursuant to a registration statement on Form S-1 filed pursuant
to the provisions of the Securities Act of 1933, as amended (the "IPO"),
shall be due and payable upon the consummation of the IPO and (ii) all
other payments which become due and payable after the IPO shall be paid
when due under the terms of this Agreement.
3. Schedule 2(a)(i) and Schedule 2(a)(ii) to the Intellectual Property
Agreement are hereby amended to read as "Schedule 2.2(a)(i)" and "Schedule
2.2(a)(ii)", respectively.
Except as amended by this Amendment No. 1, the remainder of each Agreement shall
remain in full force and effect.
This Amendment No. 1 shall cease to be effective and shall be deemed null and
void, ab initio, if the guaranty set forth below has not been agreed to and
executed by Intracel on or before August 21, 1998, or on the "closing date"
referred to in the Commitment Letter between Intracel and Northstar, as
described hereinabove, whichever is earlier.
Please indicate your acceptance of and agreement to this Amendment No. 1 by
executing the copy of this letter enclosed herewith and returning it to the
undersigned.
Very truly yours,
Organon Teknika Corporation
By: /s/ [SIG]
------------------------
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST SET FORTH ABOVE:
Perlmmune Holdings, Inc.
By: /s/ [SIG]
------------------------
<PAGE> 387
July 31, 1998
Page 6
SO ACCEPTED AND AGREED FOR PURPOSES
OF THE AMENDMENT TO THE INTELLECTUAL
PROPERTY SECURITY AGREEMENT AND THE
INTELLECTUAL PROPERTY AGREEMENT:
Akzo Nobel Pharma International, B.V.
By: /s/ [SIG]
- ------------------------------------
Perlmmune, Inc.
By: /s/ SIMON R. MCKENZIE
- ------------------------------------
Guaranty
As an inducement to Organon Teknika Corporation and Akzo Nobel Pharma
International, B.V. to enter into this Amendment of the Agreements, as
described hereinabove, Intracel Corporation hereby agrees to guarantee payment
of the Promissory Note, and payment of milestone payments due under the
Intellectual Property Agreement through the IPO Date, as specified above.
Intracel Corporation
By: /s/ SIMON R. MCKENZIE
-------------------------------
Title: President and CEO
----------------------------
Date:
------------------------------
<PAGE> 388
EXHIBIT K
OPINION
<PAGE> 389
[MORRISON & FOERSTER LLP LETTERHEAD]
August 25, 1998
To the Lenders Party to the Securities
Purchase Agreement referred to below
and to Northstar High Yield Fund,
as Purchaser
Re: Intracel Corporation
Dear Ladies and Gentlemen:
We have acted as special intellectual property counsel for Intracel
Corporation, a Delaware corporation (the "Company"), PerImmune Holdings, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Company
("Holdings"), PerImmune, Inc., a Delaware corporation and a wholly-owned
subsidiary of Holdings ("PerImmune") and Bartels, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Company ("Bartels") (the Company,
Holdings, PerImmune and Bartels are each referred to herein as an "Obligor" and
collectively referred to herein as "Obligors") in connection with the
transactions contemplated by the Securities Purchase Agreement dated August 21,
1998 (the "Securities Purchase Agreement") among the Obligors, and Northstar
High Yield Fund, Northstar High Total Return Fund, Northstar High Total Return
Fund II and Northstar Strategic Income Fund (individually, a "Purchaser" and
collectively, the "Purchaser"). This opinion is furnished to the Purchaser
pursuant to Section 6.19 of the Securities Purchase Agreement.
In connection with this opinion, we have examined:
(i) an executed copy of the IP Security Agreement;
(ii) an executed copy of the Security Agreement dated as of
August 25, 1998, made by the Company and the other Obligors in favor of the
Purchaser (the "Security Agreement");
(iii) an executed copy of the Securities Purchase Agreement;
<PAGE> 390
[MORRISON & FOERSTER LLP LOGO]
To the Lenders Party to the Securities
Purchase Agreement referred to below
and to Northstar High Yield Fund,
as Agent for such Lenders
August 25, 1998
Page Two
(iv) files created by the Akzo Nobel NV Patent Department relating
to prosecution of U.S. Patents Nos. 4,997,762, 5,180,814, 5,317,091, 5,474,755,
5,484,596, and 5,488,126 (the "Material U.S. Patents")
(v) originals and copies, certified or otherwise identified to
our satisfaction, of such other agreements, instruments and other documents as
we have deemed necessary as a basis for the opinions hereinafter set forth.
In rendering this opinion, we have assumed:
(a) the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, and the conformity to originals of all
documents submitted to us as certified or photostatic copies of such latter
documents and the authenticity of the originals of such latter documents;
(b) that each Obligor is duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has full corporate power and authority to execute, deliver and perform its
obligations under the IP Security Agreement and each of the other Loan
Documents to which it is a party;
(c) that each Obligor has taken all necessary corporate action to
authorize the execution, delivery and performance of the IP Security Agreement
and each other Loan Document to which it is a party;
(d) that each of the Loan Documents to which each Obligor is a
party, other than the IP Security Agreement and the Security Agreement (to the
extent that it pertains to the Intellectual Property Collateral, as that term
is defined in the IP Security Agreement), constitutes the legal, valid and
binding obligation of such Obligor enforceable against such Obligor in
accordance with its terms;
(e) that the IP Security Agreement and each other Loan Document
to which each Obligor is a party has been duly executed and delivered on behalf
of such Obligor;
(f) that the execution, delivery and performance by each Obligor
of the IP Security Agreement and each other Loan Document to which it is a
party will not violate the provisions of any existing order, judgment, award or
decree by which such Obligor is bound, or the provisions of any existing
agreement; and
<PAGE> 391
MORRISON & FOERSTER LLP
To the Lenders Party to the Securities
Purchase Agreement referred to below
and to Northstar High Yield Fund,
as Agent for such Lenders
August 25, 1998
Page Three
(g) that no Obligor has changed its name or its identity or
corporate structure, whether by amendment of its charter, by reorganization, or
otherwise, within the past four months.
Based upon and subject to the foregoing and the further
qualifications set forth below, it is our opinion that:
1. Each Obligor is the owner of the entire right, title and
interest in and to the material U.S. patents listed on Exhibit A to this
opinion, attached, under the name of such Obligors. Based on our review of the
patent files listed in (iv), above, and the August 13, 1996, Intellectual
Property Security Agreement recorded in the United States Patent and Trademark
Office November 12, 1996 (the "Akzo Security Interest"), we are not aware of
any lien, security interest or other encumbrance recorded against the Material
U.S. Patents under the name of such Obligor other than the first priority
security interest of Akzo Nobel Pharma International B.V., pursuant to the Akzo
Security Interest. Based on our review of the patent files listed in (iv),
above, and the Akzo Security Interest, we are not aware of any effective
financing statements or other instruments similar in effect covering any of the
Material U.S. Patents under the name of such Obligor on file in any recording
office (including, without limitation, the United States Patent and Trademark
Office (hereinafter referred to as the "PTO")), except the Akzo Security
Interest, and such as may have been filed in favor of the Purchaser relating to
the IP Security Agreement or any other Loan Documents.
2. Each of the Material U.S. Patents is subsisting and has not
been adjudged invalid, unregistrable, or unenforceable, in whole or in part,
and is in full force and effect.
3. Morrison and Foerster LLP will take possession of duplicate
original, executed copies of the IP Security Agreement, will assume
responsibility for recording same in the PTO, will promptly transport same to
Arlington, Virginia and
(a) Will promptly present each such executed copy of the IP
Security Agreement to the appropriate divisions of the PTO
for recording in said office, together with provision for
payment of all requisite fees, and will take all other steps
which may be required to assure prompt recording thereof in
said office with respect to the United States trademark
registrations and applications, and United States
<PAGE> 392
[MORRISON & FOERSTER LLP LETTERHEAD]
To the Lenders Party to the Securities
Purchase Agreement referred to below
and to Northstar High Yield Fund,
as Agent for such Lenders
August 25, 1998
Page Four
patents and patent applications contained on Schedules I and II to the
IP Security Agreement; and
(b) Will promptly deliver to the Purchaser, proof of filing of each such
executed copy of the IP Security Agreement for recordal in the PTO as
received from the PTO, and upon receipt of the Notices of Recordation
and of each such executed copy of the IP Security Agreement from the
PTO with evidence of recordal endorsed thereon, will promptly deliver
the same to the Purchaser for its records.
We are qualified to express the opinions contained herein.
Very truly yours,
/s/ MORRISON & FOERSTER
----------------------------------------
<PAGE> 393
Exhibit A
The Material U.S. Patents
4,997,762
5,180,814
5,317,091
5,474,755
5,484,596
5,488,126
<PAGE> 394
[MORRISON & FOERSTER LLP LETTERHEAD]
Northstar High Yield Fund
Northstar High Total Return Fund
Northstar High Total Return Fund II
Northstar Strategic Income Fund
300 First Stamford Place
Stamford, Connecticut
Re: Securities Purchase Agreement dated August 25, 1998 among
Intracel Corporation, PerImmune Holdings, Inc., PerImmune, Inc.
and Bartels, Inc., Northstar High Yield Fund, Northstar High
Total Return Fund, Northstar High Total Return Fund II and
Northstar Strategic Income Fund
Ladies and Gentlemen:
We have acted as special counsel for Intracel Corporation, a Delaware
corporation (the "Company"), PerImmune Holdings, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Company ("Holdings"), PerImmune, Inc., a
Delaware corporation and a wholly-owned subsidiary of Holdings ("PerImmune")
and Bartels, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Company ("Bartels") (the Company, Holdings, PerImmune and Bartels are each
referred to herein as an "Obligor" and collectively referred to herein as
"Obligors") in connection with the transactions contemplated by the Securities
Purchase Agreement dated August 25, 1998 (the "Securities Purchase Agreement")
among the Obligors, and Northstar High Yield Fund, Northstar High Total Return
Fund, Northstar High Total Return Fund II and Northstar Strategic Income Fund
(individually, a "Purchaser" and collectively, the "Purchasers"). This opinion
is furnished to the Purchasers pursuant to Section 6.19 of the Securities
Purchase Agreement.
We have examined originals or copies of the following documents and
instruments (such documents and instruments listed in clauses (i) through
(xvi), inclusive, being referred to herein as the "Documents"):
(i) the Securities Purchase Agreement;
<PAGE> 395
[MORRISON & FOERSTER LLP]
Northstar Advantage High Total Return Fund
August 25, 1998
Page 2
(ii) the 12% Guaranteed Senior Secured Primary Promissory Notes of the
Company in the aggregate original principal amount of $35,000,000
(the "Guaranteed Senior Secured Primary Notes");
(iii) the 12% Guaranteed Senior Secured Escrow Promissory Notes of the
Company in the aggregate original principal amount of $6,000,000
(the "Guaranteed Senior Secured Escrow Notes" and together with the
Guaranteed Senior Secured Primary Notes, the "Notes");
(iv) the Series A-VI Common Stock Purchase Warrants of the Company dated
August 25, 1998 (the "Warrants");
(v) the Amended and Restated Series A-II Common Stock Purchase Warrants
of the Company;
(vi) the Amended and Restated Series A-III Common Stock Purchase Warrants
of the Company;
(vii) the Amended and Restated Series A-V Common Stock Purchase Warrants
of the Company (the Amended and Restated Series A-II Common Stock
Purchase Warrants, the Amended and Restated Series A-III Common
Stock Purchase Warrants and the Amended and Restated Series A-V
Common Stock Purchase Warrants are collectively referred to herein
as the "Amended and Restated Warrants");
(viii) the Registration Rights Agreement;
(ix) the Interest Escrow Security Agreement;
(x) the Global Security Agreement;
(xi) the Intellectual Property Security Agreement;
(xii) the Pledge Agreement;
(xiii) the Guaranty issued by each of Bartels, Holdings and PerImmune;
(xiv) the CoreStates Agreement;
(xv) the Akzo Agreement;
(xvi) the Funded Commitment Facility Escrow Agreement;
<PAGE> 396
[MORRISON & FOERSTER LLP]
Northstar Advantage High Total Return Fund
August 25, 1998
Page 3
(xvii) UCC-1 financing statements, executed by the Obligors (the
"Washington Financial Statements"), copies of which are attached
hereto as Attachment 1;
(xviii) UCC-1 financing statements, executed by the Obligors (the
"Maryland Financing Statements"), copies of which are attached
hereto as Attachment 2.
(xix) UCC-1 financing statements, executed by the Obligors (the
"Delaware Financing Statements"), copies of which are attached
hereto as Attachment 3;
(xx) UCC-1 financing statements, executed by the Obligors (the
"Pennsylvania Financing Statements" and, together with the
Washington Financing Statements, the Maryland Financing
Statements, and the Delaware Financing Statements, the "Financing
Statements"), copies of which are attached hereto as Attachment 4;
In addition, we have examined such records, documents, certificates of
public officials and of the Company, Holdings, PerImmune and Bartels, the stock
certificates and stock powers of Bartels, Holdings and PerImmune, made such
inquiries of officials of the Company, Holdings, PerImmune and Bartels, and
considered such questions of law as we have deemed necessary for the purpose of
rendering the opinions set forth herein. In particular, our opinion in
paragraph (a) below as to (i) the good standing of the Company, Holdings,
PerImmune and Bartels in the State of Delaware; (ii) the qualifications and
good standing of the Company and Bartels in the State of Washington, and (iii)
the qualification and good standing of PerImmune in the States of Maryland, is
based solely upon certificates of public officials in the State of Delaware,
Washington and Maryland, which certificates are dated August 13, 1998
(Delaware), August 13, 1998 and August 18, 1998 (Washington) and August 20,
1998 (Maryland). We have made no independent investigation as to whether such
certificates are accurate or complete, but we have no knowledge of any such
inaccuracy or incompleteness.
Whenever our opinion herein with respect to the existence or absence of
facts is indicated to be based on our knowledge, it is intended to signify
that, in the course of our representation of the Obligors in connection with
the matters described in the first paragraph hereof, we have not acquired
actual knowledge of the existence or absence of such facts. We have not
undertaken any independent investigation to determine the existence or absence
of such facts, and no inference as to our knowledge of the existence of such
facts should be drawn from the fact of our representation of the Obligors.
We have assumed with your permission:
<PAGE> 397
MORRISON & FOERSTER LLP
Northstar Advantage High Total Return Fund
August 25, 1998
Page 4
(i) the genuineness of all signatures and the authenticity of
all items submitted to us as originals and the conformity
with originals of all items submitted to us as copies;
(ii) that each party to one or more of the Documents (other than
the Obligors) is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation, and has the power and
authority to execute and deliver, and to perform and
observe the provisions of, the Documents to which it is a
party;
(iii) that each party to one or more of the Documents (other than
the Obligors) has duly authorized, executed and delivered
such Documents;
(iv) that each Document constitutes a valid and binding
obligation of each party thereto (other than the Obligors);
(v) with respect to the opinion expressed in paragraph (h)
below, that each Purchaser is acquiring the Notes and
Warrants with no present intention of distributing the
same, other than in compliance with the requirements, if
any, of all applicable state and federal securities laws;
(vi) with respect to the opinions expressed in paragraph (j),
and (k) below, that, at all times material to our opinion,
each Obligor has "rights" in the personal property and
fixtures described as collateral in the Security Agreement
(collectively, the "Collateral") within the meaning of
Section 9-203(1)(c) of the New York Uniform Commercial Code
(the "NYUCC");
(vii) with respect to the opinion expressed in paragraph (q)
below, that, at all times material to our opinion, the
Company and Holdings has "rights" in the "Pledged
Collateral" (as defined in the Pledge Agreement) within the
meaning of Section 9-203(1)(c) of the NYUCC;
(viii) for purposes of the opinion expressed in paragraph (r)
below and for the purposes of the transactions
<PAGE> 398
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Northstar Advantage High Total Return Fund
August 25, 1998
Page 5
contemplated by the Documents, that the Purchasers will be
deemed the secured party and not a "securities
intermediary" (as defined in Section 8-102 of the NYUCC);
(ix) that the Company is not engaged in the business of buying
or carrying margin stock, and no portion of the proceeds of
any Loan made to the Company pursuant to the Securities
Purchase Agreement, or previously made to the Company by
any Purchaser, will be, or has been, used for such
purposes. As used in this clause, the terms "margin stock"
and "carrying" have the meanings given such terms in
Regulations T, U and X of the Board of Governors of the
Federal Reserve System;
(x) that none of the Collateral consists of property of the
type described in Sections 9-40(1)(a) or 9-401(b) of the
NYUCC;
(xi) that none of the Purchasers, in good faith, has relied upon
"margin stock" (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) as collateral in
extending or maintaining any of the Loans; and
(xii) that none of the Obligors have a place of business in the
State of Pennsylvania and that any Collateral located
within the State of Pennsylvania is located in the county
of Chester.
We express no opinion as to:
(i) the enforceability of provisions of the Documents providing for
indemnification or contribution, to the extent such indemnification
or contribution is against public policy;
(ii) the enforceability of provisions of the Documents which purport to
transfer rights under contracts, the transfer of which is restricted
by the terms thereof or by law;
(iii) the effect on the opinions expressed below of (a) the compliance or
noncompliance of any party to any of the Documents (other than the
Obligors) with any laws or regulations applicable to it, or (b) the
legal or regulatory status or
<PAGE> 399
[MORRISON & FOERSTER LLP LETTERHEAD]
Northstar Advantage High Total Return Fund
August 25, 1998
Page 6
the nature of the business of any such party; the effect on the
opinions expressed below of (a) the compliance or noncompliance of
any party to any of the Documents (other than the Obligors) with any
laws or regulations applicable to it, or (b) the legal or regulatory
status or the nature of the business of any such party;
(iv) the enforceability of provisions of the Documents which purport to
establish evidentiary standards or to make determinations conclusive;
(v) the circumstances under which rights of setoff may be exercised;
(vi) the creation of any liens purported to be created by any of the
Documents, except as set forth in paragraphs (j), (k), (p) and (q)
below;
(vii) the perfection of any liens purported to be created in the
Collateral consisting of "fixtures" (as defined in Section
9-313(1)(a) of the NYUCC);
(viii) the perfection of any liens purported to be created in the Collateral
by any of the Documents, except as set forth in paragraphs (l), (m),
(n), (o), and (p) below, or the effect of the absence of such
perfection;
(ix) the perfection of any liens purported to be created in the Delivered
Securities (as defined in paragraph (r) below) by any of the
Documents, except as set forth in paragraph (r) below, or the effect
of the absence of such perfection;
(x) the priority of any liens purported to be created by any of the
Documents, except as set forth in paragraph (r) below, or the effect
of the absence of such priority;
(xi) whether any of the Financing Statements were duly filed;
(xii) the enforceability of a security interest in any property excluded
from the NYUCC by Section 9-104 thereof;
(xiii) the accuracy of the description of the Collateral in the Security
Agreement or any of the Financing Statements or the accuracy of the
description of the Intellectual Property Collateral in the
Intellectual Property Security Agreement; or
(xiv) the enforceability of provisions of the Documents which are construed
as effectively imposing a penalty.
The only opinion with regard to perfection of a security interest in
any patents or patent applications (including the Patents) or any trademark
registrations or applications
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Page 7
(including the Trademarks) is set forth in paragraph (p) below, and we
caution that the current state of the law with respect to issues involving
security interests in intellectual property is unsettled. In rendering
that opinion with respect to Patents, we have assumed that a security
interest in the Patents is perfected under the Codes (as defined below)
and is effected either (i) by filing a financing statement under the
Washington Uniform Commercial Code, the Maryland Uniform Commercial Code
or the Delaware Uniform Commercial Code, as applicable (collectively, the
"Codes"), or (ii) by filing under the United States Patent Act by reason
of the United States Patent Act providing for a national registration or
national certificate of title or specifying a place of filing different
from that specified in the Codes. In rendering that opinion with respect to
Trademarks, we have assumed that a security interest in the Trademarks is
perfected under the Codes and is effected either (i) by filing a financing
statement under the Codes, or (ii) by filing under the Lanham Act by
reason of the Lanham Act providing for a national registration or national
certificate of title or specifying a place of filing different from that
specified in the Codes.
We note that there is also a possibility that perfection cannot be
effected under either the Codes or under the Patent Act or the Lanham Act.
For example, provisions of the Patent Act which permit recordation of an
"assignment, grant or conveyance" could be construed to preempt the
provisions of the Codes with respect to perfection of security interests
in Patents, yet the Patent Act does not provide a method for perfecting a
security interest. Similarly, provisions of the Lanham Act which permit
"assignments" could be construed to preempt the provisions of the Codes
with respect to perfecting a security interest in Trademarks, yet the
Lanham Act does not provide a method for perfecting a security interest.
This analysis may be supported by the principle of In re AEG Acquisition
Corporation, 127 B.R. 34 (C.D.Cal. 1991), aff'd, 161 B.R. 50 (9th Cir.
1993) (the "AEG Case"). In that case, the Court held that a secured
party which failed to perfect a security interest in copyrights by filing
with the United States Copyright Office held an unperfected security
interest, even though (as a work subject to the Berne Convention for the
Protection of Literary and Artistic Works (Paris Text 1971)) a federal
registration of the copyright was not required to enforce the copyright.
We know of no case, however, holding that the Patent Act or the
Lanham preempts the Uniform Commercial Code without providing an
alternative method for perfecting. Indeed, as noted above, the AEG case
states that a security interest in a copyright must be perfected by
recordation of the security interest with the United States Copyright
Office. Further, while not definitive, there is support for the view that
a security interest can be perfected in patents by a federal filing. See
e.g., Waterman v. MacKenzie, 138 U.S. 252 (1891) (a security interest
constitutes an "assignment" for purposes of permitting a secured party
standing to bring suit for infringement); G.
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Gilmore, 1 Security Interests in Personal Property Section 19:9 at
542-46 (1965)). There is also support for the view that a security
interest in patents can be perfected by filing a financing statement
under the Uniform Commercial Code. See, e.g., City Bank & Trust Co.
v. Otto Fabric, Inc., 83 B.R. 780 (D.Kan. 1988); In re Transportation
Design & Tech, Inc. 48 B.R. 635 (S.D.Cal. 1985)). Similarly, there is
support for the view that a security interest in trademarks may be
perfected by a federal filing. See, e.g., In re 199Z, Inc. 137 B.R.
778, 782 n.7 (C.D. Cal. 1992). There is also support for the view
that a security interest in trademarks can be perfected by filing a
financing statement under the Uniform Commercial Code. See, e.g., In
re 199Z, Inc., 137 B.R. 778 (C.D.Cal. 1992); In re Chattanooga
Choo-Choo Co., 98 B.R. 792 (E.D. Tenn. 1989); In re C.C. & Co., Inc.,
86 B.R. 485 (C.D.Va. 1988); In re TR-3 Industries, Inc., 41 B.R. 128
(C.D. Cal. 1984); In re Roman Cleanser Co., 43 B.R. 940 (E.D. Mich.
1984), aff'd on other grounds, 802 F. 2d 207 (6th Cir. 1986).
The opinions expressed below are subject to the following
further qualifications:
(i) the effect of bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws relating to
or affecting the rights of creditors generally, including,
without limitation, laws relating to fraudulent transfers
or conveyances, preferences and equitable subordination;
(ii) limitations imposed by general principles of equity upon
the availability of equitable remedies or the enforcement
of provisions of the Documents and the effect of judicial
decisions which have held that certain provisions are
unenforceable where their enforcement would violate the
implied covenant of good faith and fair dealing, or would
be commercially unreasonable, or where a default under the
Documents is not material;
(iii) certain provisions of the Documents may be unenforceable
in whole or in part under the laws of the State of New
York, but the inclusion of such provisions does not render
invalid any of the Documents and each of the Documents
contains, in our judgment, adequate provisions for the
practical realization of the benefits afforded thereby;
(iv) the effect of judicial decisions which may permit the
introduction of extrinsic evidence to supplement the terms
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August 25, 1998
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of the Documents or to aid in the interpretation of the
Documents;
(v) our opinion as to the enforceability of any provision of
any of the Documents requiring an Obligor to submit to the
jurisdiction of a New York state court is based solely on
the statutes and regulations in effect in the State of New
York on the date hereof (including Section 5-1402 of the
General Obligations Law of the State of New York and
Section 327 of the Civil Practice Law and Rules of the
State of New York); and we express no opinion as to the
enforceability of any provision of any of the Documents
requiring an Obligor to submit to the jurisdiction of any
federal court sitting in New York;
(vi) our opinion in paragraph (f) below is based on a review of
those statutes, rules and regulations which, in our
experience, are normally applicable to transactions of the
type contemplated by the Documents; and
(vii) our opinions with respect to Collateral consisting of
"proceeds," as defined in Section 9-306 of the NYUCC, is
limited to the extent set forth in that section.
Our opinions in paragraphs (j), (k), (l), (m), (n), (o), and (p) below are
also subject to the following further qualifications:
(i) We express no opinion with respect to the security interest of the
Purchasers in proceeds of or "accounts" (as defined in the NYUCC)
relating to any Pledged Collateral.
(ii) We call your attention to the fact that, under United States
trademark law, it is generally held that transfers of trademark
rights are invalid unless accompanied by the related goodwill
and unless the trademarks are used on substantially similar goods as
those previously represented by the trademarks; and we express no
opinion as to the assets or goodwill that would have to accompany the
transfer of any of the trademarks to ensure the continued validity of
the trademarks in the event of foreclosure and ultimate disposition
of the trademarks as a result of default.
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August 25, 1998
Page 10
(iii) We call your attention to the fact that the exercise of remedies with
respect to certain types of intellectual property, including, without
limitation, the Patents and trademarks, may require filings by the
Purchasers with the United States Patent and Trademark Office (the
"Patent and Trademark Office").
(iv) We express no opinion with respect to the validity or
enforceability, maintenance or renewal, of any item of intellectual
property, including, without limitation, the Patents and any
trademarks.
(v) We also advise you that additional action may be necessary to
continue such perfection (i) if any of the Obligors changes its
name, identity or structure, or if there is a change in the
jurisdiction in which its place of business (or, if it has more than
one place of business, its chief executive office) or the Collateral
is located, or (ii) with respect to Collateral constituting
"proceeds" under Section 9-306 of the applicable UCC.
Based upon and subject to the foregoing, we are of the opinion that:
(a) Each Obligor is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the corporate
power and authority to operate its property, lease the property it holds as
lessee and to conduct its business as presently conducted. Each of the
Company and Bartels is duly qualified and in good standing in the State of
Washington, and PerImmune is duly qualified and in good standing in the
State of Maryland.
(b) Each obligor has the corporate power and authority to execute and deliver,
and to perform and observe the provisions of, each of the Documents to
which it is a party. Each of the Documents to which an Obligor is a party
has been duly authorized, executed and delivered by such Obligor.
(c) The Company has the corporate power and authority to issue the Notes, the
Warrants and the Amended and Restated Warrants and to perform and observe
the provisions of the Warrants and the Amended and Restated Warrants. The
Notes, the Warrants and the Amended and Restated Warrants have been duly
authorized and executed, and, upon delivery to the Purchasers against
payment therefor in accordance with the terms of the Securities Purchase
Agreement, will be validly issued.
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[MORRISON & FOERSTER LLP]
Northstar Advantage High Total Return Fund
August 25, 1998
Page 11
(d) Each of the Documents to which an Obligor is a party constitutes valid and
binding obligations of such Obligor enforceable against such Obligor in
accordance with its respective terms.
(e) No registration with, consent or approval of, notice to, or other action
by, any federal or New York governmental entity or any Delaware
governmental entity pursuant to the General Corporation Law of the State
of Delaware, is required on the part of an Obligor for the execution,
delivery or performance by the Obligor of the Documents to which it is a
party, or if required, such registration has been made, such consent or
approval has been obtained, such notice has been given or such other
appropriate action has been taken. No registration with, consent or
approval of, notice to, or other action by, any federal or New York
governmental entity, any Delaware governmental entity pursuant to the
General Corporation Law of the State of Delaware, is required on the part
of the Company for the issuance of the Notes, the Warrants or the Amended
and Restated Warrants by the Company (other than filings pursuant to state
securities laws in connection with the issuance of the Notes, the Warrants
or the Amended and Restated Warrants as to which we express no opinion),
or if required, such registration has been made, such consent or approval
has been obtained, such notice has been given or such other appropriate
action has been taken.
(f) The issuance, execution, delivery and performance by each obligor of each
of the Documents to which it is a party is not in violation of its
certificate of incorporation or its bylaws. Repayment of the Notes by the
Company or issuance of stock upon exercise of the Warrants in accordance
with the respective terms of the Notes and the Warrants will not violate
(i) any federal or New York statute or regulation applicable to the
Company, (ii) the General Corporation Law of the State of Delaware or (iii)
to our knowledge, any order, writ or judgment issued by or filed with a
court of competent jurisdiction applicable to an Obligor.
(g) The shares of Common Stock which have been reserved for issuance upon
exercise of the Warrants and upon exercise of the Amended and Restated
Warrants have been duly authorized for issuance and validly and
effectively reserved by all necessary corporate action of the Company and,
when duly issued and delivered against payment therefor in accordance with
the terms of the Warrants and the Amended and Restated Warrants, will be
validly issued and outstanding, fully paid and nonassessable.
(h) The offering and sale of the Notes and the Warrants and, assuming the
Warrants are fully exercised upon receipt thereof, the Common Stock
issuable upon the exercise of the Warrants is exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to the exemption set forth under Section 4(2) of the Securities
Act.
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[MORRISON & FOERSTER LLP LOGO]
Northstar Advantage High Total Return Fund
August 25, 1998
Page 12
(i) No Obligor is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(j) The Security Agreement creates a valid lien on and security interest in
all right, title and interest of Obligors in the Collateral in favor of
the Purchasers, as security for the "Obligations" (as defined in the
Security Agreement).
(k) The Intellectual Property Security Agreement creates a valid lien on and
security interest in the Intellectual Property Collateral (as defined
therein) in favor of Purchasers, as security for the Obligations (as
defined in the Security Agreement).
(l) Upon the filing of the Washington Financing Statements in the offices
listed on Attachment 1 hereto, the security interest created by the
Obligors pursuant to the Security Agreement will be a perfected security
interest in the Collateral owned by each of the Obligors, to the extent a
security interest in such Collateral may be perfected by the filing of a
financing statement under the Uniform Commercial Code in effect in the
State of Washington.
(m) Upon the filing of the Maryland Financing Statements in the offices listed
in Attachment 2 hereto, the security interest created by the Obligors
pursuant to the Security Agreement will be a perfected security interest
in the Collateral owned by the Obligors, to the extent a security interest
in such Collateral may be perfected by the filing of a financing statement
under the Uniform Commercial Code in effect in the State of Maryland.
(n) Upon the filing of the Delaware Financing Statements in the offices listed
on Attachment 3 hereto, the security interest created by the Obligors
pursuant to the Security Agreement will be a perfected security interest
in the Collateral owned by the Obligors, to the extent a security interest
in such Collateral may be perfected by the filing of a financing statement
under the Uniform Commercial Code in effect in the State of Delaware.
(o) Upon the filing of the Pennsylvania Financing Statements in the offices
listed on Attachment 4 hereto, the security interest created by the
Obligors pursuant to the Security Agreement will be a perfected security
interest in the Collateral owned by the Obligors, to the extent a security
interest in such Collateral may be perfected by the filing of a financing
statement under the Uniform Commercial Code in effect in the State of
Pennsylvania.
(p) Upon (i) the filing of the Washington Financing Statements in the offices
listed on Attachment 1 hereto, the Maryland Financing Statements in the
offices listed on Attachment 2 hereto and the Delaware Financing
Statements in the offices listed on Attachment 3 hereto, and (ii) the
recordation of the Intellectual Property Security Agreement with the
Patent and Trademark Office against the United States patents and patent
applications identified on Schedule I thereto (the "Patents") and the
United States trademark registrations and
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August 25, 1998
Page 13
applications specifically identified on Schedule II thereto (the
"Trademarks") in accordance with the regulations of the Patent and
Trademark Office, the security interest of the Purchasers in the Patents
and Trademarks will constitute a valid and a perfected security interest
under the Codes. In addition, we know of no additional filing or recording
required to perfect a security interest in the Patents and Trademarks
under applicable federal law.
(q) The Pledge Agreement creates a valid lien on and security interest in the
Pledged Collateral in favor of the Purchasers, as security for the
Obligations.
(r) Upon delivery to the Purchasers of the "security certificates" (as defined
in Section 8-102 of the NYUCC) representing the shares of Capital Stock
listed on Schedule A to the Pledge Agreement (the "Delivered Securities"),
together with undated stock powers duly endorsed in blank, and assuming
(i) the continued possession by the Purchasers of such Delivered
Securities in the State of New York, (ii) the Purchasers take possession
of such Delivered Securities in good faith and without notice of any
adverse claim with respect thereto within the meaning of the NYUCC, and
(iii) no security interest of the type described in Section 9-304(4) or
9-304(5) of the NYUCC exists in respect of such Delivered Securities in
favor of any other party, the security interest in such Delivered
Securities created in favor of the Purchasers under the Pledge Agreement
will constitute a perfected security interest, subject to no equal or
prior security interest created under the NYUCC.
(s) To our knowledge, there are no material actions, suits, claims,
proceedings or investigations pending or threatened against or affecting
the Company or any of its Subsidiaries.
(t) To our knowledge, the consummation of the transactions contemplated by the
Securities Purchase Agreement and the Ancillary Agreements will not create
a Lien or other encumbrance against the Collateral in favor of others.
(u) The authorized capital stock consists of 25,000,000 shares of common stock
and 5,000,000 shares of preferred stock.
Except as set forth in the next paragraph, we express no opinion as to
matters governed by any laws other than the substantive laws of the State of
New York (including its applicable choice-of-law rules), the General
Corporation Law of the State of Delaware in respect of the opinions expressed
in paragraphs (a), (b), (c), (e), (f) and (g) above, and the federal laws of
the United States of America, which are in effect on the date hereof. We have
assumed that no provision of the Documents violates the public policy of the
State of Washington or the State of Maryland and that no provision of the law
of the State of New York applicable to the Documents violates the public policy
of the State of Washington or the State of Maryland. We express no
<PAGE> 407
[MORRISON & FOERSTER LLP]
Northstar Advantage High Total Return Fund
August 25, 1998
Page 14
opinion as to the effect on the opinions expressed herein of the laws of any
jurisdiction other than the State of New York.
We have, with your permission, based our opinions in paragraph (l), (m),
(n), (o) and (p) solely upon our review of the text of the Uniform Commercial
Code in effect in the States of Washington, Maryland, Delaware and Pennsylvania
as set forth in the Commerce Clearing House Secured Transaction Guide as
supplemented through July 21, 1998 and we have not undertaken any inquiry or
research in respect of the laws of Washington, Maryland, Delaware or
Pennsylvania in connection with such opinions other than the review of the
aforementioned text.
This opinion is solely for the Purchaser's benefit and may not be relied
upon by, nor may copies be delivered to, any other person without our prior
written consent.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
Morrison & Foerster LLP
<PAGE> 408
EXHIBIT L
FUNDED COMMITMENT FACILITY ESCROW AGREEMENT
<PAGE> 409
Exhibit 10.34
FUNDED COMMITMENT FACILITY ESCROW AGREEMENT
THIS FUNDED COMMITMENT FACILITY ESCROW AGREEMENT (this "Escrow
Agreement"), dated as of August 24, 1998 by and among Northstar High Total
Return Fund ("Northstar Return"), Northstar High Total Return Fund II
("Northstar Return III"), Northstar High Yield Fund ("Northstar Yield"),
Northstar Strategic Income Fund ("Northstar Income," together with Northstar
Return, Northstar Return II and Northstar Yield, the "Purchasers"), Intracel
Corporation, a Delaware corporation (the "Company"), and Bank of America NT &
SA, doing business as Seattle First National Bank, (together with its successors
and assigns, the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company has sold to the Purchasers and the
Purchasers have purchased on the date hereof, certain Guaranteed Senior Secured
Primary Promissory Notes (the "Primary Notes") in the aggregate amount of
$35,000,000 in accordance with the terms of the Securities Purchase Agreement
dated the date hereof among the Purchasers and the Company (the "Securities
Purchase Agreement"); and
WHEREAS, the Company has sold to the Purchasers and the
Purchasers have purchased on the date hereof, certain Guaranteed Senior Secured
Escrow Promissory Notes (the "Escrow Notes") in the aggregate amount of
$6,000,000 in accordance with the terms of the Securities Purchase Agreement
(the Primary Notes and the Escrow Notes are collectively referred to herein as
the "Notes"), and
WHEREAS, the obligations of the Company under the Securities
Purchase Agreement, the Notes and the Ancillary Agreements (the "Obligations"),
are secured on the terms and conditions contained in the Securities Documents
(as that term is defined in the Securities Purchase Agreement; and
WHEREAS, the Obligations of the Company are guaranteed by the
Company's Subsidiaries in accordance with the Guaranty Agreement dated the date
hereof among the Purchasers and the Company (the "Guaranty Agreement"); and
WHEREAS, in connection with the purchase and sale of the Notes,
the Company is obligated to deposit into escrow with the Escrow Agent Six
Million Dollars ($6,000,000), which sum represents all of the cash proceeds from
the sale of the Escrow Notes, to be held and disbursed by the Escrow Agent on
the terms and conditions hereinafter set forth;
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NOW THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants, agreements and other consideration
contained and exchanged in this Escrow Agreement, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, the parties
hereto agree as follows:
1. Definitions. Capitalized terms defined in the Securities
Purchase Agreement, the Notes and the Ancillary
Agreements, when used herein without definition, shall
have the respective meanings set forth therein.
2. Appointment of Escrow Agent. The Purchasers and the
Company hereby designate and appoint the Escrow Agent to
serve in accordance with the terms, conditions and
provisions of this Escrow Agreement, and the Escrow
Agent hereby agrees to act as such upon the terms,
conditions and provisions provided in this Escrow
Agreement.
3. Escrow. On the date hereof, the Company has instructed
the Purchasers to deliver and the Purchasers have
delivered to the Escrow Agent the sum of Six Million
Dollars ($6,000,000) (the "Escrow Fund"), the receipt of
which the Escrow Agent hereby acknowledges. The Escrow
Fund shall be deposited in the account described on
Annex I hereto for receipt of such amount (the "Escrow
Account") and shall be held in such Escrow Account and
distributed in accordance with the terms and provisions
of this Escrow Agreement.
4. Investment of Escrow Fund. The Escrow Fund shall be held
and invested or reinvested by the Escrow Agent solely in
cash or three-month or six-month U.S. treasury bills,
and otherwise upon and in accordance with the written
instructions of the Company and the Purchasers.
Investments of monies in the Escrow Fund shall be made
in the foregoing securities in a manner that will ensure
that such investments mature or may be redeemed or may
be subject to liquidation by sale or otherwise at the
option of the Escrow Agent at such time as may be
necessary to make timely disbursements from said Escrow
Fund. The Escrow Agent may from time to time sell such
investments and reinvest the proceeds therefrom in other
investments of the type described in this Section 4. The
Escrow Fund shall be credited with all proceeds of sale
and income from such investment.
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5. Term. Subject to claims against the Escrow Fund as
hereinafter provided, the term of this Escrow Agreement
shall terminate upon the earlier of (a) the date on
which the Escrow Fund shall have been reduced to zero;
(b) the date on which the Company shall have repaid all
of the Escrow Notes from any source of funds whatsoever;
and (c) August 25, 2003 (the "Escrow Expiration Date").
6. Disbursement of Monies in the Escrow Fund Prior to
Escrow Termination Date. On each occasion that the
Company shall execute and deliver a written notice
substantially in the form of Exhibit A hereto (each, a
"Disbursement Notice") to the Escrow Agent providing the
Escrow Agent with disbursement instructions for all or
any part of the Escrow Fund, the Escrow Agent shall
disburse the portion of the Escrow Fund referred to in
such notice in accordance with the instructions
contained in such notice.
7. Disbursement of Monies in the Escrow Fund on Default or
on the Escrow Termination Date. On the earlier of (A)
any date on which there shall occur a Default, an Event
of Default, or an event that with the lapse of time or
the giving of notice or both, shall constitute an Event
of Default with respect to the Securities Purchase
Agreement, the Notes or any of the Ancillary Agreements
(the "Default Date") and unless the Purchasers shall
have waived the provisions of this Section 7 with
respect to a particular Default Date within five (5)
Business Days after such Default Date, or (B) the Escrow
Expiration Date, the Escrow Agent shall apply any
remaining amounts in the Escrow Fund in the following
order of priority: (A) to the Purchasers, an amount
equal to all accrued unpaid past due interest on the
Notes; (B) to the Purchasers, an amount equal to all
accrued unpaid interest due on the Notes; (C) to the
Purchasers, all accrued unpaid and past due amounts
under the Securities Purchase Agreement, the Notes and
any of the Ancillary Agreements; (D) to the Purchasers,
all other accrued unpaid amounts under the Securities
Purchase Agreement, the Notes and any of the Ancillary
Agreements;(E) the aggregate principal amount
outstanding under the Notes; and (F) to the Company;
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provided however, that the Escrow Agent shall not be required to make any
disbursements with respect to a Default Date until it shall have received a
notice from the Purchasers under this Section 7 in substantially the form set
forth in Exhibit B attached hereto, and further provided that it shall make such
disbursement as set forth above promptly after receipt of such notice from the
Purchasers.
8. Escrow Agent. The Escrow Agent shall be an Eligible
Institution as that term is defined in the Securities
Purchase Agreement. The duties of the Escrow Agent,
hereunder shall be entirely administrative and not
discretionary. The Escrow Agent shall be obligated to
act only in accordance with written instructions
received by it as provided in this Escrow Agreement and
is authorized hereby to comply with such written
instructions, any orders, judgments or decrees of any
court with proper jurisdiction and shall not be liable
as a result of its compliance with the same.
a. As to any legal questions arising in connection
with the administration of this Escrow
Agreement, the Escrow Agent may rely absolutely
upon the opinions given to it by its counsel and
shall be free of liability (except for liability
arising from its own gross negligence or wilful
misconduct), for acting in reliance on such
opinions.
b. The Escrow Agent may rely absolutely upon the
genuineness and authorization of the signature
and purported signature of any party upon any
instruction, notice, release, receipt or other
document delivered to it pursuant to this Escrow
Agreement.
c. The Escrow Agent may, as a condition to the
disbursement of monies or disposition of
securities as provided herein, require from the
payee or recipient a receipt therefor and, upon
final payment or disposition, a release of the
Escrow Agent from any liability arising out of
its execution or performance of this Escrow
Agreement, such release to be in a form
satisfactory to the Escrow Agent.
d. The parties agree that any compensation due to
the Escrow Agent for its services
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hereunder shall be paid entirely by the Company.
9. Indemnity.
a. The Purchasers and the Company agree to and
hereby waive any suit, claim, demand or cause of
action of any kind which they or it may have or
may assert against the Escrow Agent arising out
of or relating to the execution or performance
by the Escrow Agent of this Escrow Agreement,
unless such suit, claim, demand or cause of
action is based upon the wilful misconduct,
gross negligence or bad faith of the Escrow
Agent. The Purchasers and the Company further
agree, jointly and severally, to indemnify the
Escrow Agent against and from any and all
claims, demands, costs, liabilities and
expenses, including reasonable counsel fees,
which may be asserted against it or to which it
may be exposed or which it may incur by reason
of its execution or performance of this Escrow
Agreement, except such claims, demands, costs,
liabilities and expenses that are based upon or
the result of the wilful misconduct, gross
negligence or bad faith of the Escrow Agent.
Such agreement to indemnify shall survive the
termination of this Escrow Agreement until
extinguished by any applicable statute of
limitations.
b. In case any litigation is brought against the
Escrow Agent in respect of which indemnity may
be sought hereunder, the Escrow Agent shall give
prompt notice of that litigation to the
Purchasers and the Company and the Purchasers
and the Company upon receipt of that notice
shall have the obligation and the right to
assume the defense of such litigation, provided
that failure of the Escrow Agent to give that
notice shall not relieve the Purchasers or the
Company from any of their obligations under this
Section 9 unless that failure prejudices the
defense of such litigation by said parties. At
its own expense, the Escrow Agent may employ
separate counsel and participate in the defense.
The Purchasers and the Company shall not be
liable hereunder pursuant to any settlement
without their respective consents.
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10. Acknowledgment by the Escrow Agent. By execution and
delivery of this Escrow Agreement, the Escrow Agent
acknowledges that the terms and provisions of this
Escrow Agreement are acceptable to it and it agrees to
carry out the provisions of this Escrow Agreement on its
part.
11. Resignation or Removal of Escrow Agent; Successors.
a. The Escrow Agent may resign as such following
the giving of ten (10) days' prior written
notice to the other parties hereto. Similarly,
the Escrow Agent may be removed and replaced
following the giving of ten (10) days' prior
written notice to the Escrow Agent by the
Purchasers and the Company. In either event,
subject to subsection 11(b), the duties of the
Escrow Agent shall terminate ten (10) days after
the date of such notice (or as of such earlier
date as may be mutually agreeable among the
parties hereto); and the Escrow Agent shall then
deliver the balance of the Escrow Fund then in
its possession to a successor Escrow Agent as
shall be appointed by the other parties hereto
as evidenced by a written notice filed with the
Escrow Agent. Any successor Escrow Agent
appointed hereunder shall be an Eligible
Institution (as that term is defined in the
Securities Purchase Agreement), that is
appointed by the Purchasers and the Company.
b. If for any reason any bank or trust company is
unwilling to serve as successor Escrow Agent and
if the other parties hereto are unable to agree
upon a successor or shall have failed to appoint
a successor prior to the expiration of ten (10)
days following the date of the notice of
resignation or removal, the then acting Escrow
Agent may petition any court of competent
jurisdiction for the appointment of a successor
Escrow Agent or other appropriate relief and
until any such appointment is made or
appropriate relief granted, the then acting
Escrow Agent shall continue as the Escrow Agent;
and any such resulting appointment shall be
binding upon all of the Parties hereto.
C. Every successor appointed hereunder shall
execute, acknowledge and deliver to its
predecessor and also to the Purchasers and the
Company, an instrument in writing accepting such
appointment hereunder, and thereupon such
successor, without
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<PAGE> 415
any further act, shall become fully vested with
all the duties, responsibilities and obligations
of its predecessor; but such predecessor shall,
nevertheless, on the written request of its
successor or any of the parties hereto, execute
and deliver an instrument or instruments
transferring to such successor all the rights of
such predecessor hereunder, and shall duly
assign, transfer and deliver all property,
securities and monies held by it pursuant to
this Escrow Agreement to its successor. Should
any instrument be required by any successor for
more fully vesting in such successor the duties,
responsibilities and obligations hereby vested
or intended to be vested in the predecessor, any
and all such instruments in writing shall, on
the request of any of the parties hereto, be
executed, acknowledged and delivered by the
predecessor or any other party so requested.
d. In the event of an appointment of a successor,
the predecessor shall cease to be custodian of
any funds, securities or other assets and
records it may hold pursuant to this Escrow
Agreement, and the successor shall become such
custodian.
e. Upon acknowledgment by any successor Escrow
Agent of the receipt of the then remaining
balance of the Escrow Fund, which acknowledgment
shall be given promptly after such receipt, the
then acting Escrow Agent shall be fully released
and relieved of all duties, responsibilities and
obligations under this Escrow Agreement.
12. Entire Agreement, Amendments and Waivers. This Escrow
Agreement contains the entire agreement (including
representations, warranties and covenants) among the
parties hereto pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements,
negotiations, discussions, arrangements or
understandings with respect thereto. No amendment,
supplement, modification or waiver of this Escrow
Agreement shall be binding unless executed in writing by
the Escrow Agent, the Required Holders (as that term is
defined in the Securities Purchase Agreement) and the
Company, provided however that, except with the prior
written consent of one hundred percent (100%) of the
Purchasers, no amendment to this Agreement can affect
the time, amount or allocation of any payments, change
the percentage
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specified in the definition of Required Holders as
contained in the Securities Purchase Agreement or
consent to the assignment or transfer by the Company or
any of its Subsidiaries of their respective obligations
under this Agreement. Any amendment or waiver of any
provision herein shall be effective only for the
purposes and period of time expressly set forth therein
and shall not entitle the Company to any other waiver or
amendment in similar or other circumstances. No course
of dealing between the Company and any Purchaser, nor
any failure to exercise or any delay in exercising on
the part of the Purchasers, any right, remedy, power or
privilege herein shall operate as a waiver thereof; nor
shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other
right, remedy, power or privilege. The rights, remedies,
powers and privileges hereunder are cumulative and not
exclusive of any rights remedies, powers and privileges
provided by law. In addition to the remedies provided in
this Escrow Agreement, any party may pursue any and all
remedies now or hereafter existing at Law or in equity.
13. Execution in Counterparts. This Escrow Agreement may be
executed in one or more counterparts each of which shall
be regarded as an original and all of which shall
constitute but one and the same instrument.
14. Severability. If any provision of this Escrow Agreement,
or any covenant, obligation or agreement contained
herein is determined by a court of competent
jurisdiction to be invalid or unenforceable, such
determination shall not affect any other provision,
covenant, obligation or agreement contained herein, each
of which shall be construed and enforced as if such
invalid or unenforceable portion were not contained
herein. Such invalidity or unenforceability shall not
affect any valid and enforceable application thereof,
and each such provision, covenant, obligation or
agreement shall be deemed to be effective, operative,
made, entered into or taken in the manner and to the
full extent permitted by law.
15. Captions. The captions and headings in this Escrow
Agreement shall be solely for convenience of reference
and shall in no way define, limit or
8
<PAGE> 417
describe the scope or intent of any provisions or
sections of this Escrow Agreement.
16. Notices. All notices, requests, consents or other
communications which are required or permitted hereunder
shall be in writing and shall be deemed to be
sufficiently given when delivered personally, mailed by
registered or certified mail, postage prepaid, or
nationwide overnight delivery service (with charges
prepaid) and addressed as follows:
if to the Purchasers:
Northstar High Total Return
Northstar High Total Return II
Northstar High Yield Fund
Northstar Strategic Income Fund
300 First Stamford Place
Stamford, Connecticut 06902
Attention: Mr. Michael A. Graves
With a copy to:
Reboul, MacMurray, Hewitt, Maynard
& Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Karen C. Wiedemann
a. if to the Company:
Intracel Corporation
2005 N.W. Sammamish Road
Issaqua, Washington 98027
Attention: Simon R. McKenzie
Chief Executive Officer
b. if to the Escrow Agent:
c. Bank of America NT & SA
doing business as
Seattle First National Bank
10500 Northeast 8th Street
Floor 5
Bellevue, Washington 98004
or, in any such case, at such other addresses or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered three (3) Business Days after mailing by
mail, or one day after
9
<PAGE> 418
delivery to an overnight express service for next day delivery, or upon
delivery, if personally delivered, as the case may be.
17. Expenses. The Company shall pay its own expenses and the
expenses of the Purchasers in connection with the
transactions contemplated hereby, including, but not
limited to, the execution and enforcement of this
Agreement and any indemnity payments by Purchasers to
the Escrow Agent in accordance with Section 9 hereto.
18. Successors. This Escrow Agreement shall be binding
upon, and inure to the benefit of the successors and
assignees of the parties hereto (including without
limitation, in the case of Purchaser and Seller, by
merger), and no other person shall have any right,
benefit or obligation hereunder.
19. Applicable Law. This Escrow Agreement shall be governed
by and construed and enforced in accordance with the
internal laws (and not the laws of conflicts) of the
State of New York as permitted by Section 5-401 of the
New York General Obligations Law (or any similar
successor provision) without giving effect to any
choice of law rule that would cause the application of
the Laws of any jurisdiction other than New York. Each
of the parties hereto hereby (i) submits for itself and
its respective Assets to the nonexclusive general
jurisdiction of the Courts of the State of New York,
County of New York and the Courts of the United States
of America for the Southern District of New York, (ii)
irrevocably agrees that, at the Purchasers' election,
all actions or proceedings arising out of or relating to
this Escrow Agreement may be litigated in such courts,
(iii) waives any objection that it may have to the venue
of any such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the
same, and (iv) agrees that service of process in any
such action or proceeding may be effected by mailing a
copy thereof by registered or certified mail, postage
prepaid, to it at its address set forth in or determined
pursuant Section 16 of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Escrow Agreement to be executed on its behalf as of the day and year first above
written.
10
<PAGE> 419
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
11
<PAGE> 420
INTRACEL CORPORATION
By /s/ SIMON R. MCKENZIE
-------------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
Bank of America NT & SA
doing business as
Seattle First National Bank
By:
-------------------------------
Name:
Title:
12
<PAGE> 421
INTRACEL CORPORATION
By /s/ SIMON R. MCKENZIE
-------------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
Bank of America NT & SA
doing business as
Seattle First National Bank
By: /s/ C. TAYLOR
-------------------------------
Name: Christopher J. Taylor
Title: Assistant Vice-President and Relationship Officer
Seafirst Investment Management
and Trust Services
12
<PAGE> 422
Exhibit A
[Form of]
DISBURSEMENT NOTICE
To: Bank of America NT & SA, doing business as Seattle First National Bank, as
Escrow Agent (the "Escrow Agent") under the Escrow Agreement dated as of
August 24, 1998 by and among Northstar High Total Return Fund, Northstar
High Total Return Fund II, Northstar Yield Fund, Northstar Strategic
Income Fund, Intracel Corporation and the Escrow Agent
Ladies and Gentlemen:
You are hereby instructed, pursuant to Section 6 of the referenced Escrow
Agreement, to disburse funds from the Escrow Fund (as defined therein) as
follows:
[INSERT PAYMENT INSTRUCTIONS AND AMOUNTS]
Very truly yours,
INTRACEL CORPORATION
By: _______________________________
Name:
Title:
Bank of America NT & SA
doing business as
Seattle First National Bank
By: _______________________________
Name:
Title:
14
<PAGE> 423
Exhibit B
[Form of]
DISBURSEMENT NOTICE
To: Bank of America NT & SA, doing business as Seattle First National Bank, as
Escrow Agent (the "Escrow Agent") under the Escrow Agreement dated as of
August 24, 1998 by and among Northstar High Total Return Fund, Northstar
High Total Return Fund II, Northstar Yield Fund, Northstar Strategic Income
Fund, Intracel Corporation and the Escrow Agent
Ladies and Gentlemen:
You are hereby instructed, pursuant to Section 7 of the referenced
Escrow Agreement, to disburse funds from the Escrow Fund (as defined therein)
as follows:
(A) to _________________, the amount of $__________, which amount is
equal to all accrued unpaid past due interest on the Notes;
(B) to _________________, the amount of $__________, which amount is
equal to all accrued unpaid interest due on the Notes;
(C) to _________________, the amount of $__________, which amount is
equal to all accrued unpaid and past due amounts under the
Securities Purchase Agreement, the Notes and any of the Ancillary
Agreements;
(D) to _________________, the amount of $__________, which amount is
equal to all other accrued unpaid amounts under the Securities
Purchase Agreement, the Notes and any of the Ancillary Agreements;
(E) to _________________, the amount of $__________, which amount is
equal to the aggregate principal amount Outstanding under the Notes;
and
15
<PAGE> 424
(F) to the Company, the amount of $____________
Very truly yours,
NORTHSTAR [ ]
By:________________________________
Name:
Title:
Bank of America NT & SA
doing business as
Seattle First National Bank
By:_________________________________
Name:
Title:
16
<PAGE> 1
EXHIBIT 10.30
INTEREST ESCROW SECURITY AGREEMENT
This INTEREST ESCROW SECURITY AGREEMENT (the "Agreement"),
dated as of August 25, 1998, among Northwestern Trust and Investors Advisory
Company, as Depositary (in such capacity, the "Depositary"), the holders set
forth on Schedule A attached hereto (the "Holders") of the certain promissory
notes (the "Notes") dated the date hereof, of Intracel Corporation, a Delaware
corporation (the "Company"), and the Company. All references herein to the "UCC"
shall mean the Uniform Commercial Code as in effect on the date hereof in the
State of New York, and all references herein to the "Revised UCC" shall mean the
1994 Official Text of Article 8 of the Uniform Commercial Code with conforming
amendments to Article 9.
RECITALS
A. Pursuant to that certain Securities Purchase Agreement
dated as of August 25, 1998 (the "Securities Purchase Agreement"), between the
Company, its Subsidiaries and the Holders, the Company is issuing the Notes (as
that term is defined in the Securities Purchase Agreement).
B. Pursuant to the Securities Purchase Agreement, the Company
shall initially deposit in the Securities Account (as defined in Section 2(a)
hereof) Four Million Nine Hundred and Twenty Thousand Dollars ($4,920,000) in
cash (which amount will be sufficient to pay, together with the proceeds from
the investment thereof, a minimum of twelve months interest on the Notes) to be
held in the Securities Account subject to the terms and conditions of this
Agreement.
C. Pursuant to the Securities Purchase Agreement, the Company
shall be required to deposit certain additional amounts in the Securities
Account in cash.
D. As security for its Obligations (as such term is defined in
the Security Agreement, dated as of the date hereof among the Company and the
Holders (the "Securities Agreement")) under the Securities Purchase Agreement,
the Notes and the Ancillary Agreements, the Company hereby grants to the
Holders, a first priority perfected Security Interest in and Lien upon the
Securities Account.
E. The parties have entered into this Agreement in order to
(i) create the Security Interest in favor of the Holders of the Securities
Account, (ii) obtain certain assurances herein from the Depositary, including,
without limitation, establishing the Holders' control (within the meaning of the
Revised UCC) over the Securities Account, and (iii) set forth the manner in
which funds will be disbursed from the Securities Account and released from the
Security Interest and Lien described above.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants, agreements and other consideration
contained and
<PAGE> 2
exchanged herein, the receipt and sufficiency of which are hereby acknowledged
and intending to be legally bound, the parties hereto covenant and otherwise
agree as follows:
1. Defined Terms. For all purposes of this Agreement, all
capitalized terms not otherwise defined below, shall have the same meaning set
forth in the Securities Purchase Agreement.
"Affiliate" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Available Funds" means (A) the sum of (i) the cash equal to
the Initial Deposit Amount, (ii) subsequent cash amounts deposited, if any, into
the Securities Account, (iii) cash interest or dividends paid into the
Securities Account with respect to the funds in the Securities Account from time
to time and (iv) the Fair Market Value of holdings of Marketable Securities in
the Securities Account, less (B) the aggregate cash disbursements previously
made pursuant to this Agreement.
"Business Day" means any day of the week other than Saturday,
Sunday and days on which banking institutions in Seattle, Washington are closed.
"Collateral" shall have the meaning given in Section 5(a)
hereof.
"Default" shall have the meaning ascribed to it in the Notes.
"Eligible Institution" has the meaning specified in Section
1.1 of the Securities Purchase Agreement.
"Event of Default" shall have the meaning ascribed to it in
the Notes.
"Initial Deposit Amount" shall mean $4,920,000
"Interest Payment Date" means, for any year, November 25,
February 25, May 25 and August 25, beginning with the Interest Payment Date of
November 25, 1998.
"Issue Date" means August 25, 1998.
"Marketable Securities" means the following securities or
financial Assets maturing not later than 180 days after their acquisition: (i)
U.S. Treasury Bills, notes and bonds payable thereby and agreements to
repurchase such instruments; (ii) any certificate of deposit issued by, or time
deposit of, an Eligible Institution; (iii) commercial paper issued by a
corporation (other than an Affiliate of the Company) with a rating, at the time
as of which any investment therein is made, of "A-1" (or higher) according to
S&P or "P-1" (or higher) according to Moody's; (iv) any banker's acceptances or
money market deposit accounts issued or offered by an Eligible Institution; and
(v) any Investment Company (as such term is defined by the Investment Company
Act of 1940) fund investing exclusively in investments of the types described in
clauses (i) through (iv) above.
2
<PAGE> 3
"Payment Notice and Disbursement Request" means a notice sent
by the Required Holders to the Depositary, which may be in the form of Exhibit A
hereto.
"Qualified Equity Transaction" means the sale by the Company
of its securities, whether in a public offering registered under the Securities
Act of 1933, as amended, or otherwise, which sale has an aggregate offering
price of not less than $40,000,000 and results in aggregate proceeds to the
Company (net of selling expenses and underwriters' discount or selling agent's
commission) of not less than $35,000,000.
"Required Holders" has the meaning specified in Section 1.1 of
the Securities Purchase Agreement.
"Securities Account" shall have the meaning given in Section
2(a).
"Security Interest" has the meaning specified in Section 1(a)
of the Security Agreement.
2. Securities Account.
(a) Establishment of Securities Account. The Depositary hereby
confirms and agrees that (i) the Depositary has established account number
"000398" under the name "Escrow A/C" (such account and any successor account,
the "Securities Account"), (ii) the Securities Account is a "securities account"
as such term is defined in Section 8-501(a) of the Revised UCC, (iii) the
Depositary shall, subject to the terms of this Agreement, treat the Holders as
the parties entitled to exercise the rights that comprise any financial Asset
credited to the Securities Account, (iv) all Assets delivered to, and actually
received by, the Depositary pursuant, to this Agreement will be promptly
credited to the Securities Account, and (v) all securities or other Assets
underlying any financial Assets credited to the Securities Account shall be
registered in the name of the Depositary or one of its agents or nominees,
indorsed to the Depositary or in blank or credited to another securities account
maintained in the name of the Depositary and in no case will any financial Asset
credited to the Securities Account be registered in the name of the Company,
payable to the order of the Company or specially indorsed to the Company except
to the extent the foregoing have been specially indorsed to the Depositary or in
blank.
(b) Investment of Funds in Securities Account. Funds deposited
in the Securities Account shall be invested and reinvested only upon the
following terms and conditions:
(i) Acceptable Investments. All funds deposited or
held in the Securities Account at any time shall be invested
in cash or Marketable Securities. Unless a Default or Event of
Default or any event that with the lapse of time or the giving
of notice, or both, would constitute an Event of Default has
occurred or would result therefrom or the Required Holders
have otherwise notified the Depositary, the Company may
instruct the Depositary in writing with respect to the
Marketable Securities in which the funds will be invested. The
Depositary shall have the right with acquittance and without
liability to rely on any such instructions from the Company
unless the Depositary shall have been notified otherwise in
writing by the Required Holders.
3
<PAGE> 4
(ii) Security Interest in Investments. No investment
of funds in the Securities Account shall be made unless the
Company has certified to the Required Holders, with a copy of
the certification being sent to the Depositary, that, upon
such investment, the Holders will have a first priority
perfected security interest in the applicable investment.
(iii) Interest and Dividends. All interest earned and
dividends paid on funds invested in cash or Marketable
Securities shall be deposited in the Securities Account as
additional Collateral for the exclusive benefit of the Holders
of the Notes and shall be reinvested in accordance with the
terms hereof at the Company's direction, unless a Default or
Event of Default or an event that with the lapse of time or
the giving of a notice or both, would constitute an Event of
Default has occurred and the Required Holders have notified
the Depositary in writing that it should only take direction
from the Required Holders or should no longer take further
written direction from the Company.
3. Funding Requirements. The Company shall direct the
Purchasers to and the Purchasers shall deposit by wire transfer in accordance
with the written instruction received from the Depositary on the Closing Date in
the Securities Account the Initial Deposit Amount. Thereafter, the Company shall
be required to replenish the funds in the Securities Account to the extent
necessary on each Interest Payment Date at such times when the Available Funds
in the Securities Account are less than the appropriate amounts as specified in
clauses (A) and (B) of this Section 3 (the "Shortfall"), and such replenishment
shall be made in the amount of such Shortfall within five (5) Business Days
after such notification of the Shortfall has been provided. The Company shall be
entitled to rely conclusively in making the foregoing determination on
information provided to it by the Depositary. The balance in the Securities
Account shall be maintained, as of each Interest Payment Date, at an amount
sufficient to provide (A) for the period prior to the date on which the Company
notifies the Depositary in writing of the consummation of a Qualified Equity
Transaction (the "Effective Date") (and thereafter if the Effective Date is not
on or before July 1, 1999), for the next four successive payments of interest on
the then Outstanding Notes on the applicable Interest Payment Dates, and, if
necessary, (B) provided the Effective Date is on or before July 1, 1999,
thereafter, the funds in the Securities Account shall be replenished to an
amount sufficient to pay the next four successive payments of interest, and,
after two successive full payments of interest thereafter, the funds shall
thereafter be maintained at a level sufficient to pay the next two successive
payments of interest on the then Outstanding Notes on the applicable Interest
Payment Dates. The Company's obligation to provide such funds and to maintain
such balance as described in either clause (A) or (B) above shall, in all
respects, terminate on the date on which the Company shall have fully paid all
interest accrued through and including the twelfth successive Interest Payment
Date (the "Termination Date"). The Depositary agrees to send a statement not
less frequently than quarterly by the fifteenth day of each month in which the
Depositary provides such statement, a statement of the balance and activity in
the Securities Account for the period covered by such statement.
4. Disbursements.
4
<PAGE> 5
(a) Payment Notice and Disbursement Requests; Disbursements.
Prior to the disbursement of any funds from the Securities Account by the
Depositary, the Company must deliver to the Depositary the written consent of
the Holders to such disbursement. The Company shall obtain such written consent
by delivering notice (the "Disbursement Notice") to the Holders of a proposed
disbursement five (5) Business Days prior to such date on which such
disbursement is to be made (the "Disbursement Date"), which Disbursement Notice
shall contain the time period to which such payment applies and the amount of
the disbursement. Promptly after receipt of the Disbursement Notice from the
Company, the Holders shall notify the Depositary of their consent, if any, to
the disbursement of funds on the Disbursement Date by delivery of a Payment
Notice and Disbursement Request substantially in the form of Exhibit A attached
hereto. No disbursements of funds from the Securities Account shall be made by
the Depositary without receipt of the Payment Notice and Disbursement Request
from the Holders authorizing such disbursement.
(b) All disbursements from the Securities Account must be made
in cash and shall apply solely to the payment of interest due under the Notes,
except in the event of a Default, an Event of Default, or an event that with the
lapse of time or the giving of notice, or both, would constitute an Event of
Default, or termination of this Agreement in accordance with the provisions of
Section 6 hereof, in which case written notice thereof shall be provided to the
Depositary by the Required Holders and disbursements of amounts from the
Securities Account shall be made in accordance with the provisions of Section
6(b)(v) of the Notes.
(c) Notwithstanding the provisions contained in Section 4(a)
above, the Holders may, at any time or from time to time, issue a written
payment demand to the Depositary without any prior notice to or from the Company
if: (i) there shall be interest due under the Notes which is five (5) or more
days past due; or (ii) in their reasonable judgment, the Required Holders have
concluded that a Default, Event of Default or event that with the lapse of time
or the giving of notice, or both, would constitute an Event of Default has
occurred and is continuing, or would result therefrom under Section 6(a)(vi) of
the Notes and written notice thereof shall be provided to the Depositary by the
Required Holders. The Depositary shall pay to the Holders promptly after receipt
of their payment demand, the sums specified therein with respect to any payments
due pursuant to the provisions of this Section 4(c).
(d) Retired Notes. In the event that the funds held in the
Securities Account exceed the respective amounts provided for in Section 3
hereof (or, in the event an interest payment or payments have been made, an
amount sufficient to provide for payment in full of any interest payment
remaining, up to and including such scheduled interest payments), the Required
Holders will be permitted to release to the Company any such excess amount if no
Default or Event of Default or event that with the lapse of time, or the giving
of notice, or both, would constitute an Event of Default, then exists under the
Notes.
5. Grant of Security Interest.
(a) The Company hereby irrevocably grants a first priority
perfected security interest in and pledges, assigns and sets over to the Holders
all of the Company's right, title and interest in the Securities Account, and
all Assets now or hereafter placed or deposited in, or delivered to the
Depositary for placement or deposit in, the Securities Account, including,
5
<PAGE> 6
without limitation, all cash and other funds held therein, all Marketable
Securities in the Securities Account established by (or otherwise maintained in
the name of) the Depositary pursuant to Section 2 and security entitlements
credited to or held in the Securities Account, and all proceeds thereof as well
as all rights of the Company under this Agreement (collectively, the
"Collateral"), in order to secure all Obligations (as defined in the Security
Agreement) of the Company under the Securities Purchase Agreement, the Notes and
the Ancillary Agreements.
The Depositary and the Company hereby acknowledge the Holders' security
interest as set forth above. The Company shall take all actions necessary on its
part to perfect, protect, maintain and insure the continuance of a first
priority perfected Security Interest in the Collateral in favor of the Holders
in order to secure all Obligations.
The rights and powers granted herein to the Holders have been granted
in order to perfect their Security Interest in the Securities Account, are
powers coupled with an interest and shall neither be affected by the bankruptcy
of the Company nor by the lapse of time.
(b) Upon demand, the Company will execute and deliver to the
Holders such instruments and documents as the Holders may reasonably deem
necessary or advisable to confirm or perfect their rights under this Agreement
and their interest in the Collateral. The Holders shall be entitled to take all
necessary action to preserve and protect the Security Interest created hereby as
a Lien and encumbrance upon the Collateral.
(c) The Company hereby appoints the Holders as its
attorney-in-fact with full power of substitution to do any act which the Company
is obligated hereunder to do, and the Holders may exercise such rights as the
Company might exercise with respect to the Collateral and take any action in the
Company's name to protect the Holders' Security Interest hereunder.
(d) In addition to the rights provided in this Agreement upon
a Default or an Event of Default, and for so long as such Default or Event of
Default or event that with the lapse of time or the giving of notice, or both,
would constitute an Event of Default continues or would result therefrom, the
Holders may exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party under the UCC, the Revised UCC (if applicable)
or other applicable Law, including, without limitation, collecting payment from
the Company of any attorney fees incurred by the Holders in exercising such
rights and remedies. The Holders may also, upon a Default or an Event of Default
or event that with the lapse of time or the giving of notice, or both, would
constitute an Event of Default, without notice to the Company except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of the
Holders' offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Required Holders may deem commercially reasonable.
The Company acknowledges and agrees that any such private sale may result in
prices and other terms less favorable to the seller than if such sale were a
public sale. The Company agrees that, to the extent notice of sale shall be
required by law, ten (10) days' notice to the Company of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification within the meaning of the UCC, the Revised
UCC, or any other applicable law. The Required Holders shall not be obligated to
make any sale
6
<PAGE> 7
regardless of notice of sale having been given. The Required Holders may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
6. Termination. (a) On the Termination Date, all funds remaining in the
Securities Account shall be disbursed by wire transfer as follows:
(i) to the Holders, in an amount equal to all accrued unpaid
past due interest on the Notes;
(ii) to the Holders in an amount equal to all accrued unpaid
interest due on the Notes;
(iii) to the Holders in an amount equal to all accrued unpaid
and past due amounts under the Securities Purchase Agreement, the Notes
and any of the Ancillary Agreements;
(iv) to the Holders in an amount equal to all other accrued
unpaid amounts under the Securities Purchase Agreement, the Notes and
any of the Ancillary Agreements;
(v) to the Holders in an amount equal to the aggregate
principal amount Outstanding under the Notes; and
(vi) any surplus of such cash or cash proceeds held by the
Holders through the Depositary and remaining on or after the
Termination Date shall be paid over to the Company or to whosoever may
be lawfully entitled to receive such surplus or as a court of competent
jurisdiction may direct.
(b) The Company and the Required Holders shall provide the
Depositary with written instructions regarding the disbursements to be made
pursuant to Section 6(a) on the Termination Date at least five (5) Business Days
prior to the Termination Date.
(c) This Agreement shall terminate automatically ten (10) days
following disbursement of all funds remaining in the Securities Account
(including proceeds from the sale of Marketable Securities), unless sooner
terminated by agreement of the parties hereto (in accordance with the terms
hereof, not in violation of the Notes, and provided that the Holders may not
agree to such earlier termination unless they have received the consent of all
Holders of all of the Notes then outstanding); provided, however, that until
such tenth day, the Company will cause this Agreement (or any permitted
successor agreement) to remain in effect and will cause the Depositary
(including any permitted successor thereto) to continue to act hereunder (or
under any such permitted successor agreement).
7. "Financial Assets" Election. The Depositary hereby agrees that each
item of property (whether investment property, financial Asset, security,
instrument or cash) comprising the Initial Deposit Amount, Available Funds,
Collateral, or any other property otherwise credited to the Securities Account
shall be treated as a "financial asset" within the meaning of Section
8-102(a)(9) of the Revised UCC.
7
<PAGE> 8
8. Entitlement Orders. If at any time the Depositary shall receive an
"entitlement order" (within the meaning of Section 8-102(a)(8) of the Revised
UCC) issued by the Holders and relating to the Securities Account, the
Depositary shall comply with such entitlement order without further consent by
the Company or any other person.
9. Subordination of Lien; Waiver of Setoff. In the event that the
Depositary has or subsequently obtains by agreement, operation of law or
otherwise a security interest in the Securities Account or any security
entitlement credited thereto, the Depositary hereby agrees that such security
interest shall be subordinate to the Security Interest of the Holders. The
financial Assets and other items deposited to the Securities Account shall not
be subject to deduction, set-off, banker's Lien, or any other right in favor of
any person other than the Holders (except that the Depositary may set off (a)
all amounts due to the Depositary in respect of the Depositary's customary fees
and expenses for the routine maintenance and operation of the Securities Account
and (b) the face amount of any checks which have been credited to the Securities
Account but are subsequently returned unpaid because of uncollected or
insufficient funds).
10. Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants that this Agreement has been duly
authorized, executed and delivered on its behalf and constitutes the legal,
valid and binding obligation of the Company. The execution, delivery and
performance of this Agreement by the Company does not violate any applicable Law
to which the Company is subject and does not require the consent of any
governmental or other regulatory body to which the Company is subject, except
for such consents and approvals as have been obtained and are in full force and
effect.
11. Representations, Warranties and Covenants of the Depositary. The
Depositary hereby makes the following representations, warranties and covenants:
(a) The Securities Account has been established as set forth
in Sections 2 through 4 above and shall be maintained in the manner set forth
herein until termination of this Agreement. The Depositary shall not change the
name or account number of the Securities Account without the prior written
consent of the Required Holders.
(b) No financial Asset is or shall be registered in the name
of the Company, payable to the Company's order, or specially endorsed to the
Company, except to the extent such financial asset has been endorsed to the
Depositary or in blank.
(c) This Agreement is the valid and legally binding obligation
of the Depositary duly authorized, executed and enforceable in accordance with
its terms.
(d) The Depositary has not entered into, and until the
termination of this Agreement shall not enter into, any agreement with any other
Person relating to any of the Securities Account and/or any financial Assets
credited thereto pursuant to which it has agreed to comply with entitlement
orders (as defined in Section 8-102(a)(8) of the Revised UCC) of such person.
The Depositary has not entered into any other agreement with the Company or the
Holders purporting to limit or condition the obligation of the Depositary to
comply with entitlement orders as set forth in Section 8 hereof.
8
<PAGE> 9
(e) The Depositary shall at all times act as a "financial
intermediary" (within the meaning of Section 8-313(4) of the UCC) or as a
"securities intermediary" (within the meaning of Section 8-102(a)(14) of the
Revised UCC), and as a custodian of funds, as applicable, and will comply with
all applicable regulations.
12. Automatic Stay. If the Company becomes the subject of a bankruptcy
or a reorganization case under the United States Bankruptcy Code, the automatic
stay imposed by section 362 of the United States Bankruptcy Code will be deemed
lifted (or, in the event that a court does not recognize the validity of such
deemed lifting of the automatic stay, the parties will use their best efforts to
seek relief from the stay), insofar as such stay affects enforcement of the
security interest in the Securities Account granted thereby.
13. Fees and Expenses. The Company agrees to pay the Depositary
reasonable compensation for its basic services rendered pursuant to this
Agreement. The fees shall be paid within 30 days after the Company has been
billed by the Depositary, except for the document review and set-up fee of $1000
plus out-of-pocket legal review expenses which shall be paid by the Company upon
establishment of the Securities Account. In the event the Depositary renders any
material service not contemplated in this Agreement, or there is any assignment
of interest in the subject matter of this Agreement, or any material
modification hereof, or if any material controversy arises hereunder, or the
Depositary is made a party to any litigation pertaining to this Agreement, or
the subject matter hereof, then the Depositary shall also be reasonably
compensated by the Company for such extraordinary services and reimbursed by the
Company for all costs and expenses, including reasonable attorneys' fees,
occasioned by any controversy, litigation or event.
14. Resignation or Removal of the Depositary. The Depositary may resign
upon 30 days' advance written notice of resignation to the Company and the
Holders. The Company and the Holders may also jointly at any time remove the
Depositary by giving written notice to the Depositary. If the Depositary shall
resign or be removed, a successor Depositary, which shall be either a bank,
trust company or other financial institution constituting an Eligible
Institution (as that term is defined in Section 1.1 of the Securities Purchase
Agreement) having an office in the State of Washington and satisfactory to the
Company and the Holders, shall be appointed by written instrument executed and
delivered by the Company and the Holders to the Depositary and to such successor
depositary, and upon the resignation or removal of the predecessor Depositary,
the successor depositary shall, without any further act, deed or conveyance,
become vested with all the right, title and interest to all property held
hereunder, of such predecessor Depositary; provided that such predecessor
Depositary shall, on the written request of the Company and the Holders, execute
and deliver to such successor depositary an instrument transferring to such
successor depositary all right, title and interest hereunder in and to the
Securities Account and all other rights hereunder, of such predecessor
Depositary. If no successor depositary has been appointed at the end of 30 days
after notice of resignation by the Depositary, the Depositary hereunder may
petition any court of competent jurisdiction to name a successor depositary.
15. Depositary Not a Party to Other Agreement. By entering into this
Agreement, the Depositary is a party only to this Agreement and the Depositary
does not become a party to any other agreement, including, but not limited to,
the Securities Purchase Agreement.
9
<PAGE> 10
16. Reliance. The Depositary may act upon any instrument or other
writing believed by it in good faith to be genuine and to be signed or presented
by the proper person or persons and shall not be liable in connection with the
performance by it of its duties pursuant to the previsions hereof, except for
its own willful default or gross negligence. The Company and the Holders shall,
jointly and severally, indemnify and save harmless the Depositary for all
claims, losses, costs, damages, liabilities and expenses which may be incurred
on the part of the Depositary, arising out of or in connection with its entering
into this Agreement and carrying out its duties hereunder due to:
(a) The Depositary's failure to ascertain or comply with the
terms of any document, other than this Agreement, and all Exhibits and Schedules
attached hereto, unless that document is filed and the Depositary is expressly
instructed by this Agreement to comply with a specified paragraph or provision
of that document. The Company agrees to indemnify and pay the Holders for any of
the Holders' losses, costs, damages, liabilities and expenses ("Holders'
Losses") which may be incurred by the Holders as a result of the indemnity
provided to the Depositary under this Section 16 except for any Holders' Losses
paid to the Depositary by the Holders as a result of the Holders' gross
negligence or willful misconduct.
(b) Forgeries or false impersonations.
(c) Exercise of the Depositary's discretion in any particular
manner in any situation in which the Depositary is authorized by this Agreement
to exercise its discretion.
(d) Any reason other than the Depositary's gross negligence or
willful misconduct in following this Agreement and acting as Depositary
hereunder.
17. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach
of this Agreement by any other party (provided, in the case of any such waiver
by a Holder, that it shall first have obtained the written consent of the
Required Holders, but no such waiver shall be deemed to have been given unless
such waiver is in writing, signed by the waiving party and specifically
designating the breach waived, nor shall any such waiver constitute a continuing
waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more
of the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties
hereto, and the rights and duties of any party hereunder shall not be assignable
except with the prior written consent of the Company and the Holders.
Notwithstanding the foregoing, this Agreement shall inure to and be binding upon
the parties and their successors and permitted assigns.
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<PAGE> 11
(d) Benefit. The parties hereto and their successors and
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof and to enforce this Agreement.
(e) Time. Time is of the essence with respect to each
provision of this Agreement.
(f) Entire Agreement; Amendments. This Agreement, the
Securities Purchase Agreement, the Notes and the other Ancillary Agreements
identified in the Securities Purchase Agreement contain the entire agreement
among the parties with respect to the subject matter hereof and supersede any
and all prior agreements, understandings and commitments, whether oral or
written. This Agreement may be amended only with the consent of the Company and
the Required Holders, and in the case of any provision referring to the rights
and duties of the Depositary, the Depositary.
(g) Notices. All notices and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received, either: (a) on the day of hand delivery; (b) three Business Days
following the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as set forth
below; or (c) one Business Day following the day timely delivered to a next-day
air courier addressed as set forth below:
To the Company:
Intracel Corporation
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
Attention: Simon R. McKenzie
Telecopy: 425-392-2992
Telephone: 425-557-1894
To the Holders:
300 Stamford Place
Stamford, Connecticut 06902
Attention: Michael Graves
Telecopy: 203-862-8601
Telephone:203-863-6224
To the Depositary:
1201 Third Avenue, 20th Floor
Seattle, Washington 98101
Attention: Robert T. Leighton
Telecopy: (206) 442-6401
Telephone: (206) 442-6409
11
<PAGE> 12
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(j) Choice of Law. The existence, validity, construction,
operation and effect of any and all terms and provisions of this Agreement shall
be determined in accordance with and governed by the Laws of the State of New
York, without regard to principles of conflicts of Laws that would result in the
application of the Law of any jurisdiction other than the State of New York.
Regardless of any provision in any other agreement, for purposes of the UCC or
the Revised UCC, New York shall be deemed to be the Depositary's location and
the Securities Account (as well as the securities entitlements related thereto)
shall be governed by the Laws of the State of New York. The parties to this
Agreement hereby agree that jurisdiction over such parties and over the subject
matter of any action or proceeding arising under this Agreement may be exercised
by a competent Court of the State of New York, or by a United States Court,
sitting in New York City. The Company hereby submits to the personal
jurisdiction of such courts, hereby waives personal service of process upon it
and consents that any such service of process may be made by certified or
registered mail, return-receipt requested, directed to the Company at its
address last specified for notices hereunder, and service so made shall be
deemed completed five (5) days after the same shall have been so mailed, and
hereby waives the right to a trial by jury in any action or proceeding with the
Depositary.
(k) Each of the Depositary and the Holders hereby represents
and warrants that this Agreement has been duly authorized, executed and
delivered on its behalf and constitutes its legal, valid and binding obligation.
(l) Conflict With Other Agreements. There are no other
agreements entered into between the Depositary and the Company with respect to
the Securities Account. In the event of any conflict between this Agreement (or
any portion thereof) and any other agreement now existing or hereafter entered
into, the terms of this Agreement shall prevail.
(m) Notice of Adverse Claims. Except for the claims and
interest of the Holders and of the Company in the Securities Account, the
Depositary does not know of any claim to, or interest in, the Securities Account
or in any "financial Asset" (as defined in Section 8-102(a) of the Revised UCC)
credited thereto. If any Person asserts any Lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against the Securities Account or in any financial Asset
carried therein, the Depositary shall promptly notify the Holders and the
Company thereof.
(n) Execution of Agreement. The execution of this Agreement by
the Depositary shall conclusively evidence its acceptance and agreement to the
terms hereof.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed and delivered
this Interest Escrow Security Agreement as of the day first above written.
COMPANY: Intracel Corporation
By: /s/ SIMON McKENZIE
------------------------------------
Name: Simon McKenzie
Title: President and Chief
Executive Officer
HOLDERS: NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
------------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
------------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
------------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
------------------------------------
Name: Michael A. Graves
Title: Vice President
13
<PAGE> 14
DEPOSITARY: NORTHWESTERN TRUST AND INVESTORS
ADVISORY COMPANY, as Depositary
By: /s/ DAVID C. WILLIAMS
----------------------------------
Name: David C. Williams
Title: President & CEO
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<PAGE> 15
EXHIBIT A
Form of Payment Notice and Disbursement Request
[Date]
___________________
___________________
___________________
Attention: Corporate Agent
Administration Department
Re: Disbursement Request No. ____
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Interest Escrow Security Agreement, dated as of
_________ (the "Interest Escrow Security Agreement") among you (the
"Depositary"), the undersigned as Holders, and Intracel Corporation, a Delaware
corporation (the "Company"). Capitalized terms used herein shall have the
meaning given in the Interest Escrow Security Agreement.
This letter constitutes a Payment Notice and Disbursement Request
under the Interest Escrow Security Agreement.
The undersigned hereby directs that you make a disbursement of
funds contained in the Securities Account in the amount of $________ to the
Holders for payment of _________.
The Depositary is entitled to rely on the foregoing in disbursing
funds relating to this Payment Notice and Disbursement Request.
_________, as Holders
By: __________________________________
Name:
Title:
15
<PAGE> 16
EXHIBIT B
Investment Instructions
All sums on deposit shall be invested
in cash or Marketable Securities.
<PAGE> 17
EXHIBIT C
Depositary Fees
<PAGE> 1
EXHIBIT 10.31
- --------------------------------------------------------------------------------
SECURITY AGREEMENT
among
Intracel Corporation,
Bartels, Inc.,
PerImmune Holdings, Inc.,
PerImmune, Inc.
and
the holders of the 12%
Guaranteed Senior Secured Primary Promissory Notes
due August 25, 2003 of
Intracel Corporation
and
the holders of the 12%
Guaranteed Senior Secured Escrow Promissory Notes
due August 25, 2003 of
Intracel Corporation
-----------------
Dated as of August 25, 1998
-----------------
- --------------------------------------------------------------------------------
<PAGE> 2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of August 25, 1998, among
Intracel Corporation, a Delaware corporation (together with its successors and
assigns, the "Company"), the Company's wholly-owned subsidiaries Bartels, Inc.
("Bartels"), PerImmune Holdings, Inc. ("Holdings") and PerImmune, Inc.
("PerImmune" and, together with Bartels and Holdings, the "Subsidiaries") and
the holders (collectively, the "Holders") of the 12% Guaranteed Senior Secured
Primary Promissory Notes (the "Guaranteed Senior Secured Primary Notes") of the
Company and the holders of the 12% Guaranteed Senior Secured Escrow Promissory
Notes (the "Guaranteed Senior Secured Escrow Notes") of the Company
(collectively, the "Notes") issued pursuant to that certain Securities Purchase
Agreement, dated as of the date hereof, by and among the Company and the other
parties thereto (the "Purchase Agreement"). As used herein, all capitalized
terms not otherwise defined herein shall have the meanings set forth in the
Purchase Agreement.
W I T N E S S E T H:
WHEREAS, the Company is to issue 12% Guaranteed Senior Secured
Primary Promissory Notes in the aggregate original principal amount of
$35,000,000 and 12% Guaranteed Senior Secured Escrow Promissory Notes in the
aggregate original principal amount of $6,000,000; and
WHEREAS, in order to secure the performance of the obligations
of the Company under the Purchase Agreement, the Notes and the Ancillary
Agreements (the "Obligations") and the guaranties relating to the Obligations
executed on the date hereof by each of the Subsidiaries, the parties hereto are
entering into this Security Agreement regarding the terms and conditions of the
Company's and Subsidiaries' (together, the "Company Parties") grant of a
security interest in the Collateral (as defined below) to the holders of the
Notes (the "Holders"); and
WHEREAS, the Company and the Holders of the Notes have entered
into the Intellectual Property Security Agreement as of the date hereof (the
"Intellectual Property Security Agreement") to secure the performance of the
Obligations, the representations, warranties, covenants, terms and provisions of
which are hereby incorporated by reference and made a part hereof; and
WHEREAS, the Company and the Holders of the Notes have entered
into an Interest Escrow Security Agreement as of the date hereof relating to the
payment of certain interest due on the Notes (the "Interest Escrow Security
Agreement"), the terms and provisions of which are hereby incorporated herein by
reference and made a part hereof, and the Company has agreed to grant to the
Holders a first priority perfected security interest in the accounts established
pursuant to the Interest Escrow Security Agreement (the "Interest Escrow
Accounts") which comprise a portion of the Collateral (as defined below); and
<PAGE> 3
WHEREAS, the Company and the Holders of the Notes have entered
into a Funded Commitment Facility Escrow Agreement as of the date hereof
relating to certain segregated escrowed funds in connection with the issuance of
the Guaranteed Senior Secured Escrow Notes (the "Funded Commitment Facility
Escrow Agreement"), the terms and provisions of which are hereby incorporated
herein by reference and made a part hereof, and the Company has agreed to grant
the Holders a first priority perfected security interest in the accounts
established pursuant to the Funded Commitment Facility Escrow Agreement (the
"Funded Commitment Facility Escrow Accounts") which comprise a portion of the
Collateral (as defined below).
NOW, THEREFORE, in consideration of the premises and other
benefits to the Company Parties, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Security Interest.
(a) Grant of Security Interest.
As collateral security for the payment and performance in full
of the Obligations in accordance with their respective terms, the Company
Parties hereby pledge, assign, transfer and grant to the Holders as to all
Collateral, a first priority perfected continuing security interest (except with
respect to certain Collateral listed on Schedule A hereto in which Akzo Nobel
Pharma International, B.V., as Collateral Agent under the Intellectual Property
Security Agreement dated August 8, 1996 (the "Collateral Agent") has a first
priority security interest (the "Akzo Security Interest Collateral") and with
respect to the Akzo Security Interest Collateral, a second priority perfected
security interest until such time as payment in full of the Debt underlying the
Akzo Security Interest Collateral has been made and at such time, a first
priority perfected security interest in the Akzo Security Interest Collateral)
(collectively, the "Security Interests") in all of the right, title and interest
of the Company Parties in and to all of the Assets, real or personal, tangible
or intangible of the Company Parties, now owned or hereafter acquired (the
"After Acquired Collateral"), wherever located, including, without limitation,
the following:
(i) All equipment in all of its forms, wherever
located, now or hereafter existing, and all
parts thereof and all accessions thereto,
with the exception of the Excluded Equipment
(any and all such equipment, parts and
accessions being the "Equipment");
(ii) All inventory in all of its forms, wherever
located, now or hereafter existing,
(including, but not limited to (i) raw
materials and work in process therefor,
finished goods thereof, and materials used
or consumed in the manufacture or
production, (ii) goods in which the Company
has an interest in mass or a joint or other
interest or right of any kind and (iii)
goods which are returned to or repossessed
by the Company, and all accessions thereto
and products thereof (any and all such
inventory, accessions and products being the
"Inventory");
2
<PAGE> 4
(iii) All accounts, accounts receivable, contract
rights, chattel paper, instruments,
securities (including, without limitation,
all Investment Property (as such term is
defined in the Uniform Commercial Code (the
"UCC")), general intangibles (as such term
is defined in the UCC) and other obligations
of any kind now or hereafter existing
whether or not arising out of or in
connection with the sale or lease of goods
or the rendering of services, and all rights
now or hereafter existing in and to all
options to acquire real or personal property
("Property Options"), security agreements,
leases and other contracts securing or
otherwise relating to any such accounts,
contract rights, chattel paper, instruments,
general intangibles or obligations (any and
all such accounts, contract rights, chattel
paper, instruments, general intangibles and
obligations being the "Receivables," and any
and all such options, leases, security
agreements and other contracts being the
"Related Contracts");
(iv) All real Assets and interests in real
property, now or hereafter existing wherever
located, together with all buildings,
towers, structures and other improvements
erected, situated or placed thereon and all
attachments used in connection therewith
(collectively, the "Real Property
Collateral");
(v) All Financial Accounts, including, but not
limited to the Interest Escrow Accounts, the
Funded Commitment Facility Escrow Accounts
and the Collateral Account (collectively,
the "Financial Accounts") and all sums of
money, from any source whatsoever, now or
hereafter transferred to and comprising the
Financial Accounts, including, without
limitation, all proceeds of the Collateral
paid into the Financial Accounts and any and
all interest and dividends and other income
dividend from any such moneys and all
certificates and instruments in or
representing the Financial Accounts now or
hereafter existing;
(vi) All documents (as such term is defined in
the UCC) or other receipts covering,
evidencing or representing goods, now owned
or hereafter acquired by the Company; and
(vii) All patents, patent applications and
patentable inventions now or hereafter
existing, including, without limitation,
each patent and patent application
identified in Schedule I to the Intellectual
Property Security Agreement and made a part
hereof, and including without limitation (A)
all inventions and improvements described
and claimed therein, (B) the right to sue or
otherwise recover for any and all past,
present and future infringements and
misappropriations thereof, (C) all income,
royalties, damages and other payments now
and hereafter due and/or payable with
respect
3
<PAGE> 5
thereto (including, without limitation,
payments under all licenses entered into in
connection therewith, and damages and
payments for the past and future
infringements thereof), and (D) all rights
corresponding thereto throughout the world
and all reissues, divisions, continuations,
continuations-in-part, provisionals,
substitutes, renewals, and extensions
thereof, all improvements thereon and all
other rights of any kind whatsoever of the
Company accruing thereunder or pertaining
thereto (the "Patents");
(viii) All trademarks, service marks, trade names,
trade dress or other indicia of trade
origin, trademark and service mark
registrations, and applications for
trademark or service mark registrations and
any renewals thereof now or hereafter
existing, including, without limitation,
each registration and application identified
in Schedule II to the Intellectual Property
Security Agreement and made a part hereof,
and including without limitation (A) the
right to sue or otherwise recover for any
and all past, present and future
infringements and misappropriations thereof
(B) all income, royalties, damages and other
payments now and hereafter due and/or
payable with respect thereto (including,
without limitation, payments under all
licenses entered into in connection
therewith, and damages and payments for past
or future infringements thereof), and (C)
all rights corresponding thereto throughout
the world and all other rights of any kind
whatsoever of the Company or accruing
thereunder or pertaining thereto, together
in each cash with the good will of the
business connected with the use of, and
symbolized by, each such trademark, service
mark, trade name, trade dress or other
indicia of trade origin (the "Trademarks");
(ix) All copyrights, whether statutory or common
law, and whether or not the underlying works
of authorship have been published, and all
works of authorship and other intellectual
property rights therein, all copyrights of
works based on, incorporated in, derived
from or relating to works covered by such
copyrights, all right, title and interest to
make and exploit all derivative works based
on or adopted from works covered by such
copyrights, and all copyright registrations
and copyright applications, and any renewals
or extensions thereof, including, without
limitation, each copyright registration and
copyright application, if any, identified in
Schedule I to the Intellectual Property
Security Agreement and made a part hereof,
and including now or hereafter existing,
without limitation, (A) the right to print,
publish and distribute any of the foregoing,
(B) the right to sue or otherwise recover
for any and all past, present and future
infringements and misappropriations thereof,
(C) all income, royalties, damages and other
payments now and hereafter due and/or
payable with respect thereto (including,
without limitation, payments under all
licenses
4
<PAGE> 6
entered into in connection therewith, and
damages and payments for past or future
infringements thereof), and (D) all rights
corresponding thereto throughout the world
and all other rights and any kind whatsoever
of the Company accruing thereunder or
pertaining thereto (the "Copyrights");
(x) All license agreements with any other person
in connection with any of the Patents,
Trademarks or Copyrights, or such other
person's patents, trade names, trademarks,
service marks or copyrights, whether the
Company is a licensor or licensee under any
such license agreement, including now or
hereafter existing, without limitation, the
license agreements listed on Schedule II to
the Intellectual Property Agreement Security
attached hereto and made a part hereof,
subject, in each case to the terms of such
license agreements, including, without
limitation, terms requiring consent to a
grant of security interest, and any right to
prepare for sale, sell and advertise for
sale, all Inventory (as defined in the
Security Agreement) now or hereafter owned
by the Company and now or hereafter covered
by such licenses (the "Intangible
Licenses"); and
(xi) All products and proceeds of any and all of
the foregoing Collateral now or hereafter
existing including without limitation,
proceeds which constitute Assets of the type
described in clauses (i) through and
including (x) and to the extent not
otherwise included, all (A) payments under
insurance (whether or not the Secured Party
is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise
with respect to any of the foregoing
Collateral, license royalties and (B) cash.
(b) The Security Interests and Liens granted hereunder shall
be treated as (i) a first priority perfected security interest in all the
existing and future Assets of the Company, and its Subsidiaries (including but
not limited to the Collateral set forth in Section 1(a) and any Assets or After
Acquired Collateral), other than (A) the Akzo Security Interest Collateral set
forth on Schedule A attached hereto and with respect thereto, a second priority
perfected security interest until such time as payment in full of the Debt
underlying the Akzo Security Interest Collateral has been made and at such time,
a first priority perfected security interest in the Akzo Security Interest
Collateral, (B) the Excluded Equipment subject to (y) the receipt of the consent
(which the Company shall use its best efforts to obtain) of Transamerica
Business Credit Corporation ("Transamerica") to the grant of a second priority
perfected Security Interest therein and (z) upon termination of any Security
Interest by Transamerica, in which case the Holders shall automatically retain a
first priority perfected Security Interest in the Excluded Equipment,, and (C)
the Receivables secured by the Receivables Facility, but only during such time
as the Receivables Facility is existing, and a second priority perfected
Security Interest in all such Receivables, and a first priority perfected
security interest in all other Receivables; and (ii) a pledge of all the issued
and outstanding Capital Stock of the Subsidiaries of the Company. For
5
<PAGE> 7
purposes of this Section 1(b) the "Receivables Facility" and "Subsidiaries"
shall have the meanings set forth in the Purchase Agreement.
(c) Until the Obligations shall have been satisfied in full
and this Agreement shall have been terminated, the Company and its Subsidiaries
(as defined in the Purchase Agreement), shall not, without the Holders' prior
written consent, which consent will not be unreasonably withheld, create, incur
or assume any pledge, sale, license or assignment of any of the Collateral or
the After Acquired Collateral, or grant, convey or hypothecate any interest in
the Collateral or the After Acquired Collateral, or take any action the effect
of which is to have created any Lien, encumbrance, claim, charge, preference,
priority or other restriction on the Collateral or the After Acquired
Collateral.
(d) Certain Definitions.
All terms not otherwise defined in this Section 1 or the
Purchase Agreement, or the Notes or any Ancillary Agreement shall have their
respective meanings, if any, in the UCC as in effect in the State of New York.
"Accounts Receivable" has the meaning specified in Section
1(a)(iii) and, to the extent not otherwise described therein, (i) all accounts
(other than accounts generated from the sale or other disposition of any
Collateral of the type described in Section 1(a) clauses (i), (iv), (vi), (vii),
(viii), (ix) and (x)), (ii) all of the rights of the Company Parties to payment
for any goods or services sold by it, whether now in existence or arising from
time to time hereafter, including, without limitation, rights evidenced by an
account, note, contract, security agreement, chattel paper or other evidence of
indebtedness or security (in each case in respect of such goods or services) and
rights to payment of any interest, finance charges or other obligations with
respect thereto (all of the foregoing payments for the purposes of this
paragraph, "Payments"), in each case together with (A) all security pledged,
assigned, hypothecated or granted to or held by the Company Parties (in each
case in respect of such goods or services) to secure Payments, (B) all of the
right, title and interest of the Company Parties in and to any goods, the sale
of which gave rise to Payments to the extent of the Company Parties' interest in
such goods after such sale, (C) all proceeds thereof, (D) all insurance and
claims for insurance effected or held for the Company Parties in respect of
Payments or such goods, (E) all guarantees of any of the foregoing, (F) all
records, ledger cards and invoices of the Company Parties relating to any of the
foregoing, and (G) all credit information, reports and memoranda relating to any
of the foregoing) and (iii) all documents, books, log books, records, ledger
cards, invoices, correspondence, files, tapes, cards, and computer programs,
computer runs, computer stored data, computer print-outs, disks, data processing
software and relating to all Assets and rights of the type described above in
this definition.
"Assets" has the meaning specified in the Purchase Agreement.
"Collateral Account" means a separate custodial account or
accounts maintained by the Holders of the Notes pursuant to this Agreement.
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"Contracts" has the meaning specified in Section 1(a)(iii) and
(vi), and to the extent not otherwise described therein, all those contracts and
agreements (including, without limitation, insurance policies, franchise,
management and employment agreements) to which any Company Party is a party or
is bound or from which any Company Party is a party or is bound or from which
such Company Party derives a benefit, and shall include, without limitation, all
rights to terminate, perform, compel performance, exercise remedies and all
rights to receive Inventory, Equipment, services and proceeds of any insurance,
indemnity, warranty or guaranty.
"Copyrights" has the meaning specified in Section 1(a)(ix) and
includes the items listed under "Copyrights" on Schedule I to the Intellectual
Property Security Agreement.
"Equipment" has the meaning specified in Section 1(a)(i), and
to the extent not otherwise described therein, all goods, other than Inventory,
and, in any event, shall include, but shall not be limited to, all equipment,
machinery, furniture, furnishings, fixtures, aircraft, computer equipment,
computer hardware, tools and vehicles, together with all attachments,
components, parts, accessories and accessions installed thereon or affixed
thereto, but excluding all Excluded Equipment.
"Excluded Equipment" means the equipment listed on Schedule B,
together with all attachments, components, parts, accessories and accessions
installed thereon or affixed thereto.
"Financial Accounts" has the meaning specified in Section
1(a)(v), and to the extent not otherwise described therein, all right, title and
interest of Company Parties in all deposit, investment or other accounts
maintained with any bank, savings and loan association, broker, brokerage, or
any other financial institution, together with all monies and other Assets
deposited or held therein, including, without limitation, any checking account,
NOW account, savings account, escrow account, savings certificate and margin
account, the Interest Escrow Accounts, the Funded Commitment Facility Escrow
Accounts and the Collateral Accounts. The Company Parties hereby grant a lien on
and assigns to the Holders each such Financial Account, whether or not such lien
or assignment is subject to the UCC.
"Funded Commitment Facility Escrow Accounts" means a separate
custodial escrow account or accounts maintained by the Company for the benefit
of the Holders of the Notes pursuant to the Funded Commitment Facility Escrow
Agreement.
"General Intangibles" has the meaning specified in Section
1(a)(iii), (vii), (viii), (ix) and (x) and to the extent not otherwise described
therein, all general intangibles, and, in any event, shall include, but not be
limited to, all rights to receive Inventory or goods that will become Inventory,
all general intangibles arising from the sale, loan, exchange or other
disposition of goods or general intangibles and all general intangibles arising
from the furnishing of services, all rights under or to any franchises, Patents,
Patent applications, know-how, inventions (whether or not patentable), Marks and
the goodwill of the business symbolized thereby, copyrights and any registration
or application relating thereto, all licenses (whether any Company Party is
licensee or licensor thereunder) but only to the extent that such licenses do
not
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<PAGE> 9
prohibit the Company Parties' granting of a security interest therein or a valid
written consent to assignment or pledge has been obtained from the licensor
thereunder, all tax refunds, tax refund claims, guaranty claims, all judgments,
chooses in action and all computer software, computer programs and all general
intangibles which represent the right to receive money and all interests of the
Company Parties in any partnerships in which any of them is a general or limited
partner.
"Interest Escrow Accounts" mean a separate custodial escrow
account or accounts maintained by the Company, for the benefit of the Holders of
the Notes pursuant to the Interest Escrow Security Agreement.
"Inventory" has the meaning specified in Section 1(a)(ii) and
to the extent not otherwise described therein, all inventory of every type or
description (other than inventory subject to purchase money security interests)
and all documents covering such inventory, including, but not limited to, all
goods, merchandise and other personal Assets, held for sale, lease or exchange,
or which are furnished or are to be furnished under contracts of service, in
each case whether such goods, merchandise or other personal Assets are on
consignment, or which constitute raw materials, work in process or materials
used or consumed or to be used or consumed in the Company Parties' businesses,
or in the processing, packaging or shipping of the same, and all finished goods.
"Leases" has the meaning specified in Section 1(a) (iv) and to
the extent not otherwise described therein, any and all leasehold interests of
the Company Parties in real or personal Assets, whether any Company Party is
lessor or lessee thereunder, and any other such leasehold interests created
hereafter.
"Patents" has the meaning specified in Section 1(a)(vii) and
includes the items listed under the heading "patents" on Schedule I to the
Intellectual Property Security Agreement.
"Permitted Lien" means (i) Liens for taxes, assessments or
governmental charges or levies not delinquent or which any Company Party is in
good faith and by appropriate proceedings contesting and for which an adequate
reserve has been established in accordance with GAAP, (ii) deposits, pledges or
other items to secure obligations under workers' compensation, social security
or similar laws, or under employment insurance, (iii) indemnity, performance or
other similar bonds or deposits, pledges or other items to secure bids, tenders,
contracts (other than contracts for the payment of money), statutory
obligations, surety and appeal bonds and other obligations of like nature, in
each case arising in the ordinary course of business, (iv) interests of
landlords or other lessors under leases of real or personal Assets, (v)
statutory Liens of landlords and mechanics', workmen's, materialmen's, carrier's
or warehousemen's or other like Liens arising in the ordinary course of business
with respect to obligations which are not due or which any Company Party is in
good faith and by appropriate proceedings contesting and for which an adequate
reserve has been established in accordance with GAAP, (vi) Liens securing
purchase money Debt incurred to finance the acquisition of the Assets encumbered
by such Liens, (vii) rights of tenants, subtenants, franchisees or parties in
possession (other than a debtor-in-possession, trustee in bankruptcy or
receiver) if such rights were granted in the ordinary course of business and
vested on or before the date hereof or created
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<PAGE> 10
thereafter in the ordinary course of business, (viii) interests of any customer
who has purchased goods that are held by any Company Party until delivery is
requested by such customer, (ix) Liens of any third party in insurance premiums
returned to any Company Party, which Liens secure loans by such third party to
the Company for the purpose of purchasing the insurance to which such premium
relates, (x) extensions, renewals or replacements of any Lien referred to in
paragraphs (i) through (ix) above, provided that any such extension, renewal or
replacement is granted in the ordinary course of business and limited to the
Assets originally encumbered thereby and (xi) Laws with respect to any Company
Parties' Assets and any amendments thereto now or at any time hereafter adopted
by any governmental or quasi-governmental authority having jurisdiction.
"Real Property" has the meaning specified in Section 1(a)(iv).
"Required Holders" has the meaning specified in the Purchase
Agreement.
"Trademarks" has the meaning specified in Section 1(a)(viii),
and to the extent not otherwise described therein, all trademarks, tradenames
and service marks, including, without limitation, those listed on Schedule II to
the Intellectual Property Security Agreement, which are registered in the United
States Patent and Trademark Office, any office of any state or any other
governmental authority, or in any country and all licenses of trademarks,
tradenames and service marks, as well as any unregistered marks used by any
Company Party in the United States and elsewhere, including any logos and/or
designs used in connection with any such trademarks, tradenames or service marks
and all registrations, recordings and applications for registration thereof;
Section 2. Representations, Warranties and Covenants. Each Company
Party hereby represents and warrants, covenants and agrees, with respect to
itself, that:
(a) Each Company Party owns each item of Collateral pledged by
it hereunder, and such Collateral is and shall at all times be free and clear of
any security interest, mortgage, hypothecation, pledge, lien or encumbrance or
restriction on the transfer thereof, except for (i) the Security Interests
created under this Security Agreement and the other Security Documents, (ii) the
Liens and encumbrances listed on Schedule C attached hereto (the "Existing
Liens") and (iii) Permitted Liens. Each Company Party shall pay and discharge,
or cause to be paid and discharged, when due and payable, all amounts secured by
any of the Existing Liens or Permitted Liens. Each Company Party shall maintain,
preserve and protect the security interests granted by it hereunder for as long
as this Security Agreement shall remain in full force and effect.
(b) Schedule D hereto sets forth as of the date hereof each
city, state and county where each Company Party has a place of business
(including each Company Party's chief executive office and principal place of
business) and each additional county and state where any Asset of each Company
Party is located.
(c) The information set forth in Schedules C and D attached
hereto is true, complete and correct as of the date hereof.
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<PAGE> 11
(d) Each Company Party will not (i) keep Collateral or After
Acquired Collateral in any State in which financing statements have not
theretofore been filed in a manner sufficient to perfect under the UCC of such
State the Security Interests in the Collateral and the After Acquired Collateral
granted hereby, or (ii) change its name or change its chief executive office or
places of business from that shown in Schedule D, unless the Company Party (A)
gives notice to the Required Holders of such event, (B) does the appropriate
filing or other action necessary to perfect the Liens of the Holders on the
Collateral and the After Acquired Collateral and (C) delivers an Officers'
Certificate to the Required Holders stating that its obligations under Section
2(d)(B) have been fulfilled and setting forth the actions taken to comply with
such section.
(e) Each Company Party will maintain or cause to be maintained
at its expense, with financially sound and reputable insurers having a claims
paying ability of "A" or better by Standard & Poor's ("S&P") or Moody's Investor
Service, Inc. ("Moody's") insurance with respect to the Collateral and After
Acquired Collateral against loss or damage of the kinds customarily insured
against by corporations of established reputations engaged in the same or
similar business and similarly situated as such Company Party, of such types and
in such amounts as are customarily carried under similar circumstances by such
other corporations and with such deductible amounts as are customary for
companies in similar businesses similarly situated. Each Company Party will
cause the Holders to be named as an additional insured and loss payee, as its
interests may appear, under all present or future policies of insurance that
insure any of the Collateral or After Acquired Collateral. Each Company Party
will cause all policies of insurance to (i) provide that insurance proceeds with
respect to the Collateral or After Acquired Collateral shall be adjusted with
such Company Party (which shall give notice of any such loss to the Holders)
prior to a Default in payment of any Note or an Event of Default, other than an
Event of Default related to the failure to pay principal of any Note, and, on
and after a Default in payment of principal of any Note or an Event of Default,
other than an Event of Default related to the failure to pay principal of any
Note, shall be adjusted with, and payable to, the Holders and (ii) include
waivers by the insurer of all claims for insurance premiums against the Holders.
Each Company Party shall use its best efforts to obtain insurance that provides
that any losses shall be payable to the Holders, notwithstanding any act,
failure to act or negligence of, or violation of warranties, declarations or
conditions contained in such policy by, such Company Party or Holders. Insurance
policies required to be obtained hereunder shall contain an agreement by the
insurer that it will not cancel such policy except after 30 days' prior notice
to the Required Holders. Each Company Party shall deliver to the Holders
originals of such policies of insurance or certificates evidencing such
policies, together with the evidence of payment (which evidence may be an
Officers' Certificate of such Company) of all premiums then due thereon and such
Company Party shall, at least five days prior to the expiration of any such
insurance, deliver other original policies or other certificates of the insurers
evidencing the renewal of such insurances. Should any Company Party fail to
effect, maintain or renew any insurance provided for in this Section, or to pay
the premium therefor, or to deliver to the Holders any of such policies or
certificates, then in any of said events each Holder, at its option, but without
obligation so to do, may, upon 10 days' notice to such Company Party procure
such insurance. Any sums expended by the Holders to procure such insurance shall
be repaid by such Company Party within 10 days following the date on which such
expenditure shall be made by the Holders. Each Company Party annually will
deliver to the Holders a letter from an insurance broker with whom such Company
Party regularly conducts its business with respect to insurance
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setting forth the insurance obtained pursuant to this Section 2(e) and then in
effect and stating whether, as to amounts, coverage and provisions, such
insurance protects such Company Party against any and all risks that are
customarily insured against by companies in similar businesses similarly
situated. Such letter shall also set forth any recommendation of such
independent insurance broker as to additional insurance, if any, required in
order to make insurance coverage of the Collateral consistent with practice
regarding insurance coverage in the Company Party's industry. Upon notice of a
Default in payment of principal of any Note or an Event of Default, other than
an Event of Default in payment of principal of any Note, the Holders, (i) may,
(ii) upon notice from the Required Holders shall and (iii) shall, in any event,
upon acceleration of the Obligations in accordance with Section 6 of the Notes,
send written notice to all insurers for which it has received policies of
insurance or certificates evidencing such policies informing them of the
occurrence of such Default or Event of Default and instructing them to adjust
all claims as set forth above until such insurers are notified to the contrary
by the Required Holders. If such Event of Default is cured or waived prior to
acceleration of any Obligations, the Required Holders shall advise such insurers
to adjust claims with the Company Party.
(f) Each Company Party, at its own expense: (i) will do all
acts and things, and will make, execute, acknowledge and deliver, and file and
record in the proper filing and recording places all such instruments
(including, without limitation, mortgages, assignments, security agreements,
financing statements and continuation statements), required (and any that are
reasonably requested by the Holders) to establish, perfect, maintain and
continue the perfection and priority of the Security Interests of the Holders in
the Collateral and the After Acquired Collateral, in the order of priority as
described in Section 1(b), and, in addition, authorizes the Holders to execute
and file in the name of the Holders any financing or continuation statements
that the Holders may determine to be necessary or advisable to protect their
security interests with respect to the Collateral and the After Acquired
Collateral; (ii) will make all searches necessary (and any deemed necessary by
the Holders) to establish and determine the validity and priority of such
Security Interests of the Holders; provided, however, that, so long as no Event
of Default has occurred and is continuing, the Company Party shall not be
required to make any search in any location more frequently than once a year;
and (iii) will satisfy all claims and charges, other than Permitted Liens and
Existing Liens, that might reasonably be expected to materially prejudice,
imperil or otherwise adversely affect the Collateral or the After Acquired
Collateral or affect the existence, perfection or priority of such Security
Interests. A carbon, photographic or other reproduction of this Security
Agreement or a financing statement shall be sufficient as a financing statement
and may be filed in lieu of the original in any or all jurisdictions which
accept such reproductions. Each Company Party, at its own expense, will cause
any New Subsidiaries (as defined in the Purchase Agreement), to do all acts and
things required to comply with the protection and perfection of the Holders'
Security Interest under this Section 2(f), in accordance with the provisions of
Section 1(b).
(g) Neither the execution and delivery of this Security
Agreement by the Company Party, the consummation of the transactions herein
contemplated nor the fulfillment of the terms hereof violate the terms of any
agreement, indenture, mortgage, deed of trust, equipment lease, instrument or
other document to which any Company Party is a party, or conflict with any Law,
applicable to such Company Party of any court or any government, regulatory body
or administrative agency or other governmental body having jurisdiction over
such Company Party or its Assets, to the extent that such violation or conflict
would have a
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material adverse effect on the financial condition, business, assets,
liabilities or prospects of such Company Party, or on the value of the
Collateral, the After Acquired Collateral or the Security Interests.
(h) No consent or approval that has not been obtained prior to
the date hereof of any governmental body, regulatory authority or securities
exchange was or is necessary as a condition to the validity of the Security
Interests granted hereunder in the Collateral and the After Acquired Collateral
and this Security Agreement is effective to vest in the Holders the rights of
the Holders in the Collateral and the After Acquired Collateral as set forth
herein.
(i) For so long as any of the Notes shall remain outstanding,
the Company Party shall not take any action discharging, canceling,
extinguishing or otherwise impairing the Company Party's right, title and
interest in and to any of the Collateral in contravention of the terms of the
Purchase Agreement, the Notes or any of the Ancillary Agreements.
(j) The Company Party shall pay and discharge any taxes,
assessments and governmental charges and levies against any Collateral and the
After Acquired Collateral prior to delinquency thereof and shall keep all
Collateral and the After Acquired Collateral free of any unpaid charges
whatsoever, unless such charges are being contested in.
Section 3. Administration of the Collateral. The Holders shall
administer the Collateral and the After Acquired Collateral in accordance with
the provisions hereof.
Section 4. Release and Substitution of Collateral. The Collateral and
the After Acquired Collateral shall not be released from the Security Interests
created hereunder and no Assets shall be substituted for any of the Collateral
except in accordance with the provisions of Article V of the Purchase Agreement,
which provisions are hereby incorporated herein by reference.
Section 5. Default; Remedies.
(a) Defined. For purposes of this Security Agreement, the
terms "Default" and "Event of Default" shall have the respective meanings
provided in the Notes and shall include an event that with the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
(b) Exercise of Remedies Under the Security Agreement. If a
Default in payment of any Obligations shall have occurred or any Event of
Default shall have occurred and be continuing, or would result therefrom, the
Holders may commence the taking of such actions (or refrain from taking actions)
toward collection or enforcement of this Security Agreement and the Collateral
or After Acquired Collateral (or any portion thereof), including, without
limitation, action toward foreclosure upon any Collateral or After Acquired
Collateral, as it deems appropriate in its sole discretion or as instructed by
the Required Holders. If any such Default or Event of Default that was the basis
for the commencement of such action shall have been cured or waived, and, in the
case where there has been an acceleration, recession of such acceleration shall
have occurred, in each case in accordance with the terms of the Purchase
Agreement, the Notes, or any of the Ancillary Agreements, as applicable, any
direction to the Holders to take
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any action in connection with the aforementioned notice shall be deemed
rescinded upon notification by the Holders of such cure, waiver or rescission of
acceleration, as the case may be.
(c) Remedies Generally. If a Default in the payment of any Obligations shall
have occurred or any Event of Default shall have occurred and be continuing or
would result therefrom, the Holders or by agents or attorneys may exercise in
respect of the Collateral or After Acquired Collateral all of the rights and
remedies set forth herein or otherwise available to a secured party upon Default
under any applicable provision of the UCC or any other applicable jurisdiction
and, in conjunction with or in addition to such rights and remedies, may
themselves or by agents or attorneys retain the Collateral or the After Acquired
Collateral or sell, assign, transfer, or dispose of, endorse and deliver the
whole or, from time to time, any part of the Collateral or the After Acquired
Collateral at public or private sale, for cash, upon credit or for other Assets,
for immediate or future delivery, and for such price or prices and on such other
terms as are satisfactory to the Holders (in their discretion) without liability
for loss or damage. Upon consummation of any such sale, the Holders shall have
the right to assign, transfer, endorse and deliver to the purchaser or
purchasers thereof the Collateral or After Acquired Collateral so sold. Each
such purchaser at any such sale shall hold the Assets sold absolutely free from
any claim or right on the part of any Company Party, and each Company Party
hereby waives (to the full extent permitted by law) all rights of redemption,
stay or appraisal which such Company Party now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Holders shall give such Company Party ten days' written notice (which each
Company Party agrees shall be deemed to be reasonable notification within the
meaning of Section 9-504(3) of the relevant UCC) of the Holder's intention to
make any such public or private sale. Any such sale shall be held at such time
or times and at such place or places as the Holders may fix. At any such sale,
the Collateral or After Acquired Collateral, or portion thereof to be sold, may
be sold as an entirety or in separate portions, as the Holders may, in their
discretion, determine. The Holders shall not be obligated to make any sale of
the Collateral or After Acquired Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of the Collateral or After Acquired
Collateral may have been given. The Holders may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case sale of all or any part of the Collateral or After Acquired
Collateral is made on credit or for future delivery, the Collateral or After
Acquired Collateral so sold may be retained by the Holders until the sale price
is paid by the purchaser or purchasers thereof, but the Holders shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral or After Acquired Collateral so sold and, in case of any
such failure, such Collateral may or After Acquired Collateral be sold again
upon like notice. As an alternative to exercising the power of sale herein
conferred upon it, the Holders may proceed by suit or suits at law or in equity
to foreclose this Security Agreement and sell the Collateral or After Acquired
Collateral or any portion thereof pursuant to judgment or decree of a court or
courts having competent jurisdiction. Any of the Collateral or After Acquired
Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Holders or after any overhaul or repair
that the Holders shall determine to be commercially reasonable. If, under
mandatory requirements of applicable law, the Holders shall be required to make
disposition of the Collateral or After Acquired Collateral within a period of
time that does not permit the giving of notice to a Company Party as provided
herein, the Holders need give
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such Company Party only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of law.
(d) Remedies; Obtaining the Collateral Upon Default. Each
Company Party agrees that, if a Default or Event of Default shall have occurred
and be continuing, or would result therefrom then and in every such case, and in
addition to the rights and remedies available to a secured party under any
applicable provisions of the Uniform Commercial Code, or any other applicable
law, the Holders, may:
(i) personally, or by agents or attorneys,
immediately take possession of the
Collateral or After Acquired Collateral or
any part thereof from such Company Party or
any other person who then has possession of
any part thereof, with or without notice or
process of law, and for that purpose may
enter upon such Company Party's premises
where any of the Collateral or After
Acquired Collateral is located and remove
the same and use in connection with such
removal any and all services, supplies, aids
and other facilities of such Company Party;
(ii) instruct the obligor or obligors on any
agreement, instrument or other obligation
constituting Collateral or After Acquired
Collateral to make any payment or render any
performance required by the terms of such
agreement, instrument or obligation directly
to the Holders or their designee;
(iii) withdraw all monies, securities and
instruments held by the Holders in any
Financial Account (including but not limited
to the Collateral Account, the Interest
Escrow Accounts or the Funded Commitment
Facility Escrow Accounts), or otherwise for
application to the Obligations;
(iv) sell or otherwise liquidate, or direct such
Company Party to sell or otherwise
liquidate, any or all investments made in
whole or in part with the Collateral or
After Acquired Collateral or any part
thereof, and take possession of the proceeds
of any such sale or liquidation; and
(v) take possession of the Collateral or After
Acquired Collateral or any part thereof by
directing such Company Party in writing to
deliver the same to the Holders at any place
or places designated by the Required
Holders, in which event such Company Party
shall at its own expense:
(A) forthwith cause the same to be
moved to the place or places so
designated by the Agent and there
delivered to the Holders;
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(B) store and keep any Collateral or
After Acquired Collateral so
delivered to the Holders at such
place or places pending further
action by the Required Holders as
provided in this Section 5(d); and
(C) while any such Collateral or After
Acquired Collateral shall be so
stored and kept, provide such guard
and maintenance services as shall
be necessary to protect the same
and to preserve and maintain such
Collateral or After Acquired
Collateral in good condition;
it being understood that such Company Party's obligation so to deliver
the Collateral or the After Acquired Collateral is of the essence of
this Security Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Holders shall be entitled to a
decree requiring specific performance by such Company Party of such
obligation.
(e) Collateral Account. The Required Holders shall deposit the
proceeds of any Collateral or the After Acquired Collateral obtained or disposed
of pursuant to this Section 5 in the Collateral Account.
(f) Intellectual Property Collateral. The Holders may exercise
in respect of the Intellectual Property Collateral (as that term is defined in
the Intellectual Property Security Agreement), in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party upon Default under the N.Y. Uniform Commercial Code,
and may also (i) require the Company or any of its Subsidiaries to, and the
Company and each of its Subsidiaries hereby agree that they will, at their
expense, and upon the request of any Holder forthwith, assemble all or part of
the documents and things embodying all or any part of the Intellectual Property
Collateral as directed by the Holders and make them available to the Holders at
a place and time to be designated by the Holders which is reasonably convenient
to the parties and (ii) without notice, except as specified below, sell the
Intellectual Property Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Holder's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Holders may
deem commercially reasonably. In the event of any sale, assignment, or other
disposition of any of the Intellectual Property Collateral of the Companies or
any of its Subsidiaries, the goodwill of the business connected with and
symbolized by any Trademarks subject to such disposition shall be included and
the Company and its Subsidiaries, as the case may be, shall supply to the
Holders the Company's and its Subsidiaries', as the case may be, know-how and
expertise, and documents and things embodying the same, relating to the
manufacture, distribution, advertising and sale of the products or the provision
of services relating to any Intellectual Property Collateral subject to such
disposition, and the Company's and its Subsidiaries', as the case may be,
customer lists and other records and documents relating to the Intellectual
Property Collateral and to the manufacture, distribution, advertising and sale
of such products and services. The Company and its Subsidiaries agree that, to
the extent notice of sale shall be required by law, at least ten days' notice to
the Company and its Subsidiaries, as the case may be, of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Holders shall not be obligated to make
any
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sale of the Intellectual Property Collateral regardless of notice having been
given. The Holders may adjourn the public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(g) Preventing Impairment of the Collateral. Regardless of
whether there shall have occurred any Default or Event of Default, the Holders
may institute and maintain or cause in the name of each Company Party or of the
Required Holders, or both, to be instituted or maintained, such suits and
proceedings as the Required Holders may be advised by counsel shall be necessary
or expedient to prevent any impairment of the Collateral or After Acquired
Collateral in contravention of the terms hereof or of the Purchase Agreement,
the Notes or any Ancillary Agreements.
Section 6. Holders Appointed Attorney-in-Fact. Each Company Party
hereby constitutes and appoints the Holders their attorney-in-fact for all
Collateral for the purpose of carrying out the provisions, but subject to the
terms and conditions, of this Security Agreement and taking any action and
executing any instrument, including, without limitation, any financing
statements or continuation statements, and taking any other action to maintain
the validity, perfection and enforcement of the Security Interests intended to
be created hereunder, that the Holders may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest.
Section 7. Purchase of Collateral by Required Holders. At any sale of
the Collateral or After Acquired Collateral, whether pursuant to power of sale
or otherwise hereunder, any Holder of the Notes may, to the extent permitted by
applicable law, bid for and purchase, free from any right of redemption, stay or
appraisal (all such rights being hereby waived and released by each Company
Party to the extent permitted by law), the Collateral or After Acquired
Collateral or any party thereof or any interest therein and upon compliance with
the terms of such sale may hold, retain, exploit, resell or otherwise dispose of
such Assets without further accountability to the Company Party for the proceeds
of such sale. Each Company Party will execute and deliver, or cause to be
executed and delivered, such instruments, endorsements, assignments, waivers,
certificates and other documents and take such further action as the Holder of
the Notes shall reasonably request in connection with any such sale.
Section 8. Disposition of Proceeds. The proceeds of any sale or other
disposition of the whole or any part of the Collateral or After Acquired
Collateral by the Holders pursuant to this Security Agreement, together with any
other monies held by the Holders pursuant to this Security Agreement, shall be
applied by the Holders in accordance with the provisions of the Notes.
Section 9. Waiver of Claims. Except as otherwise provided in this
Security Agreement, EACH COMPANY PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NOTICE OF JUDICIAL HEARING IN CONNECTION WITH THE REQUIRED
HOLDERS' TAKING POSSESSION OR THE REQUIRED HOLDERS' DISPOSITION OF ANY OF THE
COLLATERAL IN ACCORDANCE WITH THE TERMS HEREOF. THE PURCHASE AGREEMENT, THE
NOTES, AND ANY ANCILLARY AGREEMENTS INCLUDING, WITHOUT LIMITATION, ANY AND ALL
PRIOR NOTICES
16
<PAGE> 18
AND HEARINGS FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT THE
COMPANY PARTY WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE
UNITED STATES OR OF ANY STATE, and, to the fullest extent permitted by
applicable law, each Company Party hereby further waives:
(a) all damages occasioned by such taking of possession except
any damages that are the direct result of the Holders' gross negligence, bad
faith or willful misconduct; and
(b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the Holders'
rights and powers hereunder.
Any sale of, or the exercise of any options to purchase, or
any other realization upon, any Collateral or After Acquired Collateral shall
operate to divest all right, title, interest, claim and demand, at law or in
equity, of the Company Party therein and thereto, and shall be a perpetual bar
both at law and in equity against the Company Party and against any and all
persons claiming or attempting to claim the Collateral or After Acquired
Collateral so sold, optioned or realized upon, or any part thereof, through and
under such Company Party.
Section 10. Remedies Cumulative; No Waiver. Each right, power and
remedy of the Holders provided for herein, in the Purchase Agreement, the Notes
and any Ancillary Agreement or in another agreement pursuant to which a Lien is
created in favor of any Holder, or now or hereafter existing at Law or in
equity, by statute or otherwise, shall be cumulative and concurrent and shall be
in addition to every other right, power or remedy of any Holder provided for
herein, in the Purchase Agreement, the Note or in any other Ancillary Agreement
or in another agreement pursuant to which a Lien is created in favor of any
Holder or now or hereafter existing at Law or in equity, by statute or
otherwise. No failure on the part of any Holder to exercise, and no delay in
exercising, any right, power or remedy hereunder or under any such other
agreement or now or hereafter existing at Law or in equity, by statute or
otherwise, shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. No notice
to or demand on any Company Party hereunder shall, of itself, entitle it to any
other or further notice or demand in the same, similar or other circumstances.
Section 11. Additional Collateral. Without notice or consent of any
Company Party and without impairment of the Security Interests and rights
created by this Security Agreement, the Holders may accept from any person or
persons additional Collateral or other security for the Obligations. The
creation of the security interest created hereunder shall not prevent the
Holders from resorting to such additional Collateral or security without
affecting the Holders' rights hereunder. The Holders' acceptance of any such
additional Collateral or security shall not prevent the Holders from resorting
to the Collateral without affecting the Holders' rights in and to such
additional Collateral or the After Acquired Collateral or security.
Section 12. Further Assurances. Each Company Party agrees (a) that it
shall, at its own expense, file or record such notices, financing statements,
continuation statements or other documents as may be necessary to perfect the
Security Interests, and as the Holders may reasonably request, such instruments
to be in form and substance satisfactory to the Holders and (b) that each
Company Party shall, and shall cause all new Subsidiaries (as that term is
defined in
17
<PAGE> 19
the Purchase Agreement), at its own expense, do such further acts and things and
execute and deliver to the Holders such additional conveyances, assignments,
agreements and instruments as the Holders may at any time reasonably request in
connection with the administration and enforcement of this Security Agreement or
relative to the Collateral or the After Acquired Collateral or any part thereof
or in order to assure and confirm unto the Holders, their rights, powers and
remedies hereunder.
Section 13. Expenses and Indemnification.
(a) Expenses. The Company Parties agree to pay to the Holders
from time to time upon demand, all reasonable fees, costs and expenses of the
Holders (including, without limitation, the reasonable fees and disbursements of
counsel) (i) arising in connection with the preparation, execution, delivery,
modification or termination of this Security Agreement or the enforcement of any
of the provisions hereof or (ii) incurred or required to be advanced in
connection with the sale or other disposition of any Collateral or After
Acquired Collateral pursuant to this Security Agreement and the preservation,
protection or defense of the Holders' rights under this Security Agreement or in
and to the Collateral or After Acquired Collateral.
(b) Stamp and Other Taxes. The Company Parties hereby agree to
indemnify each Holder for, and hold each of them harmless against, any present
or future claim for liability for any stamp or other similar tax and any
penalties or interest with respect thereto, which may be assessed, levied or
collected by any jurisdiction in connection with this Security Agreement or any
Collateral or After Acquired Collateral.
(c) Filing Fees, Excise Taxes, Etc. The Company Parties hereby
agree to pay or to reimburse the Holders for any and all amounts in respect of
all search, filing, recording and registration fees, taxes, excise taxes and
other similar imposts which may be payable or determined to be payable in
respect of the execution, delivery, performance and enforcement of this Security
Agreement.
(d) Survival of Obligations. The Obligations of the Company
Parties set forth in this Section 13 shall survive the execution, delivery and
termination of this Security Agreement and the payment of all other Obligations.
Section 14. Obligations Absolute. The liability of the Company Parties
under this Security Agreement shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by (a) any change in the time, place or manner of payment of
all or any of the Obligations, or in any other term of this Agreement or the
Purchase Agreement, any Ancillary Agreement or the Notes, any waiver,
indulgence, renewal, extension, amendment or modification of or addition,
consent or supplement to or deletion from or any other action or inaction under
or in respect of this Agreement or the Purchase Agreement, the Notes or any
Ancillary Agreement or any assignment or transfer thereof; (b) any lack of
validity or enforceability, in whole or in part, of this Agreement or the
Purchase Agreement, any Ancillary Agreement or the Notes; (c) any furnishing of
any additional security for the Obligations or any acceptance thereof or any
release or non-perfection of any Security Interests in the Assets other than the
Collateral or After Acquired Collateral; (d) any limitation on any party's
liability or obligations under this
18
<PAGE> 20
Agreement or the Purchase Agreement, any Ancillary Agreement or the Notes; (e)
any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to any Company Party,
or any action taken with respect to this Security Agreement by any trustee or
receiver, or by any court, in any such proceeding, whether or not the Company
Party shall have notice or knowledge of any of the foregoing; (f) any exchange,
release or amendment or waiver of or consent to departure from this Agreement,
the Purchase Agreement, the Notes, any Ancillary Agreement or any other
agreement pursuant to which a Lien is created in favor of any Holder, pursuant
to which a person other than the respective Company Party has granted a security
interest; or (g) any other circumstance that might otherwise constitute a
defense available to, or discharge of, any Company Party.
Section 15. Waiver. To the extent permitted by applicable law, each
Company Party hereby waives promptness, diligence, notice of acceptance and any
other notice with respect to any of the Obligations and this Security Agreement
and any requirement that the Holders protect, secure, perfect or insure any
security interest or any Assets subject thereto or exhaust any right or take any
action against the Company Party or any other person or entity; provided,
however, that the Holders shall in any event take such care in the handling of
any Collateral or After Acquired Collateral in its possession as it takes with
respect to the Assets of a similar nature in its possession.
Section 16. Termination. Upon payment in full and satisfaction of all
of the Obligations, this Security Agreement shall terminate and the Holders
shall reassign and redeliver to each Company Party all Collateral and After
Acquired Collateral hereunder that has not been sold, disposed of, retained or
applied by the Holders in accordance with the terms hereof and the Notes. Such
reassignment and redelivery shall be without warranty by or recourse to the
Holders, and shall be at the expense of such Company Party. At such time, this
Security Agreement shall no longer constitute a Lien upon or grant any Security
Interest in any of the Collateral and After Acquired Collateral; and the Holders
shall, at such Company Party's expense, deliver to the Company Party written
acknowledgment thereof and of cancellation of this Security Agreement in a form
as reasonably requested by the Company Party and adequate for proper filing or
recording in such offices and such jurisdictions as the Company Party reasonably
deems necessary to release the Security Interests granted hereby. This Security
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned upon the insolvency, bankruptcy or reorganization of any
Company Party, all as though such payment had not been made.
Section 17. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery or by registered or certified mail, postage prepaid, return
receipt requested or by nationwide overnight delivery service (with charges
prepaid) addressed as follows:
If to any Company Party:
Intracel Corporation
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
19
<PAGE> 21
Attention: Chief Executive Officer
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
cc: Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Joseph W. Bartlett, Esq.
If to the Holders:
Northstar High Yield Fund
Northstar High Total Return Fund
Northstar High Total Return Fund II
Northstar Strategic Income Fund
300 First Stamford Place
Stamford, Connecticut 06902
Attention: Mr. Michael A. Graves
Fax Number: (203) 862-8601
Confirm Number: (203) 863-6224
cc: Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Karen C. Wiedemann, Esq.
Each party hereto may by notice to the other party designate such additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; and three calendar days after
mailing if sent by registered or certified mail (except that a notice of change
of address shall not be deemed to have been given until actually received by the
addressee) or one day after delivery to an overnight express service for next
day delivery, as the case may be. The Company Parties may give notice to the
Holders at the address set forth above, or any different address as shall be
specified for them in the Company's records.
Section 18. Binding Agreement; Assignment. This Security Agreement
shall be binding upon and inure to the benefit of the Company Parties and the
Holders and their respective successors and permitted assigns. Neither this
Security Agreement nor any Interest herein or in the Collateral or After
Acquired Collateral, or any part thereof, may be assigned by the Company
Parties; provided, however, that this Security Agreement may be assigned by a
Company Party and shall be deemed to be automatically assigned by a Company
Party to any person who succeeds to the Company Party, provided however, that
the Company Parties shall not as a result of such assignment be relieved of any
Obligations hereunder or under the Purchase Agreement, the Notes or any
Ancillary Agreements. This Security Agreement shall be deemed to be
automatically assigned by the Holders to any person who succeeds to or replaces
the
20
<PAGE> 22
Holders in accordance with the terms hereof, and its assignee shall have all
rights and powers of, and act as, the Holder hereunder.
Section 19. Governing Law. THE PARTIES HERETO EXPRESSLY ACKNOWLEDGE AND
AGREE THAT, IN ACCORDANCE WITH THE PROVISIONS OF NEW YORK GENERAL OBLIGATIONS
LAW SECTION 5-1401 GOVERNING AGREEMENTS RELATING TO ANY OBLIGATION ARISING OUT
OF A TRANSACTION COVERING IN THE AGGREGATE NOT LESS THAN $250,000, THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR THE PERFECTION OF
THE SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN NEW
YORK. TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THE
PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK
STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY
AGREEMENT, AND IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE PARTIES
HERETO IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 20. Amendments. This Security Agreement may not be amended or
modified except by a written agreement signed by the Company and the required
Holders.
Section 21. Severability. In the event that any provision contained in
this Security Agreement shall for any reason be held to be illegal or invalid
under the Laws of any jurisdiction, such illegality or invalidity shall in no
way impair the effectiveness of any other provision hereof, or of such provision
under the laws of any other jurisdiction; provided, that in the construction and
enforcement of such provision under the laws of the jurisdiction in which such
holding of illegality or invalidity exists, and to the extent only of such
illegality or invalidity, this Security Agreement shall be construed and
enforced as though such illegal or invalid provision had not been contained
herein.
Section 22. Headings. Section headings used herein are inserted for
convenience only and shall not in any way affect the meaning or construction of
this Security Agreement.
Section 23. Counterparts. This Security Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be an original, and all of
21
<PAGE> 23
which shall together constitute but one and the same instrument. A complete set
of counterparts shall be lodged with the Holders.
22
<PAGE> 24
IN WITNESS WHEREOF, the Company Parties and the Holders have caused
this Security Agreement to be executed and delivered by their respective
officers thereunto duly authorized as of the date first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. McKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
BARTELS, INC.
By: /s/ SIMON R. McKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
PERIMMUNE HOLDINGS, INC.
By: /s/ SIMON R. McKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
PERIMMUNE, INC.
By: /s/ SIMON R. McKENZIE
----------------------------------
Name: Simon R. McKenzie
Title: President and Chief
Executive Officer
NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
----------------------------------
Name: Michael A. Graves
Title: Vice President
23
<PAGE> 25
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
----------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
----------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
----------------------------------
Name: Michael A. Graves
Title: Vice President
24
<PAGE> 26
Schedule A
See attached.
<PAGE> 27
SCHEDULE A
INTELLECTUAL PROPERTY SECURITY AGREEMENT
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Monoclonal Antibodies
Tumor specific monoclonal antibodies US 4,828,991
Tumor associated monoclonal antibodies derived from US 4,997,762
human B-cell line 5,180,814
AT E71410
AU 589,351
635,511
BE 0151030
CA ??3130
CH 0151030
DE P3585093
DK 408/85
EP 0151030
ES 539,987
FR 0151030
GB 0151030
GR 850,179
HU 209,519
IE 58,859
IL 74,156
91,045
IT 0151030
JP 2021518 269230/93
LU 0151030
NL 0151030
NZ 210,867
PT 79,894
SE 0151030
ZA 8,500,689
</TABLE>
<PAGE> 28
Schedule A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Tumor specific monoclonal antibodies US 5,106,738
Tumor associated monoclonal antibody 81AV78 US 5,348,880
AU 656785
CA 2108767
EP 92913154.8
FI 935038
JP 500176/93
KR 93/703412
WO US92/04023
Tumor associated monoclonal antibodies US 5,474,755
Monoclonal Antibody 88BV59 US 08/341469
AU 651,261
CA 2083542
EP 92203827.8
FI 925638
HU 9203932
ID P-005142
IL 103758
JP 331961/92
KR 92/23925
NO 924803
NZ 245443
TW 81109353
ZA 92/8880
Monoclonal antibody 88BV59, subclones and method of making US 08/192069
AU 17425/95
CA 2158572
EP 95909472.3
FI 954700
JP 52078/95
</TABLE>
<PAGE> 29
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
KR 95/?Q4282
WO US95/01440
Tumor associated monoclonal antibody 123AV16 US 5,495,002
ID P-950285
WO EP95/00581
ZA 95/1113
In-vitro method for producing antigen specific human US 5,229,275
monoclonal antibodies
AT E123,311
AU 647,112
BE 0,454,225
CA 2,041,213
CH 0,454,225
DE 69,110,084.5
555
DK 0,454,225
EP 0,454,225
ES 0,454,225
FI 912,016
FR 0,454,225
GB 0,454,225
GR 3,017,162
IE 66,523
IT 0,454,225
JP 191343/91
KR 91/6661
NL 0,454,225
SE 0,454,225
ZA 91/2998
Imaging infectious foci with human IgM 16.88 US 08/346,988
</TABLE>
<PAGE> 30
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Chelators
Method for purifying chelator conjugated
compounds US 5,244,816
AU 656,717
CA 2,069,303
DK 0488/92
EP 90915696.0
FI 921,579
IE 3585/90
JP 514572/90
KR 92/700833
NZ 235,618
PT 95574
WO US90/05772
ZA 90/8095
Chelating agents for attaching metal ions
to proteins US 5,292,868 08/430657
5,488,126
AT E128035
AU 638,757
BE 0429644
CA 2,033,086
CH 0429644
DE 69022542.3
DK 0429644
EP 0429644 95200465.3
ES 0429644
FI 910,329
FR 0429644
GB 0429644
DE 1867/90
</TABLE>
<PAGE> 31
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0429644
JP 513354/90
KR 91/700100
NL 0429644
SE 0429644
WO US90/02910
ZA 90/4047
Technetium-99M labelling
of proteins US 5,317,091
AU 658,403
CA 2104943
EP 92907824.4
FI 933760
JP 507406/92
KR 93/702561
WO US92/01577
Chelator IDAC-2 and methods
for purifying chelator US 08/278721
conjugated compounds 08/442856
WO US95/09285
New Polyaminocarboxylate
chelators US 95/00068
WO US95/00068
Pre-Targeting
Site specific in vivo
activation of therapeutic
drugs US 5,433,955 07/300999
08/382469
AT E123414
AU 648,015
BE 0454783
CA 2025899
CH 0454783
DE 69019959.7
DK 0454783
</TABLE>
<PAGE> 32
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
EP 0454783
ES 0454783
FI 913,511
FR 0454783
GB 0454783
IT 0454783
JP 503116/90
KR 90/702129
LU 0454783
NL 0454783
NO 912,864
SE 0454783
WO 90/00503
In Vivo Binding Pair Pretargeting US 08/146186 08/452938
08/461267
AU 663,582
CA 2,107,558
EP 93906276 6
FI 934,857
ID P-005991
JP 515830/93
KR 93/703311
WO US93/01?58
ZA 93/3035
High yield preparation of dimene to
decamene chitin oligomers US 08/397464
IL 117052
WO US96/02705
</TABLE>
<PAGE> 33
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Polymer affinity systems in the delivery US 08/471264
of cytotoxic materials and other components
in the site of disease
Immunotherapy
Active specific immunotherapy US 5,484,596 08/540298
CTAA 28A32, the antigen recognized by
MCA 28A32 US 08/041529
AT 0537168
AU 660,927
BE 0537168
CA 2079601
CH 0537168
DE 0537168
DK 0537168
EP 0537168
ES 0537168
FI 924576
FR 0537168
GB 0537168
GR 0537168
IT 0537168
JP 508604/91
KR 92/702530
LU 0537168
NL 0537168
</TABLE>
<PAGE> 34
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
SE 0537168
WO US91/02459
Antigen recognized by MCA 16.88 US 5,338,832
AT E137674
AU 618,209
BE 0328578
CA 5?1,017
CH 0328578
DE P3855290.9
DK 1025/89
EP 0328578
FR 0328578
GB 0328578
HU 4187/88
IE 2034/88
IL 86,958
IT 0328578
JP 505983/89
LU 0328578
NL 0328578
NZ 225,280
SE 0328578
WO US88/02245
ZA 88/4777
Keyhole ? hemocyanin composition with enhanced US 5,407,912 08/343808
immunogenic activity
AS 09/009,121
AU 60519/94
CA 2121296
EP 942009978
</TABLE>
<PAGE> 35
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
FI 941725
ID P-940578
JP 104838/94
KR 94/8063
ZA 94/2510
Tumor associated epitope US 08/478591
CTAA 8IAV78, the antigen recognized
by human monoclonal US 08/150036
antibody 81AV78
AU 20085/92
CA 2102422
EP 92912470.9
FI 934,963
JP 500223/93
KR 93/703413
WO US92/04108
Others
Leukoregulin, an antitumor
lymphokine and its therapeutic uses US 4,849,506
5,082,657
AT E48617
AU 592,529
641,386
BE 0179127
CA 478,987
CH 0179127
DE P3574710.2
DK 170,781
170,423
EP 0179127
FI 85,867
FR 0179127
GB 0179127
</TABLE>
<PAGE> 36
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0179127
JP 501862/85
300409/93
LU 0179127
NL 0179127
NO 170423
SE 0179127
WO US85/00626
Urethral catheter and catheterization process US 5,120,316
Immunoreactive peptides of apo(2) US 08/266407
08/456840
08/457449
08/172461
AU 81,606/94
CA 2138605
EP 942036534
FI 945976
ID P-942209
JP 318892/94
KR 94/35809
ZA 94/10145
An alignment system to overlay abdominal
computer aided tomography and magnetic US 5,299,253
resonance anatomy with single photon
emulsion tomography
</TABLE>
<PAGE> 37
Schedule B
INTELLECTUAL PROPERTY SECURITY AGREEMENT
TRADEMARKS
OncoSpect(TM)
Oncovax(TM)
Onconostika(TM)
Oncoscan(TM)
Oncoselect(TM)
Apo-Tek Lp(a)*
Apo-Tek Apo E*
KLH Immune Activator*
* Final name and registration to be completed
<PAGE> 38
Schedule B
See attached.
<PAGE> 39
INTRACEL CORPORATION
EQUIPMENT LIST
<TABLE>
<CAPTION>
Vendor Equipment Description Total Cost
<S> <C> <C>
Osmonics, Inc. Steam Generator $ 48,670.00
PS. VSG-500/50TI
Kuhlmann Technologies, Inc. Pharmapro Sterilizer $133,460.00
PP263648D
Scientek Glassware Washer $ 61,135.00
Taylor Boiler & Equipment Parker Steam Boiler $ 22,310.00
Serial #48270
Inova Pao-Systeme Auto Filling, Inserting & Screw $180,671.00
Capping Machine
VFVM 4031 031 163
Urania Engineering Co. PouchPro System with $102,472.00
Desiccant Dispenser
Telenet, Inc. Phone System $ 72,264.62
Accraply, Inc. Infeed/Outfeed Turntable $ 13,295.00
Urania Engineering Co. Rotary Band Heat Sealer $ 16,060.00
with Ink Jet Printer Interface
Model 3500P
VWR Scientific Masterpro Balance with $ 4,176.31
2 Stat Data Printers
Model 620G X 001G
VWR Scientific Branson Sonifier with $ 3,232.08
1/4" micro tip
Model 450
Bio Rad Prep Cell with Power Pac $ 11,808.50
Model 491
Bio Rad Mini Protein II Cell/Power $ 5,423.00
Pac 3000 system
VWR Eppondorf Micro-centrifuge $ 2,395.00
Model 5417C
Ismaca USA, Inc. Bio-Line Dispensing System $ 35,958.00
Total $713,330.49
</TABLE>
<PAGE> 40
Schedule C
1. Certain patents, patent applications and trademarks serve as collateral under
that certain Intellectual Property Security Agreement, dated August 8, 1996,
among PerImmune Holdings, Inc., PerImmune, Inc., Akzo Nobel Pharma
International, B.V. and Organon Teknika Corporation.
2. Pursuant to an Assignment Agreement, dated December 27, 1995, by and among
Intracel Corporation, Northstar Advantage High Total Return Fund and Dade
International Inc. ("Dade"), Dade assigned all its rights, title and interest
in and to a Secured Promissory Note in the amount of $4,667,000 of Intracel,
dated November 16, 1995, issued to Dade and the Related Agreements (as
defined therein) to Northstar.
3. CoreStates obtained a security interest in all the Company's assets now owned
or hereinafter acquired, which was junior to that of Credianstalt and
Northstar, pursuant to the transactions contemplated by the Note and
Series A-III Warrant Purchase Agreement between the Company and CoreStates,
dated as of June 11, 1996 ("CoreStates Agreement").
4. The Company also has certain other short-term liabilities incurred in the
ordinary course of the Company's business.
5. Pursuant to a Loan and Security Agreement, dated September 30, 1997, by
Washington Economic Development Finance Authority, Intracel Corporation, and
Transamerica Business Credit Corporation, Transamerica Business Credit
Corporation obtained a security interest in certain equipment. The first
drawdown list is attached.
6. See Schedule 3.10 to the Purchase Agreement for Leasehold Interests.
<PAGE> 41
Schedule D
Principal Place of Business
INTRACEL CORPORATION
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
1871 NW Gilman Boulevard
Issaquah, Washington 98027
1330 Piccard Drive
Rockville, Maryland 20850
13351 Commerce Parkway
Richmond, British Columbia
V6V 2W3, Canada
BARTELS, INC.
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
PERIMMUNE, INC.
1330 Piccard Drive
Rockville, Maryland 20850
PERIMMUNE HOLDINGS, INC.
1330 Piccard Drive
Rockville, Maryland 20850
LOCATION OF ASSETS
See attached.
<PAGE> 42
LOCATION OF BARTELS, INC.'S ASSETS
<TABLE>
<CAPTION>
Ter # Rep Customer Address
<S> <C> <C> <C>
2 Stephen Harrison Steve Harrison demo
3 Michelle Brooks University of Louisville 530 South Jackson, Louisville, KY 40202
3 Michelle Brooks University of Kentucky 800 Rose Street, Lexington, KY 40536
3 Michelle Brooks Cleveland Metrohealth Mch 2500 Metrohealth Drive, Cleveland, OH 44109
3 Michelle Brooks Michelle Brooks
3 Michelle Brooks Children's Hospital Medical Center 3333 Bienel Avenue, Cincinnati, OH 45229
3 Michelle Brooks St. Elizabeth Medical Center 1054 Belmont Avenue, 1st FL, Youngstown, OH 44501
3 Michelle Brooks Lutheran Hospital 7950 ???? Blvd., Ft. Wayne, IN 48804
3 Michelle Brooks Thomas Memorial Hospital 4605 MacCorkle Ave SW, S. Charleston, WV 25309
3 Michelle Brooks Covance 8211 Scicor Dr., Indianapolis, IN 48214
4 Bruce Weissman William Jennings Bryan Dorm VAMC 5439 Garners Ferry Road, Columbia, SC 29209
4 Bruce Weissman Lab South, Inc. 3221 3rd Ave South, Burmingham, AL 35222
4 Bruce Weissman St. Francis Hospital One St. Francis Drive, Greenville, SC 29601
4 Bruce Weissman Erlanger Medical Center 975 E Third Street, Chatanooga, TN 37403
4 Bruce Weissman Quest Diagnostics 210 12th Ave South, Nashville, TN 37203
4 Bruce Weissman Floyd Medical Center Turner McCall Blvd, Rome, GA 30162
4 Bruce Weissman Bruce Weissman
4 Bruce Weissman ARL/Labrouth 536 S. Decatur Street, Montgomery, AL 35134
4 Bruce Weissman University of Alabama Hospital 521 14th St South, Birmingham, AL 35233
4 Bruce Weissman Sarasota Memorial Hospital 1700 South Tarntami Trail, Sarasota, FL 34239
4 Bruce Weissman ???? Hospital 110 Longwood Ave, Rockridge, FL 32955
4 Bruce Weissman to John Kota printer only inoperative/replaced by AAA0153981
Karen Trowartha
4 Bruce Weissman HCA W. FL Regional Medical Center 8383 N. Davis Hwy., Pensacola, FL 32514
5 Judy Houston Children's Medical Center Dallas, TX
6 Mark Forosisky Dakota Heartland Hospital 1720 S University, Fargo, ND 58103
6 Mark Forosisky St Johns Hospital 800 E Carpenter St, Springfield, IL 62769
6 Mark Forosisky The Pathology Center 8303 Dodge St, Omaha, NE 68144
6 Mark Forosisky Marian Health Center 801 5th Street, Sioux City, IA
6 Mark Forosisky Arkansas Children's Hospital 800 Marshall Street, Little Rock, AR 72202
6 Mark Forosisky McAlester Regional Hospital One Clark Bass Ave, McAlester, OK 74501
6 Mark Forosisky Med Center One/Q&R Clinic 222 N. 7th Street, Barrick, ND 58501
6 Mark Forosisky Midwest City Regional Hospital 2825 Parklawn Dr, Midwest City, OK 73110
6 Mark Forosisky in-house
8 Chuck La Croix Childrens Hospital 3020 Children's Way, San Diego, CA 92123
8 Chuck La Croix San Bern Community Hospital 1805 Medical Center Drive, San Bern, CA 92411
8 Chuck La Croix San Bern County Medical Center 780 E Gilbert, San Bernardino, CA 92401
8 Chuck La Croix Physicians Automated Lab 2101 H Street, Bakersfield, CA 90301
8 Chuck La Croix Bio Clinical Ref Lab 17420 Gridley Road, Artesia, CA 90701
8 Chuck La Croix Cottage Hospital Pueblo Bath St., Santa Barbara, CA 93102
<CAPTION>
Date
Ter # Rep Customer Reader Printer Plate Shipped
<S> <C> <C> <C> <C> <C> <C>
2 Steve Harrison Steve Harrison 137073 134441 6/30/97
3 Michelle Brooks University of Louisville 136763 AAA0118810 130699 10/27/97
3 Michelle Brooks University of Kentucky 136754 130753 10/31/97
3 Michelle Brooks Cleveland Metrohealth Mch 136751 130756 10/23/97
3 Michelle Brooks Michelle Brooks 136812 AAA0124094 130787 11/13/97
3 Michelle Brooks Children's Hospital Medical Cente 136881 AAA0151961 131373 12/12/97
3 Michelle Brooks St. Elizabeth Medical Center 136883 AAA153871 131388 12/8/97
3 Michelle Brooks Lutheran Hospital 138880 AAA0159250 131363 6/15/98
3 Michelle Brooks Thomas Memorial Hospital 137074 AAA0153965 131439 7/10/98
3 Michelle Brooks Covance 137064 AAA0153858 131429 7/16/98
4 Bruce Weissman William Jennings Bryan Dorm VAMC 136790 AAA0118792 130768 11/4/97
4 Bruce Weissman Lab South, Inc.
4 Bruce Weissman St. Francis Hospital 136744 130752 10/6/97
4 Bruce Weissman Erlenger Medical center 136745 130750 10/18/97
4 Bruce Weissman Quest Diagnostics 136749 130751 10/16/97
4 Bruce Weissman Floyd Medical Center 136751 130758 10/18/97
4 Bruce Weissman Bruce Weissman 136813 AAA0134445 130786 11/12/97
4 Bruce Weissman ARL/Labrouth 136791 AAA0118794 130758 10/25/97
4 Bruce Weissman University of Alabama Hospital 136884 AAA0133868 111376 12/4/97
4 Bruce Weissman Sarasota Memorial Hospital 136748 130755 10/7/97
4 Bruce Weissman Wueshalft Hospital 10/7/97
4 Bruce Weissman to John Kota AAA0159220 6/25/98
Karen Trowartha 136811 AAA0124306 130768 11/11/97
12/22/97
4 Bruce Weissman HCA W. FL Regional Medical Center 136898 AAA0153981* 131374 6/9/98*
5 Judy Houston Children's Medical Center 137092 AAA0159232 131432 7/30/98
6 Mark Forosisky Dakota Heartland Hospital 136888 AAA0153985 131359 12/4/97
6 Mark Forosisky St Johns Hospital 14362 AH8810767 11/19/97
6 Mark Forosisky The Pathology Center 136889 AAA0159242 131384 11/19/97
6 Mark Forosisky Marian Health Center 12/8/97
6 Mark Forosisky Arkansas Children's Hospital 136750 130757 10/22/97
6 Mark Forosisky McAleister Regional Hospital 136894 AAA0153860 131367 11/16/97
6 Mark Forosisky Med Center One/Q&R Clinic 137071 AAA0153980 131440 4/15/98
6 Mark Forosisky Midwest City Regional Hospital 136579 AAA0159221 131371 5/12/98
6 Mark Forosisky in-house 137065 131428 5/12/98
8 Chuck La Croix Childrens Hospital 136885 AAA0124097 131399 11/21/97
8 Chuck La Croix San Bern Community Hospital 136796 AAA0118791 130762 10/29/97
8 Chuck La Croix San Bern County Medical Center 136752 AAA8006075 130760 10/29/97
8 Chuck La Croix Physicians Automated Lab 10/20/97
8 Chuck La Croix Bio Clinical Ref Lab 136746 130749 10/24/97
8 Chuck La Croix Coltige Hospital 136892 AAA0153957 131361 11/25/97
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
Date
Tsr # Rep Customer Address Reader Printer Plate Stripped
- ----- ------------------ ------------------------ ------------------------------ -------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
8 Chuck La Croix St. Mary's Hospital 1050 Linden Ave., 136896 AAA0153867 131364 12/19/97
Long Beach, CA 90813
8 Chuck La Croix Samaritan Health Services 101 Civic Center Ln, 136893 AAA0153976 131366 3/1/96
Lake Havasu City, AZ
? Chuck La Croix Chuck La Croix demo 137079 AAA0159211 131424 6/25/98
9 Jon ??? Pathology Associates E 11604 Indiana, 136891 ELX800??? 13168? 12/5/97
Spokane, WA 99208
9 Jan ??? Infectious Limited 1624 South I Street, Suite 307, 136814 AAA0118786 130874 11/10/97
Laboratory Tacoma, WA
10 Linda Pickholtz Linda Pickholtz for demo 137061 AAA0153960 ?? ??
10 Linda Pickholtz Central PA Alliance Lab 1803 ?? Rose Ave., York, PA 17403 137067 AAA0153959 131126 6/27/98
Debbie Zumerling For SmithKline Beecham sent to DZ 136876 AAA0152978 131370 12/11/97
13 Bobbi Johnson Associated Pathology Labs ??? 136795 AAA0153968 130761 ??
John Kohl Florida Hospital ??? 137060 AAA0159246 137438 ??
John Kohl Omega Medical Labs ??? 136899 AAA0153974 131362 12/9/97
John Kohl MedLabs 212 Cherry Lane, ??? 136880 AAA0151952 131372 12/9/97
John Kohl Allegheny Valley Hospital ??? 136882 AAA0153817 131375 12/9/97
John Kohl ??? Medical Center 323 Jefford St., 137099 AAA0153814 131445 2/11/98
Clearwater, FL 34617
John Kohl Mount Sinai Hospital ?? Street, 9th Floor, NY NY 10029 137099 AAA0159225 131446 1/7/98
</TABLE>
<PAGE> 1
EXHIBIT 10.32
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Among
Intracel Corporation,
Bartels, Inc.,
PerImmune Holdings, Inc. and
PerImmune, Inc.
and
the holders of the 12%
Guaranteed Senior Secured Primary Notes
due August 1, 2003 of
Intracel Corporation
and
the holders of the 12%
Guaranteed Senior Escrow Notes
due August 1, 2003 of
Intracel Corporation
Dated August 25, 1998
<PAGE> 2
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT dated August 25, 1998,
among Intracel Corporation, a Delaware corporation (together with its successors
and assigns, the "Company"), the Company's wholly-owned subsidiaries, Bartels,
Inc. ("Bartels"), PerImmune Holdings, Inc. ("Holdings") and PerImmune, Inc.
("PerImmune" and, together with Bartels and Holdings, the "Subsidiaries") and
the holders of the 12% Guaranteed Senior Secured Promissory Notes of the Company
(the "Guaranteed Senior Secured Primary Notes") and the holders of the 12%
Guaranteed Senior Secured Escrow Promissory Notes ("Guaranteed Senior Secured
Escrow Notes") of the Company (collectively, the "Notes") issued pursuant to
that certain Securities Purchase Agreement, dated as of the date hereof, by and
among the Company and the other parties thereto (the "Purchase Agreement"). As
used herein, all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement.
WITNESSETH:
WHEREAS, the Company is to issue 12% Guaranteed Senior Secured
Primary Promissory Notes in the aggregate original principal amount of
$35,000,000 and 12% Guaranteed Senior Secured Escrow Promissory Notes in the
aggregate original principal amount of $6,000,000;
WHEREAS, in order to secure the performance of the obligations of
the Company under the Purchase Agreement, the Notes and the Ancillary Agreements
(the "Obligations") and the guaranties relating to the Obligations executed on
the date hereof by each of the Subsidiaries, the parties hereto entered into a
Security Agreement as of the date hereof ("Security Agreement") regarding the
terms and conditions of the Company's and Subsidiaries' (together the "Company
Parties") grant of a security interest in the certain Collateral (as defined
therein), including the Intellectual Property Collateral (as defined below) to
the Holders;
WHEREAS, pursuant to and in connection with the Security
Agreement, and also in order to secure the performance of the Obligations and
the guaranties relating to the Obligations, the parties hereto are entering into
this Intellectual Property Security Agreement to confirm and supplement the
terms and conditions of the Company Parties' grant of security interest, as set
forth in the Security Agreement, in the Intellectual Property Collateral (as
defined below) to the Holders;
WHEREAS, unless otherwise defined in this Agreement or in the
Credit Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code
in effect in the State of New York ("N.Y. Uniform Commercial Code") are used in
this Agreement as such terms are defined in such Article 8 or 9.
<PAGE> 3
NOW, THEREFORE, in consideration of the premises and other
benefits to the Company Parties, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Grant of Security. As collateral security for the
payment and performance in full of the Obligations in accordance with their
respective terms, the Company Parties hereby pledge, assign, transfer and grant
to the Holders as to all Intellectual Property Collateral (defined below), a
first priority perfected continuing security interest, except with respect to
certain Intellectual Property Collateral listed on Exhibit A-1 to the Security
Agreement in which Akzo Nobel Pharma International, B.V., as Collateral Agent
under the Intellectual Property Security Agreement dated August 13, 1996 (the
"Collateral Agent"), has a first priority security interest (the "Akzo Security
Interest Collateral"), and with respect to the Akzo Security Interest
Collateral, a second priority perfected security interest until such time as
payment in full of the Debt underlying the Akzo Security Interest Collateral has
been made and, at such time, a first priority perfected security interest in the
Akzo Security Interest Collateral, in all of such Company Party's right, title
and interest in and to the following, whether now owned or hereafter acquired by
such Company Party and whether now or hereafter existing (collectively, the
"Intellectual Property Collateral"):
(a) all patents, patent applications and patentable inventions,
including, without limitation, each patent and patent application
identified in Schedule I attached hereto and made a part hereof, and
including without limitation (i) all inventions and improvements
described and claimed therein, (ii) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriations thereof, (iii) all income, royalties, damages and
other payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past and future
infringements thereof), and (iv) all rights corresponding thereto
throughout the world and all reissues, divisions, continuations,
continuations-in-part, provisionals, substitutes, renewals, and
extensions thereof, all improvements thereon and all other rights of any
kind whatsoever of such Company Party accruing thereunder or pertaining
thereto (the "Patents");
(b) all trademarks, service marks, trade names, trade dress or
other indicia of trade origin, trademark and service mark registrations,
and applications for trademark or service mark registrations and any
renewals thereof, including, without limitation, each registration and
application identified in Schedule II attached hereto and made a part
hereof, and including without limitation (i) the right to sue or
otherwise recover for any and all past, present and future infringements
and misappropriations thereof, (ii) all income, royalties, damages and
other payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past or future
infringements thereof), and (iii) all rights corresponding thereto
throughout the
-2-
<PAGE> 4
world and all other rights of any kind whatsoever of such Company Party
accruing thereunder or pertaining thereto, together in each case with
the goodwill of the business connected with the use of, and symbolized
by, each such trademark, service mark, trade name, trade dress or other
indicia of trade origin (the "Trademarks");
(c) all copyrights, whether statutory or common law, and whether
or not the underlying works of authorship have been published, and all
works of authorship and other intellectual property rights therein, all
copyrights of works based on, incorporated in, derived from or relating
to works covered by such copyrights, all right, title and interest to
make and exploit all derivative works based on or adopted from works
covered by such copyrights, and all copyright registrations and
copyright applications, and any renewals or extensions thereof,
including, without limitation, each copyright registration and copyright
application, if any, identified in Schedule III attached hereto and made
a part hereof, and including, without limitation, (i) the right to
print, publish and distribute any of the foregoing, (ii) the right to
sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (iii) all income,
royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including, without limitation, payments
under all licenses entered into in connection therewith, and damages and
payments for past or future infringements thereof), and (iv) all rights
corresponding thereto throughout the world and all other rights of any
kind whatsoever of such Company Party accruing thereunder or pertaining
thereto (the "Copyrights");
(d) all license agreements with any other person in connection
with any of the Patents, Trademarks or Copyrights, or such other
person's patents, trade names, trademarks, service marks or copyrights,
whether such Company Party is a licensor or licensee under any such
license agreement, including, without limitation, the license agreements
listed on Schedule IV attached hereto and made a part hereof, subject,
in each case, to the terms of such license agreements, including,
without limitation, terms requiring consent to a grant of a security
interest, and any right to prepare for sale, sell and advertise for
sale, all Inventory (as defined in the Security Agreement) now or
hereafter owned by such Company Party and now or hereafter covered by
such licenses (the "Licenses"); and
(e) all proceeds of any and all of the foregoing Intellectual
Property Collateral (including, without limitation, proceeds that
constitute property of the types described in clauses (a) - (d) of this
Section 1) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Holders are the loss payees
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Intellectual Property Collateral, and (ii) cash.
Until the Obligations shall have been satisfied in full and this Agreement shall
have been terminated, the Company and its Subsidiaries (as defined in the
Purchase Agreement), shall
-3-
<PAGE> 5
not, without the Holders' prior written consent, which consent will not be
unreasonably withheld, create, incur or assume any pledge, sale, license or
assignment of any of the Intellectual Property Collateral, or grant, convey or
hypothecate any interest in the Intellectual Property Collateral, or take any
action the effect of which is to have created any Lien, encumbrance, claim,
charge, preference, priority or other restriction on the Intellectual Property
Collateral.
SECTION 2. Security Agreement. The security interest granted
hereby has been granted in conjunction with the security interest granted to the
Holders under the Security Agreement, which this Intellectual Property Security
Agreement supplements. Except as supplemented hereby, the Security Agreement
shall remain in full force and effect in accordance with its terms.
SECTION 3. Confirmation of Security Interest. The Company Parties
hereby confirm that pursuant to the Security Agreement, for good and valuable
consideration, the Company Parties have granted to the Holders a continuing
security interest in and to the Company Parties' entire right, title and
interest in all of the Collateral, including the Intellectual Property
Collateral, that the Company Parties' right, title and interest in the
Collateral is subject to such interest of the Holders and that such security
interest therein shall continue unimpaired by the security interest of the
Collateral granted hereby which serves as evidence of the continuing nature of
such interest in favor of the Holders.
SECTION 4. Representations and Warranties. Each Company Party
represents and warrants as to itself and its Intellectual Property Collateral as
follows:
(a) Such Company Party is the legal and beneficial owner of the
entire right, title and interest in and to the Intellectual Property
Collateral of such Company Party free and clear of any Lien, claim,
option or right of others, except for the liens and security interests
created by this Agreement and the lien created in favor of the
Collateral Agent. No effective financing statement or other instrument
similar in effect covering all or any part of such Intellectual Property
Collateral or listing such Company Party or any trade name of such
Company Party as debtor is on file in any recording office (including,
without limitation, the United States Patent and Trademark Office and
the United States Copyright Office), except such as may have been filed
in favor of the Holders relating to the Loan Documents and such as have
been filed in favor of the Collateral Agent.
(b) Set forth in Schedule I is a complete and accurate list of
all patents and all patent applications owned by the Company Parties.
Set forth in Schedule II is a complete and accurate list of all
trademark and service mark registrations and all trademark and service
mark applications owned by the Company Parties. Set forth in Schedule
III is a complete and accurate list of all copyright registrations and
copyright applications owned by the Company Parties. Set forth in
Schedule IV is a complete and accurate list of all Licenses owned by the
Company Parties in which a Company
-4-
<PAGE> 6
Party is (i) a licensor with respect to any of the Patents, Trademarks
or Copyrights, or (ii) a licensee of any other person's patents, trade
names, trademarks, service marks or copyrights. Except as set forth in
Schedule II, all necessary filings and recordations have been made to
protect and maintain the patents, patent applications, trademark and
service mark registrations, trademark and service mark applications,
copyright registrations, copyright applications and Licenses set forth
in Schedules I, II, III and IV.
(c) Each patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright
registration and copyright application of such Company Party set forth
in Schedules I, II and III is subsisting and has not been adjudged
invalid, unregistrable or unenforceable, in whole or in part. Each
License of such Company Party identified in Schedule IV is validly
subsisting and has not been adjudged invalid or unenforceable, in whole
or in part, and is valid and enforceable. Such Company Party is not
aware of any uses of any item of Intellectual Property Collateral which
could be expected to lead to such item becoming invalid or
unenforceable, including unauthorized uses by third parties and uses
which were not supported by the goodwill of the business connected with
such Intellectual Property Collateral.
(d) Such Company Party has not made a previous assignment,
transfer or agreement constituting a present or future assignment,
transfer or encumbrance of any of the Intellectual Property Collateral
other than the Intellectual Property Security Agreement dated August 13,
1996 with respect to the Akzo Security Interest Collateral. Such Company
Party has not granted any license (other than those listed on Schedule
IV hereto), release, covenant not to sue, or non-assertion assurance to
any person with respect to any part of the Intellectual Property
Collateral.
(e) Such Company Party has used proper statutory notice in
connection with its use of each patent, each registered trademark and
service mark and each copyright contained in Schedules I, II and III.
(f) This Agreement creates in favor of the Holders a valid first
priority security interest in the Intellectual Property Collateral of
the Company Parties, except with respect to the Akzo Security Interest
Collateral and, with respect thereto, a second priority continuing
security interest until such time as payment in full of the Debt
underlying the Akzo Security Interest Collateral has been made and, at
such time, a first priority security interest in the Akzo Security
Interest Collateral, securing the payment of the Obligations, and all
filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.
(g) With the exception of the consent of the Collateral Agent,
no consent of any other Person and no authorization, approval or other
action by, and no notice to or filing with, any governmental authority
or regulatory body or other Person is
-5-
<PAGE> 7
required (i) for the assignment and grant by such Company Party of the
security interest assigned and granted hereby or for the execution,
delivery or performance of this Agreement by such Company Party, (ii)
for the perfection or maintenance of the security interest created
hereunder (including the first priority nature of such security
interest), except for the filing of financing and continuation
statements under the Uniform Commercial Code, which financing statements
have been duly filed, and the filing and recordal of this Agreement
with the United States Patent and Trademark Office and the United States
Copyright Office or (iii) for the exercise by the Holders of their
rights provided for in this Agreement or the remedies in respect of the
Intellectual Property Collateral pursuant to this Agreement.
(h) Except for the Licenses set forth in Schedule IV, the
Company Parties are not aware of any claims that are likely to be made
by any third party relating to any item of Intellectual Property
Collateral.
(i) Except as set forth in Schedule 3.13 of the Securities
Purchase Agreement, no claim has been made and is continuing or
threatened that any item of Intellectual Property Collateral is invalid
or unenforceable or that the use by such Company Party of any
Intellectual Property Collateral does or may violate the rights of any
Person. The Company Parties are not aware of any infringement of any
item of Intellectual Property Collateral.
(j) Such Company Party has taken all necessary steps to use
consistent standards of quality in the manufacture, distribution and
sale of all products sold and the provision of all services provided
under or in connection with any of the Trademarks and has taken all
reasonably necessary steps to ensure that all licensed users of any of
the Trademarks use such consistent standards of quality.
SECTION 5. Further Assurances. (a) Each Company Party agrees that
from time to time, at the expense of such Company Party, such Company Party will
promptly execute and deliver, and use its best efforts to cause to be executed
and delivered, all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Holders may request, in
order to perfect and protect any security interest assigned and granted or
purported to be assigned and granted hereby or to enable the Holders to exercise
and enforce its rights and remedies hereunder with respect to any part of the
Intellectual Property Collateral. Without limiting the generality of the
foregoing, each Company Party will execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Holders may request, in
order to perfect and preserve the security interest assigned and granted or
purported to be assigned and granted hereunder.
(b) Each Company Party hereby authorizes the Holders to file one
or more financing or continuation statements, and amendments thereto, relating
to all or any part of
-6-
<PAGE> 8
the Intellectual Property Collateral without the signature of such Company Party
where permitted by law. A photocopy or other reproduction of this Agreement or
any financing statement covering the Intellectual Property Collateral or any
part thereof shall be sufficient as a financing statement where permitted by
law.
(c) Each Company Party will furnish to the Holders from time to
time statements and schedules further identifying and describing the
Intellectual Property Collateral and such other reports in connection with the
Intellectual Property Collateral as the Holders may reasonably request, all in
reasonable detail.
(d) Each Company Party agrees that, should it obtain an ownership
interest in any patent, patent application, patentable invention, trademark,
service mark, trade name, trade dress, other indicia of trade origin, trademark
or service mark registration, trademark or service mark application, copyright,
work of authorship, copyright registration, copyright application or license,
which is not now a part of the Intellectual Property Collateral, (i) the
provisions of Section 1 shall automatically apply thereto, (ii) any such patent,
patent application, patentable invention, trademark, service mark, trade name,
trade dress, indicia of trade origin, trademark or service mark registration or
trademark or service mark application (together with the goodwill of the
business connected with the use of same and symbolized by same), copyright, work
of authorship, copyright registration, copyright application or license shall
automatically become part of the Intellectual Property Collateral, and (iii)
with respect to any ownership interest in any patent, patent application,
trademark or service mark registration, trademark or service mark application,
copyright registration, copyright application or license that such Company Party
should obtain, it shall give prompt written notice thereof to the Holders in
accordance with the provisions of the Security Agreement. Each Company Party
authorizes the Holders to modify this Agreement by amending Schedules I, II, III
and IV (and will cooperate with the Holders in effecting any such amendment) to
include any patent, patent application, trademark or service mark registration,
trademark or service mark application, copyright registration, copyright
application or license which becomes part of the Intellectual Property
Collateral under this Section.
(e) With respect to each patent, patent application, trademark or
service mark registration, trademark or service mark application, copyright
registration, copyright application and License, such Company Party agrees to
take all necessary steps, including, without limitation, in the United States
Patent and Trademark Office, the United States Copyright Office or in any court,
to (i) maintain each such patent, trademark or service mark registration,
copyright registration and License of such Company Party, and (ii) pursue each
such patent application, trademark or service mark application, and copyright
application now or hereafter included in the Intellectual Property Collateral of
such Company Party, including, without limitation, the filing of responses to
office actions issued by the United States Patent and Trademark Office and the
United States Copyright Office, the filing of applications for renewal or
extension, the filing of affidavits under Sections 8 and 15 of the United States
Trademark Act, the filing of divisional, continuation, continuation-in-part and
-7-
<PAGE> 9
substitute applications, the filing of applications for re-issue, renewal or
extensions, the payment of maintenance fees, and the participation in
interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings. Each Company Party agrees to take corresponding
steps with respect to each new or acquired patent, patent application, trademark
or service mark registration, trademark or service mark application, copyright
registration, copyright application or License to which it is now or later
becomes entitled. Any expenses incurred in connection with such activities shall
be borne by such Company Party. No Company Party shall, without the written
consent of the Holders, which consent will not be unreasonably withheld,
discontinue use of or otherwise abandon any patent or patentable invention,
trademark or service mark, or copyright identified in Schedules I, II and III,
or abandon any right to file an application for letters patent, trademark or
service mark registration, or copyright registration, or abandon any pending
application for a letters patent, trademark or service mark registration, or
copyright registration identified in Schedules I, II and III.
(f) Each Company Party agrees to notify the Holders promptly and
in writing if it learns (i) that any item of the Intellectual Property
Collateral may be determined to have become abandoned or dedicated or (ii) of
any adverse determination or the institution of any proceeding (including,
without limitation, the institution of any proceeding in the United States
Patent and Trademark Office or any court) regarding any item of the Intellectual
Property Collateral.
(g) In the event that any Company Party becomes aware that any
item of the Intellectual Property Collateral is infringed or misappropriated by
a third party, such Company Party shall promptly notify the Holders and shall
take such actions as such Company Party or the Holders deems reasonable and
appropriate under the circumstances to protect such Intellectual Property
Collateral, including, without limitation, suing for infringement or
misappropriation and for an injunction against such infringement or
misappropriation. Any expense incurred in connection with such activities shall
be borne by such Company Party.
(h) Each Company Party shall continue to use proper statutory
notice in connection with its use of each of its patents, registered trademarks
and service marks, and copyrights contained in Schedules I, II and III.
(i) Each Company Party shall take all steps which it or the
Holders deem reasonable and appropriate under the circumstances to preserve and
protect each item of its Intellectual Property Collateral, including, without
limitation, maintaining the quality of any and all products or services used or
provided in connection with any of the Trademarks, consistent with the quality
of the products and services as of the date hereof, and taking all steps
necessary to ensure that all licensed users of any of the Trademarks use such
consistent standards of quality.
-8-
<PAGE> 10
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. MCKENZIE
------------------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
BARTELS, INC.
By: /s/ SIMON R. MCKENZIE
------------------------------------------
Name: Simon R. McKenzie
Title: President & Chief Executive Officer
PERIMMUNE HOLDINGS, INC.
By: /s/ SIMON R. MCKENZIE
-----------------------------------------
Name: Simon R. McKenzie
Tide: President & Chief Executive Officer
PERIMMUNE, INC.
By: /s/ SIMON R. MCKENZIE
-----------------------------------------
Name: Simon R. McKenzie
Tide: President & Chief Executive officer
-9-
<PAGE> 11
NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
-10-
<PAGE> 12
STATE OF WA )
) ss.:
COUNTY OF KING )
On the 20th day of August, 1998, before me personally came Simon McKenzie
to me known, who, being by me duly sworn, did depose and say he resides at 1411
1st St. North, Seattle, WA and that he is the Pres/CEO of INTRACEL CORPORATION,
the corporation described in and which executed the above instrument; that he
has been authorized to execute said instrument on behalf of said corporation;
and that he signed said instrument on behalf of said corporation pursuant to
said authority.
/s/ GWENDOLYN C. MCCLURE-DOUGLAS
--------------------------------
Notary Public
------------------------------------
Notary Public
State of Washington
[Notarial Seal] GWENDOLYN C. MCCLURE-DOUGLAS
My Appointment Expires Jan. 15, 2002
------------------------------------
STATE OF WA )
) ss.:
COUNTY OF KING )
On the 20th day of August, 1998, before me personally came Simon McKenzie
to me known, who, being by me duly sworn, did depose and say he resides at 1411
1st St. North, Seattle, WA and that he is the Pres/CEO of BARTELS, INC., the
corporation described in and which executed the above instrument; that he has
been authorized to execute said instrument on behalf of said corporation; and
that he signed said instrument on behalf of said corporation pursuant to said
authority.
/s/ GWENDOLYN C. MCCLURE-DOUGLAS
--------------------------------
Notary Public
------------------------------------
Notary Public
State of Washington
[Notarial Seal] GWENDOLYN C. MCCLURE-DOUGLAS
My Appointment Expires Jan. 15, 2002
------------------------------------
<PAGE> 13
STATE OF WA )
) ss.:
COUNTY OF KING )
On the 20th day of August, 1998, before me personally came Simon McKenzie
to me known, who, being by me duly sworn, did depose and say he resides at 1411
1st St. North, Seattle, WA and that he is the Pres/CEO of PERIMMUNE HOLDINGS,
INC., the corporation described in and which executed the above instrument; that
he has been authorized to execute said instrument on behalf of said corporation;
and that he signed said instrument on behalf of said corporation pursuant to
said authority.
/s/ GWENDOLYN C. MCCLURE-DOUGLAS
--------------------------------
Notary Public
------------------------------------
Notary Public
State of Washington
[Notarial Seal] GWENDOLYN C. MCCLURE-DOUGLAS
My Appointment Expires Jan. 15, 2002
------------------------------------
STATE OF WA )
) ss.:
COUNTY OF KING )
On the 20th day of August, 1998, before me personally came Simon McKenzie
to me known, who, being by me duly sworn, did depose and say he resides at 1411
1st St. North, Seattle, WA and that he is the Pres/CEO of PERIMMUNE, INC., the
corporation described in and which executed the above instrument; that he has
been authorized to execute said instrument on behalf of said corporation; and
that he signed said instrument on behalf of said corporation pursuant to said
authority.
/s/ GWENDOLYN C. MCCLURE-DOUGLAS
--------------------------------
Notary Public
------------------------------------
Notary Public
State of Washington
[Notarial Seal] GWENDOLYN C. MCCLURE-DOUGLAS
My Appointment Expires Jan. 15, 2002
------------------------------------
<PAGE> 14
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of August, 1998, before me personally came Michael Graves
to me known, who, being by me duly sworn, did depose and say he resides at
Fairfield County, CT and that he is the Vice President of NORTHSTAR HIGH YIELD
FUND, the institution described in and which executed the above instrument; that
he has been authorized to execute said instrument on behalf of said institution;
and that he signed said instrument on behalf of said institution pursuant to
said authority.
/s/ MARY FRANCES ENNIS
----------------------
Notary Public
MARY FRANCES ENNIS
[Notarial Seal] NOTARY PUBLIC
MY COMMISSION EXPIRES FEB. 23, 2003
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of August, 1998, before me personally came Michael Graves
to me known, who, being by me duly sworn, did depose and say he resides at
Fairfield County, CT and that he is the Vice President of NORTHSTAR HIGH TOTAL
RETURN FUND, the institution described in and which executed the above
instrument; that he has been authorized to execute said instrument on behalf of
said institution; and that he signed said instrument on behalf of said
institution pursuant to said authority.
/s/ MARY FRANCES ENNIS
----------------------
Notary Public
MARY FRANCES ENNIS
[Notarial Seal] NOTARY PUBLIC
MY COMMISSION EXPIRES FEB. 23, 2003
<PAGE> 15
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of August, 1998, before me personally came Michael Graves
to me known, who, being by me duly sworn, did depose and say he resides at
Fairfield County, CT and that he is the Vice President of NORTHSTAR HIGH TOTAL
REFUND FUND II, the institution described in and which executed the above
instrument; that he has been authorized to execute said instrument on behalf of
said institution; and that he signed said instrument on behalf of said
institution pursuant to said authority.
/s/ MARY FRANCES ENNIS
----------------------
Notary Public
MARY FRANCES ENNIS
[Notarial Seal] NOTARY PUBLIC
MY COMMISSION EXPIRES FEB. 23, 2003
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of August, 1998, before me personally came Michael Graves
to me known, who, being by me duly sworn, did depose and say he resides at
Fairfield County, CT and that he is the Vice President of NORTHSTAR STRATEGIC
INCOME FUND, the institution described in and which executed the above
instrument; that he has been authorized to execute said instrument on behalf of
said institution; and that he signed said instrument on behalf of said
institution pursuant to said authority.
/s/ MARY FRANCES ENNIS
----------------------
Notary Public
MARY FRANCES ENNIS
[Notarial Seal] NOTARY PUBLIC
MY COMMISSION EXPIRES FEB. 23, 2003
<PAGE> 16
SCHEDULE I
to
Intellectual Property Security Agreement
Patents and Patent Applications
<PAGE> 17
SCHEDULE I
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Monoclonal Antibodies
Tumor specific monoclonal antibodies US 4,828,991
Tumor associated monoclonal antibodies derived from US 4,997,762
human B-cell line 5,180,814
AT E71410
AU 589,351
635,511
BE 0151030
CA 473130
CH 0151030
DE P3585093
DK 408/85
EP 0151030
ES 539,987
FR 0151030
GB 0151030
GR 850,179
HU 209,519
IE 58,859
IL 74,156
91,045
IT 0151030
JP 2021518 269230/93
LU 0151030
NL 0151030
NZ 210,867
PT 79,894
SC 0131030
ZA 8,500,689
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Tumor specific monoclonal antibodies US 5,106,738
Tumor associated monoclonal antibody 81AV78 US 5,348,880
AU 656785
CA 2108767
EP 92913154.8
FI 935038
JP 500176/93
KR 93/703412
WO US92/04023
Tumor associated monoclonal antibodies US 5,474,755
Monoclonal Antibody 88BV59 US 08/341469
AU 651,261
CA 2083542
EP 92203827.8
FI 925638
HU 9203932
ID P-005142
IL 103758
JP 331961/92
KR 92/23925
NO 924803
NZ 245443
TW 81109353
ZA ?2/8880
Monoclonal antibody 88BV59, subclones and method of making US 08/192069
AU 17425/95
CA 2158572
EP 95909472.3
FI 954700
JP 52078/95
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
KR 95/7Q4282
WO US95/01440
Tumor associated monoclonal antibody 123AV16 US 5,495,002
ID P-950285
WO EP95/00581
ZA 95/1113
In-vitro method for producing antigen specific human US 5,229,275
monoclonal antibodies
AT E123,311
AU 657,112
BE 0,454,225
CA 2,041,213
CH 0,454,225
DE 69,110,084.5
555
DK 0,454,225
EP 0,454,225
ES 0,454,225
FI 912,016
FR 0,454,225
GB 0,454,225
GR 3,017,162
IE 66,523
IT 0,454,225
JP 191343/91
KR 91/6661
NL 0,454,225
SE 0,454,225
ZA 91/2?98
Imaging infectious ????????????? US 5,549,882
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Chelators
Method for purifying chelator conjugated
compounds US 5,244,816
AU 656,717
CA 2,069,303
DK 0488/92
EP 90915696.0
FI 921579
IE 3585/90
JP 514572/90
KR 92/700833
NZ 235,618
PT 95574
WO US90/05772
ZA 90/8095
Chelating agents for attaching metal ions
to proteins US 5,292,868
5,488,126
5,583,219
AT E128035
AU 638,757
BE 0429644
CA 2,033,086
CH 0429644
DE 69022542.3
DK 0429644
EP 0429644 952004?5.0
ES 0429644
FI 910.329
FR 0429644
GB 0429644
CE 1867/90
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0429644
JP 513354/90
KR 91/700100
NL 0429644
SE 0429644
WO US90/02910
ZA 90/4047
Technetium-99M labelling
of proteins US 5,317,091
AU 658,403
CA 2104943
EP 92907824.4
FI 933760
JP 507406/92
KR 93/702561
WO US92/01577
Chelator IDAC-2 and methods
for purifying chelator
conjugated compounds US 08/278721
08/442856
WO US95/09285
New Polyaminocarboxylate
chelators US 08/178875
WO US95/00068
Pre-Targeting
Site specific in vivo
activation of therapeutic
drugs US 5,433,955 07/300999
AT E123414
AU 648,015
BE 045?783
CA 2025599
CH 0454783
DE 69019959.7
DK 0454753
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
EP 0454783
ES 0454783
FI 913,511
FR 0454783
GB 0454783
IT 0454783
JP 503116/90
KR 90/702129
LU 0454783
NL 0454783
NO 912,864
SE 0454783
WO 90/00503
In Vivo Binding Pair Pretargeting US 5,578,289 08/452938
08/451267
AU 663,582
CA 2,107,558
EP 93906276 6
FI 934,857
ID P-005991
JP 515830/93
KR 93/703311
WO US93/01858
ZA 93/3035
High yield preparation of dimene to
decamene chitin oligomers US US/397?6?
IL 117052
WO US96/02705
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
Polymer affinity systems in the delivery US 5,686,071
of cytotoxic materials and other compounds
in the site of disease Immunotherapy
Active specific immunotherapy US 5,484,596 08/540298
CTAA 28A32, the antigen recognized by
MCA 28A32 US 5,521,285
AT 0537168
AU 660,927
BE 0537168
CA 2079601
CH 0537168
DE 0537168
DK 0537168
EP 0537168
ES 0537168
FI 924576
FR 0537168
GB 0537168
GR 0537168
IT 0537168
JP 508604/91
KR 92/702530
LU 0537168
NL 0537168
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
Title Country Patient # Allowed App # Filed App #
<S> <C> <C> <C> <C>
SE 0537168
WO US91/02459
Antigen recognized by MCA 16.88 US 5,338,832
AT E137674
AU 618,209
BE 0328578
CA 571,017
CH 0328578
DE P3855290.9
DK 1025/89
EP 0328578
FR 0328578
GB 0328578
HU 4187/88
IE 2034/88
IL 86,958
IT 0328578
JP 505583/89
LU 0328578
NL 0328578
NZ 225,280
SE 0328578
WO US88/02245
ZA 88/4777
Keyhole limpet hemocyanin composition with enhanced US 5,407,912 081343808
immunogenic activity
US 09/009,121
AU 605519194
CA 2121296
EP 942009978
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
FI 941725
ID P-940578
JP 104838/94
KR 94/8063
ZA 94/2510
Tumor associated epitope US 08/478591
CTAA 8IAV78, the antigen recognized
by human monoclonal US 5,595,738
antibody 81AV78
AU 20085/92
CA 2102422
EP 92912470.9
FI 934,963
JP 500223/93
KR 93/703413
Others WO US92/04108
Loukoregulin, an antitumor
lymphokine and its therapeutic uses US 4,849,506
5,082,657
AT E48617
AU 592,529
641,386
BE 0179127
CA 478,937
CH 0179127
DE P3574710.2
DK 170.781
170.423
E 0179127
FI 85,867
FR 0179127
GB 0179127
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
Title Country Patent # Allowed App # Filed App #
<S> <C> <C> <C> <C>
IT 0179127
JP 501862/85
300400/93
LU 0179127
NL 0179127
NQ 170423
SE 0179127
WO US85/00626
Urethral catheter and catherization process US 5,120,316
Immunoreactive peptides of apo(2) US 08/266407
5,597,908 08/457449
08/172461
08/892544
AU 81,606/94
CA 2138605
EP 942036534
FI 945976
ID P-942209
JP 318892/94
KR 94/35809
ZA 94/10145
An alignment system to overlay abdominal
computer aided tomography and magnetic US 5,299,253
resonance anatomy with single photon
emulsion tomography
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Application Patent
Title Country No. No.
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Methods, Reagents and Test Kits for Determinations US 5256532
of Subpopulations of Biological Entities
Methods for Detection and Quantification of Cell US 5385822
Subsets within Subpopulations of a Mixed Cell
Population
Methods, Reagents and Test Kits for Determinations CA 2051373
of Subpopulations of Biological Entities
Methods, Reagents and Test Kits for Determinations EP 909088684
of Subpopulations of Biological Entities
Methods for Detection and Quantification of Cell CA 2095237
Subsets within Subpopulations of a Mixed Cell
Population
Methods for Detection and Quantification of Cell EP 9290033564
Subsets within Subpopulations of a Mixed Cell
Population
Methods for Detection and Quantification of Cell JP 0501274
Subsets within Subpopulations of a Mixed Cell
Population
Immunoassay for Determination of Cells US 5374531
Immunoassay for Determination of Cells US 08/569100
Immunoassay for Determination of Cells AU 63678/94
Immunoassay for Determination of Cells CA 2158839
Immunoassay for Determination of Cells EP 949109797
Immunoassay for Determination of Cells JP 06521300
Immunoassay for Determination of Cells IL 109008
Intracellular Immunization US 08/099870
Detection Reagent, Article and Immunoassay US 08/177,732
Method
Detection Reagent, Article and Immunoassay BR PI95064455
Method 9
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
Application Patent
Title Country No. No.
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Detection Reagent, Article and Immunoassay CA 2180428
Method
Detection Reagent, Article and Immunoassay CN 951914774
Method
Detection Reagent, Article and Immunoassay EP 959061565
Method
Radial Flow Assay, Deliverying Member, US 08/177733
Test Kit and Methods
Radial Flow Assay, Deliverying Member, BR PI95064540
Test Kit and Methods
Radial Flow Assay, Deliverying Member, CA 2180429
Test Kit and Methods
Radial Flow Assay, Deliverying Member, CN 95191473
Test Kit and Methods
Radial Flow Assay, Deliverying Member, EP 959067588
Test Kit and Methods
Neutralizing Antibodies to Respiratory US 09/043522
Syncytial Virus
Neutralizing Antibodies to Respiratory US 09/043522
Syncytial Virus
Neutralizing Antibodies to Respiratory CA 2230127
Syncytial Virus
Neutralizing Antibodies to Respiratory EP 969316330
Syncytial Virus
Neutralizing Antibodies to Respiratory CA 2230116
Syncytial Virus
Neutralizing Antibodies to Respiratory EP 969338102
Syncytial Virus
</TABLE>
<PAGE> 29
SCHEDULE II
to
Intellectual Property Security Agreement
Trademark Registrations and Applications
<PAGE> 30
SCHEDULE II
AccuDx
HumaSPECT(TM)* - Ser. No. 75/170,170, Filed 9/23/96
OncoSPECT(TM)**
Oncovax(TM)*** - Ser. No. 75/084,485, Filed 4/5/96
Onconostika(TM)*
Oncoscan(TM)*
Oncoselect(TM)*
Oncotice(TM)*
Oncostat(TM)*
Apo-Tek Lp(a)***
Apo-Tek Apo E***
KLH Immune Activator***
Zymmune***
* In October 1997, PerImmune, Inc. changed the trademark name of
"OncoSPECT(TM)/CR" to "HumaSPECT(TM)"
** Registration has been applied for.
*** Final name and registration to be completed.
* Assignment to be completed.
<PAGE> 31
Item A. TRADMARKS
INTRACEL
<TABLE>
<CAPTION>
Registration
County No. Date Filed Status
- --------------- ------------ ---------- -----------------------------------
<S> <C> <C> <C>
Australia 608813 08/09/93 Pending
Benelux 537216 08/11/93 Registered
817640487 08/01/93 Pending; reg'n fee paid 6/19/95
Brazil
Canada 734,661 08/09/93 Pending; response to OA due 12/7/95
China 93073886 08/26/93 Pending; published in OG 11/21/94
France 93479055 08/03/93 Registered
Germany Z 11488/10 Wz 08/11/93 Pending; published in OG 10/31/91
Greece 116498/93 09/29/93 Pending
Israel 88567 08/12/93 Pending
Italy RM93C/002727 08/18/93 Pending
Japan 82,893/1993 08/10/93 Pending
Mexico 175,387 08/13/93 Registered 4/28/94; Reg. No. 458,743
South Korea 93-28412 08/11/93 Registered 11/2/94; Reg. No. 301304
Spain 1,779,240 09/09/93 Pending
Switzerland 2857/1994.7 04/27/94 Pending
Taiwan 82039743 08/13/93 Registered 8/16/94; Reg. No. 649265
Thailand 253401 10/08/93 Pending; published in OG 4/21/95
United Kingdom 1,544,180 08/09/93 Registered 12/16/94; Reg. No. 1,544,180
United States
TRADEMARK LICENSES
Item B.
None.
</TABLE>
<PAGE> 32
Item A. Trademarks
1. BIOVITRO
<TABLE>
<CAPTION>
Country Registration No. Date Filed Status
- ---------------- ------------------ ------------ --------
<S> <C> <C> <C>
United States 1,930,690
</TABLE>
2. FLEX-TRANS
<TABLE>
<CAPTION>
Country Registration No. Date Filed Status
- ---------------- ------------------ ------------ --------
<S> <C> <C> <C>
United States App 74/429821 Pending
2,049,370
</TABLE>
Item B. Trademark Licenses
None.
<PAGE> 33
SCHEDULE III
to
Intellectual Property Security Agreement
Copyright Registrations and Applications
<PAGE> 34
SCHEDULE III
None
<PAGE> 35
SCHEDULE IV
to
Intellectual Property Security Agreement
Licenses
<PAGE> 36
SCHEDULE IV
1. Research Collaboration and Distribution Agreement, dated December 22, 1997,
by and between PerImmune, Inc. and Mentor Corporation, pursuant to which
Mentor will fund the costs of implementing and carrying out a clinical
testing program and submitting an application to the United States Food and
Drug Administration for the Company's keyhole limpet hemocyanin composition
product (as described therein) and act as the exclusive distributor of such
product.
2. Letter of Agreement, dated September 12, 1997, by and between Bio-Tek
Instruments, Inc. and Bartels, Inc., pursuant to which Bio-Tek will act as a
distributor of certain Company products (as defined therein).
3. Distribution Agreement, dated August 1, 1997, by and between Organon
Teknika, B.V. and PerImmune, Inc., pursuant to which Organon will grant
PerImmune an exclusive right to promote, distribute and sell the Products
(as defined therein) within the Territory (as defined therein).
4. Exclusive Distribution Agreement, dated June 16, 1997, by and between
PerImmune, Inc. and Mentor Corporation, pursuant to which Mentor will act as
the exclusive distributor of the Company's bladder diagnostic product.
5. Exclusive Distribution Agreement, dated as of April 1, 1997, by and between
Syncor International Corporation and PerImmune, Inc., pursuant to which
Syncor will act as the exclusive distributor of the Company's HumaSPECT/CR.
6. Distribution Agreement, dated as of March 14, 1997, by and between Intracel
Corporation and Seradyn, Inc., pursuant to which Seradyn will act as
distributor of the Company's Zymmune CD4/CD8 test kit within the United
States.
7. Agreement, dated April 1, 1997, by and between Zeus Scientific, Inc. and
Intracel Corporation, pursuant to which Zeus Scientific grants Intracel a
nonexclusive worldwide right to distribute the ELISA products (as defined
therein).
8. Exclusive Distributor Agreement, dated as of February 1, 1997, by and
between Bartels, Inc. and HIT Medikal Tibbi Urunler Sanayii ve Ticaret A.S.,
pursuant to which HIT will act as the exclusive distributor of the Company's
INSTI HIV I/I1 components in Turkey and North Cyprus.
9. Exclusive Distributor Agreement, dated as of July 25, 1996, by and between
Bartels, Inc. and Finn-Vita, S.A., pursuant to which Finn-Vita will act as
the exclusive distributor of the Company's INSTI HIV I/II components in
Chile.
10. Exclusive Distributor Agreement, dated as of July 1, 1996, by and between
Bartels, Inc. and DSL Diagnostic Products Incorporated COB "Intermedico,"
pursuant to which DSL will act as the exclusive distributor of various
Company products (as defined therein) in Canada.
<PAGE> 37
11. Exclusive Distributor Agreement, dated as of May 8, 1996, by and between
Bartels, Inc. and AMAR Immunodiagnostics, pursuant to which AMAR will act
as the exclusive distributor of the Company's INSTI HIV I/II components in
India.
12. Distributorship Agreement, dated September 20, 1991, between Bartels
Diagnostics, division of Baxter Diagnostic Inc. and Biotrin International
Ltd., pursuant to which Biotrin will act as a non-exclusive distributor of
various Company products (as defined therein) within the territory of
Europe.
13. Material Transfer Agreement for Hepatitis C Virus Recombinant
RNA-Dependent RNA Polymerase, dated March 10, 1998, by and between Emory
University and Intracel Corporation.
14. Product Development and License Agreement, dated as of June 30, 1997, by
and between PerImmune and Sigma Diagnostics, Inc., pursuant to which Sigma
is licensing a cell line to be used in a marketable product.
15. Development Agreement and License Agreement, dated December 4, 1996, by
and between Intracel Corporation and its affiliates and subsidiaries and
Alexon Biomedical, Inc., pursuant to which Alexon and Intracel will
develop certain technology relating to a rapid, member-based enzyme-linked
immunoabsorbent assay for the detection of C. difficile Toxin A.
16. Patent License Agreement -- Exclusive, dated December 4, 1996, between
Public Health Service and Intracel Corporation, pursuant to which Public
Health Service grants Intracel an exclusive license under the Licensed
Patent Rights (as defined therein) in the Licensed Territory (as defined
therein).
17. Intellectual Property Security Agreement, dated as of August 8, 1996, by
and among PerImmune Holdings, Inc., PerImmune, Inc., Akzo Nobel Pharma
International, B.V. and Organon Teknika Corporation.
18. Intellectual Property Agreement, dated August 2, 1996, by and between Akzo
Nobel Pharma International, B.V. and PerImmune Holdings, Inc.
19. CMV Antigenemia Agreement, dated May 9, 1996, by and between Bartels, Inc.
and Argene SA, Biosoft Department, pursuant to which Argene grants Bartels
exclusive distribution rights to the Assay Kit or Components (as defined
therein) in the United States and a non-exclusive distribution right to
the Assay Kit or Components (as defined therein) in Asia, Australia, South
Africa, Antilles, South America and Central America.
20. Research Collaboration and License Agreement, dated as of January 1, 1996,
by and between PerImmune, Inc. and Baxter Healthcare Corporation, pursuant
to which PerImmune will perform research and development services for the
benefit of Baxter in accordance with the Research Plans (as defined
therein).
<PAGE> 38
21. Pursuant to an Agreement dated July 14, 1995, the Company has agreed to
make certain Vpr peptides from HIV-1 available to the University of
Minnesota in return for the option to obtain a royalty-bearing exclusive
license to any patent or patent application which the University of
Minnesota or its scientists may be granted in respect of an invention
arising out of the use of the Vpr peptides.
22. License Agreement, dated July 25, 1994, by and between Arch Development
Corporation and Organon Teknika Corporation, pursuant to which Arch grants
Organon an exclusive license to make, have made, use and sell Licensed
Products (as defined therein) within the Territory (as defined therein).
23. Agreement, dated July 18, 1994, between Intracel Corporation and the World
Health Organization, pursuant to which Intracel will engage in the
development of an INSTI diagnostic test for detection of the measles
virus.
24. License Agreement, dated June 1, 1994, by and between Thomas Jefferson
University and Intracel Corporation, pursuant to which Thomas Jefferson
grants Intracel an exclusive worldwide license to manufacture, market and
distribute the Products (as defined therein).
25. Assignment, dated September 28, 1993, by and between Alexander Klibanov
and Intracel Corporation, pursuant to which Alexander Klibanov will sell,
assign, transfer and deliver to Intracel all of his right, title and
interest in the Future Intellectual Rights (as defined therein) and all
proceeds of, and rights associated with the Future Intellectual Rights.
26. Research Agreement, dated April 9, 1993, as amended, between Intracel
Corporation and Thomas Jefferson University, pursuant to which Thomas
Jefferson will pursue a research project in accordance with the Protocol
(as defined therein).
27. Licensing Agreement, dated as of April 16, 1991, between American
Bio-Technologies, Inc. ("ABT") and the Medical Reseach Council, pursuant
to which the Medical Research Council grants ABT a nonexclusive worldwide
right and license to make, have made, lease and sell the Licensed Products
(as defined therein).
28. License Agreement, dated June 14, 1990, by and between ABT and Hoffman-La
Roche, Inc., pursuant to which Hoffman-La Roche grants ABT a nonexclusive
license in the United States to make and sell for research purposes only
the Licensed Products (as defined therein).
29. Licensing Agreement, dated May 18, 1990, as amended, by and between Baxter
Healthcare Corporation, Bartels Diagnostic Division, and Virginia Tech
Intellectual Properties, Inc., pursuant to which Virginia Tech grants
Bartels a nonexclusive license to manufacture, have made for it, use,
lease, and/or sell Licensed Product(s) (as defined therein).
<PAGE> 39
SCHEDULE II
AccuDx
HumaSPECT(TM)* - Ser. No. 75/170,170, Filed 9/23/96
OncoSPECT(TM)*
Oncovax(TM)** - Ser. No. 75/084,485, Filed 4/5/96
Onconostika(TM)
Oncoscan(TM)
Oncoselect(TM)
Oncotice(TM)
Apo-Tek Lp(a)***
Apo-Tek Apo E***
KLH Immune Activator***
Zymmune***
* In October 1997, PerImmune, Inc. changed the trademark name of
"OncoSPECT(TM)/CR" to "HumaSPECT(TM)"
** Registration has been applied for.
*** Final name and registration to be completed.
<PAGE> 1
Exhibit 10.34
FUNDED COMMITMENT FACILITY ESCROW AGREEMENT
THIS FUNDED COMMITMENT FACILITY ESCROW AGREEMENT (this "Escrow
Agreement"), dated as of August 24, 1998 by and among Northstar High Total
Return Fund ("Northstar Return"), Northstar High Total Return Fund II
("Northstar Return III"), Northstar High Yield Fund ("Northstar Yield"),
Northstar Strategic Income Fund ("Northstar Income," together with Northstar
Return, Northstar Return II and Northstar Yield, the "Purchasers"), Intracel
Corporation, a Delaware corporation (the "Company"), and Bank of America NT &
SA, doing business as Seattle First National Bank, (together with its successors
and assigns, the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company has sold to the Purchasers and the
Purchasers have purchased on the date hereof, certain Guaranteed Senior Secured
Primary Promissory Notes (the "Primary Notes") in the aggregate amount of
$35,000,000 in accordance with the terms of the Securities Purchase Agreement
dated the date hereof among the Purchasers and the Company (the "Securities
Purchase Agreement"); and
WHEREAS, the Company has sold to the Purchasers and the
Purchasers have purchased on the date hereof, certain Guaranteed Senior Secured
Escrow Promissory Notes (the "Escrow Notes") in the aggregate amount of
$6,000,000 in accordance with the terms of the Securities Purchase Agreement
(the Primary Notes and the Escrow Notes are collectively referred to herein as
the "Notes"), and
WHEREAS, the obligations of the Company under the Securities
Purchase Agreement, the Notes and the Ancillary Agreements (the "Obligations"),
are secured on the terms and conditions contained in the Securities Documents
(as that term is defined in the Securities Purchase Agreement; and
WHEREAS, the Obligations of the Company are guaranteed by the
Company's Subsidiaries in accordance with the Guaranty Agreement dated the date
hereof among the Purchasers and the Company (the "Guaranty Agreement"); and
WHEREAS, in connection with the purchase and sale of the Notes,
the Company is obligated to deposit into escrow with the Escrow Agent Six
Million Dollars ($6,000,000), which sum represents all of the cash proceeds from
the sale of the Escrow Notes, to be held and disbursed by the Escrow Agent on
the terms and conditions hereinafter set forth;
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<PAGE> 2
NOW THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants, agreements and other consideration
contained and exchanged in this Escrow Agreement, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, the parties
hereto agree as follows:
1. Definitions. Capitalized terms defined in the Securities
Purchase Agreement, the Notes and the Ancillary
Agreements, when used herein without definition, shall
have the respective meanings set forth therein.
2. Appointment of Escrow Agent. The Purchasers and the
Company hereby designate and appoint the Escrow Agent to
serve in accordance with the terms, conditions and
provisions of this Escrow Agreement, and the Escrow
Agent hereby agrees to act as such upon the terms,
conditions and provisions provided in this Escrow
Agreement.
3. Escrow. On the date hereof, the Company has instructed
the Purchasers to deliver and the Purchasers have
delivered to the Escrow Agent the sum of Six Million
Dollars ($6,000,000) (the "Escrow Fund"), the receipt of
which the Escrow Agent hereby acknowledges. The Escrow
Fund shall be deposited in the account described on
Annex I hereto for receipt of such amount (the "Escrow
Account") and shall be held in such Escrow Account and
distributed in accordance with the terms and provisions
of this Escrow Agreement.
4. Investment of Escrow Fund. The Escrow Fund shall be held
and invested or reinvested by the Escrow Agent solely in
cash or three-month or six-month U.S. treasury bills,
and otherwise upon and in accordance with the written
instructions of the Company and the Purchasers.
Investments of monies in the Escrow Fund shall be made
in the foregoing securities in a manner that will ensure
that such investments mature or may be redeemed or may
be subject to liquidation by sale or otherwise at the
option of the Escrow Agent at such time as may be
necessary to make timely disbursements from said Escrow
Fund. The Escrow Agent may from time to time sell such
investments and reinvest the proceeds therefrom in other
investments of the type described in this Section 4. The
Escrow Fund shall be credited with all proceeds of sale
and income from such investment.
2
<PAGE> 3
5. Term. Subject to claims against the Escrow Fund as
hereinafter provided, the term of this Escrow Agreement
shall terminate upon the earlier of (a) the date on
which the Escrow Fund shall have been reduced to zero;
(b) the date on which the Company shall have repaid all
of the Escrow Notes from any source of funds whatsoever;
and (c) August 25, 2003 (the "Escrow Expiration Date").
6. Disbursement of Monies in the Escrow Fund Prior to
Escrow Termination Date. On each occasion that the
Company shall execute and deliver a written notice
substantially in the form of Exhibit A hereto (each, a
"Disbursement Notice") to the Escrow Agent providing the
Escrow Agent with disbursement instructions for all or
any part of the Escrow Fund, the Escrow Agent shall
disburse the portion of the Escrow Fund referred to in
such notice in accordance with the instructions
contained in such notice.
7. Disbursement of Monies in the Escrow Fund on Default or
on the Escrow Termination Date. On the earlier of (A)
any date on which there shall occur a Default, an Event
of Default, or an event that with the lapse of time or
the giving of notice or both, shall constitute an Event
of Default with respect to the Securities Purchase
Agreement, the Notes or any of the Ancillary Agreements
(the "Default Date") and unless the Purchasers shall
have waived the provisions of this Section 7 with
respect to a particular Default Date within five (5)
Business Days after such Default Date, or (B) the Escrow
Expiration Date, the Escrow Agent shall apply any
remaining amounts in the Escrow Fund in the following
order of priority: (A) to the Purchasers, an amount
equal to all accrued unpaid past due interest on the
Notes; (B) to the Purchasers, an amount equal to all
accrued unpaid interest due on the Notes; (C) to the
Purchasers, all accrued unpaid and past due amounts
under the Securities Purchase Agreement, the Notes and
any of the Ancillary Agreements; (D) to the Purchasers,
all other accrued unpaid amounts under the Securities
Purchase Agreement, the Notes and any of the Ancillary
Agreements;(E) the aggregate principal amount
outstanding under the Notes; and (F) to the Company;
3
<PAGE> 4
provided however, that the Escrow Agent shall not be required to make any
disbursements with respect to a Default Date until it shall have received a
notice from the Purchasers under this Section 7 in substantially the form set
forth in Exhibit B attached hereto, and further provided that it shall make such
disbursement as set forth above promptly after receipt of such notice from the
Purchasers.
8. Escrow Agent. The Escrow Agent shall be an Eligible
Institution as that term is defined in the Securities
Purchase Agreement. The duties of the Escrow Agent,
hereunder shall be entirely administrative and not
discretionary. The Escrow Agent shall be obligated to
act only in accordance with written instructions
received by it as provided in this Escrow Agreement and
is authorized hereby to comply with such written
instructions, any orders, judgments or decrees of any
court with proper jurisdiction and shall not be liable
as a result of its compliance with the same.
a. As to any legal questions arising in connection
with the administration of this Escrow
Agreement, the Escrow Agent may rely absolutely
upon the opinions given to it by its counsel and
shall be free of liability (except for liability
arising from its own gross negligence or wilful
misconduct), for acting in reliance on such
opinions.
b. The Escrow Agent may rely absolutely upon the
genuineness and authorization of the signature
and purported signature of any party upon any
instruction, notice, release, receipt or other
document delivered to it pursuant to this Escrow
Agreement.
c. The Escrow Agent may, as a condition to the
disbursement of monies or disposition of
securities as provided herein, require from the
payee or recipient a receipt therefor and, upon
final payment or disposition, a release of the
Escrow Agent from any liability arising out of
its execution or performance of this Escrow
Agreement, such release to be in a form
satisfactory to the Escrow Agent.
d. The parties agree that any compensation due to
the Escrow Agent for its services
4
<PAGE> 5
hereunder shall be paid entirely by the Company.
9. Indemnity.
a. The Purchasers and the Company agree to and
hereby waive any suit, claim, demand or cause of
action of any kind which they or it may have or
may assert against the Escrow Agent arising out
of or relating to the execution or performance
by the Escrow Agent of this Escrow Agreement,
unless such suit, claim, demand or cause of
action is based upon the wilful misconduct,
gross negligence or bad faith of the Escrow
Agent. The Purchasers and the Company further
agree, jointly and severally, to indemnify the
Escrow Agent against and from any and all
claims, demands, costs, liabilities and
expenses, including reasonable counsel fees,
which may be asserted against it or to which it
may be exposed or which it may incur by reason
of its execution or performance of this Escrow
Agreement, except such claims, demands, costs,
liabilities and expenses that are based upon or
the result of the wilful misconduct, gross
negligence or bad faith of the Escrow Agent.
Such agreement to indemnify shall survive the
termination of this Escrow Agreement until
extinguished by any applicable statute of
limitations.
b. In case any litigation is brought against the
Escrow Agent in respect of which indemnity may
be sought hereunder, the Escrow Agent shall give
prompt notice of that litigation to the
Purchasers and the Company and the Purchasers
and the Company upon receipt of that notice
shall have the obligation and the right to
assume the defense of such litigation, provided
that failure of the Escrow Agent to give that
notice shall not relieve the Purchasers or the
Company from any of their obligations under this
Section 9 unless that failure prejudices the
defense of such litigation by said parties. At
its own expense, the Escrow Agent may employ
separate counsel and participate in the defense.
The Purchasers and the Company shall not be
liable hereunder pursuant to any settlement
without their respective consents.
5
<PAGE> 6
10. Acknowledgment by the Escrow Agent. By execution and
delivery of this Escrow Agreement, the Escrow Agent
acknowledges that the terms and provisions of this
Escrow Agreement are acceptable to it and it agrees to
carry out the provisions of this Escrow Agreement on its
part.
11. Resignation or Removal of Escrow Agent; Successors.
a. The Escrow Agent may resign as such following
the giving of ten (10) days' prior written
notice to the other parties hereto. Similarly,
the Escrow Agent may be removed and replaced
following the giving of ten (10) days' prior
written notice to the Escrow Agent by the
Purchasers and the Company. In either event,
subject to subsection 11(b), the duties of the
Escrow Agent shall terminate ten (10) days after
the date of such notice (or as of such earlier
date as may be mutually agreeable among the
parties hereto); and the Escrow Agent shall then
deliver the balance of the Escrow Fund then in
its possession to a successor Escrow Agent as
shall be appointed by the other parties hereto
as evidenced by a written notice filed with the
Escrow Agent. Any successor Escrow Agent
appointed hereunder shall be an Eligible
Institution (as that term is defined in the
Securities Purchase Agreement), that is
appointed by the Purchasers and the Company.
b. If for any reason any bank or trust company is
unwilling to serve as successor Escrow Agent and
if the other parties hereto are unable to agree
upon a successor or shall have failed to appoint
a successor prior to the expiration of ten (10)
days following the date of the notice of
resignation or removal, the then acting Escrow
Agent may petition any court of competent
jurisdiction for the appointment of a successor
Escrow Agent or other appropriate relief and
until any such appointment is made or
appropriate relief granted, the then acting
Escrow Agent shall continue as the Escrow Agent;
and any such resulting appointment shall be
binding upon all of the Parties hereto.
C. Every successor appointed hereunder shall
execute, acknowledge and deliver to its
predecessor and also to the Purchasers and the
Company, an instrument in writing accepting such
appointment hereunder, and thereupon such
successor, without
6
<PAGE> 7
any further act, shall become fully vested with
all the duties, responsibilities and obligations
of its predecessor; but such predecessor shall,
nevertheless, on the written request of its
successor or any of the parties hereto, execute
and deliver an instrument or instruments
transferring to such successor all the rights of
such predecessor hereunder, and shall duly
assign, transfer and deliver all property,
securities and monies held by it pursuant to
this Escrow Agreement to its successor. Should
any instrument be required by any successor for
more fully vesting in such successor the duties,
responsibilities and obligations hereby vested
or intended to be vested in the predecessor, any
and all such instruments in writing shall, on
the request of any of the parties hereto, be
executed, acknowledged and delivered by the
predecessor or any other party so requested.
d. In the event of an appointment of a successor,
the predecessor shall cease to be custodian of
any funds, securities or other assets and
records it may hold pursuant to this Escrow
Agreement, and the successor shall become such
custodian.
e. Upon acknowledgment by any successor Escrow
Agent of the receipt of the then remaining
balance of the Escrow Fund, which acknowledgment
shall be given promptly after such receipt, the
then acting Escrow Agent shall be fully released
and relieved of all duties, responsibilities and
obligations under this Escrow Agreement.
12. Entire Agreement, Amendments and Waivers. This Escrow
Agreement contains the entire agreement (including
representations, warranties and covenants) among the
parties hereto pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements,
negotiations, discussions, arrangements or
understandings with respect thereto. No amendment,
supplement, modification or waiver of this Escrow
Agreement shall be binding unless executed in writing by
the Escrow Agent, the Required Holders (as that term is
defined in the Securities Purchase Agreement) and the
Company, provided however that, except with the prior
written consent of one hundred percent (100%) of the
Purchasers, no amendment to this Agreement can affect
the time, amount or allocation of any payments, change
the percentage
7
<PAGE> 8
specified in the definition of Required Holders as
contained in the Securities Purchase Agreement or
consent to the assignment or transfer by the Company or
any of its Subsidiaries of their respective obligations
under this Agreement. Any amendment or waiver of any
provision herein shall be effective only for the
purposes and period of time expressly set forth therein
and shall not entitle the Company to any other waiver or
amendment in similar or other circumstances. No course
of dealing between the Company and any Purchaser, nor
any failure to exercise or any delay in exercising on
the part of the Purchasers, any right, remedy, power or
privilege herein shall operate as a waiver thereof; nor
shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other
right, remedy, power or privilege. The rights, remedies,
powers and privileges hereunder are cumulative and not
exclusive of any rights remedies, powers and privileges
provided by law. In addition to the remedies provided in
this Escrow Agreement, any party may pursue any and all
remedies now or hereafter existing at Law or in equity.
13. Execution in Counterparts. This Escrow Agreement may be
executed in one or more counterparts each of which shall
be regarded as an original and all of which shall
constitute but one and the same instrument.
14. Severability. If any provision of this Escrow Agreement,
or any covenant, obligation or agreement contained
herein is determined by a court of competent
jurisdiction to be invalid or unenforceable, such
determination shall not affect any other provision,
covenant, obligation or agreement contained herein, each
of which shall be construed and enforced as if such
invalid or unenforceable portion were not contained
herein. Such invalidity or unenforceability shall not
affect any valid and enforceable application thereof,
and each such provision, covenant, obligation or
agreement shall be deemed to be effective, operative,
made, entered into or taken in the manner and to the
full extent permitted by law.
15. Captions. The captions and headings in this Escrow
Agreement shall be solely for convenience of reference
and shall in no way define, limit or
8
<PAGE> 9
describe the scope or intent of any provisions or
sections of this Escrow Agreement.
16. Notices. All notices, requests, consents or other
communications which are required or permitted hereunder
shall be in writing and shall be deemed to be
sufficiently given when delivered personally, mailed by
registered or certified mail, postage prepaid, or
nationwide overnight delivery service (with charges
prepaid) and addressed as follows:
if to the Purchasers:
Northstar High Total Return
Northstar High Total Return II
Northstar High Yield Fund
Northstar Strategic Income Fund
300 First Stamford Place
Stamford, Connecticut 06902
Attention: Mr. Michael A. Graves
With a copy to:
Reboul, MacMurray, Hewitt, Maynard
& Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Karen C. Wiedemann
a. if to the Company:
Intracel Corporation
2005 N.W. Sammamish Road
Issaqua, Washington 98027
Attention: Simon R. McKenzie
Chief Executive Officer
b. if to the Escrow Agent:
c. Bank of America NT & SA
doing business as
Seattle First National Bank
10500 Northeast 8th Street
Floor 5
Bellevue, Washington 98004
or, in any such case, at such other addresses or addresses as shall have been
furnished in writing by such party to the other. Any notice given hereunder
shall be deemed given and delivered three (3) Business Days after mailing by
mail, or one day after
9
<PAGE> 10
delivery to an overnight express service for next day delivery, or upon
delivery, if personally delivered, as the case may be.
17. Expenses. The Company shall pay its own expenses and the
expenses of the Purchasers in connection with the
transactions contemplated hereby, including, but not
limited to, the execution and enforcement of this
Agreement and any indemnity payments by Purchasers to
the Escrow Agent in accordance with Section 9 hereto.
18. Successors. This Escrow Agreement shall be binding
upon, and inure to the benefit of the successors and
assignees of the parties hereto (including without
limitation, in the case of Purchaser and Seller, by
merger), and no other person shall have any right,
benefit or obligation hereunder.
19. Applicable Law. This Escrow Agreement shall be governed
by and construed and enforced in accordance with the
internal laws (and not the laws of conflicts) of the
State of New York as permitted by Section 5-401 of the
New York General Obligations Law (or any similar
successor provision) without giving effect to any
choice of law rule that would cause the application of
the Laws of any jurisdiction other than New York. Each
of the parties hereto hereby (i) submits for itself and
its respective Assets to the nonexclusive general
jurisdiction of the Courts of the State of New York,
County of New York and the Courts of the United States
of America for the Southern District of New York, (ii)
irrevocably agrees that, at the Purchasers' election,
all actions or proceedings arising out of or relating to
this Escrow Agreement may be litigated in such courts,
(iii) waives any objection that it may have to the venue
of any such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the
same, and (iv) agrees that service of process in any
such action or proceeding may be effected by mailing a
copy thereof by registered or certified mail, postage
prepaid, to it at its address set forth in or determined
pursuant Section 16 of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Escrow Agreement to be executed on its behalf as of the day and year first above
written.
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<PAGE> 11
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR HIGH YIELD FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
NORTHSTAR STRATEGIC INCOME FUND
By: /s/ MICHAEL A. GRAVES
-------------------------------
Name: Michael A. Graves
Title: Vice President
11
<PAGE> 12
INTRACEL CORPORATION
By /s/ SIMON R. MCKENZIE
-------------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
Bank of America NT & SA
doing business as
Seattle First National Bank
By:
-------------------------------
Name:
Title:
12
<PAGE> 13
INTRACEL CORPORATION
By /s/ SIMON R. MCKENZIE
-------------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
Bank of America NT & SA
doing business as
Seattle First National Bank
By: /s/ C. TAYLOR
-------------------------------
Name: Christopher J. Taylor
Title: Assistant Vice-President and Relationship Officer
Seafirst Investment Management
and Trust Services
12
<PAGE> 14
Exhibit A
[Form of]
DISBURSEMENT NOTICE
To: Bank of America NT & SA, doing business as Seattle First National Bank, as
Escrow Agent (the "Escrow Agent") under the Escrow Agreement dated as of
August 24, 1998 by and among Northstar High Total Return Fund, Northstar
High Total Return Fund II, Northstar Yield Fund, Northstar Strategic
Income Fund, Intracel Corporation and the Escrow Agent
Ladies and Gentlemen:
You are hereby instructed, pursuant to Section 6 of the referenced Escrow
Agreement, to disburse funds from the Escrow Fund (as defined therein) as
follows:
[INSERT PAYMENT INSTRUCTIONS AND AMOUNTS]
Very truly yours,
INTRACEL CORPORATION
By: _______________________________
Name:
Title:
Bank of America NT & SA
doing business as
Seattle First National Bank
By: _______________________________
Name:
Title:
14
<PAGE> 15
Exhibit B
[Form of]
DISBURSEMENT NOTICE
To: Bank of America NT & SA, doing business as Seattle First National Bank, as
Escrow Agent (the "Escrow Agent") under the Escrow Agreement dated as of
August 24, 1998 by and among Northstar High Total Return Fund, Northstar
High Total Return Fund II, Northstar Yield Fund, Northstar Strategic Income
Fund, Intracel Corporation and the Escrow Agent
Ladies and Gentlemen:
You are hereby instructed, pursuant to Section 7 of the referenced
Escrow Agreement, to disburse funds from the Escrow Fund (as defined therein)
as follows:
(A) to _________________, the amount of $__________, which amount is
equal to all accrued unpaid past due interest on the Notes;
(B) to _________________, the amount of $__________, which amount is
equal to all accrued unpaid interest due on the Notes;
(C) to _________________, the amount of $__________, which amount is
equal to all accrued unpaid and past due amounts under the
Securities Purchase Agreement, the Notes and any of the Ancillary
Agreements;
(D) to _________________, the amount of $__________, which amount is
equal to all other accrued unpaid amounts under the Securities
Purchase Agreement, the Notes and any of the Ancillary Agreements;
(E) to _________________, the amount of $__________, which amount is
equal to the aggregate principal amount Outstanding under the Notes;
and
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<PAGE> 16
(F) to the Company, the amount of $____________
Very truly yours,
NORTHSTAR [ ]
By:________________________________
Name:
Title:
Bank of America NT & SA
doing business as
Seattle First National Bank
By:_________________________________
Name:
Title:
16
<PAGE> 1
EXHIBIT 10.37
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT (this "AGREEMENT") is entered into as of
December 11, 1998 by and between INTRACEL CORPORATION ("INTRACEL"), a Delaware
corporation having its principal office at 1330 Piccard Drive, Rockville, MD,
and LEHIGH VALLEY HOSPITAL AND HEALTH NETWORK ("LEHIGH"), a Pennsylvania
non-profit corporation having its principal office at Cedar Crest & I-78,
Allentown, PA.
WHEREAS, Intracel has (i) developed OncoVaxCL(R) ("ONCOVAX") to be
utilized in the treatment of colon cancer and (ii) the technical expertise
necessary for the manufacture, production and distribution of OncoVax and other
drugs as agreed to by the parties to be used in the treatment of cancer;
WHEREAS, Lehigh and its medical staff have the knowledge and expertise,
as well as the facilities reasonably necessary to support the diagnoses and
treatment of certain oncological diseases and the location necessary for the
production and delivery of OncoVax to certain patients in the mid-Atlantic
region;
WHEREAS, Intracel and Lehigh desire to form Intracel Cancer Center of
Pennsylvania, Inc. ("ICC") as a for-profit Delaware corporation to operate a
center for the manufacture of OncoVax and other oncological products as agreed
to by the parties, and to provide, or arrange for the provision of, such
products to cancer patients; and
WHEREAS, the parties wish to set forth herein and in the documents and
agreements attached hereto and/or referenced herein the terms on which ICC would
be formed, capitalized, governed, and operated, as well as the obligations and
rights of the parties prior to such formation.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS
The following terms used in this Agreement (including the Exhibits
hereto), and the singular and plural thereof, which are not otherwise defined
herein, shall have the meanings ascribed to them in this Section 1.
<PAGE> 2
"AMENDED AND RESTATED INITIAL ONCOVAX CENTER LEASE" means the Amended
and Restated Initial OncoVax Center Lease, substantially in the form attached
hereto as Exhibit N, to be entered into by the parties on the date hereof.
"BEST EFFORTS" means, as to a party hereto, an undertaking by such party
to perform or satisfy an obligation or duty or otherwise act in a manner
reasonably calculated to obtain the intended result by action or expenditure not
disproportionate or unduly burdensome in the circumstances, which means, among
other things, that such party shall not be required to (i) expend funds other
than for payment of the reasonable and customary costs and expenses of
employees, counsel, consultants, representatives or agents of such party in
connection with the performance or satisfaction of such obligation or duty or
other action or (ii) institute litigation or arbitration as part of its best
efforts.
"BUSINESS PLAN" means the business plan to be developed by Intracel and
Lehigh as described in Section 5.1 below.
"CLEAN ROOM" means the laboratory room as described in Exhibit H leased
to Intracel or ICC, as the case may be, by Lehigh under the terms of either the
Amended and Restated Initial OncoVax Center Lease or the Final OncoVax Center
Lease.
"COMMON STOCK" means the common stock of ICC, par value $.01 per share.
"COMMON STOCK PURCHASE PRICE" means the amount to be paid in
consideration of the Common Stock pursuant to Section 3.2 below.
"EQUIPMENT" or "CLEAN ROOM EQUIPMENT" means the Equipment located in the
Clean Room as described in Exhibit J attached hereto.
"FINAL CLOSING" means the closing of the transactions described in
Section 16.1 below.
"FINAL CLOSING DATE" means the date mutually agreed upon in writing by
the parties pursuant to Section 16.1 below, which is within 30 days of the
receipt of FDA approval to market OncoVax to cancer patients at the OncoVax
Center.
"FINAL ONCOVAX CENTER LEASE" means the Final OncoVax Center Lease,
substantially in the form attached hereto as Exhibit G, to be entered into by
Lehigh and Intracel at the Final Closing pursuant to Section 5.3 below.
"ICC SERVICE AREA" shall mean the following counties in Pennsylvania:
Bradford, Susquehanna, Wayne, Lycoming, Sullivan, Wyoming, Lackawanna,
Northumberland, Montour, Columbia, Luzerne, Pike, Dauphin, Schuylkill, Carbon,
Monroe, York, Lebanon, Lancaster, Berks, Lehigh, Northampton, Chester,
Montgomery, Bucks and Delaware, and the following counties in New Jersey:
Sussex, Warren, Hunterdon, Somerset and Morris.
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"INITIAL FUNDING SCHEDULE" means the operating budget for ICC to be
developed by Intracel and Lehigh as described in Section 3.3 below. The Initial
Funding Schedule shall set forth, among other things, ICC's projected working
capital needs for the initial operation of ICC following the Final Closing Date.
"INITIAL CLOSING" means the closing of the transactions described in
Section 15.1 below.
"INITIAL CLOSING DATE" means December 11, 1998 or such other date as
mutually agreed upon in writing by the parties to this Agreement pursuant to
Section 15.1 below.
"INTERIM PHASE" means the period of time commencing on the Initial
Closing Date and ending on the Final Closing Date during which time the OncoVax
Center shall be operated in accordance with Section 10 below.
"MEDICAL DIRECTOR" means the medical director of the OncoVax Center.
"ONCOVAX CENTER" means the location from which Intracel or ICC, as the
case may be, shall manufacture, market and provide, or arrange for the provision
of, OncoVax or any other oncological product agreed to by the parties to cancer
patients.
"INTRACEL CANCER CENTER OF PENNSYLVANIA, INC." or "ICC" means a Delaware
corporation, which shall be organized by Intracel and Lehigh as contemplated in
Section 2.1 below.
"OPERATIONS AGREEMENT" means the agreement to be entered into by and
between ICC, Intracel and Lehigh on the Final Closing Date, which will set forth
the obligations of ICC, Intracel and Lehigh during the Operational Phase as more
fully described in Section 9 below.
"OPERATIONAL PHASE" means the period of time from the Final Closing Date
until the termination of this Agreement during which time the OncoVax Center
shall be operated in accordance with Section 5 below.
"STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement
substantially in the form of Exhibit F attached hereto to be entered into by and
among ICC, Intracel and Lehigh as described in Section 4 below.
"SUPERMAJORITY VOTE" shall have the meaning set forth in the
Stockholders' Agreement.
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2. FORMATION AND ORGANIZATION OF ICC
2.1. GENERALLY
Prior to and as a condition to the Final Closing, the parties
shall incorporate ICC as a for-profit corporation under the Delaware General
Corporation Law by filing a Certificate of Incorporation substantially in the
form of Exhibit A attached hereto. The parties shall thereafter, but prior to
the Final Closing, cause the adoption of the organizational resolutions and
bylaws of ICC substantially in the form of Exhibits B-1 and B-2 attached hereto.
2.2. INITIAL DIRECTORS
The members of the initial Board of Directors of ICC shall be
named in the Certificate of Incorporation referred to in Section 2.1 above and
shall consist of (a) 3 directors designated by Intracel and (b) 2 directors
designated by Lehigh. Each of the parties will provide a list of its designees
to the initial ICC Board of Directors as soon as reasonably practicable after
the date hereof and in no event later than 10 days prior to the Final Closing.
2.3. INITIAL OFFICERS
The parties will select, and cause to be elected, the officers
of ICC as soon as possible after the execution and delivery hereof and in any
event prior to the Final Closing.
3. CAPITALIZATION OF ICC
3.1. CONTRIBUTION OF EQUIPMENT AND PURCHASE OF ICC COMMON STOCK BY
INTRACEL
Subject to the terms and conditions hereof, and as set forth in
the Subscription Agreement substantially in the form attached hereto as Exhibit
C and in the Bill of Sale substantially in the form attached hereto as Exhibit D
("ICC BILL OF Sale"), Intracel hereby agrees to contribute the Equipment to ICC
at the Final Closing as further described in Section 6.2 in exchange for 1,900
shares of Common Stock of ICC, which stock shall have an aggregate value equal
to $700,000.
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3.2. SUBSCRIPTION FOR AND PURCHASE OF ICC COMMON STOCK BY LEHIGH
Subject to the terms and conditions hereof and as set forth in
the Subscription Agreement attached hereto as Exhibit E, Lehigh shall subscribe
for and shall agree to purchase, at the Final Closing, 100 shares of Common
Stock at an aggregate purchase price equal to $36,482 (the "COMMON STOCK
PURCHASE PRICE").
3.3. CAPITALIZATION OF ICC UPON FINAL CLOSING.
The parties acknowledge and agree that, in accordance with this
Section 3, upon the consummation of the Final Closing, Intracel and Lehigh will
own 95% and 5%, respectively, of the issued and outstanding capital stock of
ICC.
3.4. INITIAL FUNDING SCHEDULE
During the Interim Phase, the parties agree to negotiate in good
faith and use their best efforts to develop the Initial Funding Schedule. The
Initial Funding Schedule shall be mutually agreed upon prior to the Final
Closing and shall (i) set forth, among other things, ICC's projected capital
needs for its initial operation following the Final Closing and (ii) provide
that the parties will contribute funds to ICC in proportion to their relative
ownership interests in ICC.
4. STOCKHOLDERS AGREEMENT AND GOVERNANCE OF ICC
At the Final Closing, Intracel and Lehigh shall execute and
deliver, and cause ICC to execute, a Stockholders' Agreement substantially in
the form attached hereto as Exhibit F (the "STOCKHOLDERS' AGREEMENT"), which
shall contain, among other things, customary covenants, and representations and
warranties, and shall provide that all distributions of dividends by ICC to the
parties be made in proportion to their relative ownership interests in ICC.
Execution and delivery of the Stockholders' Agreement by all of the parties
thereto shall be a condition to the Final Closing.
5. BUSINESS AND OPERATIONS OF ICC
5.1. DEVELOPMENT OF THE BUSINESS PLAN
Intracel and Lehigh, working with ICC management, shall use
their best efforts to develop, as soon as practicable after the Final Closing,
the Business
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Plan for ICC. During the Interim Phase, the parties agree to negotiate in good
faith the terms of the Business Plan, which shall be developed on or prior to
the Final Closing. The terms of such Business Plan shall include, among other
things, the establishment and administration of the Initial Funding Schedule. As
more specifically provided in the Stockholders' Agreement, the Business Plan and
any material amendments thereto must be approved by a supermajority vote of the
Board of Directors of ICC. After the Final Closing, Intracel and Lehigh shall
each use its best efforts to cause ICC to fully and faithfully implement the
Business Plan in compliance with the Initial Funding Schedule and in a timely
manner.
5.2. SCOPE OF OPERATIONS
From the Final Closing Date until termination of this Agreement,
in addition to the conduct of Phase III clinical trials ("TRIALS") and in
accordance with the terms of the Operations Agreement (as described in Section 9
below), ICC shall operate the OncoVax Center for the manufacture of OncoVax and
other oncological products as agreed to by the parties and shall provide, or
arrange for the provision of, such products to cancer patients to the extent
permitted by applicable law (the "OPERATIONAL PHASE"). Intracel and Lehigh agree
to cooperate in coordinating publicity with the respect to the operation of the
OncoVax Center during the Operational Phase.
5.3. LEASE OF THE ONCOVAX CENTER
At the Final Closing, Lehigh and ICC shall enter into a lease
substantially in form attached hereto as Exhibit G, which shall provide for the
lease by Lehigh to ICC of the Clean Room, and all clinical patient care,
administrative and storage space, as more particularly described in Exhibit H
attached hereto, reasonably necessary for the operation of the OncoVax Center
(the "FINAL ONCOVAX CENTER LEASE").
5.4. OPERATION OF THE ONCOVAX CENTER
5.4.1. OPERATIONAL POLICIES AND PROCEDURES
The Operations Agreement shall provide that ICC shall adopt and
enforce policies and procedures for the operation of the OncoVax Center during
the Operational Phase, which such policies and procedures shall be consistent
with, and require ICC and its employees and agents to comply with, Lehigh's
Facility Policies, Rules and Regulations. Intracel shall, in accordance with the
terms of the Operations Agreement, have the right to review, amend and approve
all of ICC's operational policies and procedures including those related to
compliance with FDA
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requirements, and any amendments thereto before such
policies and procedures are implemented by ICC. Lehigh shall have the right to
review all such policies and procedures and any amendments thereto and Intracel
shall take any concerns into consideration prior to approving any such policies
and procedures. The Operations Agreement shall provide that ICC shall accept all
amendments submitted by Intracel to ICC in connection with those operational
policies and procedures related to compliance with FDA requirements. Intracel
shall maintain ultimate responsibility for compliance with all applicable FDA
product requirements.
5.4.2. ONCOVAX CENTER PERSONNEL
Except as set forth below, the terms of the Operations Agreement
shall provide that during the Operational Phase, all laboratory, clinical and
administrative personnel working in the OncoVax Center shall be employees of ICC
and subject to ICC's personnel policies and procedures which personnel policies
and procedures shall be adopted only after receipt of approval from both
Intracel and Lehigh, each in its reasonable discretion; provided, however, that
Intracel shall have the right to terminate such employees as further described
in Section 9.1 below. The Medical Director shall be an employee of Lehigh and
provide services to the OncoVax Center as further described in Section 5.4.3
below.
5.4.3. DESIGNATION OF MEDICAL DIRECTOR
Unless the parties otherwise agree, the Medical Director of the
OncoVax Center during the Interim Phase (as designated in accordance with
Section 10.5 below) shall continue as Medical Director of the OncoVax Center
after the Final Closing Date. The Medical Director shall remain an employee of
Lehigh and shall perform services for the OncoVax Center as an independent
contractor pursuant to the terms of a Medical Director Services Agreement,
substantially in the form of Exhibit I attached hereto and made a part hereof
(the "FINAL MEDICAL DIRECTOR SERVICES AGREEMENT"). The parties shall use their
best efforts to cause ICC to execute the Final Medical Director Services
Agreement on the Final Closing Date. The Final Medical Director Services
Agreement shall provide that ICC shall reimburse Lehigh for the Medical
Director's services at the fair market value for such services, which the
parties agree shall be at the rate described in Section 10.5. Lehigh shall at
all times have the right to recommend and approve the appointment of a Medical
Director for the OncoVax Center; provided, however, that Intracel shall have the
right to terminate the services provided by any particular Medical Director as
provided in Section 9.
5.5. LEHIGH AND INTRACEL CONTRACTS WITH ICC
As further developed in the Business Plan and as provided for in
the Operations Agreement, each of the parties intends to enter into a services
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agreement with ICC pursuant to which such party will provide specified
management or administrative services to ICC as further described in Sections
5.5.1 and 5.5.2 below. Each such agreement, and any amendment thereto shall be:
(a) on arms length, fair market value terms and conditions;
and
(b) subject to the prior approval by the Board of Directors
of ICC.
The parties shall use their best efforts to negotiate, enter into and cause ICC
to enter into, such mutually acceptable agreements on the Final Closing Date.
5.5.1. SERVICES PROVIDED BY LEHIGH
At the Final Closing, and from time to time throughout the term
of this Agreement and the term of the Operations Agreement, ICC may purchase
certain services from Lehigh at a price to be agreed upon by Lehigh and ICC,
which services shall include, but shall not be limited to the following:
(a) Support services such as bioengineering and
housekeeping;
(b) Specialized laboratory testing;
(c) Sales and marketing support; and
(d) Assistance with and support for the development of
relationships with managed care entities and physician
groups.
5.5.2. SERVICES PROVIDED BY INTRACEL
At the Final Closing, and from time to time throughout the term
of this Agreement and the term of the Operations Agreement, ICC may purchase
certain
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services from Intracel at a price to be agreed upon by Intracel and ICC, which
services shall include, but shall not be limited to the following:
(a) Case management services;
(b) Reimbursement services;
(c) Accounting and finance services;
(d) Quality assurance and assistance with FDA regulatory
monitoring and compliance;
(e) Sales and marketing services; and
(f) Kits and supplies necessary for the manufacture and
production of OncoVax.
6. PURCHASE AND CONTRIBUTION OF CLEAN ROOM EQUIPMENT
6.1. PURCHASE OF CLEAN ROOM EQUIPMENT AT FINAL CLOSING
Concurrent with the Final Closing, Lehigh shall sell, assign,
and transfer to Intracel, and Intracel shall purchase from Lehigh the equipment
located in the Clean Room and described in Exhibit J attached hereto (the
"EQUIPMENT") for an aggregate purchase price of $700,000 (the "PURCHASE PRICE"),
which the parties agree reflects the fair market value of the Equipment. Upon
the Final Closing, the parties agree that the Purchase Price shall be adjusted
to reflect the amount of the Purchase Price pre-paid by Intracel to Lehigh prior
to the Final Closing Date (the "ADJUSTED PURCHASE PRICE"). The Adjusted Purchase
Price shall be calculated as follows: $700,000 minus the aggregate Principal
Component (as defined in Schedule 6.1) of the aggregate rent paid by Intracel to
Lehigh pursuant to Section 7.1 of each of the Initial OncoVax Center Lease and
the Amended and Restated Initial OncoVax Center Lease. At the Final Closing,
Intracel shall pay $36,842 of the Adjusted Purchase Price by check or wire
transfer of readily available funds and the remainder of the Adjusted Purchase
Price shall be paid in the form of a convertible note substantially in the form
of Exhibit K (the "CONVERTIBLE NOTE"). The principal amount due under the
Convertible Note shall be payable in a balloon payment due on the fifth
anniversary thereof together with interest at a rate equal to the prime rate as
published in the Wall Street Journal. The Convertible Note shall be secured by a
Security Agreement substantially in the form of Exhibit L attached hereto,
pursuant to which Intracel shall grant a security interest in the Equipment to
Lehigh. The terms and conditions of the purchase of the Equipment are more
particularly set forth in the Bill of Sale attached hereto as Exhibit M (the
"LEHIGH BILL OF SALE").
6.2. CONTRIBUTION OF EQUIPMENT AT THE FINAL CLOSING
Concurrent with the purchase and sale of the Equipment, Intracel
agrees to contribute the Equipment to ICC. The parties shall use their best
efforts to cause ICC to accept such Equipment and to issue shares of Common
Stock of ICC to Intracel in exchange for such Equipment as more particularly
described in Section 3.1 and in the ICC Bill of Sale attached hereto as Exhibit
D. Intracel agrees to provide Lehigh with documentation evidencing the
contribution of Equipment to ICC at the Final Closing.
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7. LICENSE OF RIGHTS TO ICC
During the Interim Phase, the parties agree to negotiate in good faith
the terms of the License Agreement (the "LICENSE AGREEMENT") to be entered into
by Intracel and ICC at the Final Closing, pursuant to which Intracel shall grant
to ICC a limited, exclusive right in the ICC Service Area to manufacture,
produce and distribute or arrange for the distribution of, OncoVax and such
other products as the parties may mutually agree on.
8. LIMITATIONS ON ACTIVITIES OF LEHIGH
Lehigh agrees that during the term of this Agreement and for a period of
one year thereafter, it shall not directly or indirectly on its own or through
any joint venture, teaming arrangement, partnership, or other entity or
arrangement, engage in the manufacture, production or distribution of any cancer
related products comparable to any products manufactured, produced or
distributed by Intracel or ICC at any time during the Term of this Agreement.
9. OPERATIONS AGREEMENT
During the Interim Phase, Intracel and Lehigh agree to negotiate
in good faith the terms of an Operations Agreement to be entered into at the
Final Closing by ICC, Intracel and Lehigh (the "OPERATIONS AGREEMENT"). The
Operations Agreement shall set forth all the rights and obligations of ICC,
Intracel and Lehigh during the Operational Phase, including, but not limited to,
those rights and obligations described in Sections 5 and 7 above and the
additional operational rights of Intracel and Lehigh described below. In the
event of an inconsistency between the terms and conditions of this Agreement
relating to the rights and obligations of ICC, Intracel and Lehigh with respect
to those contained in the Operations Agreement, the Operations Agreement's terms
and conditions shall govern. The parties hereto shall each use its best efforts
to cause ICC to execute the Operations Agreement on the Final Closing Date.
9.1. INTRACEL'S OPERATIONAL RIGHTS
Notwithstanding anything to the contrary in this Agreement, the
parties agree that Intracel shall have, among others, the following rights: (i)
the right to audit ICC and the OncoVax Center, (ii) the right to close the
OncoVax Center or otherwise stop ICC from manufacturing OncoVax or any other
drug agreed to by the parties if the OncoVax Center or ICC's manufacturing of
OncoVax or any other drug is not in compliance with applicable laws and
regulations, (iii) the right to terminate any of ICC's employees or terminate
the services of any particular Medical Director if such employee or Medical
Director fails to comply
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with applicable laws and regulations, (iv) the right to represent ICC and the
OncoVax Center in any interaction with the FDA, (v) the right to require
implementation of any actions or changes in order to assure full compliance with
all applicable FDA requirements, and (vi) the right to take all such other
actions with respect to ICC, its operations and its employees in order to comply
with all applicable laws and regulations.
9.2. LEHIGH'S OPERATIONAL RIGHTS
Notwithstanding anything to the contrary herein, the parties
agree that Lehigh shall have the right to (i) audit ICC and the OncoVax Center,
and (ii) review on a regular basis all of ICC's and the OncoVax Center's
operational policies and procedures.
10. INTERIM PHASE OPERATIONS
10.1. INITIAL ONCOVAX CENTER LEASE
On October 21, 1998 and prior to the Initial Closing, the
parties entered in a lease (the "INITIAL ONCOVAX CENTER LEASE") and a letter
agreement relating thereto (the "LETTER AGREEMENT") for the operation of the
OncoVax Center for the period from November 1, 1998 until the Initial Closing.
At the Initial Closing, Lehigh and Intracel shall terminate the Letter Agreement
and enter into an Amended and Restated Initial OncoVax Center Lease,
substantially in the form attached hereto as Exhibit N (the "AMENDED AND
RESTATED INITIAL ONCOVAX CENTER LEASE"), which Amended and Restated Initial
OncoVax Center Lease shall provide for the lease of the Clean Room, Clean Room
Equipment, and clinical patient care, administrative and storage space
(collectively, the "FACILITIES"), each as more particularly described in
Exhibits H and J attached hereto. In the event of the termination of this
Agreement during the Interim Phase for any reason, the Amended and Restated
Initial OncoVax Center Lease shall terminate in accordance with its own terms,
effective as of the date of the termination of this Agreement.
10.2. SCOPE OF OPERATIONS DURING INTERIM PHASE
During the Interim Phase, Intracel shall utilize the Facilities
for the purpose of manufacturing and producing OncoVax for use in the conduct of
the Trials and arranging for and/or sponsoring such Trials at the OncoVax Center
and furnishing OncoVax to patients as permitted under federal law and Food and
Drug Administration ("FDA") guidance. Intracel and Lehigh agree to cooperate in
coordinating publicity with the respect to the opening of the OncoVax Center for
the
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conduct of such Trials. Lehigh agrees that it shall not publicize, advertise
or otherwise use the name of the OncoVax Center or Intracel without the prior
written consent of Intracel, which consent shall not be unreasonably withheld.
10.3. OPERATIONAL POLICIES AND PROCEDURES
Intracel shall adopt and enforce policies and procedures for the
operation of the OncoVax Center during the Interim Phase and shall require that
all Trials be conducted in accordance with (a) all applicable laws and
regulations and (b) Lehigh's Facility Policies, Rules and Regulations.
10.4. SERVICES PROVIDED BY LEHIGH
During the Interim Phase, Intracel shall purchase certain
services from Lehigh at a price to be agreed upon by Lehigh and ICC, which
services shall include the following:
(a) Support services such as bioengineering and
housekeeping;
(b) Specialized laboratory testing; and
(c) Assistance with and support for the development of
relationships with managed care entities and physician
groups.
Such services will be provided pursuant to an agreement
negotiated at arms length and providing for fair market value terms and
conditions.
10.5. ONCOVAX CENTER PERSONNEL
Except as described below, during the Interim Phase all
laboratory, clinical and administrative personnel engaged in the manufacture and
production of OncoVax and the conduct of the Trials, shall be employees of
Intracel and subject to Intracel's personnel policies and procedures. The
medical director of the OncoVax Center during the Interim Phase shall be Herbert
C. Hoover, Jr., M.D. or his designee (the "MEDICAL DIRECTOR"). The Medical
Director shall be an employee of Lehigh and shall render services during the
Interim Phase as an independent contractor pursuant to the terms and conditions
of an initial Medical Director Services Agreement, substantially in the form of
Exhibit O attached hereto and made a part hereof (the "INITIAL MEDICAL DIRECTOR
SERVICES AGREEMENT"). The parties agree that the fair market value of the
services provided by the Medical Director for the OncoVax Center during the
first year shall be $75,000, which compensation pursuant to the terms of the
Initial Medical Director Services Agreement shall be adjusted annually by
Intracel during the Interim Phase to reflect the fair market value of the
Medical Director's services. In the event of the
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termination of this Agreement during the Interim Phase for any reason, the
Initial Medical Director Services Agreement shall automatically terminate in
accordance with its own terms, effective as of the date of termination of this
Agreement.
10.6. ADDITIONAL EQUIPMENT; IMPROVEMENTS TO THE CLEAN ROOM
During the Interim Phase, Intracel may purchase additional
equipment for the Clean Room and make improvements to the Clean Room, which
additional equipment and improvements shall be transferred to ICC by Intracel,
as soon as practicable after the Final Closing on a date agreed to by the
parties. The parties agree that any amounts paid by Intracel to purchase such
additional equipment and improvements shall be off-set against any capital
contributions Intracel is required to make pursuant to the Initial Funding
Schedule.
11. REGULATORY APPROVALS
After the Initial Closing and prior to the Final Closing,
Intracel shall use its best efforts to obtain any authorizations, consent, and
approvals of any federal, state, local, foreign or other governmental agency,
instrumentality, commission, authority, board or body or other person or entity,
including the FDA, for the transactions contemplated hereunder. Such approvals
and authorizations shall include, without limitation, the FDA's approval and
authorization to market and provide OncoVax, manufactured at the OncoVax Center,
to cancer patients. Lehigh agrees to use its best efforts to cooperate with, and
provide support to, Intracel in complying with current Good Manufacturing
Practices ("CGMPS") and to maintain any state licenses necessary to furnish care
to cancer patients at the OncoVax Center.
12. REPRESENTATIONS AND WARRANTIES
Concurrent with the execution and delivery of this Agreement,
Intracel and Lehigh have each executed and delivered the Certificates attached
hereto as Exhibits P-1 and P-2 containing certain representations and warranties
of the parties.
13. CONDITIONS PRECEDENT TO INITIAL CLOSING
The obligations of each party to consummate the transactions
contemplated in this Agreement and to proceed with the Initial Closing are
subject to the fulfillment at or prior to the Initial Closing, of each of the
following conditions
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(the failure of any of which shall excuse and discharge all obligations of such
party hereunder, unless such failure is agreed to in writing by such party):
(a) the execution and delivery by the parties of the Amended and
Restated Initial OncoVax Center Lease as set forth in Section 10.1 above;
(b) the Letter Agreement shall be terminated;
(c) the execution and delivery by the parties of the Initial
Medical Director Services Agreement; and
(d) the representations and warranties of Intracel and Lehigh
contained in this Agreement shall be true and correct in all material respects
as of the Initial Closing Date as if made at and as of such time, and Intracel
and Lehigh shall have performed or complied with, in all material respects all
agreements and covenants required by this Agreement to be performed or complied
with by it prior to or at and as of the Initial Closing Date.
14. CONDITIONS PRECEDENT TO THE FINAL CLOSING
14.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY
The obligations of each party to consummate the transactions
contemplated in this Agreement and to proceed with the Final Closing are subject
to the fulfillment at or prior to the Final Closing, of each of the following
conditions (the failure of any of which shall excuse and discharge all
obligations of such party hereunder, unless such failure is agreed to in writing
by such party):
(a) Intracel's and Lehigh's designation of the initial ICC board
of directors pursuant to Section 2.2;
(b) the incorporation and organization of ICC as evidenced by
the filing of the Articles of Incorporation of ICC with and issuance of a
Certificate of Incorporation by, the Delaware Secretary of State;
(c) the adoption of the Bylaws of ICC;
(d) the development of the Initial Funding Schedule pursuant to
Section 3.3;
(e) the development of the Business Plan pursuant to Section 5.1
above; and
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<PAGE> 15
(f) FDA approval of OncoVax for use in the treatment of cancer.
14.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF INTRACEL
The obligations of Intracel as contemplated in this Agreement
and to proceed with the Final Closing are subject to the fulfillment, at or
prior to the Final Closing, of each of the following conditions (the failure of
any of which shall excuse and discharge all obligations of Intracel hereunder,
unless such failure is excused in writing by Intracel):
(a) the execution of the Lehigh Bill of Sale by Lehigh and the
delivery of the Equipment as set forth in Section 6.1 above;
(b) the execution and delivery of the Stockholders' Agreement by
Lehigh and ICC;
(c) the delivery of the Common Stock Purchase Price by Lehigh
and the delivery of a duly executed Subscription Agreement as set forth in
Section 3.2 above;
(d) the execution and delivery of the Final OncoVax Center Lease
as set forth in Section 5.3 above;
(e) the execution and delivery of the Final Medical Director
Services Agreement as set forth in Section 5.4.3 above;
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<PAGE> 16
(f) the execution and delivery of the License Agreement as set
forth in Section 7 above;
(g) the execution and delivery of the Operations Agreement as
set forth in Section 9 above;
(h) the representations and warranties of Lehigh contained in
this Agreement shall be true and correct in all material respects as of the
Final Closing Date as if made at and as of such time, and Lehigh shall have
performed or complied with, in all material respects all agreements and
covenants required by this Agreement to be performed or complied with by it
prior to or at and as of the Final Closing Date; and
(i) the transaction has been approved by the board of directors
of Lehigh or the executive committee of such board, if any.
14.3. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF LEHIGH
The obligations of Lehigh to consummate the transactions
contemplated in this Agreement and to proceed with the Final Closing are subject
to the fulfillment, at or prior to the Final Closing, of each of the following
conditions (the failure of any of which shall excuse and discharge all
obligations of Lehigh hereunder, unless such failure is excused in writing by
Lehigh):
(a) the execution and delivery of the Stockholders' Agreement by
Intracel and ICC;
(b) Intracel's delivery of the Equipment to ICC pursuant to the
ICC Bill of Sale and the delivery of a duly executed Subscription Agreement as
set forth in Sections 3.1 and 6.2 above;
(c) the execution and delivery of the Final OncoVax Center Lease
as set forth in Section 5.3 above;
(d) the execution and delivery of the Final Medical Director
Services Agreement as set forth in Section 5.4.3 above;
(e) the execution and delivery of the Convertible Note and the
Security Agreement as set forth in Section 6.1 above;
(f) the execution and delivery of the License Agreement as set
forth in Section 7 above;
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<PAGE> 17
(g) the execution and delivery of the Operations Agreement as
set forth in Section 9 above;
(h) the representations and warranties of Intracel contained in
this Agreement shall be true and correct in all material respects as of the
Final Closing Date as if made at and as of such time, and Intracel shall have
performed or complied with, in all material respects all agreements and
covenants required by this Agreement to be performed or complied with by it
prior to or at and as of the Final Closing Date; and
(i) the transaction has been approved by the board of directors
of Intracel or the executive committee of such board.
15. THE INITIAL CLOSING
15.1. GENERALLY
The Initial Closing shall take place at the offices of Lehigh
Valley Hospital and Health Network or at such other place to which the parties
may agree, on December 11, 1998, or such other time as the parties may agree
(the "INITIAL CLOSING DATE"). At the Initial Closing, and as a condition
precedent to the Initial Closing, the parties shall comply with such conditions
and shall deliver such documents as are set forth in Sections 15.2 and 15.3.
15.2. DELIVERIES BY INTRACEL
At the Initial Closing, in addition to any other documents or
agreements required under any other provision of this Agreement, Intracel shall
make the following deliveries and performance (and the obligation of Lehigh to
consummate the Initial Closing shall be conditioned thereon):
(a) this Agreement duly executed by Intracel;
(b) a certificate of good standing for Intracel from the
State of Delaware;
(c) a copy, certified by the Secretary of State of the State
of Delaware, of the Certificate of Incorporation of
Intracel, as amended;
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<PAGE> 18
(d) a copy of the Bylaws of Intracel, as amended, as
certified by the appropriate officers of Intracel as
being true, complete and in full force and effect;
(e) a certificate signed by the appropriate officers of
Intracel certifying resolutions authorizing the
execution of this Agreement and the transactions
hereunder;
(f) the Amended and Restated Initial OncoVax Center Lease
duly executed by Intracel;
(g) the Agreement terminating the Letter Agreement duly
executed by Intracel as required by Section 10.1 (the
"TERMINATION AGREEMENT");
(h) the Initial Medical Director Services Agreement duly
executed by Intracel;
(i) evidence that Intracel has obtained and maintains
insurance as required by Section 18.7.1 below; and
(j) any additional documents that Lehigh may reasonably
require for the proper consummation of the transactions
contemplated by this Agreement.
15.3. DELIVERIES BY LEHIGH
At the Initial Closing, in addition to any other documents or
agreements required under any other provision of this Agreement, Lehigh shall
make the following deliveries and performance (and the obligation of Intracel to
consummate the Initial Closing shall be conditioned thereon):
(a) this Agreement duly executed by Lehigh;
(b) a certificate of good standing for Lehigh from the
Commonwealth of Pennsylvania;
(c) a copy, certified by the Secretary of State of the
Commonwealth of Pennsylvania, of the Articles of
Incorporation of Lehigh, as amended;
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<PAGE> 19
(d) a copy of the Bylaws of Lehigh, as amended, as certified
by the appropriate officers of Lehigh as being true,
complete and in full force and effect;
(e) a certificate signed by the appropriate officers of
Lehigh certifying resolutions authorizing the execution
of this Agreement and the transactions hereunder;
(f) the Amended and Restated Initial OncoVax Center Lease
duly executed by Lehigh;
(g) the Termination Agreement duly executed by Lehigh;
(h) the Initial Medical Director Services Agreement duly
executed by Lehigh;
(i) evidence that Lehigh has obtained and maintains
insurance as required by Section 18.7.2 below; and
(j) any additional documents that Intracel may reasonably
require for the proper consummation of the transactions
contemplated by this Agreement.
16. THE FINAL CLOSING
16.1. GENERALLY
The Final Closing shall take place on a date, mutually agreed
upon by the parties, within 30 days after the receipt of FDA approval to market
OncoVax to cancer patients at the OncoVax Center (the "FINAL CLOSING DATE"), at
Lehigh's facility located at Cedar Crest & I-78, Allentown, PA or at such other
place to which the parties may agree. At the Final Closing, and as a condition
precedent to the Final Closing, the parties shall comply with such conditions
and shall deliver such documents as are set forth in Sections 16.2, 16.3 and
16.4.
16.2. DELIVERIES BY INTRACEL
At the Final Closing, in addition to any other documents or
agreements required under any other provision of this Agreement, Intracel shall
make the following deliveries and performance (and the obligation of Lehigh to
consummate the Final Closing shall be conditioned thereon):
(a) List of Intracel's designees to the initial ICC Board of
Directors;
(b) the Stockholders' Agreement duly executed by Intracel;
(c) the Convertible Note executed by Intracel;
(d) the Security Agreement duly executed by Intracel;
(e) the ICC Bill of Sale duly executed by Intracel, and
delivery of the ICC Bill of Sale and Equipment to ICC,
and documentation evidencing the delivery of the
Equipment to Lehigh;
(f) the License Agreement duly executed by Intracel pursuant
to Section 7;
(g) the Operations Agreement duly executed by Intracel
pursuant to Section 9; and
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<PAGE> 20
(h) any additional documents that Lehigh may reasonably
require for the proper consummation of the transactions
contemplated by this Agreement.
16.3. DELIVERIES BY LEHIGH
At the Final Closing, in addition to any other documents or
agreements required under any other provision of this Agreement, Lehigh shall
make the following deliveries and performance (and the obligation of Intracel to
consummate the Final Closing shall be conditioned thereon):
(a) List of Lehigh's designees to the initial ICC Board of
Directors;
(b) the Stockholders' Agreement duly executed by Lehigh;
(c) the Common Stock Purchase Price;
(d) the Final OncoVax Center Lease duly executed by Lehigh
pursuant to Section 5.3;
(e) the Final Medical Director Services Agreement duly
executed by Lehigh pursuant to Section 5.4.3;
(f) the Lehigh Bill of Sale duly executed by Lehigh pursuant
to Section 6.1 and delivery of the Equipment to
Intracel;
(g) the Operations Agreement duly executed by Lehigh
pursuant to Section 9;
(h) an Opinion of Bond Counsel to Lehigh in a form
satisfactory to Intracel; and
(i) any additional documents that Intracel may reasonably
require for the proper consummation of the transactions
contemplated by this Agreement.
16.4. DELIVERIES BY ICC
At the Final Closing, the parties shall use their best efforts
to cause ICC to:
(a) deliver to Lehigh, against delivery of the Common Stock
Purchase Price, a duly issued stock certificate made out
in Lehigh's name and representing the shares of Common
Stock to be purchased by Lehigh pursuant to Section 3.2
above;
(b) deliver to Intracel, against delivery of the Equipment,
a duly issued stock certificate made out in Intracel's
name and representing the shares of Common Stock to be
purchased by Intracel pursuant to Section 3.1 above;
(c) deliver the Stockholders' Agreement duly executed by
ICC;
(d) deliver the Final OncoVax Center lease duly executed by
ICC pursuant to Section 5.3;
(e) deliver the Final Medical Director Services Agreement
duly executed by ICC pursuant to Section 5.4.3;
(f) deliver the License Agreement duly executed by ICC
pursuant to Section 7; and
(g) deliver the Operations Agreement duly executed by ICC
pursuant to Section 9.
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17. TERMINATION
17.1. TERMINATION
17.1.1. TERMINATION PRIOR TO FINAL CLOSING
This Agreement may be terminated at any time prior to Final
Closing as follows:
(a) immediately upon the mutual written agreement of Intracel
and Lehigh;
(b) immediately by Intracel, after written notice to Lehigh and
the expiration of any applicable cure period, upon a material breach of any
representation, warranty, covenant or agreement on the part of Lehigh set forth
in this Agreement, or if any representation or warranty of Lehigh has become
materially untrue, in either case such that Lehigh is unable to cure such
material breach so that the conditions set forth in Section 14 are incapable of
being satisfied by the Final Closing Date; provided, however, that in any case,
a willful breach will
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<PAGE> 22
be deemed to cause such conditions to be incapable of being satisfied for
purposes of this paragraph (b);
(c) immediately by Lehigh after written notice to Intracel and
the expiration of any applicable cure period, upon a material breach of any
representation, warranty, covenant or agreement on the part of Intracel set
forth in this Agreement, or if any representation or warranty of Intracel has
become materially untrue, in either case such that Intracel is unable to cure
such material breach so that the conditions set forth in Section 14 are
incapable of being satisfied by the Final Closing Date; provided, however, that
in any case, a willful breach will be deemed to cause such conditions to be
incapable of being satisfied for purposes of this paragraph (c); or
(d) immediately upon written notice by either party to the other
party if, through no fault of either party, the Final Closing shall not have
taken place by December 31, 2000, or such other date agreed to by the parties.
17.1.2. TERMINATION AFTER TO FINAL CLOSING
This Agreement may be terminated at any time after the Final
Closing as follows:
(a) immediately by either party after written notice to the
other party and the expiration of any applicable cure period in the event that
the other party has materially breached a representation, warranty, covenant or
agreement contained in this Agreement or in any other agreement or document
contemplated hereunder and such breach has not been cured within 30 days of
written notice thereof by the non-breaching party; or
(b) immediately upon written notice by either party to the other
party if FDA approval to market OncoVax is permanently withdrawn.
17.2. EFFECT OF TERMINATION
17.2.1. PRIOR TO FINAL CLOSING
In the event this Agreement is terminated prior to Final Closing
as provided above, (a) each of Lehigh and Intracel shall deliver to the other
party all documents previously delivered (and copies thereof in its possession)
concerning one another and the transactions contemplated hereby, (b) the Amended
and Restated Initial OncoVax Center Lease and the Initial Medical Director
Services Agreement shall terminate effective the date of termination of this
Agreement and the parties shall take any further action required to be taken
pursuant to the terms of
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<PAGE> 23
the Amended and Restated Initial OncoVax Center Lease and the Initial Medical
Director Services Agreement, and (c) neither of the parties nor any of their
respective stockholders, directors, officers or agents shall have any liability
to the other party, except for any deliberate breach or deliberate omission
resulting in breach of any of the provisions of this Agreement. In such case,
the breaching party shall be liable only for the expenses and costs of the
non-breaching party, and in no event shall either party be liable for
anticipated profits or consequential damages.
17.2.2. AFTER FINAL CLOSING
In the event this Agreement is terminated after Final Closing as
provided above, (a) each of Lehigh and Intracel shall deliver to the other party
all documents previously delivered (and copies thereof in its possession)
concerning one another and the transactions contemplated hereby, (b) the parties
shall take such steps as are reasonably necessary to cause the dissolution of
ICC in a timely fashion and in accordance with applicable law, (c) the parties
shall take such steps as are reasonably necessary to wind down the affairs of
ICC in accordance with applicable law and to terminate all of the agreements and
arrangements entered into by the parties as contemplated hereunder, (d) the
Final OncoVax Center Lease and the Final Medical Director Services Agreement
shall terminate effective the date of such termination of this Agreement and the
parties shall take any further action required to be taken pursuant to the terms
of the Final OncoVax Center Lease and the Final Medical Director Services
Agreement, (e) the parties shall cause ICC to sell, and ICC shall be obligated
to sell, the Clean Room Equipment to Lehigh, who shall be required to purchase
the Clean Room Equipment at its depreciated book value as of the date of
termination, and (f) neither of the parties nor any of their respective
stockholders, directors, officers or agents shall have any liability to the
other party, except for any deliberate breach or deliberate omission resulting
in breach of any of the provisions of this Agreement. In such case, the
breaching party shall be liable only for the expenses and costs of the
non-breaching party, and in no event shall either party be liable for
anticipated profits or consequential damages.
17.2.3. GENERALLY
After termination, each party shall keep confidential all
information provided by the other pursuant to this Agreement which is not in the
public domain, shall exercise the same degree of care in handling such
information as it would exercise with similar confidential information of its
own, and shall return any such information upon the other party's request.
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<PAGE> 24
18. INDEMNIFICATION; LIMITATION ON LIABILITY; INSURANCE; SURVIVAL
18.1. LEHIGH INDEMNIFICATION OF INTRACEL
Subject to Section 18.6.2 below, Lehigh will indemnify, defend
and hold harmless Intracel and Intracel's successors and assigns from and
against any and all actual and direct claims, damages, losses and liabilities
(including reasonable attorneys' fees) ("LOSSES") which may at any time be
asserted against or suffered by Intracel as a result of or on account of
Lehigh's negligence or any breach of any representation, warranty or covenant on
the part of Lehigh made herein or in any instrument or document delivered by
Lehigh pursuant hereto. Furthermore, Lehigh will indemnify Intracel and
Intracel's successors and assigns from any Losses arising out of any action
relating to or arising out of any action taken by Lehigh, or its employees as
agents, in connection with the Trials to be conducted at the Facilities during
the Interim Phase.
18.2. INTRACEL INDEMNIFICATION OF LEHIGH
Subject to Section 18.6.1 below, Intracel will indemnify, defend
and hold harmless Lehigh and Lehigh's successors and assigns from and against
any and all Losses which may at any time be asserted against or suffered by
Lehigh as a result of or on account of Intracel's negligence or any breach of
any representation, warranty or covenant on the part of Intracel made herein or
in any instrument or document delivered by Intracel pursuant hereto.
Furthermore, Intracel will indemnify Lehigh and Lehigh's successors and assigns
from any Losses arising out of any action relating to or arising out of any
action taken by Intracel, or its employees as agents, in connection with the
Trials to be conducted at the Facilities during the Interim Phase.
18.3. NOTICE
A party (an "INDEMNIFIED PARTY") shall give prompt written
notice to an indemnifying party (the "INDEMNIFYING PARTY") of any payments,
demands, claims, suits, judgments, liabilities, losses, costs, damages or
expenses (a "CLAIM") in respect of which such Indemnifying Party has a duty to
provide indemnity to such Indemnified Party under this Section 18, except that
any delay or failure to notify the Indemnifying Party only shall relieve the
Indemnifying Party of its obligations hereunder to the extent, if at all, that
it is prejudiced by reason of such delay or failure.
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<PAGE> 25
18.4. THIRD PARTY ACTIONS
In the event any claim is made, suit is brought, or other
proceeding instituted against a party to this Agreement which involves or
appears reasonably likely to involve a Loss, the Indemnified Party will, within
10 days after receipt of notice of any such claim, suit, or proceeding for which
indemnification may be sought, notify the Indemnifying Party in writing of the
commencement thereof; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party can demonstrate actual monetary prejudice as a direct or
indirect result of such failure.
The Indemnified Party may elect, within 30 days after the
Indemnifying Party's receipt of such notice, or five days before the return date
required by any citation, claim, or other statute, whichever occurs earlier, to
contest or defend against such claim at the Indemnifying Party's expense, and
shall give written notice to the Indemnifying Party of the commencement of such
defense. The Indemnifying Party, its subsidiaries, successors, and assigns shall
be entitled to participate with the Indemnified Party in such event (at the
Indemnifying Party's cost and expense). In the event that the Indemnified Party
does not elect to contest, defend, settle, or pay the claim as provided above,
the Indemnifying Party, its subsidiaries, successors, or assigns shall have the
exclusive right to prosecute, defend, compromise, settle, or pay the claim in
its sole discretion and pursue its rights under this Agreement but shall not be
entitled in any way to release, waive, settle, modify, or pay such claim without
the consent of the Indemnified Party. Each party, its subsidiaries, successors,
and assigns shall cooperate in the defense of such action and the records of
each shall be available to the other with respect to such defense.
18.5. OTHER RECOVERIES
The amount of any Losses recoverable by an Indemnified Party
hereunder shall be reduced by the amount, if any, of the recovery (net of
reasonable expenses incurred in obtaining said recovery) the Indemnified Party
hereunder shall have received with respect thereto from any other party, person,
or entity, other than an insurer of the Indemnified Party unless such insurer
has expressly waived all rights of subrogation with respect to such recovery. In
the event such a recovery is made by an Indemnified Party after it receives
payment or other credit hereunder with respect to any Losses, then a refund
equal in aggregate amount to the recovery, net of reasonable expenses incurred
in obtaining that recovery, shall be made promptly to the Indemnifying Party
making such payment. Without limiting the foregoing, in the event that a claim
or benefit is created in connection with the occurrence of any Losses which have
not been collected by the Indemnified Party at the time payment with respect to
such Losses is made by the Indemnifying
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<PAGE> 26
Party, the Indemnified Party shall assign such benefit or claim to the
Indemnifying Party as a condition to the payment by the Indemnifying Party and
shall cooperate with the Indemnifying Party in its efforts to collect any such
benefit or claim. If such claim or benefit is not assignable under applicable
laws, the Indemnified Party shall cooperate in good faith with the Indemnifying
Party's efforts to collect such claim or benefit.
18.6. LIMITATION OF LIABILITY
18.6.1. LIMITATION OF INTRACEL'S LIABILITY.
Notwithstanding any other provision contained in this
Agreement, Intracel's liability under this Agreement shall be limited to actual
and direct losses suffered by Lehigh arising as a result of Intracel's negligent
failure to perform its obligations under this Agreement. Lehigh acknowledges and
agrees that Intracel shall not be liable for any lost reimbursement or loss of
data, earnings, profits or goodwill or any other indirect, consequential,
incidental, exemplary or punitive damages suffered by any person or entity,
including Lehigh, caused directly or indirectly by the acts or omissions of
Intracel, its employees or agents in the course of performing services or
functions contemplated under or related in any way to this Agreement (including,
without limitation, any breach by Intracel of its obligations under this
Agreement). Notwithstanding any other provision contained in this Agreement,
Intracel's maximum aggregate liability to Lehigh for any and all causes
whatsoever, and Lehigh's remedy, regardless of the form of action, whether in
contract or tort, including negligence, and whether or not pursuant to the
indemnification provisions contained in Section 18.2 and whether or not Intracel
is notified of the possibility of damage to Lehigh, shall be limited to
$3,000,000.
18.6.2. LIMITATION OF LEHIGH'S LIABILITY.
Notwithstanding any other provision contained in this
Agreement, Lehigh's liability under this Agreement shall be limited to actual
and direct losses suffered by Intracel arising as a result of Lehigh's negligent
failure to perform its obligations under this Agreement. Intracel acknowledges
and agrees that Lehigh shall not be liable for any lost reimbursement or loss of
data, earnings, profits or goodwill or any other indirect, consequential,
incidental, exemplary or punitive damages suffered by any person or entity,
including Intracel, caused directly or indirectly by the acts or omissions of
Lehigh, its employees or agents in the course of performing obligations or
functions contemplated under or related in any way to this Agreement (including,
without limitation, any breach by Lehigh of its obligations under this
Agreement). Notwithstanding any other provision contained in this Agreement,
Lehigh's maximum aggregate liability to Intracel for any and all causes
whatsoever, and Intracel's remedy, regardless of the form of
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<PAGE> 27
action, whether in contract or tort, including negligence, and whether or not
pursuant to the indemnification provisions contained in Section 18.1, and
whether or not Lehigh is notified of the possibility of damage to Intracel,
shall be to $3,000,000.
18.7. INSURANCE
18.7.1. INTRACEL'S OBLIGATION TO INSURE.
Intracel shall obtain and maintain in effect at all
times during the term of this Agreement insurance as set forth in Schedule
18.7.1. Such insurance policies shall name Lehigh as an additional insured and
Intracel shall provide such evidence as Lehigh may reasonably request from time
to time that Intracel has obtained and continues to maintain in full force and
effect insurance coverage as described in the preceding sentence. If such
insurance is purchased on a claims made basis, upon the termination of this
Agreement for any reason Intracel shall purchase an extended reporting
endorsement in amounts equivalent to the liability coverage maintained on the
date of termination to cover prior acts.
18.7.2. LEHIGH'S OBLIGATION TO INSURE.
Lehigh shall obtain and maintain in effect at all times
during the term of this Agreement insurance as set forth in Schedule 18.7.2.
Such insurance policies shall name Intracel as an additional insured and
Lehigh shall provide such evidence as Intracel may reasonably request from time
to time that Lehigh has obtained and continues to maintain in full force and
effect insurance coverage as described in the preceding sentence. If such
insurance is purchased on a claims made basis, upon the termination of this
Agreement for any reason Lehigh shall purchase an extended reporting endorsement
in amounts equivalent to the liability coverage maintained on the date of
termination to cover prior acts.
18.8. SURVIVAL
All representations, warranties, covenants, indemnities and
other agreements made by any party to this Agreement (including all Exhibits
hereto) or in any document, statement, certificate, or other instrument referred
to herein or delivered at the Initial Closing or the Final Closing in connection
with the transactions contemplated hereby shall survive any investigation made
by or on behalf of any of the parties and shall survive the execution and
delivery of this Agreement, the Initial Closing and the Final Closing, and the
consummation of the transactions contemplated hereby and shall remain in full
force and effect for a period of three years after the Final Closing Date,
except for claims, if any, asserted in writing prior to such third anniversary,
which claims shall survive until finally resolved and satisfied in full.
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<PAGE> 28
19. MISCELLANEOUS
19.1. CONFIDENTIAL AND PROPRIETARY INFORMATION
All non-public information received by Lehigh from Intracel or
by Intracel from Lehigh in connection with the transactions contemplated hereby
will be treated by the recipient as proprietary and will be made available only
to those within its organization who have a "need to know" in connection with
the matters contemplated hereby, to such recipient's attorneys, accountants and
other advisors, and as may be required by applicable law or regulations or may
be requested by any regulatory authority to which Lehigh or Intracel is subject;
provided, however, the foregoing restrictions with respect to information
furnished to one party by the other shall not apply to any such information
which the receiving party demonstrates (i) is on the date hereof, or hereafter
becomes, generally available to the public other than as a result of a
disclosure, directly or indirectly, by the receiving party or (ii) was available
or becomes available to the receiving party on a confidential or
non-confidential basis from a source other than the other party hereto, which
source was not itself bound by a confidentiality agreement with such other party
and did not receive such information, directly or indirectly, from a person or
entity so bound.
19.2. FURTHER ASSURANCES
The parties hereby agree to take whatever further actions or to
execute and deliver whatever further documents or instruments or make whatever
further filings as may be reasonably necessary or desirable to effectuate the
express provisions or the intent of this Agreement.
19.3. ASSIGNMENT; BINDING EFFECT
This Agreement, and the rights and obligations of the parties
created hereunder, shall not be assigned or delegated by either Lehigh or
Intracel without the prior written consent of all parties, and any purported or
attempted assignment or delegation without such consent shall be void and
without effect, except that (i) either party may assign or delegate its rights
and obligations under this Agreement to any successor to such party in the event
of a merger or consolidation of such party with another entity, or to any
purchaser of all or substantially all of the assets or business of such party,
and (ii) either party may assign or delegate its rights and obligations under
this Agreement to an Affiliate (as defined below) in which case the assigning or
delegating party shall not be relieved of their obligations hereunder. Any such
successor, purchaser or Affiliate shall execute a counterpart to the
Stockholders Agreement. For purposes of this Section 19.3, an Affiliate shall
mean, as to any party hereto, any corporation or other entity which,
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directly or indirectly, through one or more intermediaries, controls (i.e.,
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of an entity, whether through ownership of voting
securities, by contract, or otherwise) is controlled by, or is under common
control with such party. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs, executors, administrators, and/or personal
representatives.
19.4. GOVERNING LAW
This Agreement and the rights and obligations of the parties
hereto shall be governed by and construed and enforced in accordance with the
laws of the Maryland (excluding the choice of law rules thereof).
19.5. SEVERABILITY
In the event that a court of competent jurisdiction holds that a
particular provision or requirement of this Agreement is in violation of any
applicable law, each such provision or requirement shall be enforced only to the
extent it is not in violation of such law or is not otherwise unenforceable and
all other provisions and requirements of this Agreement shall remain in full
force and effect.
19.6. EXPENSES; ATTORNEYS' FEES
The parties shall pay their own respective expenses (including,
without limitation, the fees, disbursements and expenses of their attorneys,
accountants, actuaries, and financial and other advisors) in connection with the
negotiation and preparation of this Agreement and the transactions contemplated
hereby. If any party is required to institute legal action or arbitration
against another party to enforce the provisions of this Agreement, the
prevailing party shall be entitled to recover costs of litigation, including,
but without limitation, reasonable attorneys' fees.
19.7. MODIFICATION; WAIVER
This Agreement shall not be modified or amended except by an
instrument in writing signed by Lehigh and Intracel. No delay or failure on the
part of any party hereto in exercising any right, power, or privilege under this
Agreement or any other instruments executed and delivered in connection with or
pursuant to this Agreement, shall impair any such right, power, or privilege or
be construed as a waiver of any default hereunder or any acquiescence therein.
No single or partial exercise of any such right, power, or privilege shall
preclude the
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<PAGE> 30
further exercise of such right, power, or privilege, or the exercise of any
other right, power, or privilege. No waiver shall be valid against any party
hereto unless made in writing and signed by the party against whom enforcement
of such waiver is sought and then only to the extent expressly specified
therein.
19.8. NOTICE
All notices, demands, requests or other communications which may
be or are required to be given, served or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered
(including delivery by courier), sent by Federal Express or by other recognized
overnight delivery service, mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, or sent by telegram, telex, or
facsimile transmission, addressed as follows:
If to Intracel:
Intracel Corporation
1330 Piccard Drive
Rockville, Maryland 20850
Attn: Daniel S. Reale
Facsimile: (301) 296-0082
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 13th Street, N. W.
Washington, D.C. 20004-1004
Attn: Donna A. Boswell, Esq.
Facsimile: (202) 637-5910
If to Lehigh:
Lehigh Valley Hospital and Health Network
Cedar Crest & I-78
P.O. Box 689
Allentown, Pennsylvania 18105-1556
Attn: Louis L. Leibhaber
Facsimile: (610) 402-7253
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<PAGE> 31
with a copy (which shall not constitute notice) to:
Tallman, Hudders & Sorrentino
The Paragon Centre
1611 Pond Road, Suite 300
Allentown, Pennsylvania 18104-2256
Attn: Matthew R. Sorrentino, Esq.
Facsimile: (610) 391-1800
Each party may designate by notice in writing a new address to
which any notice, demand, request or communication may thereafter be so given,
served, or sent. Each notice, demand, request, or communication which shall be
mailed, delivered, or transmitted in the manner described above shall be deemed
sufficiently given, served, sent, or received for all purposes at such time as
it is delivered to the addressee (with the return receipt, the delivery receipt,
the affidavit of messenger, or (with respect to a telex or facsimile) the answer
back being deemed conclusive, but not exclusive, evidence of such delivery) or
at such time as delivery is refused by the addressee upon presentation.
19.9. BENEFIT OF THIS AGREEMENT
It is the explicit intention of the parties hereto that except
as set forth below no person or entity other than a party hereto is or shall be
entitled to bring any action to enforce any provision of this Agreement against
any of the parties hereto, and that the covenants, undertakings, and agreements
set forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective successors and
assigns as permitted hereunder. Notwithstanding the foregoing, ICC shall be a
third party beneficiary hereto with respect to the enforcement of, and only to
the extent of, any rights it may have hereunder.
19.10. COMPLETE AGREEMENT
This Agreement sets forth the entire agreement of the parties
hereto with respect to its subject matter and any all prior agreements, whether
oral or written, between or among the parties hereto and relating to the subject
matter hereof are superseded hereby.
19.11. CONTRACT MODIFICATIONS FOR PROSPECTIVE LEGAL EVENTS
In the event any state or federal laws or regulations, now
existing or enacted or promulgated after the date hereof, are interpreted by
judicial decision, a
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<PAGE> 32
regulatory agency or legal counsel in such manner as to
indicate that this Agreement or any provision hereof may be in violation of such
laws or regulations, Intracel and Lehigh shall amend this Agreement as necessary
to preserve the underlying economic and financial arrangements between Intracel
and Lehigh and without substantial economic detriment to either party. Neither
party shall claim or assert illegality as a defense to the enforcement of this
Agreement or any provision hereof; instead any such purported illegality shall
be resolved pursuant to the terms of this Section 19.11.
19.12. EXECUTION IN COUNTERPARTS
This Agreement may be executed in counterparts, each of which
shall constitute an original hereof for all purposes.
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<PAGE> 33
IN WITNESS WHEREOF, each of the parties has duly caused this
Agreement to be duly executed in its name and on its behalf, as of the date
first written above.
INTRACEL:
INTRACEL CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
LEHIGH:
LEHIGH VALLEY HOSPITAL AND HEALTH NETWORK
By:__________________________________
Name:________________________________
Title:_______________________________
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<PAGE> 34
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
INTRACEL CANCER CENTER OF PENNSYLVANIA, INC.
1. NAME
The name of this corporation is INTRACEL CANCER CENTER OF PENNSYLVANIA,
INC. (the "Corporation").
2. REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be located at the
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 in the
County of New Castle. The registered agent of the Corporation at such address
shall be The Corporation Trust Company.
3. PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law"). The
Corporation shall have all power necessary or helpful to engage in such acts and
activities.
4. CAPITAL STOCK
4.1. Authorized Shares
The total number of shares of all classes of stock that the Corporation
shall have the authority to issue is Three Thousand (3,000) shares of Common
Stock, all of one class, having a par value of $.01 per share ("Common Stock").
<PAGE> 35
4.2 RELATIVE RIGHTS
Each share of Common Stock shall have the same relative rights as
and be identical in all respects to all the other shares of Common Stock.
4.3 DIVIDENDS
Dividends may be paid on the Common Stock out of any assets legally
available for the payment of dividends thereon, but only when and as declared
by the Board of Directors of the Corporation.
4.4 VOTING RIGHTS
Each holder of shares of Common Stock shall be entitled to attend
all special and annual meetings of the stockholders of the Corporation and to
cast one vote for each outstanding share of Common Stock so held upon any
matter or thing (including, without limitation, the election of one or more
directors) properly considered and acted upon by the stockholders.
5. INCORPORATOR; INITIAL DIRECTORS
5.1 INCORPORATOR
The name and mailing address of the incorporator (the
"Incorporator") are The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware 19801. The powers of the Incorporator
shall terminate upon the filing of this Certificate of Incorporation.
5.2 INITIAL DIRECTORS
The following persons, having the following mailing addresses,
shall serve as the directors of the Corporation until the first annual meeting
of the stockholders of the Corporation or until their successors are elected
and qualified:
NAME MAILING ADDRESS
------------------- -------------------------
------------------- -------------------------
------------------- -------------------------
------------------- -------------------------
------------------- -------------------------
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<PAGE> 36
6. BOARD OF DIRECTORS
6.1 NUMBER; ELECTION
The number of directors of the Corporation shall be such number as
from time to time shall be fixed by, or in the matter provided in, the bylaws
of the Corporation. Unless and except to the extent that the bylaws of the
Corporation shall otherwise require, the election of directors of the
Corporation need not be by written ballot.
6.2 LIMITATION OF LIABILITY
No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(c) under Section 174 of the Delaware General Corporation Law; or (d) for any
transaction from which the director derived an improper personal benefit. Any
repeal or modification of this Article 6.2 shall be prospective only and shall
not adversely affect any right or protection of, or any limitation of the
liability of, a director of the Corporation existing at, or arising out of
facts or incidents occurring prior to, the effective date of such repeal or
modification.
7. COMPROMISE OR ARRANGEMENTS
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for this Corporation under Section
279 of Title 8 of the Delaware Code order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three fourths in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of this Corporation as consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of
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<PAGE> 37
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
8. AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors of the Corporation is
expressly authorized and empowered to adopt, amend and repeal the bylaws of
the Corporation.
IN WITNESS WHEREOF, the undersigned, being the Incorporator
hereinabove named, for the purposes of forming a corporation pursuant to the
Delaware General Corporation Law, hereby certifies that the facts hereinabove
stated are truly set forth, and accordingly execute this Certificate of
Incorporation this ____ day of ______________, ____.
THE CORPORATION TRUST
COMPANY
Incorporator
By:______________________________
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<PAGE> 38
EXHIBIT B-1
INTRACEL CANCER CENTER OF PENNSYLVANIA, INC.
UNANIMOUS CONSENT OF DIRECTORS
The undersigned, being all of the directors of Intracel Cancer Center of
Pennsylvania, Inc., a Delaware corporation (the "CORPORATION"), for the purpose
of taking action without a meeting of the Board of Directors pursuant to
Sections 108 and 141(f) of the General Corporation Law of the State of
Delaware, hereby adopt the following resolutions:
1. BYLAWS
RESOLVED, that the proposed Bylaws attached hereto as Exhibit A are
hereby adopted as the Bylaws of the Corporation, and the Secretary of the
Corporation is hereby directed to insert said Bylaws in the Minute Book of the
Corporation.
2. OFFICERS
RESOLVED, that the following persons are hereby appointed to serve as
officers of the Corporation, holding the offices indicated opposite their
names, until their respective successors are appointed and qualified or until
their earlier resignation or removal:
NAME OFFICE
___________________ [Chairperson]
___________________ [President and Treasurer]
___________________ [Secretary]
3. PRINCIPAL OFFICE
RESOLVED, that the principal office of the Corporation shall be
established and maintained in ____________________.
<PAGE> 39
4. STOCK CERTIFICATE
RESOLVED, that the form of stock certificate attached hereto as Exhibit B
is hereby approved and adopted, and the Secretary is hereby directed to insert
a specimen thereof in the Minute Book of the Corporation.
5. FISCAL YEAR
RESOLVED, that the fiscal year of the Corporation shall be the calendar
year.
6. ORGANIZATION EXPENSES
RESOLVED, that the Treasurer is hereby authorized to pay all fees and
expenses that such officer determines to be necessary or advisable in
connection with the organization of the Corporation (such determination to be
conclusively, but not exclusively, evidenced by the payment of such fees or
expenses).
7. QUALIFICATION TO DO BUSINESS
RESOLVED, that the President, Secretary and any Vice President, and each
of them, are hereby authorized (1) to take all actions and to execute and file
all instruments that any such officer determines to be necessary or advisable
in order to qualify the Corporation under any law or laws in any state, country
or other jurisdiction in which any such officer determines it to be necessary
or advisable for the Corporation to conduct activities, including without
limitation the appointment and substitution of agents or attorneys for service
of process, and the designation and change of statutory offices, and to effect
withdrawal from any state, country or other jurisdiction whenever any such
officer determines it to be necessary or advisable for the Corporation to cease
conducting activities therein; and (2) to make all such other filings with the
governmental entities of the United States or of any state, country or other
jurisdiction as such officer may determine to be necessary or advisable in
connection with the conduct of the affairs of the Corporation (any
determination pursuant to this resolution to be conclusively, but not
exclusively, evidenced by the taking of such actions or the execution of such
instruments).
8. BANK ACCOUNTS
RESOLVED, that the President and Secretary of the Corporation, and each of
them, are hereby authorized to open an account or accounts for and in the name
of the Corporation with such bank or banks in the State of Delaware, and in any
other state, country or other jurisdiction, as they, or either of them, may
determine to be necessary or advisable in conducting the affairs of the
Corporation (such
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<PAGE> 40
determination to be conclusively, but not exclusively, evidenced by the opening
of such account or accounts), and to deposit therein funds coming into the
possession of the Corporation;
RESOLVED FURTHER, that all such banks are hereby authorized and directed
to pay checks and other orders for the payment of money drawn on the name of
the Corporation when signed by the President of the Corporation or by any
employee designated in writing by ??? and no such bank shall be required, in
any case, to make inquiry respecting the application of any instrument executed
by virtue of this resolution, or of the proceeds therefrom, nor be under any
obligation to see the application of such instrument or proceeds; and
RESOLVED FURTHER, that all resolutions required by such banks in
connection with such accounts that are consistent with the foregoing are hereby
adopted, and the Secretary is directed to attach copies of all such resolutions
to these resolutions.
9. FILING OF CONSENT
RESOLVED, that this Consent shall be filed with the minutes and records
of the Corporation.
10. GENERAL
RESOLVED, that each of the officers of the Corporation hereby is
authorized to do all things, to take all actions and to execute, deliver and
file all documents and instruments, in the name and on behalf of the
Corporation, as such officer may determine to be necessary or advisable in
effecting the foregoing resolutions and the transactions contemplated
thereunder (such determination to be conclusively, but not exclusively,
evidenced by the taking of such actions or the execution of such documents or
instruments by any such officer).
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<PAGE> 41
IN WITNESS WHEREOF, each of the undersigned has executed and delivered
this Unanimous Consent of Directors as of the date set forth below.
Dated as of _________________, 199
__________________________
By:_______________________
Name:_____________________
__________________________
By:_______________________
Name:_____________________
__________________________
By:_______________________
Name:_____________________
__________________________
By:_______________________
Name:_____________________
__________________________
By:_______________________
Name:_____________________
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<PAGE> 42
EXHIBIT B-2
INTRACEL CANCER CENTER OF PENNSYLVANIA, INC.
BYLAWS
Adopted
as of
_________________, 199_
<PAGE> 43
TABLE OF CONTENTS
1. OFFICES................................................................ 1
1.1. Registered Office................................................. 1
1.2. Other Offices..................................................... 1
2. MEETINGS OF STOCKHOLDERS............................................... 1
2.1. Place of Meetings................................................. 1
2.2. Annual Meetings................................................... 1
2.3. Special Meetings.................................................. 2
2.4. Notice of Meetings................................................ 2
2.5. Waivers of Notice................................................. 2
2.6. Business at Special Meetings...................................... 2
2.7. List of Stockholders.............................................. 3
2.8. Quorum at Meetings................................................ 3
2.9. Voting and Proxies................................................ 3
2.10 Required Vote..................................................... 4
2.11 Action Without a Meeting.......................................... 4
3. DIRECTORS.............................................................. 5
3.1. Powers............................................................ 5
3.2. Number and Election............................................... 5
3.3. Designation of Directors.......................................... 5
3.4. Vacancies......................................................... 5
3.5. Meetings.......................................................... 6
3.5.1. Regular Meetings.......................................... 6
3.5.2. Special Meetings.......................................... 6
3.5.3. Telephone Meetings........................................ 6
3.5.4. Action Without Meeting.................................... 6
3.5.5. Waiver of Notice of Meeting............................... 6
3.6 Quorum and Vote at Meetings........................................ 7
3.7 Committees of Directors............................................ 7
3.8 Compensation of Directors.......................................... 8
4. OFFICERS............................................................... 8
4.1. Positions......................................................... 8
4.2. Chairperson....................................................... 8
4.3. President......................................................... 9
4.4. Vice President.................................................... 9
4.5. Secretary......................................................... 9
4.6. Assistant Secretary............................................... 9
4.7. Treasurer.........................................................10
<PAGE> 44
4.8. Assistant Treasurer...............................................10
4.9. Term of Office....................................................10
4.10. Compensation.....................................................10
4.11. Fidelity Bonds...................................................10
5. CAPITAL STOCK..........................................................11
5.1. Certificates of Stock; Uncertificated Shares......................11
5.2. Lost Certificates.................................................11
5.3. Record Date.......................................................12
5.3.1. Actions by Stockholders..................................12
5.3.2. Payments.................................................12
5.4. Stockholders of Record............................................13
6. INDEMNIFICATION; INSURANCE.............................................13
6.1. Authorization of Indemnification..................................13
6.2. Right of Claimant to Bring Action Against the Corporation.........14
6.3. Non-exclusivity...................................................15
6.4. Survival of Indemnification.......................................15
6.5. Insurance.........................................................15
7. GENERAL PROVISIONS.....................................................16
7.1. Inspection of Books and Records...................................16
7.2. Dividends.........................................................16
7.3. Reserves..........................................................16
7.4. Execution of Instruments..........................................16
7.5. Fiscal Year.......................................................16
7.6. Seal..............................................................17
<PAGE> 45
BYLAWS
OF
INTRACEL CANCER CENTER OF PENNSYLVANIA, INC.
1. OFFICES
1.1 REGISTERED OFFICE
The initial registered office of the Corporation shall be in
Wilmington, Delaware, and the initial registered agent in charge thereof shall
be The Corporation Trust Company.
1.2 OTHER OFFICES
The Corporation may also have offices at such other places, both
within and without the State of Delaware, as the Board of Directors may from
time to time determine or as may be necessary or useful in connection with the
business of the Corporation.
2. MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
All meetings of the stockholders shall be held at such place as may
be fixed from time to time by the Board of Directors, the Chairperson or the
President.
2.2 ANNUAL MEETINGS
The Corporation shall hold annual meetings of stockholders,
commencing with the year _______, on such date and at such time as shall be
designated from time to time by the Board of Directors, the Chairperson or the
President, at which stockholders shall elect a Board of Directors and transact
such other business as may properly be brought before the meeting.
<PAGE> 46
2.3. SPECIAL MEETINGS
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the Board of
Directors, the Chairperson or the President.
2.4. NOTICE OF MEETINGS
Notice of any meeting of stockholders, stating the place, date and
hour of the meeting, and (if it is a special meeting) the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting (except to the extent that such notice is waived or is not
required as provided in the General Corporation Law of the State of Delaware
(the "Delaware General Corporation Law") or these Bylaws). Such notice shall be
given in accordance with, and shall be deemed effective as set forth in,
Section 222 (or any successor section) of the Delaware General Corporation Law.
2.5. WAIVERS OF NOTICE
Whenever the giving of any notice is required by statute, the
Certificate of Incorporation or these Bylaws, a waiver thereof, in writing and
delivered to the Corporation, signed by the person or persons entitled to said
notice, whether before or after the event as to which such notice is required,
shall be deemed equivalent to notice. Attendance of a stockholder at a meeting
shall constitute a waiver of notice (1) of such meeting, except when the
stockholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (2) (if it is a special meeting) of
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the stockholder
objects to considering the matter at the beginning of the meeting.
2.6 BUSINESS AT SPECIAL MEETINGS
Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice (except to the extent that such
notice is waived or is not required as provided in the Delaware General
Corporation Law or these Bylaws).
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<PAGE> 47
2.7. LIST OF STOCKHOLDERS
After the record date for a meeting of stockholders has been
fixed, at least ten days before such meeting, the officer who has charge of the
stock ledger of the Corporation shall make a list of all stockholders entitled
to vote at the meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place in the city
where the meeting is to be held, which place is to be specified in the notice
of the meeting, or at the place where the meeting is to be held. Such list
shall also, for the duration of the meeting, be produced and kept open to the
examination of any stockholder who is present at the time and place of the
meeting.
2.8. QUORUM AT MEETINGS
Stockholders may take action on a matter at a meeting only if a
quorum exists with respect to that matter. Except as otherwise provided by
statute or by the Certificate of Incorporation, the holders of a majority of
the shares entitled to vote at the meeting, and who are present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. Where a separate vote by a class
or classes is required, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter. Once a share
is represented for any purpose at a meeting (other than solely to object (1) to
holding the meeting or transacting business at the meeting, or (2) (if it is a
special meeting) to consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice), it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for the
adjourned meeting. The holders of a majority of the voting shares represented
at a meeting, whether or not a quorum is present, may adjourn such meeting from
time to time.
2.9. VOTING AND PROXIES
Unless otherwise provided in the Delaware General Corporation
Law or in the Corporation's Certificate of Incorporation, and subject to the
other provisions of these Bylaws, each stockholder shall be entitled to one
vote on each matter, in person or by proxy, for each share of the Corporation's
capital stock that has voting power and that is held by such stockholder. No
proxy shall be voted or
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<PAGE> 48
acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed appointment of proxy shall be irrevocable if the
appointment form states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power.
2.10. REQUIRED VOTE
When a quorum is present at any meeting of stockholders, all
matters shall be determined, adopted and approved by the affirmative vote
(which need not be by ballot) of the holders of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote
with respect to the matter, unless the proposed action is one upon which, by
express provision of statutes, the Certificate of Incorporation or the
Stockholders' Agreement dated as of __________, 199_ by and between the
Corporation and the stockholders (the "Stockholders' Agreement"), a different
vote is specified and required, in which case such express provision shall
govern and control with respect to that vote on that matter. Where a separate
vote by a class or classes is required, the affirmative vote of the holders of
a majority of the shares of such class or classes present in person or
represented by proxy at the meeting shall be the act of such class.
Notwithstanding the foregoing, directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors.
2.11. ACTION WITHOUT A MEETING
Any action required or permitted to be taken at a stockholders'
meeting may be taken without a meeting, without prior notice and without a vote,
if the action is taken by persons who would be entitled to vote at a meeting and
who hold shares having voting power equal to not less than the minimum number of
votes that would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed by
the stockholders entitled to take action without a meeting, and delivered to the
Corporation in the manner prescribed by the Delaware General Corporation Law for
inclusion in the minute book. No consent shall be effective to take the
corporate action specified unless the number of consents required to take such
action are delivered to the Corporation within sixty days of the delivery of the
earliest-dated consent. Written notice of the action taken shall be given in
accordance with the Delaware General Corporation Law to all stockholders who do
not participate in taking the action who would have been entitled to notice if
such action had been taken at a meeting having a record date on the date that
written consents signed by a sufficient number of holders to take the action
were delivered to the Corporation.
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<PAGE> 49
3. DIRECTORS
3.1 POWERS
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things, subject to
any limitation set forth in the Certificate of Incorporation, these Bylaws, or
as otherwise may be provided in the Delaware General Corporation Law or in the
Stockholders' Agreement.
3.2 NUMBER AND ELECTION
The number of directors which shall constitute the whole board
shall not be fewer than three nor more than seven. The first board shall
consist of five directors. Thereafter, within the limits above specified and
subject to the terms of SECTION 3.2(b) of the Stockholders' Agreement, the
number of directors shall be determined by resolution of the Board of Directors.
3.3 DESIGNATION OF DIRECTORS
Candidates for election as directors shall be designated by the
stockholders as provided in the Stockholders' Agreement. The directors shall be
elected at the annual meeting of the stockholders, except as provided in
SECTION 3.4 hereof, and each director elected shall hold office until such
director's successor is elected and qualified or until the director's earlier
death, resignation or removal. Directors need not be stockholders.
3.4 VACANCIES
Vacancies in any directorships resulting from the removal,
resignation or death of an director and newly created directorships resulting
from any increase in the authorized number of directors shall be filled by the
affirmative vote of a majority of stockholders, subject to any conditions or
limitations set forth in the Stockholders' Agreement. Each director so chosen
shall hold office until the next election of directors of the class to which
such director was appointed, and until such director's successor is elected and
qualified, or until the director's earlier death, resignation or removal. In
the event that one or more directors resign from the Board, effective at a
future date, the stockholders shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office
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<PAGE> 50
until the next election of directors, and until such director's successor is
elected and qualified, or until the director's earlier death, resignation or
removal.
3.5 MEETINGS
3.5.1. REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors.
3.5.2. SPECIAL MEETINGS
Special meetings of the Board may be called by the Chairperson or
President on one day's notice to each director, either personally or by
telephone, express delivery service (so that the scheduled delivery date of
the notice is at least one day in advance of the meeting), telegram or
facsimile transmission, and on five days' notice by mail (effective upon
deposit of such notice in the mail). The notice need not describe the purpose
of a special meeting.
3.5.3. TELEPHONE MEETINGS
Members of the Board of Directors may participate in a meeting of the
board by any communication by means of which all participating directors
can simultaneously hear each other during the meeting. A director participating
in a meeting by this means is deemed to be present in person at the meeting.
3.5.4. ACTION WITHOUT MEETING
Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if the action is taken by all
members of the Board. The action must be evidenced by one or more written
consents describing the action taken, signed by each director, and delivered to
the Corporation for inclusion in the minute book.
3.5.5. WAIVER OF NOTICE OF MEETING
A director may waive any notice required by statute, the Certificate
of Incorporation or these Bylaws before or after the date and time stated in
the notice. Except as set forth below, the waiver must be in writing, signed by
the director entitled to the notice, and delivered to the Corporation for
inclusion in the minute book. Notwithstanding the foregoing, a director's
attendance at or participation in a meeting waives any required notice to the
director of the meeting unless the
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director at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
3.6. QUORUM AND VOTE AT MEETINGS
At all meetings of the board, a quorum of the Board of Directors
consists of a majority of the total number of directors prescribed pursuant to
SECTION 3.2 of these Bylaws, except as may be otherwise specifically provided
by the Stockholders' Agreement. The vote of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute, or by
the Certificate of Incorporation, or by these Bylaws, or by the Stockholders'
Agreement. Pursuant to SECTION 3.2 of the Stockholders' Agreement, a
supermajority vote of directors is required for the Corporation to take certain
actions.
3.7. COMMITTEES OF DIRECTORS
The Board of Directors may designate one or more committees, each
committee to consist of one or more directors. The Board may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. If a member of a
committee shall be absent from any meeting, or disqualified from voting
thereat, the remaining member or members present and not disqualified from
voting, whether or not such member or members constitute a quorum, may, by
unanimous vote, appoint another member of the Board of Directors to act at the
meeting in the place of such absent or disqualified member. Any such committee,
to the extent provided in the resolution of the Board of Directors, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to
approving or adopting, or recommending to the stockholders, any action or
matter expressly required by the Delaware General Corporation Law to be
submitted to stockholders for approval or adopting, amending or repealing any
bylaw of the Corporation, and unless the resolution designating the committee,
these bylaws or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock, or to adopt a certificate of ownership and merger
pursuant to Section 253 of the Delaware General Corporation Law. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report
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the same to the Board of Directors, when required. Unless otherwise specified
in the Board resolution appointing the Committee, all provisions of the
Delaware General Corporation Law and these Bylaws relating to meetings, action
without meetings, notice (and waiver thereof), and quorum and voting
requirements of the Board of Directors apply, as well, to such committee and
their members.
3.8. COMPENSATION OF DIRECTORS
The Board of Directors shall have the authority to fix the
compensation of directors. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
4. OFFICERS
4.1. POSITIONS
The officers of the Corporation shall be a Chairperson, a President, a
Secretary and a Treasurer, and such other officers as the Board of Directors (or
an officer authorized by the Board of Directors) from time to time may appoint,
including one or more Vice Chairmen, Executive Vice Presidents, Vice Presidents,
Assistant Secretaries and Assistant Treasurers. Each such officer shall exercise
such powers and perform such duties as shall be set forth below and such other
powers and duties as from time to time may be specified by the Board of
Directors or by any officer(s) authorized by the Board of Directors to prescribe
the duties of such other officers. Any number of offices may be held by the same
person, except that in no event shall the President and the Secretary be the
same person. As set forth below, each of the Chairperson, President, and/or any
Vice President may execute bonds, mortgages and other contracts under the seal
of the Corporation, if required, except where required or permitted by law to be
otherwise executed and except where the execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation.
4.2. CHAIRPERSON
The Chairperson shall be the chief executive officer of the
Corporation, shall have overall responsibility and authority for management of
the operations of the Corporation (subject to the authority of the Board of
Directors), shall (when present) preside at all meetings of the Board of
Directors and stockholders, and shall ensure that all orders and resolutions of
the Board of Directors and stockholders are carried into effect. The
Chairperson may execute bonds, mortgages and other contracts, under the seal of
the Corporation, if required, except where
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required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
4.3 PRESIDENT
The President shall be the chief operating officer of the Corporation
and shall have full responsibility and authority for management of the
day-to-day operations of the Corporation, subject to the authority of the Board
of Directors and Chairperson. The President may execute bonds, mortgages and
other contracts, under the seal of the Corporation, if required, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
4.4 VICE PRESIDENT
In the absence of the President or in the event of the President's
inability or refusal to act, the Vice President (or in the event there be more
than one Vice President, the Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President.
4.5 SECRETARY
The Secretary shall have responsibility for preparation of minutes of
meetings of the Board of Directors and of the stockholders and for
authenticating records of the Corporation. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors. The Secretary or an Assistant Secretary may also attest
all instruments signed by any other officer of the Corporation.
4.6 ASSISTANT SECRETARY
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there
shall have been no such determination, then in the order of their election),
shall, in the absence of the Secretary or in the event of the Secretary's
inability or refusal to act, perform the duties and exercise the powers of the
Secretary.
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4.7. TREASURER
The Treasurer shall be the chief financial officer of the
Corporation and shall have responsibility for the custody of the corporate funds
and securities and shall see to it that full and accurate accounts of receipts
and disbursements are kept in books belonging to the Corporation. The Treasurer
shall render to the Chairperson, the President, and the Board of Directors, upon
request, an account of all financial transactions and of the financial condition
of the Corporation.
4.8. ASSISTANT TREASURER
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or if
there shall have been no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer.
4.9. TERM OF OFFICE
The officers of the Corporation shall hold office until their
successors are chosen and qualify or until their earliest resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Any officer elected or appointed by the Board of Directors may be
removed at any time, with or without cause, by the affirmative vote of a
majority of the Board of Directors.
4.10. COMPENSATION
The compensation of officers of the Corporation shall be fixed by
the Board of Directors or by any officer(s) authorized by the Board of Directors
to prescribe the compensation of such other officers.
4.11. FIDELITY BONDS
The Corporation may secure the fidelity of any or all of its
officers or agents by bond or otherwise.
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5. CAPITAL STOCK
5.1. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution that some or all
of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates, and upon request
every holder of uncertificated shares, shall be entitled to have a certificate
(representing the number of shares registered in certificate form) signed in
the name of the Corporation by the Chairperson, President or any Vice
President, and by the Treasurer, Secretary or any Assistant Treasurer or
Assistant Secretary of the Corporation. Any or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
whose signature or facsimile signature appears on a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
5.2. LOST CERTIFICATES
The Board of Directors, Chairperson, President or Secretary may
direct a new certificate of stock to be issued in place of any certificate
theretofore issued by the Corporation and alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
that the certificate of stock has been lost, stolen or destroyed. When
authorizing such issuance of a new certificate, the board or any such officer
may, as a condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed certificate or certificates, or such owner's
legal representative, to advertise the same in such manner as the board or such
officer shall require and/or to give the Corporation a bond or indemnity, in
such sum or on such terms and conditions as the board or such officer may
direct, as indemnity against any claim that may be made against the Corporation
on account of the certificate alleged to have been lost, stolen or destroyed or
on account of the issuance of such new certificate or uncertificated shares.
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5.3. RECORD DATE
5.3.1. ACTIONS BY STOCKHOLDERS
In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty days nor less
than ten days before the date of such meeting. If no record date is fixed by
the Board of Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting, unless the Board of Directors fixes a new record
date for the adjourned meeting.
In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which record date shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by the Board
of Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by the Delaware General Corporation Law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation in the manner prescribed
by Section 213(b) of the Delaware General Corporation Law. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the Delaware General Corporation Law, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
5.3.2. PAYMENTS
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the
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date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty days prior to such action. If no
record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
5.4. STOCKHOLDERS OF RECORD
The Corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares to receive
dividends, to receive notifications, to vote as such owner, and to exercise all
the rights and powers of an owner. The Corporation shall not be bound to
recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise may be provided by the Delaware General
Corporation Law.
6. INDEMNIFICATION: INSURANCE
6.1. AUTHORIZATION OF INDEMNIFICATION
Each person who was or is a party or is threatened to be made a
party to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and
whether by or in the right of the Corporation or otherwise (a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
partner (limited or general) or agent of another corporation or of a
partnership, joint venture, limited liability company, trust or other
enterprise, including service with respect to an employee benefit plan, shall
be (and shall be deemed to have a contractual right to be) indemnified and held
harmless by the Corporation (and any successor to the Corporation by merger or
otherwise) to the fullest extent authorized by, and subject to the conditions
and (except as provided herein) procedures set forth in the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but any such
amendment shall not be deemed to limit or prohibit the rights of
indemnification hereunder for past acts or omissions of any such person insofar
as such amendment limits or prohibits the indemnification rights that said law
permitted the Corporation to provide prior to such amendment) and in the
Certificate of Incorporation, against all expenses, liabilities and losses
(including attorneys' fees, judgments, fines, ERISA taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith;
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provided, however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person (except for a suit or action pursuant to SECTION 6.2 hereof) only
if such proceeding (or part thereof) was authorized by the Board of Directors
of the Corporation. Persons who are not directors or officers of the
Corporation and are not so serving at the request of the Corporation may be
similarly indemnified in respect of such service to the extent authorized at
any time by the Board of Directors of the Corporation. The indemnification
conferred in this SECTION 6.1 also shall include the right to be paid by the
Corporation (and such successor) the expenses (including attorneys' fees)
incurred in the defense of or other involvement in any such proceeding in
advance of its final disposition; provided, however, that, if and to the extent
the Delaware General Corporation Law requires, the payment of such expenses
(including attorneys' fees) incurred by a director or officer in advance of the
final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such director or officer to
repay all amounts so paid in advance if it shall ultimately be determined that
such director or officer is not entitled to be indemnified under this SECTION
6.1 or otherwise; and provided further, that, such expenses incurred by other
employees and agents may be so paid in advance upon such terms and conditions,
if any, as the Board of Directors deems appropriate.
6.2. RIGHT OF CLAIMANT TO BRING ACTION AGAINST THE CORPORATION
If a claim under SECTION 6.1 is not paid in full by the
Corporation within sixty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring an action against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such action. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in connection with
any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed or is otherwise not entitled to indemnification
under SECTION 6.1, but the burden of proving such defense shall be on the
Corporation. The failure of the Corporation (in the manner provided under the
Delaware General Corporation Law) to have made a determination prior to or
after the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard
of conduct set forth in the Delaware General Corporation Law shall not be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct. Unless otherwise
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specified in an agreement with the claimant, an actual determination by the
Corporation (in the manner provided under the Delaware General Corporation Law)
after the commencement of such action that the claimant has not met such
applicable standard of conduct shall not be a defense to the action, but shall
create a presumption that the claimant has not met the applicable standard of
conduct.
6.3. NON-EXCLUSIVITY
The rights to indemnification and advance payment of expenses
provided by SECTION 6.1 hereof shall not be deemed exclusive of any other
rights to which those seeking indemnification and advance payment of expenses
may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
6.4. SURVIVAL OF INDEMNIFICATION
The indemnification and advance payment of expenses and rights
thereto provided by, or granted pursuant to, SECTION 6.1 hereof shall, unless
otherwise provided when authorized or ratified, continued as to a person who
has ceased to be a director, officer, employee, partner or agent and shall
inure to the benefit of the personal representatives, heirs, executors and
administrators of such person.
6.5. INSURANCE
The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, partner (limited or general) or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust or other enterprise, against any liability asserted
against such person or incurred by such person in any such capacity, or arising
out of such person's status as such, and related expenses, whether or not the
Corporation would have the power to indemnify such person against such
liability under the provisions of the Delaware General Corporation Law.
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7. GENERAL PROVISIONS
7.1 INSPECTION OF BOOKS AND RECORDS
Subject to any additional conditions or limitations set forth in
the Stockholders' Agreement, any stockholder, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the Corporation's stock ledger, a list of its stockholders, and its other books
and records, and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder.
In every instance where an attorney or other agent shall be the person who
seeks the right to inspection, the demand under oath shall be accompanied by a
power of attorney or such other writing which authorizes the attorney or other
agent to so act on behalf of the stockholder. The demand under oath shall be
directed to the Corporation at its registered office or at its principal place
of business.
7.2 DIVIDENDS
The Board of Directors may declare dividends upon the capital stock
of the Corporation, subject to the provisions of the Certificate of
Incorporation and the laws of the State of Delaware.
7.3 RESERVES
The directors of the Corporation may set apart, out of the funds of
the Corporation available for dividends, a reserve or reserves for any proper
purpose and may abolish any such reserve.
7.4 EXECUTION OF INSTRUMENTS
All checks, drafts or other orders for the payment of money, and
promissory notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
7.5 FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of
the Board of Directors.
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7.6. SEAL
The corporate seal shall be in such form as the Board of Directors
shall approve. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
The foregoing Bylaws were adopted by the Board of Directors on
___________, 199__.
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EXHIBIT D
BILL OF SALE
THIS BILL OF SALE (the "BILL OF SALE") is executed and delivered effective
this _______ day of _________ 199__, by Intracel Corporation, a Delaware
corporation ("SELLER"), to Intracel Cancer Center of Pennsylvania, Inc., a
Delaware corporation ("BUYER").
WHEREAS, Seller and Buyer have entered into a Subscription Agreement,
pursuant to which, among other things, Seller has agreed to contribute the
assets described in Exhibit A attached hereto and incorporated by reference
herein (the "ASSETS") in exchange for 1,900 shares of common stock par value
$.01 per share (the "COMMON STOCK"), of Buyer; and
WHEREAS, the parties hereto desire by this Bill of Sale for Seller to
sell, assign, transfer and convey to Buyer the Assets in exchange for the
shares of Common Stock to be issued to Seller pursuant to the Subscription
Agreement.
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Seller hereby grants, bargains, sells, delivers, transfers, sets
over, assigns and conveys to Buyer and its successors and assigns, free and
clear of any and all liens, claims or encumbrances of any kind, except for the
security interest in the assets granted by Seller to Lehigh Valley Hospital and
Health Network ("LEHIGH") pursuant to that certain Security Agreement of even
date herewith, by and among Seller and Lehigh attached hereto as Exhibit B (the
"SECURITY AGREEMENT"), in the Assets in exchange for a total of 1,900 shares of
Common Stock. The parties agree that the Common Stock to be issued to Seller
reflects the fair market value of the Assets.
2. Seller, for itself and its successors and assigns, covenants to and
agrees with Buyer to warrant and defend the sale, transfer, assignment,
conveyance and delivery of the Assets unto Buyer and its successors and
assigns, against all lawful claims and demands arising from Seller's ownership
of the Assets prior to the date hereof.
<PAGE> 63
3. Seller hereby covenants to and agrees with Buyer that it will duly
execute and deliver any other documents necessary to effect the transfer of the
Assets.
4. Buyer, for itself and its successor and assigns, covenants to
and agrees with Seller, to take all actions necessary to allow Seller to comply
with its obligations under the Security Agreement.
5. All of the terms and provisions of this Bill of Sale shall be
binding upon Seller and its respective successors and assigns, and shall inure
to the benefit of Buyer and its successors and assigns.
6. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of Maryland, excluding choice of law rules.
7. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which shall be deemed one and the same
instrument.
IN WITNESS WHEREOF, Seller and Buyer have caused the due execution
and delivery of this Bill of Sale as of the day and year first written above.
INTRACEL CANCER CENTER OF
PENNSYLVANIA, INC.
By: __________________________
Name: ________________________
Title: _______________________
INTRACEL CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
2
<PAGE> 64
EXHIBIT E
INTRACEL CANCER CENTER OF PENNSYLVANIA, INC.
____________
SUBSCRIPTION AGREEMENT
____________
_____________, 1998
<PAGE> 65
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. SUBSCRIPTION FOR AND PURCHASE OF STOCK............................. 1
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBSCRIBER............ 1
2.1 Accredited Investor Status............................... 2
2.2 Non-Registration of Shares............................... 2
2.3 Purchase for Investment Only............................. 2
2.4 Ability to Evaluate Investment and Bear Economic Risk.... 2
2.5 Familiarity with Business................................ 3
2.6 Restricted Securities; Rule 144.......................... 3
2.7 Legend on Shares......................................... 3
2.8 Authorization; Enforceability............................ 4
2.9 Brokers and Finders...................................... 4
3. MISCELLANEOUS...................................................... 4
</TABLE>
<PAGE> 66
INTRACEL CANCER CENTER OF PENNSYLVANIA, INC.
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "AGREEMENT") is made and entered into as
of _______________, 199__ by and between Intracel Cancer Center of
Pennsylvania, Inc., a Delaware corporation (the "COMPANY"), and Lehigh Valley
Hospital and Health Network, a Pennsylvania non-profit corporation (the
"SUBSCRIBER").
WHEREAS, Subscriber desires to subscribe for and purchase, and the Company
desires to issue and sell, the shares of common stock of the Company, par value
$.01 per share (the "COMMON STOCK"), described in Section 1 below, all upon the
terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
1. SUBSCRIPTION FOR AND PURCHASE OF STOCK
Subject to the terms and conditions hereof, Subscriber hereby subscribes
for and agrees to purchase, and the Company hereby agrees to issue and sell to
Subscriber, 100 shares of Common Stock (the "SHARES") at an aggregate purchase
price equal to $36,842 (the "PURCHASE PRICE"). Simultaneously with the
execution and delivery of this Agreement.
(a) Subscriber shall deliver to the Company, against delivery of a
certificate representing the Shares, payment of the Purchase Price in
the form of a check payable to the order of the Company or in such
other form as the Company may reasonably request; and
(b) the Company shall deliver to Subscriber, against delivery of the
Purchase Price, a duly issued stock certificate made out in
Subscriber's name and representing the Shares.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBSCRIBER
In order to induce the Company to enter into this Agreement, Subscriber
makes the following representations, warranties and covenants, each of which is
material to and is being relied upon by the Company.
<PAGE> 67
2.1 ACCREDITED INVESTOR STATUS
Subscriber is an "accredited investor" as such term is defined in
Rule 501 under the Securities Act of 1933, as amended (the "SECURITIES ACT") as
of the date of the purchase of the Shares.
2.2 NON-REGISTRATION OF SHARES.
Subscriber understands that the Shares to be purchased by the
Subscriber under this Agreement have not been registered under the Securities
Act, or any applicable state securities laws, in reliance upon exemptions
contained in the Securities Act and applicable state securities laws and any
applicable regulations promulgated thereunder or interpretations thereof, and
cannot be offered for sale, sold or otherwise transferred unless such Shares
are subsequently so registered or qualify for exemption from registration under
the Securities Act and applicable state securities laws; that the certificates
representing such Shares shall bear a legend substantially in the form set
forth in Section 2.7 below; and that any transfer agent now or hereafter
employed or utilized by the Company shall be instructed not to effect any
transfer of the Shares without prior written authorization from the Company
(or, if the Company serves as its own transfer agent, a notation shall be made
in the Company's records indicating the transfer restrictions to which the
Shares are subject), which authorization may not be unreasonably withheld or
delayed.
2.3 PURCHASE FOR INVESTMENT ONLY.
The Shares are being acquired under this Agreement by Subscriber
solely for its own account, for investment and not with a view toward resale or
other distribution within the meaning of the Securities Act; and the Shares
will not be offered for sale, sold or otherwise transferred without either
registration or exemption from registration under the Securities Act and
applicable state securities laws.
2.4 ABILITY TO EVALUATE INVESTMENT AND BEAR ECONOMIC RISK.
Subscriber has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of its
investment in the Shares; and Subscriber understands and is able to bear any
economic risks associated with such investment (including the necessity of
holding the Shares for an indefinite period of time, inasmuch as the Shares
have not been registered under the Securities Act and any applicable state
securities laws).
2
<PAGE> 68
2.5 FAMILIARITY WITH BUSINESS.
Subscriber is familiar with the business and financial affairs of
the Company and has been given the opportunity to ask questions of, and receive
answers from, the principal officers of the Company; and Subscriber has had
further opportunity to obtain any additional information necessary or desirable
to verify the accuracy of the foregoing information. In evaluating the
suitability of an investment in the Shares, Subscriber confirms that it has not
relied upon any representations or other information (whether oral or written)
other than as set forth herein or in the documents furnished to it by the
Company.
2.6 RESTRICTED SECURITIES; RULE 144.
Subscriber understands that the Shares will be considered
"restricted securities" within the meaning of Rule 144 under the Securities
Act; that Rule 144 may not be available to exempt from the registration
requirements of the Securities Act the sale of such "restricted securities";
that if Rule 144 is available, sales may be made in reliance upon Rule 144 only
in accordance with the terms and conditions of Rule 144, which among other
things generally requires that the Shares be held for at least one year and
that sales be made in limited amounts; and that, if an exemption for such sales
by such Subscriber is not available, registration of the Shares may be
required, but that the Company is under no obligation to register the Shares or
to facilitate compliance or to comply with any exemption.
2.7 LEGEND ON SHARES.
The certificate representing the Shares to be sold to Subscriber
pursuant to this Agreement shall bear a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR STATE SECURITIES LAWS AND CANNOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
REGULATIONS PROMULGATED THEREUNDER AND APPLICABLE STATE SECURITIES
LAWS. THE OWNER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
AGREES NOT TO SELL THE SECURITIES FOR A PERIOD OF 1 YR AFTER [THE
DATE OF THE SECURITIES]
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS RESTRICTED BY AND SUBJECT TO THE PROVISIONS OF
A
3
<PAGE> 69
STOCKHOLDERS' AGREEMENT, DATED AS OF ___________ __, 199_, AS
AMENDED AND MODIFIED FROM TIME TO TIME, AMONG THE ISSUER OF SUCH
SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S
STOCKHOLDERS. A COPY OF SUCH STOCKHOLDERS' AGREEMENT AND ANY AND ALL
AMENDMENTS THERETO SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY
TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND IS ALSO AVAILABLE FOR
INSPECTION AND EXAMINATION AT THE OFFICES OF THE COMPANY."
2.8 AUTHORIZATION; ENFORCEABILITY.
Subscriber has the capacity to execute and deliver this Agreement
and, subject to fulfillment or waiver (to the extent legally permitted) of
conditions precedent to such Subscriber's obligations hereunder, to carry out
its obligations hereunder. This Agreement constitutes a valid and legally
binding obligation of Subscriber enforceable in accordance with its terms,
except (a) as such enforcement may be limited by bankruptcy, reorganization,
insolvency, or other laws and court decisions relating to or affecting the
enforcement of creditors' rights generally (including, but not limited to,
statutory or other law regarding fraudulent transfers), and (b) as to the
availability of specific performance or other equitable remedies or subject to
principles of public policy.
2.9 BROKERS AND FINDERS
Subscriber confirms that it has not employed any broker or finder
or incurred any liability for any brokerage fees, commissions, or finders' fees
in connection with the transactions contemplated herein.
3. MISCELLANEOUS
No amendment or modification of this Agreement shall be valid or
binding unless set forth in writing and duly executed by the party against whom
enforcement of the amendment or modification is sought. No delay or failure to
exercise any right, power or remedy under this Agreement or enforcing any
provision of this Agreement shall be construed as a waiver of such provision or
a waiver of any default or acquiescence in such default or affect the right of
the Company to enforce each and every provision of this Agreement in accordance
with its terms. Any notice required to be given under this Agreement shall be
in writing and shall be hand delivered (including delivery by courier), sent by
Federal Express or by other recognized overnight delivery service, mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or sent by facsimile
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<PAGE> 70
transmission, to the parties at the addresses or facsimile numbers set forth
below their respective signatures below. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware (excluding
the choice of law rules thereof). This Agreement constitutes the entire
Agreement between the parties hereto with respect to the subject matter hereof.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. This Agreement may
be executed in counterparts.
* * * * *
IN WITNESS WHEREOF, each of the parties has duly caused this
Agreement to be duly executed in its name and on it behalf, as of the date
first written above.
COMPANY:
INTRACEL CANCER CENTER OF
PENNSYLVANIA, INC.
By:_____________________________
Name:___________________________
Title:__________________________
Address:________________________
________________________
________________________
Fax No._________________________
SUBSCRIBER:
LEHIGH VALLEY HOSPITAL AND HEALTH
NETWORK
By:_____________________________
Name:___________________________
Title:__________________________
Address:________________________
________________________
________________________
Fax No._________________________
5
<PAGE> 71
EXHIBIT F
INTRACEL CANCER CENTER OF PENNSYLVANIA, INC.
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "Agreement") is entered into
as of ____________ ___, 19__ by and between Intracel Cancer Center of
Pennsylvania, inc., a Delaware corporation (the "Corporation"), and the
stockholders of the Corporation as listed on Exhibit A attached hereto (the
stockholders listed on Exhibit A are hereinafter referred to collectively as
"Stockholders" and individually as a "Stockholder").
WHEREAS, the Stockholders have formed a Delaware corporation
known as "Intracel Cancer Center of Pennsylvania, Inc." to own and operate a
center to manufacture OncoVaxcl(r) and other oncological products as agreed to
by the Stockholders and to provide such products to cancer patients;
WHEREAS, the Stockholders have purchased and are the holders of
record of the shares of capital stock of the Corporation set forth opposite
their name on Exhibit A hereto; and
WHEREAS, the Stockholders desire to set forth in this Agreement
(i) the terms and conditions upon which they would capitalize the Corporation
and manage its business and affairs and (ii) restrictions on the issuance and
transfer of capital stock of the Corporation.
NOW THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. PURPOSES AND SCOPE
The Corporation has been organized for, among other lawful
purposes, the purpose of owning and operating a center known as the "OncoVax
Center" which shall manufacture OncoVaxCL(R) and other oncological products as
agreed to by the Stockholders and provide such products to cancer patients.
<PAGE> 72
2. CAPITALIZATION
2.1. CAPITAL STRUCTURE.
As stated in the Certificate of Incorporation of the
Corporation, the Corporation initially shall have authorized capital stock
consisting of Three Thousand (3,000) shares of common stock, par value $.01 per
share (the "Common Stock").
2.2. INITIAL SUBSCRIPTIONS FOR STOCK.
Intracel Corporation ("Intracel") and Lehigh Valley Hospital and
Health Network ("Lehigh") have each purchased the number of shares of Common
Stock set forth below under the terms of a Joint Venture Agreement dated as of
December 11, 1998 (the "Joint Venture Agreement") and pursuant to Subscription
Agreements each dated as of _________ ___, 1998.
<TABLE>
<CAPTION>
Number of Purchase
Stockholder Shares Purchased Price
- ----------- ---------------- -----
<S> <C> <C>
Intracel Corporation 1,900 $700,000
Lehigh Valley Hospital 100 $ 36,843
and Health Network
</TABLE>
2.3. ADDITIONAL CONTRIBUTIONS TO CAPITAL.
2.3(a) Capital Contributions. The Stockholders shall have no
obligation to make additional contributions to the capital of the Corporation
except at such times, and in such amounts, as may be set forth in the Initial
Funding Schedule attached hereto as Exhibit C, as amended from time to time, and
as otherwise may be agreed upon by a Supermajority Vote (as defined in Section
10 below) of the Board of Directors and the Stockholders in accordance with
Section 4 below.
2.3(b) Loans and Advances. The Stockholders may make loans or
other advances to the Corporation in such amounts and at such rates of interest,
if any, as may be agreed upon by a Supermajority Vote of the Board of Directors;
provided, however, that the Stockholders need not obtain a Supermajority Vote
approval from the Board Director's for loans made to the Corporation on
commercially reasonable terms comparable to terms available to the Corporation
from commercial lending sources. Any such loans or advances shall be a debt of
the
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<PAGE> 73
Corporation to the lending Stockholders and shall not be regarded as
contributions to the capital of the Corporation.
2.4. LEGEND.
Each certificate representing shares of Capital Stock (as
defined in Section 9 below) shall bear a legend in substantially the following
form as consistent with the terms of this Agreement and applicable law:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR STATE SECURITIES LAWS AND CANNOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR
THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE ACT
AND REGULATIONS PROMULGATED THEREUNDER AND APPLICABLE STATE
SECURITIES LAWS. THE OWNER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AGREES NOT TO SELL THE SECURITIES FOR A PERIOD OF 1
YR AFTER [THE DATE OF THE SECURITIES]
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND SUBJECT TO
THE PROVISIONS OF A STOCKHOLDERS' AGREEMENT, DATED AS OF
_________ __, 199_, AS AMENDED AND MODIFIED FROM TIME TO TIME,
AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN
OF THE COMPANY'S STOCKHOLDERS. A COPY OF SUCH STOCKHOLDERS'
AGREEMENT AND ANY AND ALL AMENDMENTS THERETO SHALL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST AND IS ALSO AVAILABLE FOR INSPECTION AND EXAMINATION AT
THE OFFICES OF THE COMPANY.
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<PAGE> 74
3. CORPORATE GOVERNANCE; EXCLUSIVITY
3.1. BOARD OF DIRECTORS.
3.1(a) Composition of Board of Directors. The Board of Directors
shall be composed of directors designated by the Stockholders as more
specifically set forth in Exhibit B.
3.1(b) Stockholder Covenants. The Corporation and each
Stockholder (for so long as such Stockholder owns any Capital Stock) shall take
or cause to be taken all such actions within their respective power and
authority as may be required to:
(i) establish and maintain the authorized size of the Board of
Directors of the Corporation at the number of directors set
forth in Exhibit B attached hereto;
(ii) maintain the quorum requirements for actions of the Board
of Directors at the number of directors set forth in Exhibit B
attached hereto;
(iii) maintain the voting requirements for actions of the Board
of Directors at a majority of directors present at a meeting at
which there is a quorum, except with respect to (A) such matters
as the Certificate of Incorporation, the Bylaws, or applicable
provisions of the Delaware General Corporation Law impose a
greater voting requirement or (B) such matters as require action
by a Supermajority Vote of the Board of Directors in accordance
with Section 3.2;
(iv) cause to be elected to the Board of Directors the directors
designated by the Stockholders (the "Designated Directors") as
set forth in Exhibit B hereto or as otherwise instructed in
writing by the Stockholder entitled to designate a director
pursuant to this Agreement;
(v) remove forthwith any director when (and only when) such
removal is requested in writing for any reason, with or without
cause, by the Stockholder that designated such director; and
(vi) in the case of a vacancy caused by the death, resignation
or removal (as herein provided) of any director, to elect a
director
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<PAGE> 75
designated by the Stockholder entitled to fill the vacant
director position.
3.2. ACTIONS REQUIRING A SUPERMAJORITY VOTE OF BOARD OF DIRECTORS.
In addition to any vote required by law, the Certificate of
Incorporation, or the Bylaws of the Corporation, a Supermajority Vote (as
defined in Section 9 below and Exhibit B hereto) of the Board of Directors shall
be required for the Corporation to:
(a) Materially change the Corporation's principal business of
manufacturing OncoVaxCL(R) and other oncological products and
providing such products to cancer patients;
(b) Change or modify the authorized size of the Board of
Directors of the Corporation as set forth in Exhibit B attached
hereto;
(c) Enter into or materially amend any contract between the
Corporation and any of its Affiliates (including the
Stockholders and their respective Affiliates);
(d) Require any Stockholder to make any additional capital
contribution in excess of the consideration paid or payable for
Capital Stock purchased by such Stockholders and any amounts set
forth in the Funding Schedule attached hereto as Exhibit C;
(e) Adopt the Corporation's (i) business plan and any amendments
thereto or (ii) annual budget and plan and any material
revisions thereto or deviation therefrom;
(f) Incur indebtedness from any Stockholder, except as provided
in Section 2.3(b) above; or
(g) Incur or assume any other indebtedness in a single
transaction or in the aggregate in excess of $250,000.
3.3. SPECIAL APPROVAL RIGHT.
Notwithstanding any provision herein to the contrary, any
proposed action or transaction of the Corporation which Lehigh determines, in
its reasonable discretion, is reasonably likely to (i) have an adverse effect on
Lehigh's qualification as a tax-exempt charity or (ii) result in the receipt by
Lehigh of a material amount of "unrelated business taxable income" for federal
income tax purposes, must be approved by Lehigh in advance. Lehigh hereby
acknowledges and agrees that the execution, delivery and the terms of this
Agreement and that certain Joint Venture Agreement dated as of December 11,
1998, by and between Lehigh and Intracel (the "Joint Venture Agreement"), as
well as each of the exhibits to the Joint Venture
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<PAGE> 76
Agreement have already been approved by Lehigh prior to the execution and
delivery of this Agreement, and that the terms of this Section 3.3 do not apply
to the execution, delivery and performance of this Agreement, the Joint Venture
Agreement, and the exhibits to the Joint Venture Agreement.
3.4. DIVIDENDS.
Dividends, if any, shall be payable only in the manner and to
the extent permitted by law and in the sole and absolute discretion of the Board
of Directors of the Corporation. Any distribution of dividends to Stockholders
shall be made in proportion to their relative ownership interests in the
Corporation.
3.5. OPERATIONS AS INDEPENDENT COMPANIES; INTERESTED DIRECTOR
TRANSACTIONS.
3.5(a) Independent Companies. The business and financial affairs
of the Corporation shall be conducted in a manner consistent with the operation
of a separate and distinct corporation independent of its corporate
Stockholders. Nothing in this Agreement shall be construed so as to constitute
the Stockholders as partners or as agents of each other, or in any other manner
other than as separate and distinct corporations. Each Stockholder shall
compensate and reimburse the Corporation for the fair market value of any goods
or services received from the Corporation. The Corporation shall reimburse and
compensate each Stockholder for the fair market value of goods and services
provided by the Stockholder to the Corporation; provided, however, that no
Stockholder shall be entitled to such reimbursement or compensation unless such
reimbursement or compensation or the agreement under which such reimbursement or
compensation is to be paid or provided has been approved by the Board of
Directors of the Corporation.
3.5(b) Interested Director Transactions. In addition to any
requirements set forth in the Certificate of Incorporation, the Bylaws, or this
Agreement, any transaction between the Corporation and any director of the
Corporation or between the Corporation and any other corporation, firm, or
entity of which a director of the Corporation (the "Interested Director") is the
designee on the Board of Directors as contemplated in Section 3.1(a) above or
of which he/she is a director or in which he/she has a material financial
interest, shall be subject to the following:
(i) the Interested Director(s) must disclose his/her/their
common directorship or material financial interest to
the Board of Directors; and
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<PAGE> 77
(ii) the transaction must be approved by the affirmative vote
of a majority, or by a Supermajority Vote if required by
Section 3.2, of the directors other than the Interested
Director(s) (the "Disinterested Directors"). For
purposes of this Section 3.5(b), a Supermajority Vote of
the Disinterested Directors shall mean the affirmative
vote of at least 80% of the Disinterested Directors
rounded up to the nearest whole number.
3.6. BOOKS AND RECORDS; AUDIT.
Financial and all other books and records of the Corporation
shall be maintained at the principal office of the Corporation. In addition to
any right provided by law (including the Delaware General Corporation Law), each
Stockholder, upon reasonable notice and during normal business hours, shall have
the right to inspect the financial and all other records of the Corporation and
to make copies thereof; provided, however, that such access shall be subject to
the confidentiality and non-disclosure obligations in Section 10.4 below and,
notwithstanding any other provision herein, no Stockholder shall have access to
competitive information relating to any other Stockholder or any entity
affiliated therewith. Following the close of the fiscal year of the Corporation,
the financial books and records of the Corporation shall be audited by an
independent accounting firm selected and approved by the Board of Directors of
the Corporation. The financial statements examined by the Corporation's
independent auditors shall be final and binding upon all Stockholders.
3.7. FISCAL YEAR.
The Corporation shall conduct its financial affairs and shall
prepare federal and state tax returns on the basis of a fiscal year ending June
30, unless otherwise required by law.
4. RESTRICTIONS ON TRANSFER OF SHARES
4.1. TRANSFER SUBJECT TO RIGHTS OF CORPORATION AND STOCKHOLDERS.
Except as set forth in Section 4.9 below, no Stockholder shall
directly or indirectly transfer any Capital Stock to any person or entity
without the written consent of all of the other Stockholders (such parties,
together with the Corporation, hereinafter referred to individually as an
"Offeree" and collectively as the "Offerees"), unless the party desiring to make
such transfer (the "Transferor") shall have first made the Offer required by
this Section 4, and such Offer shall not have been accepted as provided in this
Section 4. Any purported transfer contrary to the terms of this Section 4 shall
be null and void and of no force and effect.
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<PAGE> 78
4.2. TRANSFER.
The term "transfer" as used in this Section 4 shall include a
sale, gift, mortgage, pledge, exchange, assignment, or other disposition,
whether or not for value, including a disposition under judicial order, legal
process, execution, attachment, or enforcement of an encumbrance, whether
resulting from bankruptcy, dissolution, insolvency, or otherwise but shall not
include a Change of Control (as defined in Section 9 below) of any Stockholder
or a pledge or mortgage in connection with a Stockholder financing where the
mortgagee or pledgee may not exercise voting or other rights associated with the
Capital Stock.
4.3. OFFER.
Except as provided in Section 4.9, the Transferor shall, prior
to transferring any or all of its Capital Stock, make to the Corporation and the
other Offerees an offer in writing to sell the Capital Stock proposed to be
transferred by the Transferor (the "Offer"). Attached to the Offer, which shall
be sent to the Corporation, shall be a statement of intention to transfer, and
the specific terms and conditions of the proposed transfer, including, but not
limited to, (i) the names and addresses of not more than five person(s) or
entity(ies) that the Transferor in good faith believes to be bona fide
prospective transferees, (ii) the number of shares of Capital Stock involved in
the proposed transfer, (iii) all of the terms of such transfer (which must
include a cash price unless a bona fide offer has been made to the Transferor
which consists partly or wholly of consideration other than cash), including the
terms and conditions of any bona fide offer made to the Transferor and a copy of
any such offer which is in writing, and (iv) the address of the Transferor to
which notice or acceptance of the Offer is to be sent. The Corporation reserves
the right to make reasonable requests for information regarding any proposed
transferee identified by the Transferor and the First Offer Period described in
Section 4.4(a) below shall not begin until such information has been received by
the Corporation and the Corporation has made a good faith determination that the
transferee(s) are reasonably qualified to comply with the covenants and
agreements contained in this Agreement; provided, that the Transferor may
require the Corporation to maintain the identity of the proposed transferee and
all such information confidential.
4.4. ACCEPTANCE.
(a) First Offer Period. Within 30 days after the Corporation's
receipt of the Offer (the "First Offer Period"), the Corporation
shall notify the Transferor whether or not it desires to
purchase any of the Capital Stock offered and how many of the
shares of
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<PAGE> 79
Capital Stock it desires to purchase. If a purchase by
the Corporation of all of the shares of Capital Stock offered is
intended, the notice shall fix a closing date not more than 30
days after the expiration of the First Offer Period.
(b) Second Offer Period. Should the Corporation determine to
purchase all of the shares of Capital Stock offered, it shall
promptly notify the other Offerees that it has made such
determination. Should the Corporation determine to purchase none
or less than all of the shares of Capital Stock offered, it
shall promptly communicate the Offer for the remaining shares of
Capital Stock to the other Offerees, which shall have 20 days
from the date of receipt of such notice (the "Second Offer
Period") within which to notify the Corporation whether or not
they intend to purchase any of the shares of Capital Stock
offered and how many of the shares of Capital Stock they desire
to purchase. The Corporation shall in turn promptly notify the
Transferor of any intended purchases by the other Offerees.
(c) Closing. The closing date of any such purchases hereunder by
such Offerees shall be no later than 30 days after the
expiration of the Second Offer Period. Any shares of Capital
Stock purchased by the participating Offerees (other than the
Corporation) shall be purchased in proportion to their holdings,
or in such other proportions as they may agree. The phrase "in
proportion to their holdings" as used in this Section 4.4 shall
mean in the proportion which the combined voting power of the
shares of Capital Stock held by each Offeree bears to the
aggregate voting power of the shares of Capital Stock held by
all the participating Offerees (other than the Corporation) at
the time when the formula is being applied; provided, however,
that any shares of Capital Stock which any Offeree has a right
to purchase under this Section 4.4 but declines to purchase may
be purchased by the remaining Offerees (if purchased in the
manner and within the time periods prescribed herein).
(d) Assignment of Rights. The Corporation or any other Offeree
may assign its rights to purchase Capital Stock pursuant to any
Offer made hereunder to (i) any stockholder of such Offeree,
(ii) any employee benefit plan (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended) maintained by the Corporation or such other Offeree or
any Subsidiary or Affiliate, or (iii) any Affiliate of the
Corporation or such Offeree. The Corporation or any other
Offeree shall give reasonable written notice to the Transferor
and all other Offerees of any assignment of its rights as
permitted hereunder.
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<PAGE> 80
4.5. SPECIFIED MINIMUM PURCHASE.
Notwithstanding the foregoing, if the Transferor has received a
bona fide written offer from a prospective purchaser of its shares of Capital
Stock, but a condition of such offer is that such prospective purchaser will not
purchase less than the total, or a specified minimum, number of shares of
Capital Stock owned by the Transferor at the time of the bona fide written
offer, then in order to exercise the foregoing rights of first refusal the
Corporation and the other Offerees must purchase, in the aggregate, either (i)
all of the shares of Capital Stock offered by the Transferor, or (ii) no less
than that number of shares of Capital Stock which, when deducted from the total
number of shares of Capital Stock being offered by the Transferor, results in
the minimum number of shares of Capital Stock specified in the bona fide written
offer from such prospective purchaser remaining available for sale by the
Transferor to such prospective purchaser. Otherwise, the Offer shall be deemed
to have been completely rejected by the Corporation and the other Offerees.
4.6. PURCHASE PRICE.
The purchase price for each share of Capital Stock purchased
from the Transferor by the Corporation or the other Offerees shall be (i) the
same as, and on the same terms and conditions as, specified in the bona fide
offer received by the Transferor from a prospective transferee of some or all of
its Capital Stock, if such an offer has been received by the Transferor, or (ii)
the price in cash specified by the Transferor in the Offer. The purchase price
shall be payable in cash. In the event that a bona fide offer to purchase
Capital Stock received by the Transferor specifies the payment of consideration
other than cash, the purchase price for purposes of this Section 4.6 shall be
the cash equivalent of such consideration, determined on a per share basis by
the Board of Directors of the Corporation in good faith.
4.7. RELEASE OF TRANSFEROR FROM RESTRICTIONS.
If the Corporation and the other Offerees shall fail to purchase
all of the Capital Stock offered by the Transferor pursuant to the terms of this
Section 4, the Transferor shall be free for a period of 90 days to sell the
offered but unsold shares of Capital Stock to (i) the prospective transferee who
has made a bona fide offer to the Transferor, for the price and on the terms of
such offer, or (ii) one or more of the prospective transferees identified in the
Offer, if the Transferor has not received a bona fide offer from a prospective
transferee, for a price and on terms no more favorable to such transferee(s)
than were available to the Corporation and the other Offerees under the Offer.
Any such sale also shall be subject to the other provisions of this Section 4,
including Section 4.10 below. If the offered but unsold shares of Capital Stock
are not so sold by the Transferor within the specified 90-day period, all of the
Transferor's rights with respect to transfer of the Capital Stock
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<PAGE> 81
without again complying with the restrictions contained in this Section 4 shall
terminate.
4.8. TERMINATION OF RIGHTS AND OBLIGATIONS.
The rights and obligations of the parties under this Section 4
shall irrevocably terminate on the occurrence of any of the following events:
(i) the voluntary or involuntary dissolution of the Corporation; (ii) the
receipt by the Corporation from the SEC of an order of effectiveness as to any
registration statement relating to an Initial Public Offering (as defined in
Section 9 below) that is subsequently consummated; (iii) the termination of this
Agreement pursuant to Section 7.2 below; or (iv) an acquisition, consolidation,
or merger of the Corporation into or with another corporation that results in
the Stockholders owning publicly-traded securities.
4.9. TRANSFERS TO AFFILIATE.
Each Stockholder may transfer some or all of its shares of
Capital Stock to an Affiliate (as defined in Section 9 below) thereof without
such transfer being subject to Sections 4.3-4.7 above. Prompt written notice of
any such transfer shall be delivered to the Corporation and the other
Stockholder(s). From and after any such transfer, the Affiliate to which such
shares are transferred shall enjoy the respective rights of the transferring
Stockholder, and be subject to the respective restrictions imposed on such
Stockholder under this Agreement but the transferring Stockholder shall not be
relieved of any of its obligations hereunder and shall remain a party for all
purposes hereof.
4.10. AGREEMENTS BINDING UPON TRANSFEREES.
In the event that, at any time or from time to time, any shares
of Capital Stock are transferred in compliance with the terms of this Agreement
to any party, other than the Corporation, the transferee shall take such shares
of Capital Stock pursuant to all provisions, conditions, and covenants of this
Agreement, and, to the extent applicable, the Joint Venture Agreement and the
exhibits thereto, and, as a condition precedent to the transfer of such shares
of Capital Stock, the transferee shall agree in writing to be bound by all
provisions of this Agreement and all other applicable agreements by executing
and delivering a counterpart of this Agreement and all other applicable
agreements whereupon such transferee shall become a party hereto and thereto. In
the event that there shall be any transfer to any person or entity pursuant to
any provision of this Agreement and in compliance with the terms of this
Agreement all references herein to the Stockholders or to a Stockholder shall be
deemed to include such transferee, and the provisions of this Agreement shall
thereafter be binding upon such transferee.
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4.11. STOCK TRANSFER RECORD.
The Corporation shall keep a stock transfer book in which shall
be recorded the name and address of each Stockholder of the Corporation. No
transfer or issuance of any shares of Capital Stock shall be effective or valid
unless and until recorded in the stock transfer book. The Corporation shall not
record any transfer or issuance of shares of Capital Stock in the stock transfer
book unless the transfer or issuance is in strict compliance with all provisions
of this Agreement. Each Stockholder agrees that, in the event such Stockholder
desires to make a transfer within the provisions hereof, such Stockholder shall
furnish to the Corporation such evidence of compliance with this Agreement as
may be reasonably be required by the Board of Directors of the Corporation.
5. PARTICIPATION IN CERTAIN ACQUISITION OFFERS
5.1. OBLIGATION TO OFFER.
In the event any Stockholder or Stockholders receive a bona fide
offer or related series of offers from any person (the "Control Offeror") to
purchase from such Stockholder(s) not less than 50%, by voting power, of the
then outstanding Capital Stock (a "Majority Interest") or to purchase from such
Stockholder(s) that number of shares of stock which, when added to the number of
shares of stock at the time already owned, directly or indirectly, by the
Control Offeror and its Affiliates constitutes a Majority Interest (a "Control
Offer"), such Stockholder(s) shall promptly forward a copy of such Control Offer
to the Corporation and the other Stockholders. The Stockholder(s) to whom the
Control Offer has been made shall not sell any such Capital Stock to the Control
Offeror unless (a) the Control Offer is extended to the other Stockholders and
(b) if the Control Offer, as extended, relates to less than all of the Capital
Stock owned by the other Stockholders, each Stockholder shall be entitled to
sell to the Control Offeror pursuant to the Control Offer, and the Control
Offeror shall agree to purchase from each Stockholder, a proportionate share of
the aggregate number of shares of Capital Stock as to which the Control Offer
relates. For the purposes of this Section 5.1, a Stockholder's proportionate
share of Capital Stock shall be the product of (i) the number of shares of
Capital Stock to which such Control Offer relates times (ii) the ratio that the
number of shares of Capital Stock owned by such Stockholder bears to the number
of shares of Capital Stock owned by all Stockholders electing to sell to the
Control Offeror. Notwithstanding anything contained in this Section 5.1, no
Stockholder shall
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sell any Capital Stock to a Control Offeror unless and until the provisions of
Section 4 hereof have been complied with.
5.2. OBLIGATION TO SELL.
In the event that the Corporation has received a proposal for
any merger, sale of a significant portion of the Corporation's assets,
recapitalization, sale of more than a majority by voting power of all of the
Capital Stock, or other extraordinary transaction (an "Acquisition Offer"), or
any Stockholder has received a Control Offer, and (a) the Board of Directors of
the Corporation has recommended by at least a Supermajority Vote such
Acquisition Offer or Control Offer to the Stockholders or (b) Stockholders
owning more than 80% by voting power of the Capital Stock have notified the
Stockholders in writing that such Stockholders are in favor of such Acquisition
Offer or Control Offer, each Stockholder agrees that such Stockholder shall (i)
vote any shares of Capital Stock of the Corporation having the right to vote
held by such Stockholder (or as to which such Stockholder has voting power)
in favor of the consummation of transactions contemplated by such Acquisition
Offer or Control Offer at any meeting of Stockholders at which such transactions
are considered, (ii) tender all shares of Capital Stock held by such Stockholder
or as to which such Stockholder has power of disposition which are the subject
of such Acquisition Offer or Control Offer in accordance with the terms of the
Acquisition Offer or Control Offer, and (iii) take all other actions required in
order to fully effect the transactions contemplated by such Acquisition Offer or
Control Offer.
6. SPECIFIC PERFORMANCE
The parties hereto agree that it is impossible to measure in
money the damages which will accrue to a party hereto by reason of a failure by
any other party to perform any and all of their obligations under this
Agreement. Accordingly, in addition to any other remedies which such party may
have at law or in equity, the parties agree that each such party shall have the
right to have all obligations, undertakings, agreements, covenants, and other
provisions of this Agreement specifically performed, and that each such party
shall have the right to obtain an order or decree of such specific performance
in any of the courts of the United States or of any state or political
subdivisions thereof. An action for specific performance under this Section 6
shall not be subject to arbitration under Section 8 unless all parties mutually
agree in writing.
7. TERM; TERMINATION
7.1. TERM OF AGREEMENT.
This Agreement shall be effective as of the date first above
written and shall continue in effect until terminated in accordance with the
provisions of Section 7.2 below.
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7.2. TERMINATION.
This Agreement shall terminate upon the first to occur of the
following events:
(a) the mutual written agreement of all of the Stockholders;
(b) the dissolution and liquidation of the Corporation; or
(c) the consummation of a merger or consolidation as a result of
which the Corporation does not survive.
7.3. RETURN OF PROPRIETARY INFORMATION.
Upon the termination of this Agreement, each Stockholder shall
return to the other Stockholders or the Corporation any and all proprietary and
confidential information provided by such other Stockholders or the Corporation.
8. ARBITRATION
Unless otherwise provided in this Agreement, any controversy or claim
arising out of or relating to this Agreement or any breach of any provision of
this Agreement shall be settled by arbitration in accordance with the rules of
the American Arbitration Association then in force. The parties agree to abide
by all awards rendered in such arbitration proceedings, and all such awards may
be filed by the prevailing party with a court of competent jurisdiction, as a
basis for judgment and the issuance of execution thereon.
9. DEFINITIONS
"Acquisition Offer" shall have the meaning set forth in Section 5.2.
"Affiliate" means, as to any party hereto, any corporation or other
entity which, directly or indirectly, through one or more intermediaries,
controls (i.e., possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of an entity, whether through
ownership of voting securities, by contract, or otherwise), is controlled by, or
is under common control with such party.
"Agreement" means this Stockholders' Agreement.
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<PAGE> 85
"best efforts" means, as to a party hereto, an undertaking by such party
to perform or satisfy an obligation or duty or otherwise act in a manner
reasonably calculated to obtain the intended result by action or expenditure not
disproportionate or unduly burdensome in the circumstances, which means, among
other things, that such party shall not be required to (i) expend substantial
funds other than for payment of the reasonable and customary costs and expenses
of employees, counsel, consultants, representatives, or agents of such party in
connection with the performance or satisfaction of such obligation or duty or
other action or (ii) institute litigation or arbitration as a part of its best
efforts.
"Capital Stock" means any share of any class or series of capital stock
or other equity securities of the Corporation or any right or option to acquire
any share of capital stock or other equity securities of the Corporation and
shall include the Common Stock.
"Change of Control" means with respect to an entity (a) a transfer of
all or substantially all of the assets of such entity, (b) a transfer of equity
interest in such entity after which the acquirer holds more than 50% of the
voting power of all equity interests in such entity, (c) the merger,
consolidation, or other reorganization of such entity with or into another
entity, or (d) a change in the composition of the governing body of such entity,
other than in the ordinary course, which results in the replacement of more than
50% of the membership of such governing body, as a result of one transaction or
a series of transactions.
"Common Stock" means the common stock of the Corporation, par value $.01
per share.
"Control Offer" shall have the meaning set forth in Section 5.1 above.
"Control Offeror" shall have the meaning set forth in Section 5.1 above.
"Corporation" means Intracel Cancer Center of Pennsylvania, Inc., a
Delaware corporation.
"First Offer Period" shall have the meaning set forth in Section 4.4.
"Founding Stockholder" shall mean either Intracel Corporation or Lehigh
Valley Hospital and Health Network.
"Initial Public Offering" means the first public sale of Capital Stock
pursuant to a registration statement filed under the Securities Act.
"Joint Venture Agreement" means that certain Joint Venture Agreement
dated as of December 11, 1998, by and between Intracel and Lehigh.
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"Majority Interest" shall have the meaning set forth in Section 5.1
above.
"Offer" shall have the meaning set forth in Section 4.3.
"Offeree" shall have the meaning set forth in Section 4.1.
"Second Offer Period" shall have the meaning set forth in Section 4.4.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholder" means Intracel Corporation and Lehigh Valley Hospital and
Health Network, any other Stockholder listed on Exhibit A or any successor,
assign or transferee thereof as permitted hereunder.
"Subsidiary" means, with respect to any party hereto, any corporation or
other entity of which such party has an equity or other ownership interest that
represents a majority of the voting power of all equity and other ownership
interests in such corporation or other entity.
"Supermajority Vote" means, a vote of at least the number of directors
as set forth in Exhibit B hereto, provided that the vote of such directors must
include at least one director designated by each of the Founding Stockholders.
"Transfer" shall have the meaning set forth in Section 4.2.
"Transferor" shall have the meaning set forth in Section 4.1.
29. MISCELLANEOUS
10.1. FURTHER ASSURANCES.
The parties hereby agree to take whatever further actions or to
execute and deliver whatever further documents or instruments or make whatever
further filings as may be reasonably necessary or desirable to effectuate the
express provisions or the intent of this Agreement.
10.2. CONFLICT AMONG CORPORATION DOCUMENTS.
In the event of a conflict between this Stockholders' Agreement,
the Certificate of Incorporation or the Bylaws of the Corporation, such conflict
shall be resolved with reference to the documents in the following order: first,
by reference
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<PAGE> 87
to the Certificate of Incorporation of the Corporation; second, by reference to
the Bylaws of the Corporation; and finally, with reference to this Agreement.
10.3. ASSIGNMENT; BINDING EFFECT.
Except as provided in Section 4, this Agreement, and the rights
and obligations of the parties created hereunder, shall not be assigned or
delegated by any Stockholder or the Corporation without the prior written
consent of all parties and any purported or attempted assignment or delegation
without such consent shall be void and without effect. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns, heirs, executors,
administrators, and/or personal representatives.
10.4. CONFIDENTIAL AND PROPRIETARY INFORMATION.
Each Stockholder agrees that it shall not, without the prior
written consent of the Corporation, directly or indirectly disclose to anyone
other than the Corporation or the other Stockholders any non-public information
regarding the Corporation and its operations, this Agreement, or the
transactions contemplated hereby or regarding the other Stockholders except to
the extent such disclosure is required by law or legal process. Subject to the
terms of any confidentiality, nondisclosure, or similar agreement between or
among the Stockholders and/or the Corporation, information received by any
Stockholder from the other Stockholders in connection with the transactions
contemplated hereby will be treated by the recipient as proprietary and
confidential and will be made available only to those within its organization
who have a "need to know" in connection with the matters contemplated hereby, to
such recipient's attorneys, accountants, and other
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<PAGE> 88
professional advisors who are bound by applicable professional rules to maintain
the confidentiality of such information, and as may be required by applicable
law or regulations or as may be requested by any regulatory authority to which
any Stockholder or the Corporation is subject; provided, however, the foregoing
restrictions with respect to information furnished to one party by the other
shall not apply to any such information which the receiving party demonstrates
(a) is on the date hereof, or hereafter becomes, generally available to the
public without restriction and other than as a result of a disclosure, directly
or indirectly, by the receiving party in violation of any confidentiality
agreement or other nondisclosure obligation relating to such information or (b)
was available or becomes available to the receiving party on a confidential or
nonconfidential basis from a source other than the other party hereto, which
source was not itself bound by a confidentiality agreement with such other party
and did not receive such information, directly or indirectly, from a person or
entity so bound.
10.5. GOVERNING LAW.
This Agreement and the rights and obligations of the parties
hereto shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware (excluding the choice of law rules thereof).
10.6. SEVERABILITY.
In the event that a court of competent jurisdiction holds that a
particular provision or requirement of this Agreement is in violation of any
applicable law, each such provision or requirement shall be enforced only to the
extent it is not in violation of such law or is not otherwise unenforceable and
all other provisions and requirements of this Agreement shall remain in full
force and effect.
10.7. EXPENSES; ATTORNEYS' FEES.
The parties shall pay their own respective expenses (including,
without limitation, the fees, disbursements and expenses of their attorneys,
accountants, actuaries, and financial and other advisors) in connection with the
negotiation and preparation of this Agreement and the transactions contemplated
hereby. If any party is required to institute legal action or arbitration
against another party to enforce the provisions of this Agreement, the
prevailing party shall be entitled to recover costs of litigation, including,
but without limitation, reasonable attorneys' fees.
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<PAGE> 89
10.8. AMENDMENT.
This Agreement shall not be modified or amended except by an
instrument in writing executed by all of the Stockholders. All such instruments
shall be serially numbered and dated, whereupon they shall become an integral
part of, or construed together with, this Agreement. Notwithstanding the
foregoing, the Corporation shall have the authority to amend Exhibit A and/or
Exhibit B to reflect a designation of directors received from one or more
Stockholders in accordance with Section 3.1 above, without the need for any
Stockholder to execute such amended Exhibit A and/or Exhibit B. The Corporation
shall forthwith provide copies of any such counterpart or amended Exhibit A
and/or Exhibit B to each Stockholder.
10.9. WAIVER.
No delay or failure on the part of any party hereto in
exercising any right, power, or privilege under this Agreement or any other
instruments executed and delivered in connection with or pursuant to this
Agreement, shall impair any such right, power, or privilege or be construed as a
waiver of any default hereunder or any acquiescence therein. No single or
partial exercise of any such right, power, or privilege shall preclude the
further exercise of such right, power, or privilege, or the exercise of any
other right, power, or privilege. No waiver shall be valid against any party
hereto unless made in writing and signed by the party against whom enforcement
of such waiver is sought and then only to the extent expressly specified
therein.
10.10. NOTICE.
All notices, demands, requests or other communications which may
be or are required to be given, served or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered
(including delivery by courier), sent by Federal Express or by other recognized
overnight delivery service, mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, or sent by telegram, telex, or
facsimile transmission, addressed as follows:
if to the Corporation:
Intracel Cancer Center of
Pennsylvania, Inc.
---------------------------------------------
---------------------------------------------
Attn:
----------------------------------------
Facsimile: ( )
----------------------------
with a copy (which shall not constitute notice) to:
if to Intracel:
Intracel Corporation
1330 Piccard Drive
Rockville, Maryland 20850
Attn: Daniel S. Reale
Facsimile: (301) 296-0082
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 13th Street, N. W.
Washington, D.C. 20004-1004
Attn: Donna A. Boswell, Esq.
Facsimile: (202) 637-5910
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<PAGE> 90
if to Lehigh:
Lehigh Valley Hospital and Health Network
Cedar Crest & I-78
P.O. Box 689
Allentown, Pennsylvania 18105-1556
Attn: Louis L. Leibhaber
Facsimile: (610) 402-7253
with a copy (which shall not constitute notice) to:
Tallman, Hudders & Sorrentino
The Paragon Centre
1611 Pond Road, Suite 300
Allentown, Pennsylvania 18104-2256
Attn: Matthew R. Sorrentino, Esq.
Facsimile: (610) 391-1800
if to other Stockholders, to the address set forth on Exhibit A:
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served, or sent.
Each notice, demand, request, or communication which shall be mailed, delivered,
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent, or received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger, or (with respect to a telex or facsimile) the answer back being
deemed conclusive, but not exclusive, evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
10.11. BENEFIT OF THIS AGREEMENT.
It is the explicit intention of the parties hereto that no
person or entity other than a party hereto (including the Corporation) is or
shall be entitled to bring any action to enforce any provision of this Agreement
against any of the parties hereto, and that the covenants, undertakings, and
agreements set forth in this Agreement shall be solely for the benefit of, and
shall be enforceable only by, the parties hereto or their respective successors
and assigns as permitted hereunder.
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<PAGE> 91
10.12. SURVIVAL.
Neither expiration nor termination of this Agreement shall
terminate those obligations and rights of the parties pursuant to provisions of
this Agreement which by their express terms are intended to survive and such
provisions shall survive the expiration or termination of this Agreement.
10.13. COMPLETE AGREEMENT.
This Agreement, together with the Exhibits and Schedules hereto,
sets forth the entire agreement of the parties hereto with respect to its
subject matter and any and all prior agreements, whether oral or written,
between or among the parties hereto and relating to the subject matter hereof
are superseded hereby.
10.14. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in counterparts, each of which
shall constitute an original hereof for all purposes.
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<PAGE> 92
IN WITNESS WHEREOF, each of the parties has duly caused this
Agreement to be duly executed in its name and on its behalf, as of the date
first written above.
INTRACEL CANCER CENTER
OF PENNSYLVANIA, INC.
By:___________________________________
Name:________________________________
Title:_________________________________
INTRACEL CORPORATION
By:___________________________________
Name:________________________________
Title:_________________________________
LEHIGH VALLEY HOSPITAL AND HEALTH NETWORK
By:___________________________________
Name:________________________________
Title:_________________________________
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EXHIBIT G
FINAL ONCOVAX CENTER LEASE
THIS FINAL ONCOVAX CENTER LEASE (this "LEASE"), is entered into
as of ________ __, 1998 by and between LEHIGH VALLEY HOSPITAL AND HEALTH
NETWORK, a Pennsylvania non-profit corporation ("LANDLORD"), having its
principal office at Cedar Crest & I-78, Allentown, PA and INTRACEL CANCER CENTER
OF PENNSYLVANIA, INC., a Delaware corporation ("TENANT"), having its principal
office at ________________________________.
W I T N E S S E T H:
1. LEASED PREMISES; FIXTURES AND EQUIPMENT; COMMON AREAS
Landlord does hereby grant, demise and lease unto Tenant, and
Tenant does hereby lease and take from Landlord, for the Term (as defined below)
and upon the terms and conditions set forth in this Lease, the premises known as
the "Clean Room" which is located on the second floor of the General Services
Building of Landlord's hospital and described on Exhibit A attached hereto,
together with the clinical patient care, administrative and storage space also
described on Exhibit A, and all improvements made by Landlord, now or hereafter
constructed thereon and all rights, privileges, easements and appurtenances
belonging or pertaining thereto (collectively, the "LEASED PREMISES" ), together
with all of Landlord's fixtures and personal property, whether owned or leased
by Landlord, located on or used or useful or associated with, the Leased
Premises (as defined in Exhibit B), and all other furnishings, machinery,
apparatus, movable or non-movable equipment and materials described in Exhibit B
attached hereto (collectively the "FIXTURES AND EQUIPMENT"). Landlord also
hereby grants to Tenant a nonexclusive license for the benefit of Tenant, its
employees, agents and invitees for access to and from the Leased Premises
through the building and over the property of Landlord appurtenant thereto, and
to use those parts of the building designated by Landlord for use by tenants
including, but not limited to toilet rooms, elevators and unrestricted parking
areas, all as more particularly described in Exhibit C attached hereto
(collectively, the "COMMON AREAS").
2. SERVICES
During the Term, Landlord shall provide Tenant with all services,
including, but not limited to, electricity, heat, gas and air conditioning
(collectively "UTILITIES"), removal of hazardous waste, cleaning services and
laundry, necessary
<PAGE> 94
and sufficient for Tenant to use the Leased Premises as described in Section 9.1
below.
3. POSSESSION
Landlord shall deliver to Tenant on the Commencement Date (as
herein defined) actual and exclusive possession of the Leased Premises, free and
clear of all leases, tenancies, agreements, matters, liens and defects in title,
together with exclusive possession of the Fixtures and Equipment.
4. TERM
The initial term of this Lease (the "INITIAL TERM") shall
commence on the Final Closing Date as that term is defined in that certain Joint
Venture Agreement (the "JOINT VENTURE AGREEMENT") entered into by and between
the parties hereto on December 11, 1998 (the "COMMENCEMENT DATE") and shall end,
unless earlier terminated as described in Section 5 below, on the ten year
anniversary date after the Final Closing Date. Thereafter, Tenant may extend the
term of this Lease for additional ____ year terms ("RENEWAL TERMS") by the
delivery of written notice to Landlord at least _____ days prior to the
expiration of the then effective Initial Term or Renewal Term. The Initial Term
and all Renewal Terms shall hereinafter be collectively referred to as the
"TERM". The parties agree that upon expiration or earlier termination as
described in Section 5 below, this Lease shall immediately expire or terminate
without the necessity of any notice from either Landlord or Tenant to terminate
the same, and Tenant hereby expressly waives all right to any notice which may
be required under any laws now or hereafter enacted and in force in
Pennsylvania, including The Landlord and Tenant Act of 1951, Act of April 6,
1951, Act of April 6, 1951, P.L. 69 as amended (the "ACT") upon such expiration
or termination.
5. EARLY TERMINATION
5.1. TERMINATION OF JOINT VENTURE AGREEMENT
This Lease shall immediately terminate if the Joint Venture Agreement is
terminated for any reason.
5.2. EVENTS OF DEFAULT; REMEDIES
5.2.1. EVENTS OF DEFAULT BY TENANT
Any of the following occurrences or acts shall constitute an
"Event of Default" under this Lease:
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<PAGE> 95
(i) Tenant fails to pay, on the date on which the same is
due and payable, any installment of monthly rent and any additional payments,
within ten days after Landlord notifies that such payment is overdue and due and
owing.
(ii) Except as otherwise provided herein, a party fails to
observe or perform any other provision hereof for 30 days (or such shorter
period of time if such default endangers life or property) after the
non-breaching party shall have delivered to Tenant notice of such failure.
(iii) A party's filing of a petition in bankruptcy under
Title 11 of the United States Code, as amended, or the commencement of a
proceeding under any other applicable law concerning insolvency, reorganization
or bankruptcy or a party becomes generally unable to pay its debts as they
become due; provided, however, if a proceeding with respect to an act of
bankruptcy is filed or commenced against Tenant, the same shall not constitute
an Event of Default if such proceeding is dismissed within 60 days from the date
of such filing.
(iv) The Leased Premises shall have been abandoned.
(v) Any representation or warranty made herein or any
statement or representation made in any certificate, report or opinion
(including legal opinions), financial statement or other instrument furnished in
connection with this Lease, proves to have been incorrect, false or misleading
in any material respect when made.
(vi) A party fails to comply with any requirement of any
governmental authority having jurisdiction within the time required by such
governmental authority; or any proceeding is commenced or action taken to
enforce any remedy for a violation of any requirement of a governmental
authority or any restrictive covenant affecting the Leased Premises or any part
thereof.
5.2.2. REMEDIES
If an Event of Default shall have happened and be continuing, a
party shall have the right at its election, then or at any time thereafter while
such Event of Default shall continue, to give written notice of its intention to
terminate this Lease on a date specified in such notice. Upon the giving of such
notice, the Term and the estate hereby granted shall expire and terminate on
such date as fully and completely and with the same effect as if such date were
the date hereinbefore fixed for the expiration of the Term.
5.3. OTHER TERMINATION EVENTS
This Lease may also be earlier terminated as further described in
Sections 10.4 and 15 below.
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<PAGE> 96
6. ACTIONS UPON TERMINATION
Upon the expiration or termination of this Lease,
(i) Tenant shall immediately permit Landlord and its employees
and agents full access to the Leased Premises to aid in the transition to a new
operator, and further agrees to give up quiet and peaceful possession without
further notice from Landlord.
(ii) If termination results because of Tenant's Event of Default,
Tenant shall continue to pay to Landlord the monthly rent until the end of the
Term; provided, that Tenant shall not be responsible for such rent if the Leased
Premises have been relet.
7. PAYMENTS
7.1. RENTAL PAYMENTS
Tenant shall pay as rent for the Leased Premises and the Fixtures
and Equipment to Landlord during the period of time from the Commencement Date
through the Term monthly installments of ____________________ ($_______), in
advance without demand on or before the first day of each month from and
including the month in which the Commencement Date occurs, which the parties
agree reflects the fair market rental value of the Leased Premises and the
Fixtures and Equipment. Such rent shall be adjusted on an annual basis to
reflect the fair market rental value of the Leased Premises and the Fixtures and
Equipment. Rent for any partial month shall be prorated based upon the actual
number days in such month.
7.2. ADDITIONAL PAYMENTS
Tenant shall pay as additional payments for the services provided
in Section 2 above (except Utilities which Landlord shall provide to Tenant
without any additional payments), monthly installments of
__________________________ ($________), in advance without demand on or before
the first day of each month from and including the month in which the
Commencement Date occurs, which the parties agree reflects the fair market value
of the services provided in Section 2.
7.3. DEFAULT
Tenant may not be declared in default for non-payment of rent or
any additional payments due hereunder if such rent or additional payments is/are
received by Landlord by the 10th day of the month.
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<PAGE> 97
8. TITLE AND QUIET ENJOYMENT
Subject to Section 18 below, Landlord hereby represents, warrants
and covenants that it has good and marketable fee simple title to the Leased
Premises, that the same is subject to no other leases, tenancies, agreements,
encumbrances (including delinquent taxes), liens or defects in title affecting
said property or the rights granted Tenant in this Lease. Landlord further
covenants that there are no restrictive covenants, zoning or other local
ordinances or regulations which will prevent Tenant from using and occupying the
Leased Premises for a current Good Manufacturing Practices ("CGMP") laboratory
and support area. Landlord further represents, warrants and covenants that it
has good and marketable title to all Fixtures and Equipment and that same are
subject to no leases, agreements, encumbrances, liens or defects in title
affecting said property or the rights granted Tenant in this Lease. Landlord
covenants and agrees that during the Term, Tenant shall, upon paying the rent
and performing the covenants of this Lease on its part to be performed,
peaceably and quietly have, hold and enjoy the Leased Premises and Fixtures and
Equipment and all rights granted Tenant in this Lease.
9. USES OF LEASED PREMISES; ACCESS TO LEASED PREMISES AND COMMON AREAS
9.1. TENANT'S USE OF LEASED PREMISES
The Leased Premises and the Fixtures and Equipment therein shall
be used for the conduct and operation of a cGMP laboratory and support area in
conformity with applicable law and the terms and conditions of the Joint Venture
Agreement. The Leased Premises shall be operated under the names of "Intracel
Cancer Center of Pennsylvania, Inc.," and the "OncoVax Center", and no other
names shall be permitted to be used in lieu of or in addition to such name
without the prior written consent of Landlord. Tenant hereby agrees to comply
and conform in all material respects with all legal requirements concerning the
use, occupancy and conditions of the Leased Premises and all machinery,
equipment, furnishings, fixtures and improvements therein. If any such legal
requirement requires an occupancy or use permit, license, special exception, or
other local, state or federal agency certification, then Tenant shall promptly
obtain and keep current the same.
9.2. LANDLORD ACCESS TO LEASED PREMISES
Landlord may enter upon the Leased Premises, upon reasonable
notice to Tenant, to inspect, maintain, repair the Leased Premises. Landlord may
enter the Leased Premises at any time to perform emergency repairs to preserve
the Leased Premises and/or the Fixtures and Equipment.
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9.3. TENANT'S ACCESS TO LEASED PREMISES AND COMMON AREAS
Landlord shall keep the Leased Premises and the Common Areas
"open" during normal business hours which, for purposes of this Lease, shall
mean 24 hours a day, 365 days a year. Landlord shall provide lighting,
electricity, heat, air conditioning, water, elevator service and other necessary
services for Tenant's use and access to the Leased Premises and the Common Areas
when open. Tenant's use of the Common Areas shall not unreasonably hinder or
interfere with the Landlord's or other tenants' use of their Common Areas.
10. CONDITION OF LEASED PREMISES, FIXTURES AND EQUIPMENT; MAINTENANCE AND
REPAIRS
10.1. CONDITION OF LEASED PREMISES, FIXTURES AND EQUIPMENT
Landlord hereby represents and warrants that the Leased Premises
are constructed substantially in compliance with all applicable building codes
and regulations and substantially in accordance with the plan and specifications
approved by the Commonwealth of Pennsylvania Board of Health (the "BOARD OF
HEALTH"). Upon the expiration or earlier termination of the Lease, Tenant shall
surrender the Leased Premises in good condition, reasonable wear and tear and
damage by casualty and fire excepted, with all lighting, plumbing, electrical
and life/safety systems and the Fixtures and Equipment, in good working
condition, other than the "Tenant's Fixtures and Equipment Required to be
Removed" (as defined in Section 11.2).
10.2. TENANT'S MAINTENANCE AND REPAIRS
During the Term of this Lease, Tenant, at its expense, hereby
agrees to clean, and maintain and keep in good repair its equipment.
10.3. LANDLORD'S MAINTENANCE AND REPAIRS
Landlord shall make and pay for all repairs, replacements and
maintenance which are necessary for the operation of the Leased Premises, the
Common Areas, and the Fixtures and Equipment, excluding repairs or maintenance
necessitated by Tenant's willful acts or gross negligence. Tenant agrees to
notify Landlord of any necessary repairs within a reasonable period time of its
discovery. If Landlord fails to commence to perform any such maintenance,
replacement and repair after five days notice from Tenant, Tenant shall have the
right to undertake such maintenance, replacement and repair and to deduct any
expenditures associated therewith from the rent payments due under Section 7.1
above.
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10.4. FIRE OR OTHER HAZARD
Tenant hereby agrees to notify Landlord of any damages to the
Leased Premises resulting from fire or other hazard and also of any dangerous or
hazardous condition within the Leased Premises immediately upon the occurrence
of such fire or other hazard or discovery of such condition, or as soon as
practicable thereafter. Upon occurrence of a fire, repairs shall be made by
Landlord as soon as reasonably may be done unless the costs of repairing the
Leased Premises exceed 25% of the replacement cost of the building in which case
the Landlord may, at its option, terminate this Lease by giving Tenant written
notice of termination within 45 days of the date of such fire. If the Landlord
does not terminate this Lease as described above, then Landlord has 45 days
after the date of such fire to give written notice to Tenant setting forth
Landlord's unqualified commitment to make all necessary repairs or replacements,
the projected date of commencement of such repairs, and Landlord's good faith
estimate of the date of completion of the same. If Landlord fails to give such
notice, or if the date of completion is more than 90 days after the date of the
fire or other hazard, then Tenant may, at its option, terminate this Lease and
Landlord will be obligated to refund to Tenant any rent allocable to the period
subsequent to the date of the fire. During any period of restoration and repair
Tenant shall continue to operate within the Leased Premises to the extent
practicable, with a pro-rata reduction in the rental payments based upon the
usable portions of the Leased Premises.
11. ALTERATIONS AND REMODELING OF LEASED PREMISES, AND FIXTURES AND EQUIPMENT
11.1. ALTERATIONS AND MODIFICATIONS TO THE LEASED PREMISES
Tenant may, at its own expense, from time to time during the term
of this Lease, upon the prior written approval of Landlord as described in
Section 11.3 below, make such structural alterations, additions, replacements
and changes, in and to the Leased Premises, and any buildings thereon, as it
finds necessary or desirable for the operation of the Leased Premises as a cGMP
laboratory. All such alterations, demolitions, additions, replacements and
changes shall be made in accordance with plans and specifications prepared by
Tenant and approved by Landlord, in conformity with applicable building laws and
regulations. Such alterations, additions, replacements and changes shall become
a part of the Leased Premises, shall be maintained and kept in repair in
accordance with the provisions of Section 10, and at the expiration or
termination of this Lease shall become the property of Landlord.
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11.2. ALTERATIONS AND MODIFICATIONS TO THE FIXTURES AND EQUIPMENT
Tenant may, at its own expense, from time-to-time during the term
of this Lease, install, replace and operate in the Leased Premises such
removable medical equipment and personal property ("TENANT'S FIXTURES AND
EQUIPMENT") as it shall deem necessary or desirable in the conduct of its
business, provided all laws, rules and regulations of governmental bodies with
respect thereto shall be in all material respects complied with by Tenant.
Tenant's Fixtures and Equipment shall include the "Clean Room Equipment" as
described on Exhibit D hereto. Tenant may also, upon the prior written approval
of Landlord as described in Section 11.3 below, make such alterations,
additions, replacements and changes, in and to the Fixtures and Equipment, as it
finds necessary or desirable for the operation of a cGMP laboratory. Prior to
the expiration or termination of this Lease, Landlord and Tenant shall designate
those items of Tenant's Fixtures and Equipment that Landlord or Tenant desires
be removed from the Leased Premises, which shall include the "Clean Room
Equipment" described on Exhibit D, upon the expiration or termination of the
Lease ("TENANT'S FIXTURES AND EQUIPMENT REQUIRED TO BE REMOVED"). With the
exception of Tenant's Fixtures and Equipment Required to be Removed, all of the
Fixtures and Equipment shall remain on the Leased Premises at the termination of
this Lease and shall remain the property of Landlord and Landlord shall pay
Tenant the fair market value of any alterations, addition, or replacements to
such Fixtures and Equipment.
11.3. LANDLORD'S CONSENT
Landlord agrees not to unreasonably withhold, delay or condition
its consent to any action proposed by Tenant pursuant to this Section 11,
provided that (i) the alterations, construction or installation shall not have a
material adverse effect on the structure, appearance or use of the Leased
Premises or the building in which the Leased Premises are located or Fixtures
and the Equipment, in the reasonable judgment of Landlord, (ii) all such
alterations, construction and installations shall be expeditiously completed in
compliance with all legal requirements, (iii) all work done in connection with
any such alterations, construction or installation shall comply with the
requirements of any insurance policy required to be maintained by Tenant
hereunder, (iv) Tenant shall promptly pay all costs and expenses of any such
alteration, construction or installation and shall discharge all liens filed
against any of the Leased Premises or the Fixtures and Equipment arising out of
the same, (v) Tenant shall procure and pay for all permits and licenses required
in connection with any such alteration, construction or installation, (vi) such
alterations shall comply with any recorded lien or covenant affecting the Leased
Premises, and (vii) Landlord shall incur no expense or cost whatsoever in
connection with such alterations, including without limitation, costs for
reviewing and approving plans, or tap fees or other utility fees. Landlord may
require, as a condition to its consent to any alterations, reasonable
appropriate payments, bonds, assurances and undertakings from Tenant to ensure
that all such
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conditions are satisfied. Notwithstanding the foregoing, it shall not be
unreasonable for Landlord to withhold its consent, or to condition its consent,
if the holder of a mortgage withholds its consent to any of the foregoing, or
requires that certain conditions or requirements be satisfied or observed.
11.4. LIENS OR ENCUMBRANCES
Except as permitted under Section 18, neither Tenant nor Landlord will
directly or indirectly, create or permit to be created or to remain, and will
promptly discharge, at its expense, any lien or encumbrance with respect to, the
Leased Premises or any part thereof, or the Fixtures and Equipment or either
party interest therein as a result of any alteration, construction, installation
or other action of either party. The existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien, or any right in respect thereof,
shall not constitute a violation of this Section 11.4 if payment is not yet due
upon the contract or for the goods or services in respect of which any such lien
has arisen so long as such payment is made or bonded off within 30 days after
the later to occur of the completion of the work which gave rise to the
imposition of said liens or the rendering of the invoice, statement or demand
for such payment. Nothing contained in this Lease shall be construed as
constituting the consent or request of Landlord, expressed or implied, of any
contractor, subcontractor, laborer, materialman or vendor to or for the
performance of any labor or services or other furnishing of any materials for
any construction, alteration, addition, repair or demolition of or to the Leased
Premises or any part thereof.
12. ENVIRONMENTAL MATTERS
12.1. DEFINITIONS
As used in herein, the following items shall have meanings set
forth below:
(i) "CAA" shall mean the Clean Air Act, codified at
42 U.S.C. Sections 7401, et seq., as amended.
(ii) "CERCLA" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, codified at 42
U.S.C. Sections 9601, et seq., as amended.
(iii) "CWA" shall mean the Clean Water Act,
codified at 33 U.S.C. Sections 407, et seq., as amended.
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(iv) "ENFORCEMENT AGENCY" shall mean, collectively,
the Environmental Protection Agency ("EPA") and any state, county, municipal or
other agency having authority to enforce any Environmental Laws.
(v) "ENVIRONMENTAL LAWS" - shall mean CERCLA, HMTA,
RCRA, CAA, CWA, TSCA, RHA and the Right-to-Know Act and all other federal, local
and municipal laws, statutes, ordinances and codes, guidelines and standards
relating to health, safety, sanitation, and the protection of the environment or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Materials, including, without
limitation, the Pennsylvania Solid Waste Management Act, 35 P.S. Sections
6018.103, et. seq., the Pennsylvania Hazardous Sites Clean Up Act (Act 108 of
1988), laws and regulations regarding the discharge of water or other materials
or fluids into waterways, and the rules, regulations, guidelines, decisions,
orders and directives of federal, local and municipal governmental agencies,
authorities and courts with respect thereto presently in effect or hereafter
enacted, promulgated or implemented.
(vi) "ENVIRONMENTAL PERMITS" - shall mean all
permits, licenses, approvals, authorizations, consents or registrations required
by any applicable Environmental Laws, on either an individual or group basis, in
connection with the construction, ownership, use or operation of the Leased
Premises, or the storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Materials related to the Leased
Premises.
(vii) "HAZARDOUS MATERIALS" - shall mean, without
limitation, flammable, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum or petroleum
based or related substances, hydrocarbons or like substances and their additives
or constituents, and any substances now or hereafter defined as "hazardous
substances," "extremely hazardous substances," "hazardous wastes," "infectious
wastes" or "toxic chemicals" in any Environmental Laws, or in any regulation or
order issued pursuant to any Environmental Laws.
(viii) "HMTA" - shall mean the Hazardous Materials
Transportation Act, codified at 49 U.S.C. Sections 1801, et seq., as amended.
(ix) "RCRA" - shall mean the Resource Conservation
and Recovery Act of 1976, codified at 42 U.S.C. Sections 6801, et seq.,
as amended.
(x) "RELEASE" - shall have the same meaning as
given to that term in CERCLA, as amended, and the regulations promulgated
thereunder.
(xi) "RHA" - shall mean the Rivers and Harbors
Appropriation Act, codified at 33 U.S.C. Sections 401, et seq., as amended.
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(xii) "RIGHT-TO-KNOW ACT" - shall mean the
Emergency Planning and Community Right-To-Know Act, codified at 42 U.S.C.
Sections 11001, et seq., as amended.
(xiii) "TSCA" - shall mean the Toxic Substances
Control Act, codified at 15 U.S.C. Sections 2601, et seq., as amended.
12.2. LANDLORD OBLIGATIONS; REPRESENTATION AND WARRANTIES
Landlord hereby represents and warrants to Tenant that on the
Commencement Date the Leased Premises does not contain asbestos or any Hazardous
Materials. Landlord shall be responsible for costs, expenses, damages and
penalties resulting from the existence of any Hazardous Materials in the Leased
Premises at the date of execution of this Lease and all alterations made by
Landlord to the Leased Premises or the Common Areas shall be made in accordance
any comply with all Environmental Laws and the requirements of any Enforcement
Agencies.
12.3. TENANT OBLIGATIONS
Tenant shall comply at all times and in all respects with the
provisions of all Environmental Laws and Environmental Permits, and shall not
commit any actions or omissions that result in the incurrence of any liability
under such Environmental Laws and Environmental Permits. Tenant shall obtain,
whenever necessary and in its own name, appropriate Environmental Permits for
its operations and shall comply in all respects with the requirements of such
Environmental Permits. All alterations made in the Leased Premises made by
Tenant shall be made in accordance with and shall comply with all Environmental
Laws and the requirements of any Enforcement Agencies. If any statutes, laws,
ordinances, rules or regulations are promulgated at any time after the date of
execution of this Lease for the removal, abatement or containment of Hazardous
Materials in the Leased Premises or any portion of the Leased Premises and, in
the reasonable judgment of Landlord, it is hazardous for the Tenant to remain in
the Leased Premises during such removal, abatement, or containment of the
Hazardous Materials, Tenant shall vacate the Leased Premises or that portion of
the Leased Premises that is hazardous and, provided that such condition did not
result from Tenant's acts, omissions, or operations, Tenant's rent shall be
abated proportionately for the period of time in which Tenant's use of such
portion of the Leased Premises has been interrupted. Tenant shall not
intentionally or unintentionally use, store, handle, spill or discharge any
Hazardous Materials at or in the vicinity of the Leased Premises, other than
those Hazardous Materials generally used, stored or handled in a cGMP
laboratory. Tenant shall promptly deliver to Landlord copies of all notices made
by Tenant to, or received by Tenant from, any Enforcement Agency or from the
United States Occupational Safety and
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Health Administration concerning environmental matters or Hazardous Materials at
the Leased Premises.
12.4. INDEMNIFICATION; HOLD HARMLESS
Landlord shall indemnify, defend and hold Tenant harmless of and
from actual and direct losses arising out of or relating to any and all claims
arising from the existence, removal, containment, or abatement of any Hazardous
Materials from the Leased Premises related to Hazardous Materials existing in
the Leased Premises prior to the Commencement Date. Tenant shall indemnify,
defend and hold Landlord harmless of and from actual and direct losses arising
out of or relating to any and all claims arising by reason of any violation by
Tenant of the provisions of Section 12.3 above. This indemnity provision shall
survive expiration or earlier termination of this Lease.
12.5. INSPECTIONS
At any time throughout the Term of this Lease, Landlord may cause
an inspection to be made of the Leased Premises and its surrounding area for the
purpose of determining whether any Hazardous Materials is present thereon.
13. INSURANCE
13.1. TENANT INSURANCE
Tenant shall, at all times through the Term and at its sole expense,
maintain professional and general liability insurance (through third party
insurers) against claims for bodily injury or death occurring in or about the
Leased Premises, such insurance to provide coverage not less than $3,000,000 per
occurrence, $5,000,000 per annual aggregate. All such insurance shall name
Landlord as an additional insured and shall provide that Landlord be given 30
days prior notice of any material change or cancellation of such insurance.
Copies of such insurance policies shall be delivered to Landlord, upon
Landlord's request.
13.2. LANDLORD'S INSURANCE
Landlord shall, at all times through the Term and at its sole
expense, maintain insurance for the Leased Premises and the Common Areas at
replacement cost value, without coinsurance provisions, against fire and such
other hazards as are included within extended coverage and against earthquake
and flood damage, which insurance shall also include major mechanical system
repair and replacement coverage. In addition, Landlord shall, at all times
through the Term and at its sole expense, maintain insurance for the Fixtures
and Equipment at
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replacement cost value, without coinsurance provisions, against fire and such
other hazards as are included within extended coverage and against earthquake
and flood damage, which insurance shall also include major mechanical system
repair and replacement coverage. Copies of such insurance policies shall be
delivered to Tenant, upon Tenant's request.
14. LIABILITY OF LANDLORD
Landlord shall be liable for all loss of property by theft or
otherwise, for all damage to property, for all injuries to persons while on the
Leased Premises from escape or leakage of water, rain, snow, or steam from any
part of the building on which the Leased Premises are located or from the pipes
or plumbing system therein, and for all damage resulting from the short
circuiting of electricity or from any other cause, where any such losses,
damages and/or injuries are due to the willful acts or negligence of the
Landlord, its servant, agents, or employees.
15. CONDEMNATION
If all or a part of the Leased Premises and/or Common Areas are taken by
eminent domain or conveyed in lieu thereof and such Leased Premises cannot then
be used by Tenant for its intended use as set forth in Section 9.1 above, this
Lease shall immediately terminate as of the date that the condemning authority
takes possession of the Leased Premises, subject to the following:
(i) All compensation awarded for the taking (or the proceeds of any
sale in lieu thereof) of the Leased Premises and/or Common Areas
shall be the property of the Landlord;
(ii) All compensation awarded for the taking or loss of any of the
Tenant's Fixtures and Equipment or for moving or relocation
expenses shall be the property of Tenant; and
(iii) If only part of the Leased Premises and/or Common Areas are taken
such that Tenant may still use the Leases Premises for its
intended use, this Lease shall remain in effect with a pro-rata
reduction in the rental payments based upon the usable portions
of the Leased Premises.
16. ASSIGNING OR SUBLETTING
Tenant shall not assign, sublet or in any manner transfer this
Lease or any estate or interest therein, or grant a license, concession or other
right of occupancy, to all or part of the Leased Premises, without Landlord's
prior written
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consent, except that Tenant may assign, sublet or in any manner transfer this
Lease of any estate or interest therein, or grant a license, concession or other
right of occupancy, to all of part of the Leased Premises (i) to any successor
to Tenant in the event of a merger or consolidation of Tenant with another
entity, or to any purchaser of all or substantially all of the assets or
business of Tenant, and (ii) to an Affiliate (as defined below). For purposes of
this Section 16, an Affiliate shall mean, as to any party hereto, any
corporation or other entity which, directly or indirectly, through one or more
intermediaries, controls (i.e., possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of an entity,
whether through ownership of voting securities, by contract, or otherwise) is
controlled by, or is under common control with such party. In the event of any
permitted assignment, all rights, obligations and liabilities herein shall
extend to any successors or assigns.
17. WAIVER OF SUBROGATION
To the extent permitted by their insurers, Landlord hereby
releases Tenant, and Tenant hereby releases Landlord, and their respective
shareholders or members, directors, officers, employees and agents, from any and
all claims or demands for damages, losses, expenses, or injury to the Leased
Premises, or to the Fixtures and Equipment, or the inventory or other property
of Landlord or Tenant, as the case may be, in, or about, the Leased Premises
which may be caused by or results from events or happenings which are covered by
insurance carried by the respective parties and in force at the time of any such
damages, losses, expenses, or injury.
18. SUBORDINATION; ESTOPPEL CERTIFICATES
Subject to Section 8 above, this Lease is subordinate to the lien
of all present or future mortgages which affect the Leased Premises and to all
renewals, modifications, replacements and extensions thereof. This provision
shall be self-operative, but in any event Tenant hereby agrees to execute
promptly and deliver any estoppel certificate or other assurances that Landlord
may request in furtherance hereof. In the event of any foreclosure of any such
mortgage or modification, Tenant shall attorn to the purchaser in foreclosure of
who shall be named in any deed in lieu of foreclosure, shall recognize any such
purchaser as the Landlord under this Lease, and so long as Tenant is not in
default hereunder, this Lease shall remain in full force and effect.
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19. MISCELLANEOUS
19.1. NOTICE
All notices, demands, requests or other communications which may
be or are required to be given, served or sent by any party to any other party
pursuant to this Lease shall be in writing and shall be hand delivered
(including delivery by courier), sent by Federal Express or by other recognized
overnight delivery service, mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, or sent by telegram, telex, or
facsimile transmission, addressed as follows:
If to ICC:
Intracel Cancer Center of Pennsylvania, Inc.
____________________________________________
____________________________________________
____________________________________________
Attn: _____________________________________
Facsimile: ________________________________
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 13th Street, N. W.
Washington, D.C. 20004-1004
Attn: Donna A. Boswell, Esq.
Facsimile: (202) 637-5910
If to Lehigh:
Lehigh Valley Hospital and Health Network
Cedar Crest & I-78
P.O. Box 689
Allentown, Pennsylvania 18105-1556
Attn: Louis L. Liebhaber
Facsimile: (610) 402-7253
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with a copy (which shall not constitute notice) to:
Tallman, Hudders & Sorrentino
The Paragon Centre
1611 Pond Road, Suite 300
Allentown, Pennsylvania 18104-2256
Attn: Matthew R. Sorrentino, Esq.
Facsimile: (610) 391-1800
Each party may designate by notice in writing a new address to
which any notice, demand, request or communication may thereafter be so given,
served, or sent. Each notice, demand, request, or communication which shall be
mailed, delivered, or transmitted in the manner described above shall be deemed
sufficiently given, served, sent, or received for all purposes at such time as
it is delivered to the addressee (with the return receipt, the delivery receipt,
the affidavit of messenger, or (with respect to a telex or facsimile) the answer
back being deemed conclusive, but not exclusive, evidence of such delivery) or
at such time as delivery is refused by the addressee upon presentation.
19.2. COMPLETE AGREEMENT
This Lease, and all Exhibits hereto and incorporated agreements
(including the Joint Venture Agreement) set forth the entire agreement of the
parties hereto with respect to its subject matter and any and all prior
agreements, whether oral or written, between or among the parties hereto and
relating to the subject matter hereof are superseded hereby.
19.3. GOVERNING LAW
This Lease and the rights and obligations of the parties hereto
shall be governed by and construed and enforced in accordance with the laws of
the Commonwealth of Pennsylvania (excluding choice of laws rules thereof).
19.4. PARAGRAPH HEADINGS
The paragraph headings in this Lease are for convenience only and
are not a part of this Lease and do not in any way limit or amplify the terms
and provisions hereof and in no way shall be held to explain, modify or aid in
the interpretation, construction or meaning of the provisions of this Lease.
19.5. SEVERABILITY
In the event that a court of competent jurisdiction holds that a
particular provision or requirement of this Lease is in violation of any
applicable
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law, each such provision or requirement shall be enforced only to the extent it
is not in violation of such law or is not otherwise unenforceable and all other
provisions and requirements of this Lease shall remain in full force and effect.
19.6. MODIFICATION; WAIVER
This Lease shall not be modified or amended except by an
instrument in writing signed by Landlord and Tenant. No delay or failure on the
part of any party hereto in exercising any right, power, or privilege under this
Lease or any other instruments executed and delivered in connection with or
pursuant to this Lease, shall impair any such right, power, or privilege or be
construed as a waiver of any default hereunder or any acquiescence therein. No
single or partial exercise of any such right, power, or privilege shall preclude
the further exercise of such right, power, or privilege, or the exercise of any
other right, power, or privilege. No waiver shall be valid against any party
hereto unless made in writing and signed by the party against whom enforcement
of such waiver is sought and then only to the extent expressly specified
therein.
19.7. BENEFIT OF THIS LEASE
It is the explicit intention of the parties hereto that except as
set forth below no person or entity other than a party hereto is or shall be
entitled to bring any action to enforce any provision of this Lease against any
of the parties hereto, and that the covenants, undertakings, and agreements set
forth in this Lease shall be solely for the benefit of, and shall be enforceable
only by, the parties hereto or their respective successors and assigns as
permitted hereunder.
19.8. SIGNAGE ON LEASED PREMISES
Landlord shall, at its own expense, erect all exterior and interior
signage at the Leased Premises as approved by Tenant.
19.9. INDEPENDENT CONTRACTOR
Tenant shall lease and operate the Leased Premises as an
independent contractor, and shall not be considered an agent, employee of,
partner of or joint venturer with Landlord.
19.10. EXECUTION IN COUNTERPARTS
This Lease may be executed in counterparts, each of which shall
constitute an original hereof for all purposes.
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IN WITNESS WHEREOF, each of the parties intending to be legally
bound has duly caused this Lease to be duly executed and delivered in its name
and on its behalf, as of the date first written above.
TENANT:
INTRACEL CANCER CENTER OF
PENNSYLVANIA, INC.
By:____________________________________
Name__:________________________________
Title:_________________________________
LANDLORD:
LEHIGH VALLEY HOSPITAL AND
HEALTH NETWORK
By:____________________________________
Name__:________________________________
Title:_________________________________
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EXHIBIT H
DESCRIPTION OF CLEAN ROOM, AND
ADMINISTRATIVE AND STORAGE SPACE
SEE ATTACHED
<PAGE> 112
[LAYOUT OF LEHIGH VALLEY HOSPITAL
DEPARTMENT OF SURGERY RESEARCH LABORATORY]
The Clean Room, and Administrative and Storage Space consists of all the area
within and including the dotted lines.
<PAGE> 113
EXHIBIT I
FINAL MEDICAL DIRECTOR SERVICES AGREEMENT
This Final Medical Director Services Agreement (this "AGREEMENT") is
entered into as of ________________ __, ____, by and between Intracel Cancer
Center of Pennsylvania, Inc. a Delaware for-profit corporation ("ICC"), and
Lehigh Valley Hospital and Health Network, a Pennsylvania non-profit corporation
("LEHIGH") (each a "PARTY", and collectively "PARTIES").
WHEREAS, Intracel Corporation ("INTRACEL") and Lehigh have entered into
a Joint Venture Agreement dated as of December 11, 1998 (the "JOINT VENTURE
AGREEMENT") pursuant to which ICC was formed to operate a center for the
manufacture and provision of OncoVaxCL(R) ("ONCOVAX"), a product developed by
Intracel to be utilized in the treatment of colon cancer and other oncological
products as agreed to by Intracel and Lehigh;
WHEREAS, ICC and Lehigh have entered into a lease with the same
effective date as this Agreement (the "FINAL ONCOVAX CENTER LEASE") pursuant to
which ICC is leasing from Lehigh the necessary space and equipment to operate a
laboratory and support area in compliance with current Good Manufacturing
Practices to manufacture and provide OncoVax and other oncological products as
agreed to by Intracel and Lehigh (the "ONCOVAX CENTER");
WHEREAS, Herbert C. Hoover, Jr., M.D. is a physician employed by Lehigh
Valley Physician Group, a Pennsylvania non-profit corporation and wholly-owned
subsidiary of Lehigh;
WHEREAS, Herbert C. Hoover, Jr., M.D. serves as the Chair of Surgery for
Lehigh pursuant to an agreement between Lehigh Valley Physician Group and
Lehigh;
WHEREAS, ICC desires to obtain the services of Herbert C. Hoover, Jr.,
M.D. ("MEDICAL DIRECTOR") or his designee on a part-time, independent contractor
basis from Lehigh for the provision of certain Medical Director services at the
OncoVax Center as set forth more fully in Section 1.1 ("SERVICES");
WHEREAS, pursuant to the Joint Venture Agreement, Lehigh has agreed to
provide the Services of the Medical Director on a part-time, independent
contractor basis to ICC for ICC's Service Fee (as defined below) to Lehigh; and
WHEREAS, the Parties desire to enter into this Agreement to set forth
the terms and conditions under which Lehigh will provide the Services to ICC,
and ICC will compensate Lehigh for such Services.
<PAGE> 114
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. MEDICAL DIRECTOR SERVICES
1.1 GENERAL DESCRIPTION OF SERVICES
During the Term (as defined in Section 6), Lehigh shall provide the
Services to ICC through Medical Director or, as described in Section 1.9 below,
through Medical Director's designee. The Services shall include: (a) assisting
ICC in establishing and enhancing the OncoVax Center, including assisting with
the clinical design of the center and the establishment of protocols and
systems; and (b) serving the OncoVax Center once it is operational as a medical
director, including (1) participating in administrative meetings and performing
other administrative duties as requested by ICC, (2) recommending rules and
policies for the operation of the center, (3) serving as a liaison with Lehigh
and Lehigh physicians, and (4) assisting in the assessment of outcomes and other
clinical data with respect to OncoVax and other Intracel or ICC products.
Medical Director and Lehigh acknowledge and agree that, depending upon certain
development decisions and other circumstances, some details of Medical
Director's duties may change over time. This Agreement shall remain in effect
notwithstanding such changes. ICC agrees to discuss any such changes with
Medical Director and to consider his input in these decisions. No activities or
services performed by Medical Director pursuant to this Agreement shall
constitute the practice of medicine. Any evaluations, diagnoses, treatments,
procedures or other professional health care services furnished to patients by
Medical Director will be provided in his individual capacity as a practicing
physician or employee of Lehigh or other entity, and will not be provided by
Medical Director in his capacity as an independent contractor to ICC pursuant to
this Agreement.
1.2 BEST EFFORTS
Medical Director shall devote his best efforts to performing the
Services. In doing so, Medical Director shall use his full education, skills,
and professional energy, consistent with his training and experience, to advance
the business interests of Intracel. During the Term of this Agreement, Medical
Director shall not engage in any other activity or occupation for compensation,
or any non-compensated activity, that in Intracel's reasonable opinion is
competitive with or adverse to the interests of ICC, without the prior written
consent of Intracel. Notwithstanding the foregoing, nothing in this Section 1.2
or elsewhere in this Agreement shall prevent Medical Director, during the time
not required for the performance of the Services, from maintaining his
individual medical practice or performing his duties as the Chair of Surgery for
Lehigh or an employee of Lehigh Valley Physician Group.
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1.3 HOURS AND RECORDS
Notwithstanding any other provision of this Agreement, Medical Director
shall not spend less than 15 hours per month or be required to spend more than
25 hours per month, on average, performing the Services. The Parties agree that
these minimum and maximum numbers are annual averages, and that Medical Director
may spend less than 15 hours or more than 25 hours in any particular month
depending on Intracel's needs and Medical Director's availability. Within ten
(10) days following the end of each calendar month during the Term of this
Agreement, Lehigh shall provide ICC with a record of time Medical Director spent
performing the Services in the previous month. Such accounting shall include the
dates on which Medical Director performed Services, a description of the
Services performed on each date, and the amount of time spent performing those
Services.
1.4 REPORTING TO INTRACEL
Lehigh and/or Medical Director shall notify ICC in writing within one
working day of the occurrence of any of the following: (a) Medical Director's
being notified that any written complaint or report concerning him has been
filed with the Pennsylvania state medical board or the National Practitioner
Data Bank; (b) Medical Director's being notified that any written complaint has
been filed against him, or any adverse action has been proposed (whether final
or not), at any hospital, other health care facility, health maintenance
organization, preferred provider organization, insurer or health plan,
professional review organization, professional association or governmental body;
(c) Medical Director's receiving a summons and complaint or a subpoena relating
to his professional practice; (d) Medical Director's being charged with any
crime (excluding minor traffic violations); (e) any other event which reasonably
might be anticipated to expose ICC to a legal claim or adverse publicity, or
interfere with Medical Director's discharging his responsibilities under this
Agreement; or (f) any other disciplinary or professional liability actions
initiated against Medical Director. Medical Director acknowledges and agrees
that ICC may inform malpractice carriers or other appropriate parties of any
such occurrence.
1.5 COMPLIANCE WITH LAW
Lehigh and Medical Director shall perform the Services faithfully,
diligently, ethically, in a professional manner and in accordance with all
applicable laws, regulations and currently recognized professional standards.
1.6 COMPLIANCE WITH ICC AND INTRACEL RULES
Lehigh and Medical Director shall comply in all material respects with
the reasonable rules and policies of ICC, Intracel and the OncoVax Center, as
they now exist or as they may from time to time be amended, including rules and
policies
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governing the provision of services, billing, records, and relationships with
OncoVax Center employees.
1.7 COOPERATION IN PROCEEDINGS
During and after the Term (and notwithstanding expiration or termination
of this Agreement for whatever reason), Lehigh and Medical Director shall,
without additional compensation, provide all reasonable assistance requested by
ICC in order to (a) assert ICC's rights under any insurance policies; or (b)
assist ICC in defense of professional liability or other actions.
1.8 PROFESSIONAL LIABILITY INSURANCE
Lehigh covenants that the Medical Director shall at all times during the
Term be covered by professional liability insurance that meets all requirements
of the Pennsylvania Healthcare Malpractice Act, as amended, and that such
coverage will be provided at Lehigh's cost.
1.9 MEDICAL DIRECTOR'S DESIGNEE
The Parties agree that Medical Director may delegate the provision of
Services to a designee, which designee shall be Sarah Stevens, M.D. unless the
Parties mutually agree on another designee. Notwithstanding anything in Section
1.3 to the contrary, Medical Director's designee shall devote a minimum of fifty
percent (50%) of her professional time to the performance of the Services. In
the event of such delegation, Medical Director's designee shall be subject to
all the terms and conditions under this Agreement which are applicable to
Medical Director as if a reference to such designee was expressly set forth in
each provision applicable to Medical Director. Any breach of any term or
condition as applied to any designee shall be a breach thereof in the same
manner as if applied to Medical Director himself.
2. REPRESENTATION AND WARRANTIES OF LEHIGH
2.1 GENERAL REPRESENTATIONS AND WARRANTIES
Lehigh hereby represents and warrants that (a) Medical Director
possesses and throughout the Term shall maintain, a current, valid, and
unencumbered license to practice medicine in the State of Pennsylvania; (b)
Medical Director either (1) is not subject to any actual or threatened
investigation, disciplinary proceeding, ethics action, public or private suit or
claim as to malpractice or professional misconduct, and his performance in his
job functions is not impaired due to a physical or mental condition or substance
abuse, or (2) as to any such matter to which Medical Director is subject, full
information has been disclosed in writing to Intracel; (c) Medical
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Director either (1) knows of no existing circumstances that would provide a
basis for revoking or suspending his medical license, or subjecting him to suit,
or which would be harmful to ICC in engaging Medical Director, or (2) has
disclosed the same in writing to ICC; (d) Medical Director has adequate
malpractice "occurrence" coverage or "tail" coverage under existing insurance
with limits of liability of not less than $1 million per occurrence and $3
million in the aggregate, covering any claims relating to activities in his
private medical practice, and Lehigh shall indemnify and hold harmless ICC from
and against any claims, costs or expenses arising from such activities; and (e)
execution and performance of this Agreement does not violate any contract,
agreement, regulatory ruling or judicial order to which Lehigh or Medical
Director is subject (including both the Medical Director's employment agreement
and Lehigh's agreement with Lehigh Valley Physician Group), or to the best of
Lehigh's knowledge, violate any law.
2.2 EFFECT OF INACCURATE REPRESENTATIONS OR WARRANTIES
The Parties acknowledge and agree that if any representation or warranty
contained in this Section 2 is untrue or becomes untrue during the Term of this
Agreement, such untrue representation or warranty shall be deemed to be a
material misrepresentation by Medical Director and ICC shall have the right to
terminate this Agreement pursuant to Section 6.
3. RESPONSIBILITIES OF INTRACEL
3.1 ICC FACILITIES
Throughout the Term of this Agreement, ICC shall provide clerical and
other administrative support, to the extent ICC deems reasonable, to help
facilitate Medical Director's performance of the Services.
3.2 BUSINESS AND PROPERTY LIABILITY INSURANCE
ICC shall maintain general business and property liability insurance for
claims arising from (a) the occupancy of ICC offices by Medical Director; and
(b) the performance by Medical Director of the Services in accordance with the
terms of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF INTRACEL
ICC hereby represents and warrants that (a) it is a corporation duly
organized and validly existing; (b) this Agreement has been duly executed on
behalf of ICC; (c) this Agreement is a legal, valid and binding obligation of
ICC; and (d) execution and performance of this Agreement does not violate any
contract, agreement,
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regulatory ruling, or judicial order to which ICC is subject, or to the best of
ICC's knowledge, violate any law.
5. PAYMENT FOR SERVICES
5.1 SERVICE FEE
In return for the Services, ICC shall pay to Lehigh a monthly service
fee ("SERVICE FEE") payable in arrears at the end of each month during the Term.
The Service Fee shall be [$6,250] per month, which the Parties agree reflects
the fair market value for the Services.
5.2 EXPENSES
Subject to reasonable ICC policies, including advance approval by ICC,
and up to the reasonable dollar limits specified from time to time by ICC,
Lehigh shall be entitled to reimbursement by ICC for reasonable expenses
(including but not limited to reasonable travel expenses) incurred by Medical
Director during the Term of this Agreement in performance of the Services and
upon the presentation of appropriate documentation. It is intended that all
expenses incurred pursuant to this Section 5.2 are to be ordinary and necessary
business expenses. It is therefore agreed that if any expense paid for, or
reimbursed to, Lehigh is disallowed by the Internal Revenue Service as a federal
income tax deduction of ICC, (1) ICC shall not be obliged to contest such
ruling, and (2) Lehigh shall reimburse ICC for such disallowed expense within
sixty (60) days after the final determination of such disallowance.
6. TERM AND TERMINATION
6.1 TERM
The term of this Agreement (the "TERM") shall commence on the Final
Closing Date as that term is defined in the Joint Venture Agreement (the
"EFFECTIVE DATE") and shall end on the one year anniversary date after the Final
Closing Date, unless earlier terminated in accordance with this Section 6. At
least 60 days prior to the end of the Term, the parties agree to negotiate in
good faith the terms for the renewal of this Agreement. Such renewed agreement
shall be substantially in the form of this Agreement, but will reflect, among
other things, any changes (a) in the applicable laws and (b) in the fair market
value of the Services provided.
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<PAGE> 119
6.2 TERMINATION BY INTRACEL
ICC may terminate this Agreement for Cause at any time during the Term
of this Agreement by giving Lehigh written notice at least thirty (30) days in
advance (the "NOTICE PERIOD") of the effective date of such termination (the
"TERMINATION DATE"). ICC may (without alteration of payment obligations under
this Agreement during the Notice Period) require that Medical Director cease his
performance of the Services at any time during the Notice Period. The following
shall be Cause for termination pursuant to this Section 6.2: (i) Lehigh itself,
or through Medical Director, breaches or fails to perform a material obligation
under this Agreement and that breach or failure is not cured to the reasonable
satisfaction of ICC within the Notice Period; (ii) any act or omission
constituting fraud or material misrepresentation by Lehigh or Medical Director
in dealing with ICC or the OncoVax Center; (iii) Medical Director's license to
practice medicine is suspended, limited or revoked, irrespective of other
proceedings, or Medical Director's DEA license to prescribe controlled
substances is revoked, limited or suspended; (iv) Medical Director is suspended
or barred from participation in Medicare; (v) Herbert C. Hoover, Jr. is no
longer the Medical Director performing the Services on behalf of Lehigh, or he
becomes disabled to the extent that he is unable to perform the Services; (vi)
Medical Director becomes ineligible for professional liability coverage on
commercially reasonable terms; (vii) Lehigh is adjudged insolvent or bankrupt or
makes a general assignment for the benefit of creditors; or (viii) Medical
Director is convicted of a crime bearing on the practice of medicine, any crime
involving moral turpitude or fraud, or Medical Director is convicted of any
felony.
6.3 TERMINATION BY LEHIGH
Lehigh may terminate this Agreement for Cause at any time during the
Term of the Agreement by giving ICC written notice at least thirty (30) days in
advance (the "NOTICE PERIOD") of the effective date of such termination (the
"TERMINATION DATE"). The following shall be Cause for termination pursuant to
this Section 6.3: (i) ICC becomes insolvent or bankrupt or makes a general
assignment for the benefit of creditors; (ii) ICC breaches or fails to perform
any material obligation under this Agreement, and such breach or failure is not
cured to the reasonable satisfaction of Lehigh within the Notice Period; or
(iii) ICC commits fraud or material misrepresentation in its dealings with
Lehigh or Medical Director.
6.4 TERMINATION BY EVENT
Unless the Parties agree in writing to continue this Agreement, this
Agreement shall automatically terminate upon the occurrence, at any time, of any
of the following events: (i) the termination for any reason of the Joint Venture
Agreement (other than expiration of that Agreement coupled with the
effectiveness and continued effectiveness of the Operations Agreement as defined
in Section 9 of the Joint Venture Agreement); (ii) the termination for any
reason of the Operations
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Agreement; (iii) the dissolution of ICC for any reason; or (iv) in accordance
with and only in accordance with the provisions of Section 8.5, in the event
this Agreement is deemed in the reasonable opinion of either Party to violate
law and be incapable of amendment.
6.5 TERMINATION OF MEDICAL DIRECTOR OR DESIGNEE BY INTRACEL
The Parties agree that pursuant to Section 9.1 of the Joint
Venture Agreement Intracel shall have the right to require that Medical Director
or any of his designees cease his or her performance of the Services at any time
during the Term of this Agreement if Medical Director or his designee fails to
comply with any or all applicable laws, rules and regulations.
6.6 COOPERATION
In the event of the expiration or termination of this Agreement for any
reason, Lehigh and Medical Director shall, without further compensation, if so
requested by ICC, thereafter, promptly (a) respond to requests for information
as reasonably may be necessary to ensure appropriate transfer of their
responsibilities; and (b) advise ICC if either receives a complaint, summons,
subpoena, or similar court order for records or testimony relating to
performance of the Services.
7. CONFIDENTIALITY
7.1 CONFIDENTIALITY
During the course of Lehigh's performance of the Services, Lehigh and/or
Medical Director may come to know certain confidential and proprietary business
or medical information of or about ICC, Intracel, the OncoVax Center, and/or ICC
or Intracel affiliates and joint venture partners (collectively, "ENTITIES"),
including but not limited to information concerning (a) business, affairs or
operations of the Entities or their customers, (b) Entity trade secrets, new
product developments, special or unique processes, protocols, or methods, (c)
Entity marketing, sales, advertising or other concepts or plans, (d) Entity fees
and billing arrangements, (e) Entity finances, (f) Entity management systems, or
(g) Entity business plans or prospects ("CONFIDENTIAL INFORMATION"). The term
"Confidential Information" shall exclude any information that is a matter of
public knowledge (except if such public knowledge resulted from an improper act
of Medical Director or Lehigh). Lehigh agrees that both during the Term of this
Agreement and after the expiration or termination of this Agreement for whatever
reason, Lehigh shall hold all such Confidential Information in the strictest
confidence, and shall not disclose, use, display, transfer, sell, publish, or
otherwise make available to any other person or entity, any such Confidential
Information without the prior written consent of ICC or Intracel as the case may
be, except as may be specifically required by law. Lehigh
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shall protect such Confidential Information in a manner consistent with the
usual manner in which the most confidential business and professional
information is protected. Lehigh shall ensure that Medical Director complies
with the provisions of this Section 7.1.
7.2 ENFORCEMENT OF CONFIDENTIALITY REQUIREMENTS
Lehigh agrees that the restrictions contained in Section 7.1 are
part of the consideration for inducing ICC to contract with Lehigh to provide
the Services for the fees provided for in this Agreement; that such restrictions
are reasonable and necessary to protect the business interests of ICC, Intracel
and the OncoVax Center; and that any violation of such restrictions will cause
substantial and irreparable injury to ICC, Intracel and/or the OncoVax Center.
These restrictions shall be effective and enforceable upon the execution of this
Agreement by Lehigh, irrespective of the length of its Term. The Parties agree
that ICC, Intracel and the OncoVax Center each are entitled, in addition to any
and all other remedies available at law or in equity, to a restraining order,
preliminary and permanent injunctive relief and specific performance to prevent
a breach or contemplated breach of these restrictions, without the necessity of
proving actual damages. In the event of a breach of these provisions, Lehigh
shall be obligated to pay all costs and expenses, including reasonable
attorneys' fees, incurred by ICC, Intracel or the OncoVax Center due to such
breach or threatened breach.
7.3 NO ACQUIRED INTERESTS
Lehigh and Medical Director agree that upon termination or expiration of
this Agreement, all proprietary interest of ICC, Intracel or the OncoVax Center
in OncoVax or each of its other products, in customer accounts, lists,
copyrighted items, trade secrets, proprietary information, including all
intellectual property rights in any materials, documents, protocols, systems,
reports, or inventions, and all business assets, tangible or intangible
(collectively "PROPRIETARY INTERESTS"), with which Lehigh or Medical Director
deals or has access to, or that are developed or improved in whole or in part by
Lehigh or Medical Director in performing the Services during the Term of this
Agreement, shall remain the sole and exclusive property of ICC, Intracel and/or
the OncoVax Center, and in no event shall Lehigh or Medical Director, by virtue
of performing the Services, acquire any personal interest in the Proprietary
Interests or any right to use the Proprietary Interests except as specifically
set forth in a license agreement or other agreement executed by the Parties.
Lehigh and Medical Director each hereby assign to ICC all of Lehigh's or Medical
Director's right, title and interest, including all intellectual property
rights, if any, in any Proprietary Interests developed in whole or in part by
Lehigh or by Medical Director in performance of the Services, which Proprietary
Interests all shall be considered works made for hire. Lehigh and Medical
Director agree that upon termination or expiration of this Agreement each shall
promptly return to ICC all
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business, corporate, medical or financial records, documents, forms, contracts,
lists and completed work or work in progress relating to the affairs of ICC,
Intracel or the OncoVax Center and any personal property of ICC or the
OncoVax Center in their possession at the time of termination or expiration.
8. GENERAL PROVISIONS
8.1 NOTICES
All notices and other communications under this Agreement shall be in
writing and shall be deemed given when delivered personally, sent by federal
express or other recognized overnight delivery service or mailed by registered
or certified mail, return receipt requested, to the Parties as follows or to
such other addressee as a party may in writing designate.
If to Lehigh:
Lehigh Valley Hospital and Health Network
Cedar Crest & I-78
P.O. Box 689
Allentown, Pennsylvania 18105-1556
Attn: Louis L. Leibhaber
Facsimile: (610) 402-7253
with a copy to:
Tallman, Hudders & Sorrentino
The Paragon Centre
1611 Pond Road, Suite 300
Allentown, Pennsylvania 18104-2256
Attn: Matthew R. Sorrentino, Esq.
Facsimile: (610) 391-1800
If to ICC or OncoVax Center, to:
Intracel Cancer Center of Pennsylvania, Inc.
_____________________________________________
_____________________________________________
_____________________________________________
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with a copy to:
Donna Boswell, Esq.
Hogan & Hartson L.L.P.
555 13th Street, N.W.
Washington, D.C. 20004
Each notice, demand, request or communication that shall be given or
made in the manner described in this Section 8.1 shall be deemed sufficiently
given or made for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, or the affidavit of messenger
being deemed conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation. This Section 8.1
shall survive termination of this Agreement.
8.2 ENTIRE AGREEMENT; AMENDMENTS
This Agreement sets forth the entire understanding and agreement between
the parties with respect to the subject matter of this Agreement, and supersedes
all prior undertakings of any kind, whether written or oral. No terms,
conditions, or warranties, other than those contained in this Agreement, and no
amendments or modifications to this Agreement, shall be valid unless made in
writing and signed by the Parties.
8.3 EFFECT AND BENEFIT OF AGREEMENT
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns. The covenants,
undertakings, and agreements set forth in this Agreement shall be solely for the
benefit of, and shall be enforceable only by, the Parties and their permitted
assigns, respective heirs, successors or legal representatives. Nothing in this
Agreement is intended to or shall be construed to, confer upon any person or
entity not a Party to this Agreement, any rights or benefits under this
Agreement. Notwithstanding the foregoing, Intracel shall be a third party
beneficiary hereto with respect to the enforcement of, and only to the extent
of, any rights it may have hereunder.
8.4 ASSIGNMENT
This Agreement and its performance shall not be assigned, sublet,
delegated or transferred by either Party in whole or in part without the prior
written consent of the other party, except that ICC shall have the right to
assign or delegate its rights and responsibilities under this Agreement, in
whole or in part, without Lehigh's consent, to the OncoVax Center (or a
successor entity) or to any affiliate or subsidiary of, or successor entity to,
Intracel.
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8.5 INVALID PROVISIONS
If any provision of this Agreement or other document contemplated in
this Agreement is held to be illegal, invalid, or unenforceable under present or
future laws, such provisions shall be fully severable: (a) the appropriate
documents shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of the Agreement; (b) the
remaining provisions shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision; and (c) the Parties
shall in good faith negotiate and substitute a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible and still
be legal, valid and enforceable, unless the effect of such severance and
substitution would be to deprive a Party substantially of the benefits
contemplated under this Agreement, in which case either Party may terminate this
Agreement upon thirty days written notice to the other Party.
8.6 INDEPENDENT CONTRACTORS
The Parties acknowledge and agree that, with respect to this Agreement
and the arrangements set forth in this Agreement, they are independent
contractors and that except as provided in this Agreement, neither Party has the
right to obligate or bind the other Party in any manner whatsoever. Nothing in
this Agreement shall be interpreted, or is intended, to constitute either Party
as the employee or employer, joint venturer, or partner of the other Party. The
Parties understand and agree that (a) ICC will not withhold on behalf of Medical
Director any sum for income tax, unemployment insurance, social security or any
other withholding applicable to employees, and ICC will not provide Medical
Director with any of the benefits provided to employees of ICC or its
affiliates; (b) as between ICC and Lehigh, all such payments, withholdings and
benefits, if any, shall be the sole responsibility of Lehigh; and (c) Lehigh
will indemnify and hold ICC harmless from any and all loss or liability, cost or
expense arising with respect to any such payments, withholds, and benefits.
8.7 ACCESS TO BOOKS AND RECORDS
Until the expiration of six (6) years after expiration or termination of
this Agreement, ICC and Medical Director each shall make available to the
Secretary, U.S. Department of Health and Human Services, the U.S. Comptroller
General and their representatives, this Agreement and all books, documents and
records necessary to certify the nature and extent of the costs of the services
furnished hereunder and will provide such additional documentation as they
reasonably require. If Medical Director carries out any of the duties of this
Agreement through a subcontract worth ten thousand dollars ($10,000) or more
over a twelve month period with a related organization, the subcontract will
also contain a clause to permit access by the Secretary, Comptroller General,
and their representatives to
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the related organization's books and records. This Section 8.7 shall survive
termination of this Agreement.
8.8 REMEDIES
Any remedies the Parties may have pursuant to this Agreement or by law
shall be cumulative.
8.9 NO WAIVER
The waiver by either Party of any breach of any provision of this
Agreement shall not be construed as a waiver of any subsequent breach of the
same or another provision. The failure to exercise any right under this
Agreement shall not operate as a waiver of such right. Any waiver must be in
writing and signed by the Party to be charged.
8.10 GOVERNING LAW
This Agreement, to the extent any particular issue is controlled by
state law, shall be governed by and construed in accordance with the laws of the
State of Maryland (but not including choice of law rules thereof).
8.11 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but which together shall constitute one
and the same Agreement.
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IN WITNESS WHEREOF, each of the Parties intending to be legally
bound has caused this Agreement to be duly executed and delivered in its name
and on its behalf as of the date first set forth above.
INTRACEL CANCER CENTER OF
PENNSYLVANIA, INC.
By:__________________________________________
Name:
Title:
LEHIGH VALLEY HOSPITAL AND HEALTH NETWORK
By:__________________________________________
Name:
Title:
ACKNOWLEDGED AND AGREED:
HERBERT C. HOOVER, JR., M.D.
By:__________________________________________
ACKNOWLEDGED AND AGREED:
SARAH STEVENS, M.D.
By:__________________________________________
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EXHIBIT J
DESCRIPTION OF CLEAN ROOM EQUIPMENT
<TABLE>
<CAPTION>
EQUIPMENT NAME MANUFACTURER MODEL # SERIAL #
- --------------------------------------- ---------------------- ---------------- --------------
<S> <C> <C> <C>
Bio Safety Hood, 4' Baker SG400 58432
Bio Safety Hood, 6' Baker SG600 58388
Bio Safety Hood, 6' Baker SG601 58382
Gammacell Irradiator Nordion 1000A 247
Controlled Rate Freezer Gordinier 7009 06911-0497
Freezer Chamber Gordinier 8753 06911-0497
MVE-TEC 2000 Storage MVE XLC-500F CDRA97B101
Incubator, CO2 Sanyo MCO-17AI 60905781
Incubator, CO2 Sanyo MCO-17AI 60905783
Ultralow Freezer Sanyo MDF-U6088SC 61006995
Water Bath, 1 of 2 Precision 180 697050163
Water Bath, 2 of 2 Precision 180 697030900
Refrigerator/Freezer Kenmore 363-9662825 L70640925
Chemical Fume Hood Kewaunee H05 R106417
Balance Ainsworth De410-D 73866
Microscope Nikon Labophot-2 462566
Refrigerator, undercounter Kenmore 564.9936111 961003215
Refrigerator, undercounter Kenmore 564.9936111 960901790
Immersible Stirrer VWR 230 0094
Immersible Stirrer VWR 230 0066
Immersible Stirrer VWR 230 0086
Immersible Stirrer VWR 230 0092
Pipetman Rainin P-1000
Pipetman Rainin P-200
Pipetman Rainin P-200
Pipetman Rainin P-200
Magnahelic Gauge Sure Flow
Magnahelic Gauge Sure Flow
Megafuge 1.0R Hereaus 75003062/02 232331
Calibrated Timer VWR
4 Work Stations with Divider Panels
3 Two Drawer Lateral Files
4 Office Chairs
5 Lab Chairs
Six door locker
2 two drawer file cabinets
1 Four Drawer File Cabinet
1 Six Drawer Lateral File Cabinet
3 Four Drawer File Cabinets
Computer Workstation with Printer
Fax Machine Murata
</TABLE>
<PAGE> 128
EXHIBIT K
THIS CONVERTIBLE PROMISSORY NOTE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER (THE "ACT"), AND ALL
APPLICABLE STATE SECURITIES LAWS, OR (B) PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER, OR OTHERWISE IN COMPLIANCE WITH, THE ACT AND ALL APPLICABLE
STATE SECURITIES LAWS.
CONVERTIBLE PROMISSORY NOTE
$______________ ______________, 19__
FOR VALUE RECEIVED, the undersigned, Intracel Corporation, a
Delaware corporation ("INTRACEL"), hereby promises to pay to the order of Lehigh
Valley Hospital and Health Network, a Pennsylvania non-profit corporation
("HOLDER"), the sum of ______________________ and __/100 Dollars ($________), in
lawful money of the United States, same-day funds (the "PRINCIPAL SUM") from the
date hereof until paid in full at the rate and in the manner set forth below
together with interest on the principal balance thereof at the rate and in the
manner hereinafter provided.
This Note is secured by the collateral described in that certain
Security Agreement of even date herewith, by and between Intracel and the Holder
(the "SECURITY AGREEMENT"). The Holder is entitled to the benefits of the
Security Agreement and reference is made thereto for a description of the
collateral and the rights and remedies of the Holder thereunder. Neither the
reference to the Security Agreement nor any provision thereof, shall affect or
impair the absolute and unconditional obligation of the Company to pay the
Principal Sum hereof, together with interest accrued thereon, when due.
The Principal Sum shall be due and payable on _________ __, 20__,
(the "MATURITY DATE") when the outstanding principal balance, if any, together
with accrued interest and any other amounts payable hereunder shall be due and
payable in full.
<PAGE> 129
Interest on the unpaid Principal Sum shall begin to accrue on the
Commencement Date and shall continue to accrue at an annual rate equal to the
"Prime Rate" as published from time to time in THE WALL STREET JOURNAL listing
of "Money Rates", and shall be the highest such rate if more than one is quoted.
If this index ceases to be published in THE WALL STREET JOURNAL, an alternate
index of similar nature will be selected. All computations of interest shall be
made by the Holder on the basis of a year of 360 days for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest is payable.
Whenever any payment hereunder shall be stated to be due on a day
other than a day on which full-service commercial banks are generally open for
business in the State of Maryland (a "BUSINESS DAY"), such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest.
All payments hereunder shall be made to Holder at _____________________
_______________________________ or at such other address as the Holder may from
time to time designate in writing to Intracel.
Commencing on the first business day after the date Intracel's
common stock, par value $.0001 per share ("COMMON STOCK") is listed or admitted
for trading on a national securities exchange, Holder may elect to convert all
or a portion of the outstanding Principal Sum and accrued interest due
hereunder, in even increments of Fifty Thousand and No/100 Dollars ($50,000.00),
into the number of shares of Common Stock derived by dividing (a) such
outstanding Principal Sum to be converted hereunder by (b) the Conversion Price
then in effect. For purposes of this Note, Conversion Price shall mean the last
sale price, regular way, of the shares of the Common Stock on the Business Day
immediately preceding the date Holder notifies Intracel of its election to
convert all or a portion of the Principal Sum into Common Stock (the "PRICING
DATE") or, in case no such sale takes place on the Pricing Date, the average of
the closing bid and asked prices of the shares of the Common Stock, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange, or, if the shares of the Common Stock are not listed or admitted
to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which shares of the Common Stock
are listed or admitted to trading; provided, however, that the Conversion Price
shall in no event be an amount be less than [seventy-five percent (75%) of the
per share initial public offering price of the Common Stock]. If shares of
Common Stock are not publicly held or so listed or publicly traded, the
Conversion Price shall be an amount determined in good faith by the Intracel
Board of Directors as the fair market value of a share of Common Stock which
determination shall be final, binding and conclusive. Holder may
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exercise its right to convert all or a portion of the Principal Sum under this
Note only once during each calendar quarter during the term of this Note.
Intracel shall at all times reserve and keep available for
issuance upon the conversion of this Note, free from any preemptive rights, such
number of its authorized but unissued shares of Common Stock as will from time
to time be sufficient to permit the conversion of the entire outstanding
Principal Sum of this Note into shares of Common Stock, and shall take all
action required to authorize a sufficient number of shares of Common Stock
necessary to permit the conversion, at any time, of the outstanding Principal
Sum of this Note, plus accrued but unpaid interest due thereon.
Any one of the following events constitutes an event of default
("EVENT OF DEFAULT") under this Note: (a) failure of Intracel to make any
payment of the Principal Sum or interest when due and such failure continues for
five days after written notice of such default by Holder; (b) failure of
Intracel to perform, observe, or comply with any provisions of this Note; (c)
filing by Intracel of any petition for relief under the Bankruptcy Code or any
similar federal or state statute or service upon Intracel of any petition for
relief under the Bankruptcy Code or under any federal or state bankruptcy,
reorganization, arrangement, insolvency, receivership, or similar law, if that
petition is not dismissed within 30 days after service upon Intracel.
Upon the occurrence of any Event of Default, Holder may, at its
option, declare the entire unpaid balance of the Principal Sum, together with
all accrued and unpaid interest, to become immediately due and payable. Holder's
failure to exercise this option upon an Event of Default, however, does not
constitute a waiver of Holder's right to exercise this option in the event of a
subsequent Event of Default. Holder shall have no duty to exercise any or all of
the rights and remedies herein provided or contemplated. Holder's acceptance of
any payment hereunder that is less than payment in full of all amounts due and
payable at the time of such payment shall not constitute a waiver of the right
to exercise any of the foregoing options at that time or at any subsequent time,
or nullify any prior exercise of any such option without Holder's express
written consent. Intracel shall pay all costs incurred by Holder in the
collection or enforcement of this Note, whether or not suit is filed thereon,
including reasonable attorneys' fees.
This Note shall be governed by and construed according to the
laws of the State of Maryland, without regard to principles of conflict of laws.
Intracel agrees that the extension of credit evidenced by this
Note shall be used by Intracel solely in furtherance of Intracel's commercial
business activities.
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This Note shall be binding upon the successors and assigns of
Intracel and shall inure to the benefit of Holder, and its successors and
permitted assigns. This Note may not be assigned or transferred by Holder
without the prior written consent of the Intracel, which consent shall not be
unreasonably withheld.
If any term or provision of this Note shall be held invalid,
illegal or unenforceable, in whole or in part, neither the validity of the
remaining part of such term or provision, nor the validity of the remaining
terms of this Note shall in any way be affected thereby.
Intracel hereby waives any right to a trial by jury in connection
with any suit brought under this Note by Holder. This Note arises out of that
certain Bill of Sale, by and between Intracel and Holder, dated of even date
herewith.
INTRACEL CORPORATION
By:_________________________________
Name:_______________________________
Title:______________________________
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<PAGE> 132
EXHIBIT L
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is entered into as of this _______ day
of ____________, 19___, by and between Lehigh Valley Hospital and Health
Network, a Pennsylvania non-profit corporation with its principal office at
Cedar Crest & I-78, Allentown, PA ("SECURED PARTY"), and Intracel Corporation, a
Delaware corporation with its principal office at 1330 Piccard Drive, Rockville,
MD ("DEBTOR").
WHEREAS, Debtor has executed and delivered to the Secured Party
a convertible promissory note (the "NOTE") of even date herewith; and
WHEREAS, as a condition to the obligation of Secured Party to
accept the Note, Debtor is required to enter into this Security Agreement and to
grant to Secured Party a security interest in the Collateral (as hereinafter
defined).
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
1. SECURITY INTEREST
1.1. COLLATERAL
As security for the Secured Obligations, Debtor hereby grants to
Secured Party a Security Interest in and lien on, and assigns and pledges to
Secured Party, all of the following (the "COLLATERAL"):
(a) all of the equipment described in Exhibit A attached hereto,
which equipment will be located at _______________________________________
during the term hereof.
(b) any and all additions to any of the foregoing, and any and
all replacements, products and proceeds (including insurance proceeds) of any of
the foregoing.
1.2. RIGHT OF SECURED PARTY TO PAY TAXES OR COSTS RELATING TO
COLLATERAL
Secured Party shall have the right, but not the obligation, to
pay any taxes or levies on the Collateral or any costs to repair or to preserve
the
<PAGE> 133
Collateral, which payment shall be made for the account of Debtor and shall
constitute a part of the Secured Obligations.
1.3. FINANCING STATEMENTS
At the request of Secured Party, Debtor will promptly join with
Secured Party in executing financing statements, continuation statements,
assignments, certificates and other documents with respect to the Collateral
pursuant to the Uniform Commercial Code and otherwise as may be necessary to
enable Secured Party to perfect or from time to time renew the Security
Interests granted hereby (including without limitation such financing
statements, continuation statements, certificates and other documents as may be
necessary to perfect a Security Interest in any additional property or rights
hereafter acquired by Debtor or in any replacements or proceeds thereof), in a
form satisfactory to Secured Party, and Debtor will pay the cost of filing the
same in all public offices wherever Secured Party deems filing to be necessary
or desirable. Debtor grants Secured Party the right, at Secured Party's option,
to file any or all such financing statements, continuation statements and other
documents pursuant to the Uniform Commercial Code and otherwise, without
Debtor's signature, and irrevocably appoints Secured Party as Debtor's attorney
in fact to execute any such statements and documents in Debtor's name and to
perform all other acts which Secured Party deems appropriate to perfect and
continue the Security Interests conferred by this Agreement.
1.4. INJURY TO COLLATERAL
No injury to, or loss or destruction of, the Collateral shall
relieve Debtor of any of the Secured Obligations.
2. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants to the Secured Party that:
2.1. CORPORATE AUTHORITY
Debtor is a corporation duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has all requisite
power and authority, corporate and otherwise, to own, operate and lease its
properties and to carry on its business as currently conducted, to execute and
deliver and perform this Agreement and any other instruments or agreements
executed in connection herewith, and to incur the obligations provided for
therein and to perform the transactions contemplated thereby (including without
limitation the creation of a first security interest in favor of Secured
Party in the Collateral), all of which have been duly and validly authorized by
all proper and necessary actions, all of which actions are in full force and
effect.
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2.2. APPROVALS
No approval, consent or other action by the stockholders of
Debtor, by any governmental authority, or by any other person or entity, is or
will be necessary to permit the valid execution, delivery or performance by
Debtor of this Agreement or of any other instruments or agreements executed in
connection herewith.
2.3. BINDING EFFECT, NO VIOLATIONS
Debtor has duly authorized the execution, delivery and
performance of this Agreement and of all other instruments or agreements
executed in connection herewith, each of which, upon its execution and delivery,
will constitute a legal, valid and binding obligation of Debtor, enforceable
against Debtor in accordance with its terms. The execution, delivery, and
performance of this Agreement and of all other instruments or agreements
executed in connection herewith will not (a) violate, conflict with, or
constitute a default under any law, regulation, order or any other requirement
of any governmental authority or arbitrator, any terms of the Articles or
Certificate of Incorporation or bylaws of Debtor, or any contract, agreement or
other arrangement binding upon or affecting Debtor or any of its properties, (b)
result in the creation, imposition or acceleration of any indebtedness or any
mortgage, lien, reservation, covenant, restriction or other encumbrance (each of
the foregoing hereinafter referred to as an "ENCUMBRANCE") of any nature upon,
or with respect to, Debtor or any of its properties, (c) have a material adverse
effect on the conduct of Debtor's business as it is now being conducted and
proposed to be conducted while this Agreement is in effect, or (d) otherwise
impair the value of the Security Interests granted to Secured Party hereunder.
2.4. TITLE TO COLLATERAL
As of the date hereof, Debtor is the sole owner of, and has
good, valid and marketable title to, the Collateral, free from all Encumbrances
and Security Interests in favor of any person other than Secured Party, and has
full right and power to grant Secured Party a Security Interest therein. Upon
the execution and delivery of this Agreement, and upon the filing of financing
statements referred to in SECTION 1.3 hereof, Secured Party will have a good,
valid and perfected first lien and Security Interest in the Collateral, subject
to no liens, encumbrances and security interests in favor of any other person or
entity.
2.5. NO DEFAULT
No event which constitutes, or with notice, lapse of time or
other condition would constitute, an Event of Default has occurred or is
continuing. Debtor is not, to its knowledge, in default under any contract or
agreement, which default would have a material adverse effect on the business,
properties or
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condition, financial or otherwise, of Debtor, or in default in the performance
of any representations, warranties, covenants or conditions respecting any of
its indebtedness, and no holder of any indebtedness of Debtor has given notice
of any asserted default thereunder, and no liquidation or dissolution of Debtor
and no receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to the Debtor or its properties is pending or, to the
knowledge of Debtor, is threatened against it.
3. AFFIRMATIVE COVENANTS OF DEBTOR
Until all Secured Obligations of Debtor have been paid in full
and performed, Debtor hereby covenants that it shall, unless Secured Party
otherwise consents in advance in writing:
3.1. CORPORATE EXISTENCE AND BUSINESS CONDUCT
Preserve, maintain and keep in full force and effect its
corporate existence in the jurisdiction of its incorporation, and all rights,
franchises, and privileges necessary or desirable in the normal conduct of its
business; continue to engage in business of the same general type as now
conducted by it; and conduct such business in an orderly, efficient and regular
manner consistent with the conduct of its business prior to the date hereof.
3.2. TAXES, CHARGES, AND OBLIGATIONS
Pay and discharge, or cause to be paid and discharged, all
taxes, assessments and other governmental charges imposed upon the Collateral or
upon any part thereof, or for its use or operation, prior to the date on which
penalties attach thereto, as well as all lawful claims which, if unpaid, might
become an Encumbrance upon the Collateral, and pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of the indebtedness and other obligations of whatever nature of Debtor;
provided that Debtor shall not be required to pay any such tax, assessment,
charge, levy, claim, indebtedness or obligation which is being contested in good
faith and by proper proceedings if Debtor sets aside on its books adequate
reserves therefor.
3.3. MAINTENANCE OF PROPERTY
Keep the property comprising the Collateral, or cause the
property comprising the Collateral to be kept, in good repair, working order and
condition, and from time to time make all necessary or desirable repairs,
renewals and replacements thereof.
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<PAGE> 136
3.4. INSURANCE
Maintain, or caused to be maintained, with financially sound and
reputable insurers acceptable to Secured Party, insurance with respect to the
Collateral against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar business
and similarly situated, of such types and in such amounts as are customarily
carried under similar circumstances by such other corporations. Debtor shall
furnish to, or cause to be furnished to, Secured Party such certificates,
policies or endorsements evidencing such insurance as Secured Party may require,
and if Debtor fails to do so, Secured Party may obtain such insurance and charge
the cost thereof to Debtor's account and add it to Secured Obligations of
Debtor. All such insurance policies shall be in form and substance reasonably
satisfactory to Secured Party. Secured Party shall be named as an additional
insured on all such insurance policies. In the event of a casualty loss, the
proceeds of all such insurance policies shall be payable directly to Secured
Party and may be applied to the restoration or replacement of that portion of
the Collateral which was the subject of such loss or to payment of Secured
Obligations of Debtor, whether or not due, as Secured Party may direct. Debtor
shall give Secured Party immediate written notice of any and all loss or damage
to the Collateral, however occasioned.
3.5. CONTRACT OBLIGATIONS
Perform in accordance with its terms every contract, agreement,
or other arrangement to which Debtor is a party or by which it or any of the
Collateral is bound, except to the extent that Debtor is contesting the
provisions thereof in good faith and by proper proceedings, and the failure to
comply therewith does not and will not, in the aggregate, have a material
adverse effect on the business, operations, property, or condition (financial or
otherwise) of Debtor.
3.6. COMPLIANCE WITH LAWS
Comply with all applicable laws, regulations, orders, and other
requirements of any court, tribunal, arbitrator or governmental authority,
non-compliance with which could have a material adverse effect on the business,
operations, property or condition (financial or otherwise) of Debtor.
3.7. ACCESS TO DEBTOR'S EMPLOYEES, PROPERTIES, AND BOOKS AND RECORDS
Permit Secured Party and any agents or representatives thereof
to visit and inspect the Collateral to examine and make abstracts from any of
Debtor's books and records at any and all reasonable times and as often as
Secured Party or such agents or representatives may desire, and to discuss the
business, operations,
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properties, and condition (financial or otherwise) of Debtor as they affect the
Collateral with any of the officers, directors, employees, agents or
representatives (including, without limitation, the independent certified public
accountants) of Debtor. Debtor will maintain such records and books of account
at the address indicated in SECTION 7.3, except that Debtor may relocate such
records and books of account if Debtor gives Secured Party at least thirty (30)
days' prior written notice of any change in the location of such records and
books of account.
3.8. COLLATERAL
Execute and deliver any and all documents, or cause the
execution and delivery of any and all documents, necessary for Secured Party to
create, perfect, preserve, validate or otherwise protect its Security Interest
in the Collateral; maintain, or cause to be maintained, at all times, Secured
Party's Security Interest in the Collateral; immediately upon learning thereof,
report to Secured Party any reclamation, return or repossession of goods, any
claim or dispute asserted by any debtor or other obligor of Debtor, and any
other matters affecting the value or enforceability or collectibility of any of
the Collateral; defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein adverse to Secured
Party and pay all costs and expenses (including attorneys' fees and expenses)
incurred in connection with such defense; and at Debtor's sole cost and expense
(including attorneys' fees and expenses), settle any and all such claims and
disputes and indemnify and protect Secured Party against any liability, loss or
expense arising therefrom or out of any such reclamation, return or repossession
of any of the Collateral, provided, however, if Secured Party shall so elect, it
shall have the right at all times to settle, compromise, adjust, or litigate all
claims or disputes directly with the debtor or other obligor of Debtor upon such
terms and conditions as Secured Party deems advisable, and to charge all costs
and expenses thereof (including attorneys' fees and expenses) to Debtor's
account and to add them to the Secured Obligations.
4. NEGATIVE COVENANTS OF DEBTOR
Until all Secured Obligations of Debtor are paid in full and performed,
Debtor hereby covenants and agrees that it shall not, unless Secured Party
otherwise consents in advance in writing:
4.1. ENCUMBRANCES
Directly or indirectly create, incur, assume, or permit to
continue in existence any mortgage, lien, charge or encumbrance on, or security
interest in, or pledge or deposit of, or conditional sale or other title
retention agreement with respect to the Collateral, except for:
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(i) liens for taxes, assessments or governmental charges the
payment of which is not at the time required by SECTION 3.2;
(ii) statutory liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business for sums not yet due or being contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted, for which
it has made such reserve or other appropriate provision, if any, as shall be
required by generally accepted accounting principles;
(iii) liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(iv) any attachment lien being contested in good faith and by
proceedings promptly initiated and diligently conducted, unless the attachment
giving rise thereto shall not, within sixty (60) days after the entry thereof,
have been discharged or fully funded or shall not have been discharged within
sixty (60) days after the termination of such bond;
(v) any judgment lien, unless the judgment it secures shall not,
within sixty (60) days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within sixty (60) days after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions and other similar
charges or encumbrances incurred in the ordinary course of business and not
interfering with the ordinary conduct of the business of Debtor;
(vii) liens securing motor vehicle loans and leases provided
that any such lien shall at all times be confined to the motor vehicle or
vehicles being purchased with the proceeds of such indebtedness or leased;
(viii) liens which (a) secure loans for the purchase of
equipment other than equipment which is purchased to replace equipment
comprising the Collateral, (b) are confined to the equipment so purchased, and
(c) are incurred with the Secured Party's prior written consent, which consent
shall not be unreasonably withheld;
(ix) liens, charges, encumbrances and priority claims junior to
those of the Secured Party and which are incidental to the conduct of the
business of Debtor and the ownership of its properties and assets and incurred
in the ordinary course of Debtor's business; and
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(x) mortgages, liens and security interests securing the payment
of the Secured Obligations.
4.2. LOCATION OF COLLATERAL
Change the location of any items of inventory or equipment from
the places of business where such items of Collateral are required to be located
by SECTION 1.1 hereof.
5. EVENTS OF DEFAULT
Debtor shall be in default under this Agreement upon the happening of
any of the following events or conditions ("EVENTS OF DEFAULT"):
5.1. FAILURE TO MAKE PAYMENT
Debtor shall fail to make any payment of principal or interest
on any of the Secured Obligations as and when the same shall become due and
payable (whether at maturity or at a date fixed by acceleration or otherwise),
and such failure continues for a period of twenty (20) Business Days, which for
purposes of this Agreement shall mean any day on which full-service commercial
banks are generally open for business in the State of Maryland (each, a
"BUSINESS DAY"), after Secured Party gives notice thereof to Debtor; or
5.2. REPRESENTATION AND WARRANTIES
Any representation or warranty of Debtor made herein shall prove
to have been incorrect or misleading or breached in any material respect on or
as of any date as of which made; or
5.3. OBSERVANCE OF COVENANTS
Debtor shall at any time fail to observe, satisfy or perform any
of the covenants or agreements contained in SECTION 3 or 4 hereof and such
default shall continue unremedied for a period of twenty (20) Business Days
after written notice of the existence of such default shall have been received
by Debtor from Secured Party; or
5.4. OBSERVANCE OF OTHER PROVISIONS
Debtor shall fail to observe or perform any other term, covenant
or agreement contained in this Agreement and such default shall continue
unremedied for a period of twenty (20) Business Days after written notice of
such default shall have been received by Debtor from Secured Party.
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6. RIGHTS OF SECURED PARTY UPON OCCURRENCE OF EVENTS OF DEFAULT
6.1. MISCELLANEOUS RIGHTS OF SECURED PARTY
Upon the occurrence of any Event of Default, such Event of
Default not having been previously remedied or cured, Secured Party shall have
the right (a) to declare all of the Secured Obligations to be immediately due
and payable, whereupon all such Secured Obligations shall become immediately due
and payable without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by Borrower, anything contained herein
to the contrary notwithstanding; and/or (b) to exercise any one or more of the
rights and remedies exercisable by Secured Party under other provisions of this
Agreement or exercisable by a secured party under the Uniform Commercial Code as
in effect in Pennsylvania (subject to any rights of Debtor to redeem the
Collateral provided therein) or under any other applicable law.
6.2. RIGHT OF SECURED PARTY TO TAKE POSSESSION AND FORECLOSE
Upon the occurrence of any Event of Default, such default not
having previously been remedied or cured, Secured Party shall have the right,
subject to compliance with the requirements of SECTION 6.3, to take possession
of the Collateral and of any and all books of account and records of Debtor
relating to any of the Collateral, the right to place Secured Party's
representatives upon any premises on which the Collateral or any part thereof or
any such books of account or records may be situated with full power to remove
the same therefrom. Secured Party may require Debtor to assemble the Collateral
or any part thereof and to make the same (to the extent the same is moveable)
available to Secured Party at a place to be designated by the Secured Party
which is reasonably convenient to all parties. Secured Party may render the
Collateral or any part thereof unusable without removing the same from the
premises on which it may be situated, and may sell the same on the premises of
Debtor if such Collateral or part thereof is situated thereon. The Secured Party
will give the Debtor at least twenty (20) days' prior written notice of the time
and place of any public sale thereof or of the time after which any private sale
or any other intended disposition thereof is to be made, which notice shall
constitute reasonable notice. In addition to exercising the foregoing rights,
Secured Party may, to the extent permitted by law, arrange for and conduct the
sale of the Collateral at a public or private sale, as Secured Party may elect,
which sale may be conducted by an employee or representative of Secured Party,
and such sale shall be considered or deemed to be a sale in a commercially
reasonable manner. Secured Party may release, temporarily or otherwise, to
Debtor any item of Collateral of which Secured Party has taken possession
pursuant to any right granted to Secured Party by this Agreement without waiving
any rights granted to Secured Party under this SECTION 62.2.
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<PAGE> 141
Secured Party, in dealing with or disposing of the Collateral or any part
thereof, shall not be required to give priority or preference to any item of
Collateral or otherwise to marshall assets.
6.3. RIGHT OF SECURED PARTY TO USE AND OPERATE COLLATERAL
Upon the Secured Party's taking possession of all or any part of
the Collateral, pursuant to any right granted Secured Party by this Agreement,
Secured Party shall have the right to hold, store, and/or use, operate, manage
and control the same. Upon any such taking of possession, Secured Party may,
from time to time, at the expense of Debtor, make all such repairs,
replacements, alterations, additions and improvements to and of all or any of
the Collateral as Secured Party may deem proper. In any such case Secured Party
shall have the right to exercise all rights and powers of Debtor in respect of
the Collateral or any part thereof as Secured Party shall deem best, including
the right to enter into any and all such agreements with respect to the leasing
and/or operation of the Collateral or any part thereof as Secured Party may see
fit; and Secured Party shall be entitled to collect and receive all rents,
issues, profits, fees, revenues and other income of the same and every part
thereof.
6.4. APPLICATION OF PROCEEDS
All dividends, interest, rents, issues, profits, fees, revenues,
income, and other proceeds from collecting, holding, managing, renting, selling,
or otherwise disposing of the Collateral or any part thereof shall be applied in
the following order of priority:
First, to the payment of all costs and expenses
of collecting, storing, leasing, holding, operating,
managing, selling or otherwise disposing of, or
delivering the Collateral or any part thereof or any
proceeds thereof and of conducting the Debtor's
business, and of maintenance, repairs, replacements,
alterations, additions and improvements of or to the
Collateral, and to the payment of all sums which Secured
Party may be required or may elect to pay, if any, for
taxes, assessments, insurance and other charges upon the
Collateral or any part thereof, and all other payments
which Secured Party may be required or authorized to
make under any provision of this Agreement (including in
each such case legal costs and attorneys' fees and
expenses and all expenses, liabilities and advances made
or incurred in connection therewith);
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Second, to the payment of all Secured
Obligations;
Third, to the satisfaction of indebtedness
secured by any subordinate security interest of record
in the collateral if written notification of demand
therefor is received before distribution of the proceeds
is completed. If requested by Secured Party, the holder
of a subordinate security interest shall seasonably
furnish reasonable proof of his interest, and unless he
does so Secured Party need not comply with his demands;
and
Fourth, to the payment of any surplus then
remaining to Debtor, unless otherwise provided by law or
directed by a court of competent jurisdiction; provided
that Debtor shall be liable for any deficiency if such
proceeds are insufficient to satisfy the Secured
Obligations.
7. MISCELLANEOUS PROVISIONS
7.1. ADDITIONAL ACTIONS AND DOCUMENTS
Debtor hereby agrees to take or cause to be taken such further
actions, to execute, deliver and file or cause to be executed, delivered and
filed such further documents and instruments, and to obtain such consents, as
may be necessary or as may be reasonably requested in order to fully effectuate
the purposes, terms and conditions of this Agreement, whether before, at or
after the closing of transactions contemplated hereby or the occurrence of an
Event of Default hereunder.
7.2. EXPENSES
Debtor agrees, whether or not the transactions hereby
contemplated shall be consummated, to reimburse and save Secured Party harmless
against liability for the payment of all out-of-pocket expenses arising in
connection with the preparation, execution, delivery, administration, or
enforcement of, or the preservation or exercise of any rights (including the
right to collect and dispose of the Collateral) under this Agreement, including
without limitation the fees and expenses of counsel to Secured Party arising in
such connection.
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7.3. NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by telegram, addressed as follows:
(a) If to Debtor:
Intracel Corporation
1330 Piccard Drive
Rockville, MD 20850
Attention: Daniel S. Reale
Facsimile: (301) 296-0082
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 13th Street, N.W.
Washington, D.C. 20004-1109
Attention: Donna Boswell, Esq.
(b) If to Secured Party:
Lehigh Valley Hospital and Health Network
Cedar Crest & I-78
Allentown, PA
Attention: Louis L. Leibhaber
Facsimile: (610) 402-7253
with a copy (which shall not constitute notice) to:
Tallman, Hudders & Sorrentino
The Paragon Center
1611 Pond Road, Suite 300
Allentown, PA 18104-2256
Attention: Matthew R. Sorrentino, Esq.
Facsimile: (610) 391-1800
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication which shall be mailed in the
manner described above, or which shall be delivered to a telegraph company,
shall be deemed sufficiently given, served, sent or received for all purposes at
such time as it is delivered to the addressee (with the return receipt or the
delivery receipt being deemed conclusive evidence of such delivery) or at such
time
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as delivery is refused by the addressee upon presentation.
7.4. WAIVER BY SECURED PARTY
No waiver by Secured Party of, or consent by Secured Party to, a
variation from the requirements of any provision of this Agreement shall be
effective unless made in a written instrument duly executed on behalf of Secured
Party by its duly authorized officer, and any such waiver shall be limited
solely to those rights or conditions expressly waived.
7.5. RELEASE OF COLLATERAL
Promptly following performance and payment in full of the
Secured Obligations, the Security Interest created hereby shall terminate, and
Secured Party shall execute and deliver such documents, at Debtor's expense, as
are necessary to release Secured Party's Security Interest in the Collateral.
7.6. BENEFIT AND ASSIGNMENT
This Security Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns as
permitted hereunder. This Agreement may not be assigned by the Debtor without
the prior written consent of Secured Party. In the event of a sale or assignment
by Secured Party of all or any part of the interests in the Note, Secured Party
may assign and transfer its rights and interests under this Agreement in whole
or in part to the Purchaser or Purchasers of such interests in the Note,
whereupon such Purchaser or Purchasers shall become vested with all of the
powers and rights given to the Secured Party hereunder, and shall be deemed to
be a Secured Party for all purposes hereunder, and the predecessor Secured Party
shall thereafter be forever released and fully discharged from any liability or
responsibility hereunder with respect to the rights and interests so assigned.
7.7. SEVERABILITY
If fulfillment of any provision of this Agreement, or
performance of any transaction related hereto, at the time such fulfillment or
performance shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled or performed shall be
reduced to the limit of such validity.
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<PAGE> 145
7.8. SURVIVAL
It is the express intention and agreement of the parties hereto
that all covenants and agreements, statements, representations, warranties and
indemnities made by Debtor shall survive the execution and delivery of this
Agreement.
7.9. RIGHTS CUMULATIVE
The rights and remedies of Secured Party described herein are
cumulative and not exclusive of any other rights or remedies which Secured Party
otherwise would have at law or in equity or otherwise. No notice to or demand on
Debtor in any case shall entitle Debtor to any other notice or demand in similar
or other circumstances.
7.10. ENTIRE AGREEMENT, MODIFICATION; BENEFIT
This Agreement and the exhibits hereto constitute the entire
agreement of the parties hereto with respect to the transactions contemplated
herein, and supersede all prior oral and written agreements with respect to the
transactions contemplated herein, and may not be modified, deleted or amended in
any manner except by agreement in writing executed by the parties.
7.11. TERMINATION
This Agreement shall terminate upon payment in full of all
amounts payable and performance of all other obligations owed by Borrower to
Secured Party under this Agreement.
7.12. CONSTRUCTION
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of Maryland (but not including the choice
of law rules thereof). Each party hereto hereby acknowledges that all parties
hereto participated equally in the negotiation and drafting of this Agreement
and that, accordingly, no court construing this Agreement shall construe it more
stringently against one party than against the other.
7.13. EXECUTION
To facilitate execution, this Agreement may be executed in as
many counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind
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<PAGE> 146
any party, appear on each counterpart; but it shall be sufficient that the
signature of, or on behalf of, each party, or that the signatures of the persons
required to bind any party, appear on one or more of the counterparts. All
counterparts shall collectively constitute a single agreement. It shall not be
necessary in making proof of this Agreement to produce or account for any
particular number of counterparts; but rather any number of counterparts shall
be sufficient so long as those counterparts contain the respective signatures
of, or on behalf of, all of the parties hereto.
7.14. FILING
A photographic or other copy of this Agreement may be filed in
lieu of a financing statement.
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<PAGE> 147
IN WITNESS WHEREOF, each of the parties have duly caused this
Security Agreement to be duly executed in its name and on its behalf, as of the
date first written above.
ATTEST: DEBTOR:
INTRACEL CORPORATION
By: By:
------------------------------- --------------------------------------
Name: Name:
----------------------------- ------------------------------------
Title: Title:
---------------------------- -----------------------------------
ATTEST: SECURED PARTY:
LEHIGH VALLEY HOSPITAL AND
HEALTH NETWORK
By: By:
------------------------------- --------------------------------------
Name: Name:
----------------------------- ------------------------------------
Title: Title:
---------------------------- -----------------------------------
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<PAGE> 148
EXHIBIT M
BILL OF SALE
THIS BILL OF SALE (the "BILL OF SALE") is executed and delivered effective
this ________ day of _______ 199__, by Lehigh Valley Hospital and Health
Network, a Pennsylvania non-profit corporation ("SELLER"), to Intracel
Corporation, a Delaware corporation ("BUYER").
WHEREAS, Seller and Buyer have entered into a Joint Venture Agreement
dated as of November __, 1998, providing for, among other things, the purchase
by the Buyer of the assets described in Exhibit A attached hereto and
incorporated by reference herein (the "ASSETS"); and
WHEREAS, the parties hereto desire by this Bill of Sale for Seller to
sell, assign, transfer and convey to Buyer the Assets for the purchase price
(the "PURCHASE PRICE") set forth herein.
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Seller hereby grants, bargains, sells, delivers, transfers, sets
over, assigns and conveys to Buyer and its successors and assigns, free and
clear of any and all liens, claims or encumbrances of any kind, except for
Seller's Security Interest (as defined below), those Assets set forth in
Exhibit A for a total aggregate Purchase Price of $_____, of which $______ shall
be paid by Buyer by check or wire transfer of readily available funds, and the
remaining $______ shall be paid by Buyer in the form of a convertible promissory
note substantially in the form of Exhibit B attached hereto (the "PROMISSORY
NOTE"), which is secured by a Security Agreement of even date herewith, by and
between Buyer and Seller substantially in the form of Exhibit C attached hereto
(the "SECURITY AGREEMENT"), pursuant to which Buyer has granted a security
interest in the Assets (the "SELLER'S SECURITY INTEREST") to secure Buyer's
obligations under the Promissory Note. The principal amount due under the
Promissory Note shall be due and payable on _________, 20__ together with
interest thereon at a rate equal to the prime rate of
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interest as published in the Wall Street Journal. The parties agree that the
Purchase Price reflects the fair market value of the Assets.
2. Seller, for itself and its successors and assigns, covenants to and
agrees with Buyer to warrant and defend the sale, transfer, assignment,
conveyance and delivery of the Assets unto Buyer and its successors and
assigns, against all lawful claims and demands arising from Seller's ownership
of the Assets prior to the date hereof.
3. Seller hereby covenants to and agrees with Buyer that it will duly
execute and deliver any other documents necessary to effect the transfer of the
Assets.
4. All of the terms and provisions of this Bill of Sale shall be binding
upon Seller and its respective successors and assigns, and shall inure to the
benefit of Buyer and its successors and assigns.
5. This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of Maryland, excluding choice of law rules.
6. This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which shall be deemed one and the same
instrument.
IN WITNESS WHEREOF, Seller and Buyer have caused the due execution of this
Bill of Sale as of the day and year first written above.
LEHIGH VALLEY HOSPITAL AND HEALTH
NETWORK
By: ______________________
Name: ____________________
Title: ___________________
INTRACEL CORPORATION
By: ______________________
Name: ____________________
Title: ___________________
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<PAGE> 150
EXHIBIT N
AMENDED AND RESTATED INITIAL ONCOVAX CENTER LEASE
THIS AMENDED AND RESTATED INITIAL ONCOVAX CENTER LEASE (this
"LEASE"), is entered into as of December 11, 1998 by and between LEHIGH VALLEY
HOSPITAL AND HEALTH NETWORK, a Pennsylvania non-profit corporation
("LANDLORD"), having its principal office at Cedar Crest & I-78, Allentown, PA
and INTRACEL CORPORATION, a Delaware corporation (the "TENANT"), having its
principal office at 1330 Piccard Drive, Rockville, MD.
WHEREAS, on October 21, 1998 the parties hereto were negotiating in
good faith the terms of a Joint Venture Agreement to be entered into by and
between the parties (the "JOINT VENTURE AGREEMENT"), which contemplated that
the parties would enter into an Initial OncoVax Center Lease (the "INITIAL
ONCOVAX CENTER LEASE") and notwithstanding the fact that the Joint Venture
Agreement was not entered into on such date, the parties entered into the
Initial OncoVax Center Lease and an accompanying letter agreement;
WHEREAS, the parties have concluded the negotiations of the Joint
Venture Agreement and desire to enter into such Joint Venture Agreement; and
WHEREAS, the parties desire to enter into this Lease to amend and
restate the Initial OncoVax Center Lease in its entirety to reflect all of the
additional terms and conditions relating to said lease as negotiated between
the parties since the execution of the Initial OncoVax Center Lease.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
W I T N E S S E T H:
1. LEASED PREMISES; FIXTURES AND EQUIPMENT; COMMON AREAS
Landlord does hereby grant, demise and lease unto Tenant, and Tenant
does hereby lease and take from Landlord, for the Term (as defined below) and
upon the terms and conditions set forth in this Lease, the premises known as
the "Clean Room" which is located on the second floor of the General Services
Building of Landlord's hospital and described on EXHIBIT A attached hereto,
together with the clinical patient care, administration and storage space also
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described on EXHIBIT A, and all improvements made by Landlord, now or hereafter
constructed thereon and all rights, privileges, easements and appurtenances
belonging or pertaining thereto (collectively, the "LEASED PREMISES"), together
with all of Landlord's fixtures and personal property, whether owned or leased
by Landlord, located on or used or useful or associated with, the Leased
Premises, including but not limited to the Clean Room Equipment (as defined in
EXHIBIT B), and all other furnishings, machinery, apparatus, movable or
non-movable equipment and materials described in EXHIBIT B attached hereto
(collectively the "FIXTURES AND EQUIPMENT"). Landlord also hereby grants to
Tenant a nonexclusive license of the benefit of Tenant, its employees, agents
and invitees for access to and from the Leased Premises through the building
and over the property of Landlord appurtenant thereto, and to use those parts
of the building designated by Landlord for use by tenants including, but not
limited to toilet rooms, elevators and unrestricted parking areas, all as more
particularly described in EXHIBIT C attached hereto (collectively, the "COMMON
AREAS").
2. SERVICES
During the Term, Landlord shall provide Tenant with all services,
including, but not limited to, electricity, heat, gas and air conditioning
(collectively "UTILITIES"), removal of hazardous waste, cleaning services and
laundry, necessary and sufficient for Tenant to use the Leased Premises as
described in SECTION 9.1 below.
3. POSSESSION
Landlord shall deliver to Tenant on the Commencement Date (as herein
defined) actual and exclusive possession of the Leased Premises, free and clear
of all leases, tenancies, agreements, matters, liens and defects in title,
together with exclusive possession of the Fixtures and Equipment.
4. TERM
The term of this Lease (the "TERM") shall commence on November 1,
1998 (the "COMMENCEMENT DATE") and shall end, unless earlier terminated as
described in SECTION 5 below, on the Final Closing Date as that term is defined
in that certain Joint Venture Agreement (the "JOINT VENTURE AGREEMENT") entered
into by and between the parties hereto and dated of even date herewith. The
parties agree that this Lease shall immediately expire or terminate upon the
Final Closing Date or earlier terminate as described in SECTION 5 below
without the necessity of any notice from either Landlord or Tenant to
terminate the same, and Tenant hereby expressly waives all right to any notice
which may be required under any laws now or hereafter enacted and in force in
Pennsylvania, including The
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Landlord and Tenant Act of 1951, Act of April 6, 1951, Act of April 6, 1951,
P.L. 69 as amended (the "Act") upon such expiration or termination.
5. EARLY TERMINATION
5.1 TERMINATION OF JOINT VENTURE AGREEMENT
This Lease shall immediately terminate if the Joint Venture Agreement is
terminated for any reason.
5.2 EVENTS OF DEFAULT; REMEDIES
5.2.1 EVENTS OF DEFAULT BY TENANT
Any of the following occurrences or acts shall constitute an "Event
of Default" under this Lease:
(i) Tenant fails to pay, on the date on which the same is due
and payable, any installment of monthly rent and any additional payments,
within ten days after Landlord notifies that such payment is overdue and due
and owing.
(ii) Except as otherwise provided herein, a party fails to
observe or perform any other provision hereof for 30 days (or such shorter
period of time if such default endangers life or property) after the
non-breaching party shall have delivered to Tenant notice of such failure.
(iii) A party's filing of a petition in bankruptcy under Title
11 of the United States Code, as amended, or the commencement of a proceeding
under any other applicable law concerning insolvency, reorganization or
bankruptcy or a party becomes generally unable to pay its debts as they become
due; provided, however, if a proceeding with respect to an act of bankruptcy is
filed or commenced against Tenant, the same shall not constitute an Event of
Default if such proceeding is dismissed within 60 days from the date of such
filing.
(iv) The Leased Premises shall have been abandoned.
(v) Any representation or warranty made herein or any statement
or representation made in any certificate, report or opinion (including legal
opinions), financial statement or other instrument furnished in connection with
this Lease, proves to have been incorrect, false or misleading in any material
respect when made.
(vi) A party fails to comply with any requirement of any
governmental authority having jurisdiction within the time required by such
governmental authority; or any proceeding is commenced or action taken to
enforce
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any remedy for a violation of any requirement of a governmental authority or
any restrictive covenant affecting the Leased Premises or any part thereof.
5.2.2. REMEDIES
If an Event of Default shall have happened and be continuing, a party
shall have the right at its election, then or at any time thereafter while such
Event of Default shall continue, to give written notice of its intention to
terminate this Lease on a date specified in such notice. Upon the giving of such
notice, the Term and the estate hereby granted shall expire and terminate on
such date as fully and completely and with the same effect as if such date were
the date hereinbefore fixed for the expiration of the Term.
5.3. OTHER TERMINATION EVENTS
This Lease may also be earlier terminated as further described in
Sections 10.4 and 15 below.
6. ACTIONS UPON TERMINATION
Upon the expiration or termination of this Lease,
(i) Tenant shall immediately permit Landlord and its employees and
agents full access to the Leased Premises to aid in the transition to a new
operator, and further agrees to give up quite and peaceful possession without
further notice from Landlord.
(ii) If termination results because of Tenant's Event of Default,
Tenant shall continue to pay to Landlord the monthly rent until the end of the
Term; provided, that Tenant shall not be responsible for such rent if the Leased
Premises have been relet.
7. PAYMENTS
7.1 RENTAL PAYMENTS
Tenant shall pay as rent for the Leased Premises and the Fixtures and
Equipment to Landlord during the period of time from the Commencement Date
through the Term monthly installments of Six Thousand Six Hundred and Ninety
Dollars and no cents ($6,690.00), in advance without demand on or before the
first day of each month from and including the month in which the commencement
Date occurs, which the parties agree (i) reflects the fair market rental value
of the Leased Premises and the Fixtures and Equipment and (ii) is attributable
in its entirety to
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the Fixtures and Equipment. Rent for any partial month shall be prorated based
upon the actual number days in such month.
7.2. ADDITIONAL PAYMENTS
Tenant shall pay as additional payments for the services provided in
Section 2 above (except Utilities which Landlord shall provide to Tenant
without any additional payments), monthly installments of Two Thousand Dollars
and no cents ($2,000.00), in advance without demand on or before the first day
of each month from and including the month in which the Commencement Date
occurs, which the parties agree reflects the fair market value of the services
provided in Section 2.
7.3. DEFAULT
Tenant may not be declared in default for non-payment of rent or any
additional payments due hereunder if such rent or additional payments is/are
received by Landlord by the 10th day of the month.
8. TITLE AND QUIET ENJOYMENT
Subject to Section 18 below, Landlord hereby represents, warrants and
covenants that it has good and marketable fee simple title to the Leased
Premises, that the same is subject to no other leases, tenancies, agreements,
encumbrances (including delinquent taxes), liens or defects in title affecting
said property or the rights granted Tenant in this Lease. Landlord further
covenants that there are no restrictive covenants, zoning or other local
ordinances or regulations which will prevent Tenant from using and occupying
the Leased Premises for a current Good Manufacturing Practices ("cGMP")
laboratory and support area. Landlord further represents, warrants and
covenants that it has good and marketable title to all Fixtures and Equipment
and that same are subject to no leases, agreements, encumbrances, liens or
defects in title affecting said property or the rights granted Tenant in this
Lease. Landlord covenants and agrees that during the Term, Tenant shall, upon
paying the rent and performing the covenants of this Lease on its part to be
performed, peaceably and quietly have, hold and enjoy the Leased Premises and
Fixtures and Equipment and all rights granted Tenant in this Lease.
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9. USES OF LEASED PREMISES; ACCESS TO LEASED PREMISES AND COMMON AREAS
9.1. TENANT'S USE OF LEASED PREMISES
The Leased Premises and the Fixtures and Equipment therein shall be
used for the conduct and operation of a cGMP laboratory and support area in
conformity with applicable law and the terms and conditions of the Joint
Venture Agreement. The Leased Premises shall be operated under the names of
"Intracel Corporation," and no other names shall be permitted to be used in
lieu of or in addition to such name without the prior written consent of
Landlord. Tenant hereby agrees to comply and conform in all material respects
with all legal requirements concerning the use, occupancy and conditions of the
Leased Premises and all machinery, equipment, furnishings, fixtures and
improvements therein. If any such legal requirement requires an occupancy or
use permit, license, special exception, or other local, state or federal agency
certification, then Tenant shall promptly obtain and keep current the same.
9.2. LANDLORD ACCESS TO LEASED PREMISES
Landlord may enter upon the Leased Premises, upon reasonable notice
to Tenant, to inspect, maintain, repair the Leased Premises. Landlord may enter
the Leased Premises at any time to perform emergency repairs to preserve the
Leased Premises and/or the Fixtures and Equipment.
9.3. TENANT'S ACCESS TO LEASED PREMISES AND COMMON AREAS
Landlord shall keep the Leased Premises and the Common Areas "open"
during normal business hours which, for purposes of this Lease, shall mean 24
hours a day, 365 days a year. Landlord shall provide lighting, electricity,
heat, air conditioning, water, elevator service and other necessary services
for Tenant's use and access to the Leased Premises and the Common Areas when
open. Tenant's use of the Common Areas shall not unreasonably hinder or
interfere with the Landlord's or other tenants' use of their Common Areas.
10. CONDITIONS OF LEASED PREMISES, FIXTURES AND EQUIPMENT; MAINTENANCE AND
REPAIRS
10.1. CONDITION OF LEASED PREMISES, FIXTURES AND EQUIPMENT
Landlord hereby represents and warrants that the Leased Premises are
constructed substantially in compliance with all applicable building codes and
regulations and substantially in accordance with the plan and specifications
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<PAGE> 156
approved by the Commonwealth of Pennsylvania Board of Health (the "Board of
Health"). Upon the expiration or earlier termination of the Lease, Tenant
shall surrender the Leased Premises in good condition, reasonable wear and tear
and damage by casualty and fire excepted, with all lighting, plumbing,
electrical and life/safety systems and the Fixtures and Equipment, in good
working condition, other than the "Tenant's Fixtures and Equipment Required to
be Removed or Otherwise Transferred" (as defined in Section 11.2).
10.2 TENANT'S MAINTENANCE AND REPAIRS
During the Term of this Lease, Tenant, at its expense, hereby agrees
to clean, and maintain and keep in good repair its equipment.
10.3 LANDLORD'S MAINTENANCE AND REPAIRS
Landlord shall make and pay for all repairs, replacements and
maintenance which are necessary for the operation of the Leased Premises, the
Common Areas, and the Fixtures and Equipment, excluding repairs or maintenance
necessitated by Tenant's willful acts or gross negligence. Tenant agrees to
notify Landlord of any necessary repairs within a reasonable period time of its
discovery. If Landlord fails to commence to perform any such maintenance,
replacement and repair after five days notice from Tenant, Tenant shall have
the right to undertake such maintenance, replacement and repair and to deduct
any expenditures associated therewith from the rent payments due under Section
7.1 above.
10.4 FIRE OR OTHER HAZARD
Tenant hereby agrees to notify Landlord of any damages to the Leased
Premises resulting from fire or other hazard and also of any dangerous or
hazardous condition within the Leased Premises immediately upon the occurrence
of such fire or other hazard or discovery of such condition, or as soon as
practicable thereafter. Upon occurrence of a fire, repairs shall be made by
Landlord as soon as reasonably may be done unless the costs of repairing the
Leased Premises exceed 25% of the replacement cost of the building in which
case the Landlord may, at its option, terminate this Lease by giving Tenant
written notice of termination within 45 days of the date of such fire. If the
Landlord does not terminate this Lease as described above, then Landlord has 45
days after the date of such fire to give written notice to Tenant setting forth
Landlord's unqualified commitment to make all necessary repairs or
replacements, the projected date of commencement of such repairs, and
Landlord's good faith estimate of the date of completion of the same. If
Landlord fails to give such notice, or if the date of completion is more than
90 days after the date of the fire or other hazard, then Tenant may, at its
option, terminate this Lease and Landlord will be obligated to refund to Tenant
any rent allocable to the period subsequent to the date of the fire. During any
period of restoration and
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repair Tenant shall continue to operate within the Leased Premises to the
extent practicable, with a pro-rata reduction in the rental payments based upon
the usable portions of the Leased Premises.
11. ALTERATIONS AND REMODELING OF LEASED PREMISES, AND FIXTURES AND EQUIPMENT
11.1 ALTERATIONS AND MODIFICATIONS TO THE LEASED PREMISES
Tenant may, at its own expense, from time to time during the term of
this Lease, upon the prior written approval of Landlord as described in Section
11.3 below, make such structural alterations, additions, replacements and
changes, in and to the Leased Premises, and any buildings thereon, as it finds
necessary or desirable for the operation of the Leased Premises as a cGMP
laboratory. All such alterations, demolitions, additions, replacements and
changes shall be made in accordance with plans and specifications prepared by
Tenant and approved by Landlord, in conformity with applicable building laws
and regulations. Except for Fixtures and Equipment acquired, or purchased and
contributed to ICC (as defined below) by Tenant pursuant to Section 11.2 below,
such alterations, additions, replacements and changes shall become a part of
the Leased Premises, shall be maintained and kept in repair in accordance with
the provisions of Section 10, and at the expiration or termination of this
Lease shall become the property of Landlord without the payment of any money or
other consideration.
11.2 ALTERATIONS AND MODIFICATIONS TO THE FIXTURES AND EQUIPMENT
Tenant may, at its own expense, from time-to-time during the term of
this Lease, install, replace and operate in the Leased Premises such removable
medical equipment and personal property ("TENANT'S FIXTURES AND EQUIPMENT") as
it shall deem necessary or desirable in the conduct of its business, provided
all laws, rules and regulations of governmental bodies with respect thereto
shall be in all material respects complied with by Tenant. Tenant may also,
upon the prior written approval of Landlord as described in Section 11.3 below,
make such alterations, additions, replacements and changes, in and to the
Fixtures and Equipment, as it finds necessary or desirable for the operation of
a cGMP laboratory. The Clean Room Equipment as described on Exhibit B shall be
sold to Tenant by Landlord as of the Final Closing Date and this Lease's
expiration date pursuant to Section 6.1 of the Joint Venture Agreement and
together with any alterations, additions, replacements and changes thereto
shall be concurrently contributed to Intracel Cancer Center of Pennsylvania,
Inc. ("ICC") pursuant to Sections 3.1 and 6.2 of the Joint Venture Agreement.
If this Lease is earlier terminated by Tenant pursuant to Section 5.2.1 above,
the Clean Room Equipment and together with any alterations, additions,
replacements and changes thereto shall remain Landlord's property and Landlord
shall reimburse Tenant the actual
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costs of all alterations, additions, replacements and changes thereto. Prior to
the expiration or termination of this Lease, Landlord and Tenant shall
designate those items of Tenant's Fixtures and Equipment that Landlord or
Tenant desires be removed from the Leased Premises, and the Clean Room
Equipment to be purchased by Tenant and contributed to ICC upon the expiration
or termination of the Lease ("TENANT'S FIXTURES AND EQUIPMENT REQUIRED TO BE
REMOVED OR CONTRIBUTED"). With the exception of Tenant's Fixtures and Equipment
Required to be Removed or Contributed, all of the Fixtures and Equipment shall
remain on the Leased Premises at the termination of this Lease and shall remain
the property of Landlord.
11.3 LANDLORD'S CONSENT
Landlord agrees not to unreasonably withhold, delay or condition its
consent to any action proposed by Tenant pursuant to this Section 11, provided
that (i) the alterations, construction or installation shall not have a
material adverse effect on the structure, appearance or use of the Leased
Premises or the building in which the Leased Premises are located or Fixtures
and the Equipment, in the reasonable judgment of Landlord, (ii) all such
alterations, construction and installations shall be expeditiously completed in
compliance with all legal requirements, (iii) all work done in connection with
any such alterations, construction or installation shall comply with the
requirements of any insurance policy required to be maintained by Tenant
hereunder, (iv) Tenant shall promptly pay all costs and expenses of any such
alteration, construction or installation and shall discharge all liens filed
against any of the Leased Premises or the Fixtures and Equipment arising out of
the same, (v) Tenant shall procure and pay for all permits and licenses
required in connection with any such alteration, construction or installation,
(vi) such alterations shall comply with any recorded lien or covenant affecting
the Leased Premises, and (vii) Landlord shall incur no expense or cost
whatsoever in connection with such alterations, including without limitation,
costs for reviewing and approving plans, or tap fees or other utility fees.
Landlord may require, as a condition to its consent to any alterations,
reasonable appropriate payments, bonds, assurances and undertakings from Tenant
to ensure that all such conditions are satisfied. Notwithstanding the
foregoing, it shall not be unreasonable for Landlord to withhold its consent,
or to condition its consent, if the holder of a mortgage withholds its consent
to any of the foregoing, or requires that certain conditions or requirements be
satisfied or observed.
11.4 LIENS OF ENCUMBRANCES
Except as permitted under Section 18, neither Tenant nor Landlord
will directly or indirectly, create or permit to be created or to remain, and
will promptly discharge, at its expense, any lien or encumbrance with respect
to, the Leased Premises or any part thereof, or the Fixtures and Equipment or
either party
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interest therein as a result of any alteration, construction, installation or
other action of either party. The existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien, or any right in respect thereof,
shall not constitute a violation of this Section 11.4 if payment is not yet due
upon the contract or for the goods or services in respect of which any such
lien has arisen so long as such payment is made or bonded off within 30 days
after the later to occur of the completion of the work which gave rise to the
imposition of said liens or the rendering of the invoice, statement or demand
for such payment. Nothing contained in this Lease shall be construed as
constituting the consent or request of Landlord, expressed or implied, of any
contractor, subcontractor, laborer, materialman or vendor to or for the
performance of any construction, alteration, addition, repair or demolition of
or to the Leased Premises or any part thereof.
12. ENVIRONMENTAL MATTERS
12.1. DEFINITIONS
As used in herein, the following items shall have meanings set forth
below:
(i) "CAA" shall mean the Clean Air Act, codified at 42 U.S.C.
Sections 7401, et seq., as amended.
(ii) "CERCLA" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, codified at 42 U.S.C.
Sections 9601, et seq., as amended.
(iii) "CWA" shall mean the Clean Water Act, codified at 33 U.S.C.
Sections 407, et seq., as amended.
(iv) "ENFORCEMENT AGENCY" shall mean, collectively, the
Environmental Protection Agency ("EPA") and any state, county, municipal or
other agency having authority to enforce any Environmental Laws.
(v) "ENVIRONMENTAL LAWS" shall mean CERCLA, HMTA, RCRA, CAA,
CWA, TSCA, RHA and the Right-to-Know Act and all other federal local and
municipal laws, statutes, ordinances and codes, guidelines and standards
relating to health, safety, sanitation, and the protection of the environment
or governing the use, storage, treatment, generation, transportation,
processing, handling, production or disposal of Hazardous Materials, including,
without limitation, the Pennsylvania Solid Waste Management Act, 35 P.S.
Sections 6018.103, et seq., the Pennsylvania Hazardous Sites Clean Up Act (Act
108 of 1988), laws and regulations regarding the discharge of water or other
materials or fluids into waterways, and the rules, regulations, guidelines,
decisions, orders and
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directives of federal, local and municipal governmental agencies, authorities
and courts with respect thereto presently in effect or hereafter enacted,
promulgated or implemented.
(vi) "ENVIRONMENTAL PERMITS" -shall mean all permits, licenses,
approvals, authorizations, consents or registrations required by any applicable
Environmental Laws, on either an individual or group basis, in connection with
the construction, ownership, use or operation of the Leased Premises, or the
storage, treatment, generation, transportation, processing, handling, production
or disposal of Hazardous Materials related to the leased Premises.
(vii) "HAZARDOUS MATERIALS" -shall mean, without limitation,
flammable, explosives, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum or petroleum based or related
substances, hydrocarbons or like substances and their additives or constituents,
and any substances now or hereafter defined as "hazardous substances,"
"extremely hazardous substances," "hazardous wastes," "infectious wastes" or
"toxic chemicals" in any Environmental Laws, or in any regulation or order
issued pursuant to any Environmental Laws.
(viii) "HMTA" -shall mean the Hazardous Materials Transportation
Act, codified at 49 U.S.C. Sections 1801, et seq., as amended.
(ix) "RCRA" -shall mean the Resource Conservation and Recovery
Act of 1976, codified at 42 U.S.C. Sections 6801, et seq., as amended.
(x) "RELEASE" -shall have the same meaning as given to that term
in CERCLA, as amended, and the regulations promulgated thereunder.
(xi) "RHA" -shall mean the Rivers and Harbors Appropriation Act,
codified at 33 U.S.C. Sections 401, et seq., as amended.
(xii) "RIGHT-TO-KNOW ACT" -shall mean the Emergency Planning and
Community Right-To-Know Act, codified at 42 U.S.C. Sections 11001, et. seq., as
amended.
(xiii) "TSCA" -shall mean the Toxic Substances Control Act,
codified at 15 U.S.C. Sections 2601, et. seq., as amended.
12.2. LANDLORD OBLIGATIONS; REPRESENTATION AND WARRANTIES
Landlord hereby represents and warrants to Tenant that on the
Commencement Date the Leased Premises does not contain asbestos or any Hazardous
Materials. Landlord shall be responsible for costs, expenses, damages and
penalties resulting from the existence of any Hazardous Materials in the
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Leased Premises at the date of execution of this Lease and all alterations made
by Landlord to the Leased Premises or the Common Areas shall be made in
accordance any comply with all Environmental Laws and the requirements of any
Enforcement Agencies.
12.3. TENANT OBLIGATIONS
Tenant shall comply at all times and in all respects with the
provisions of all Environmental Laws and Environmental Permits, and shall not
commit any actions or omissions that result in the incurrence of any liability
under such Environmental Laws and Environmental Permits. Tenant shall obtain,
whenever necessary and in its own name, appropriate Environmental Permits for
its operations and shall comply in all respects with the requirements of such
Environmental Permits. All alterations made in the Leased Premises made by
Tenant shall be made in accordance with and shall comply with all Environmental
Laws and the requirements of any Enforcement Agencies. If any statutes, laws,
ordinances, rules or regulations are promulgated at any time after the date of
execution of this Lease for the removal, abatement or containment of Hazardous
Materials in the Leased Premises or any portion of the Leased Premises and, in
the reasonable judgment of Landlord, it is hazardous for the Tenant to remain
in the Leased Premises during such removal, abatement, or containment of the
Hazardous Materials, Tenant shall vacate the Leased Premises or that portion of
the Leased Premises that is hazardous and, provided that such condition did not
result from Tenant's acts, omissions, or operations, Tenant's rent shall be
abated proportionately for the period of time in which Tenant's use of such
portion of the Leased Premises has been interrupted. Tenant shall not
intentionally or unintentionally use, store, handle, spill or discharge any
Hazardous Materials at or in the vicinity of the Lease Premises, other than
those Hazardous Materials generally used, stored or handled in a cGMP
laboratory. Tenant shall promptly deliver to Landlord copies of all notices
made by Tenant to, or received by Tenant from, any Enforcement Agency or from
the United States Occupational Safety and Health Administration concerning
environmental matters or Hazardous Materials at the Leased Premises.
12.4. INDEMNIFICATION; HOLD HARMLESS
Landlord shall indemnify, defend and hold Tenant harmless of and from
actual and direct losses arising out of or relating to any and all claims
arising from the existence, removal, containment, or abatement of any Hazardous
Materials from the Leased Premises related to Hazardous Materials existing in
the Leased Premises prior to the Commencement Date. Tenant shall indemnify,
defend and hold Landlord harmless of and from actual and direct losses arising
out of or relating to any and all claims arising by reason of any violation by
Tenant of the
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provisions of Section 12.3 above. This indemnity provision shall survive
expiration or earlier termination of this Lease.
12.5. INSPECTIONS
At any time throughout the Term of this Lease, Landlord may cause an
inspection to be made of the Leased Premises and its surrounding area for the
purpose of determining whether any Hazardous Materials is present thereon.
13. INSURANCE
13.1. TENANT INSURANCE
Tenant shall, at all times through the Term and at its sole expense,
maintain professional and general liability insurance (through third party
insurers) against claims for bodily injury or death occurring in or about the
Leased Premises, such insurance to provide coverage not less than $3,000,000
per occurrence, $5,000,000 per annual aggregate. In addition, Tenant shall, at
all times through the Term and at its sole expense, maintain insurance for the
Fixtures and Equipment at replacement cost value, without coinsurance
provisions, against fire and such other hazards as are included within extended
coverage and against earthquake and flood damage, which insurance shall also
include major mechanical system repair and replacement coverage. All such
insurance shall name Landlord as an additional insured and shall provide that
Landlord be given 30 days prior notice of any material change or cancellation
of such insurance. Copies of such insurance policies shall be delivered to
Landlord, upon Landlord's request. The parties shall mutually determine how to
distribute any insurance proceeds received to replace any or all of the
Fixtures and Equipment.
13.2. LANDLORD'S INSURANCE
Landlord shall, at all times through the Term and at its sole
expense, maintain insurance for the Leased Premises and the Common Areas at
replacement cost value, without coinsurance provisions, against fire and such
other hazards as are included within extended coverage and against earthquake
and flood damage, which insurance shall also include major mechanical system
repair and replacement coverage. Copies of such insurance policies shall be
delivered to Tenant, upon Tenant's request.
14. LIABILITY OF LANDLORD
Landlord shall be liable for all loss of property by theft or otherwise,
for all damage to property, for all injuries to persons while on the Leased
Premises
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from escape or leakage of water, rain, snow, or steam from any part of the
building on which the Leased Premises are located or from the pipes or plumbing
system therein, and for all damage resulting from the short circuiting of
electricity or from any other cause, where any such losses, damages and/or
injuries are due to the willful acts or negligence of the Landlord, its
servant, agents, or employees.
15. CONDEMNATION
If all or a part of the Leased Premises and/or Common Areas are taken by
eminent domain or conveyed in lieu thereof and such Leased Premises cannot then
be used by Tenant for its intended use as set forth in Section 9.1 above, this
Lease shall immediately terminate as of the date that the condemning authority
takes possession of the Leased Premises, subject to the following:
(i) All compensation awarded for the taking (or the proceeds of any sale
in lieu thereof) of the Leased Premises and/or Common Areas shall be
the property of the Landlord;
(ii) All compensation awarded for the taking or loss of any of the
Tenant's Fixtures and Equipment or for moving or relocation expenses
shall be the property of Tenant; and
(iii) If only part of the Leased Premises and/or Common Areas are taken
such that Tenant may still use the Leases Premises for its intended
use, this Lease shall remain in effect with a pro-rata reduction in
the rental payments based upon the usable portions of the Leased
Premises.
16. ASSIGNING OR SUBLETTING
Tenant shall not assign, sublet or in any manner transfer this Lease
or any estate or interest therein, or grant a license, concession or other
right of occupancy, to all or part of the Leased Premises, without Landlord's
prior written consent, except that Tenant may assign, sublet or in any manner
transfer this Lease of any estate or interest therein, or grant a license,
concession or other right of occupancy, to all of part of the Leased Premises
(i) to any successor to Tenant in the event of a merger or consolidation of
Tenant with another entity, or to any purchaser of all or substantially all of
the assets or business of Tenant, and (ii) to an Affiliate (as defined below).
For purposes of this Section 16, an Affiliate shall mean, as to any party
hereto, any corporation or other entity which, directly or indirectly, through
one or more intermediaries, controls (i.e., possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of an
entity, whether through ownership of voting securities, by contract, or
otherwise) is controlled by, or is under common control with such party. In the
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event of any permitted assignment, all rights, obligations and liabilities
herein shall extend to any successors or assigns.
17. WAIVER OF SUBROGATION
To the extent permitted by their insurers, Landlord hereby releases
Tenant, and Tenant hereby releases Landlord, and their respective shareholders
or members, directors, officers, employees and agents, from any and all claims
or demands for damages, losses, expenses, or injury to the Leased Premises, or
to the Fixtures and Equipment, or the inventory or other property of Landlord
or Tenant, as the case may be, in, or about, the Leased Premises which may be
caused by or results from events or happenings which are covered by insurance
carried by the respective parties and in force at the time of any such damages,
losses, expenses, or injury.
18. SUBORDINATION; ESTOPPEL CERTIFICATES
Subject to Section 8 above, this Lease is subordinate to the lien of
all present or future mortgages which affect the Leased Premises and to all
renewals, modifications, replacements and extensions thereof. This provision
shall be self-operative, but in any event Tenant hereby agrees to execute
promptly and deliver any estoppel certificate or other assurances that Landlord
may request in furtherance hereof. In the event of any foreclosure of any such
mortgage or modification, Tenant shall attorn to the purchaser in foreclosure
of who shall be named in any deed in lieu of foreclosure, shall recognize any
such purchaser as the Landlord under this Lease, and so long as Tenant is not
in default hereunder, this Lease shall remain in full force and effect.
19. MISCELLANEOUS
19.1 NOTICE
All notices, demands, requests or other communications which may be
or are required to be given, served or sent by any party to any other party
pursuant to this Lease shall be in writing and shall be hand delivered
(including delivery by courier), sent by Federal Express or by other recognized
overnight delivery service, mailed by first-class, registered or certified
mail, return receipt requested, postage prepaid, or sent by telegram, telex, or
facsimile transmission, addressed as follows:
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If to Intracel:
Intracel Corporation
1330 Piccard Drive
Rockville, Maryland 20850
Attn: Daniel S. Reale
Facsimile: (301) 296-0082
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 13th Street, N.W.
Washington, D.C. 20004-1004
Attn: Donna A. Boswell, Esq.
Facsimile: (202) 637-5910
If to Lehigh:
Lehigh Valley Hospital and Health Network
Cedar Crest & I-78
P.O. Box 689
Allentown, Pennsylvania 18105-1556
Attn: Louis L. Liebhaber
Facsimile: (610) 402-7253
with a copy (which shall not constitute notice) to:
Tallman, Hudders & Sorrentino
The Paragon Centre
1611 Pond Road, Suite 300
Allentown, Pennsylvania 18104-2256
Attn: Matthew R. Sorrentino, Esq.
Facsimile: (610) 391-1800
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served, or
sent. Each notice, demand, request, or communication which shall be mailed,
delivered, or transmitted in the manner described above shall be deemed
sufficiently given, served, sent, or received for all purposes at such time as
it is delivered to the addressee (with the return receipt, the delivery
receipt, the affidavit of messenger, or (with respect to a telex or facsimile)
the answer back being deemed conclusive, but not exclusive, evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
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19.2. COMPLETE AGREEMENT
This Lease, and all Exhibits hereto and incorporated agreements (including
the Joint Venture Agreement) set forth the entire agreement of the parties
hereto with respect to its subject matter and any and all prior agreements,
whether oral or written, between or among the parties hereto and relating to
the subject matter hereof are superseded hereby.
19.3. GOVERNING LAW
This Lease and the rights and obligations of the parties hereto shall
be governed by and construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania (excluding choice of laws rules thereof).
19.4. PARAGRAPH HEADINGS
The paragraph headings in this Lease are for convenience only and are
not a part of this Lease and do not in any way limit or amplify the terms and
provisions hereof and in no way shall be held to explain, modify or aid in the
interpretation, construction or meaning of the provisions of this Lease.
19.5. SEVERABILITY
In the event that a court of competent jurisdiction holds that a
particular provision or requirement of this Lease is in violation of any
applicable law, each such provision or requirement shall be enforced only to
the extent it is not in violation of such law or is not otherwise unenforceable
and all other provision and requirements of this Lease shall remain in full
force and effect.
19.6. MODIFICATION; WAIVER
This Lease shall not be modified or amended except by an instrument
in writing signed by Landlord and Tenant. No delay or failure on the part of
any party hereto in exercising any right, power, or privilege under this Lease
or any other instruments executed and delivered in connection with or pursuant
to this Lease, shall impair any such right, power, or privilege or be construed
as a waiver of any default hereunder or any acquiescence therein. No single or
partial exercise of any such right, power, or privilege shall preclude the
further exercise of such right, power, or privilege, or the exercise of any
other right, power, or privilege. No waiver shall be valid against any party
hereto unless made in writing and signed by the party against whom enforcement
of such waiver is sought and then only to the extent expressly specified
therein.
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19.7 BENEFIT OF THIS LEASE
It is the explicit intention of the parities hereto that except as
set forth below no person or entity other than a party hereto is or shall be
entitled to bring any action to enforce any provision of this Lease against any
of the parties hereto, and that the covenants, undertakings, and agreements set
forth in this Lease shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective successors and
assigns as permitted hereunder.
19.8 SIGNAGE ON LEASED PREMISES
Landlord shall, at its own expense, erect all exterior and interior
signage at the Leased Premises as approved by Tenant.
19.8 INDEPENDENT CONTRACTOR
Tenant shall lease and operate the Leased Premises as an independent
contractor, and shall not be considered an agent, employee of, partner of or
joint venturer with Landlord.
19.10 EXECUTION COUNTERPARTS
This Lease may be executed in counterparts, each of which shall
constitute and original hereof for all purposes.
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IN WITNESS WHEREOF, each of the parties intending to be legally bound has
duly caused this Lease to be duly executed and delivered in its name and on its
behalf, as of the date first written above.
TENANT:
INTRACEL CORPORATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
LANDLORD:
LEHIGH VALLEY HOSPITAL AND
HEALTH NETWORK
By:
---------------------------
Name:
-------------------------
Title:
------------------------
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EXHIBIT A
DESCRIPTION OF CLEAN ROOM, AND CLINICAL PATIENT CARE,
ADMINISTRATIVE AND STORAGE SPACE
SEE ATTACHED
<PAGE> 170
EXHIBIT B
DESCRIPTION OF FIXTURES AND EQUIPMENT
Set forth below is a description of the Fixtures and Equipment.
1. Clean Room Equipment. For purposes of this Lease, the term "Clean
Room Equipment" shall include all of the following equipment:
EQUIPMENT NAME MANUFACTURER MODEL # SERIAL #
Bio Safety Hood, 4' Baker SG400 58432
Bio Safety Hood, 6' Baker SG600 58388
Bio Safety Hood, 6' Baker SG601 58382
Gammacell Irradiator Nordion 1000 A 247
Controlled Rate Freezer Gordinier 7009 06911-0497
Freezer Chamber Gordinier 8753 06911-0497
MVE-TEC 2000 Storage MVE XLC-500F CDRA97B101
Incubator, CO2 Sanyo MCO-17AI 60905781
Incubator, CO2 Sanyo MCO-17AI 60905783
Ultralow Freezer Sanyo MDF-U6088SC 61006995
Water Bath, 1 of 2 Precision 180 697050163
Water Bath, 2 of 2 Precision 180 697090900
Refrigerator/Freezer Kenmore 363-9662825 L70640925
Chemical Fume Hood Kewaunee H05 R106417
Balance Ainsworth De410-D 73866
Microscope Nikon Labophot-2 462566
Refrigerator, undercounter Kenmore 564.9936111 961003216
Refrigerator, undercounter Kenmore 564.9936111 960901790
Immersible Stirrer VWR 230 0094
Immersible Stirrer VWR 290 0066
Immersible Stirrer VWR 230 0086
Immersible Stirrer VWR 230 0092
Pipetman Rainin P-1000
Pipetman Rainin P-200
Pipetman Rainin P-200
Pipetman Rainin P-200
Magnahelic Gauge Sure Flow
Magnahelic Gauge Sure Flow
Megafuge 1.0R Hereaus 75003062/02 232331
Calibrated Timer VWR
4 Work Stations with
Divider Panels
3 Two Drawer Lateral Files
4 Office Chairs
5 Lab Chairs
Six door locker
2 two drawer file cabinets
1 Four Drawer File Cabinet
1 Six Drawer Lateral File
<PAGE> 171
<TABLE>
<CAPTION>
EQUIPMENT NAME MANUFACTURER MODEL # SERIAL #
<S> <C> <C> <C>
Cabinet
3 Four Drawer File Cabinets
Computer Workstation with
Printer
Fax Machine Murata
</TABLE>
2. Other furnishings, machinery, apparatus, movable or non-movable
equipment and materials. For purposes of this Lease, the term "Other
furnishings, machinery, apparatus, movable or non-movable equipment and
materials" shall include all of the following:
NONE
<PAGE> 172
EXHIBIT C
DESCRIPTION OF COMMON AREAS
SEE ATTACHED
<PAGE> 173
EXHIBIT O
INITIAL MEDICAL DIRECTOR SERVICES AGREEMENT
This Initial Medical Director Services Agreement (this "AGREEMENT") is
entered into as of December 11, 1998, by and between Intracel Corporation, a
Delaware for-profit corporation ("INTRACEL"), and Lehigh Valley Hospital and
Health Network, a Pennsylvania non-profit corporation ("LEHIGH") each a
("PARTY", and collectively "PARTIES").
WHEREAS, Intracel Corporation ("INTRACEL") and Lehigh have entered into a
Joint Venture Agreement dated as of December 11, 1998 (the "JOINT VENTURE
AGREEMENT") pursuant to which they intend to form a corporation ("ICC") to
operate a center for the manufacture and provision of OncoVaxCL(R) ("ONCOVAX"),
a product developed by Intracel to be utilized in the treatment of colon
cancer and other oncological products as agreed to by Intracel and Lehigh;
WHEREAS, during the period between the Effective Date and the formation of
capitalization of ICC, ICC and Lehigh have entered into an amended and restated
lease with the same effective date as this Agreement (the "AMENDED AND RESTATED
INITIAL ONCOVAX CENTER LEASE") pursuant to which Intracel is leasing from
Lehigh the necessary space and equipment to operate a laboratory and support
area in compliance with current Good Manufacturing Practices to manufacture and
provide OncoVax and other oncological products as agreed to by Intracel and
Lehigh (the "ONCOVAX CENTER";
WHEREAS, Herbert C. Hoover, Jr., M.D. is a physician employed by Lehigh
Valley Physician Group, which is a Pennsylvania non-profit corporation and
wholly-owned subsidiary of Lehigh;
WHEREAS, Herbert C. Hoover, Jr., M.D. serves as the Chair of Surgery for
Lehigh pursuant to an agreement between Lehigh Valley Physician Group and
Lehigh;
WHEREAS, Intracel desires to obtain the services of Herbert C. Hoover,
Jr., M.D. ("MEDICAL DIRECTOR") or his designee on an initial part-time,
independent contractor basis from Lehigh for the provision of certain Medical
Director services at the OncoVax Center as set forth more fully in Section 1.1
("SERVICES");
WHEREAS, pursuant to the Joint Venture Agreement, Lehigh has agreed to
provide the Services of the Medial Director on an initial part-time,
independent contractor basis to Intracel for Intracel's Service Fee (as defined
below) to Lehigh; and
<PAGE> 174
WHEREAS, the Parties desire to enter into this Agreement to set forth the
terms and conditions under which Lehigh will provide the Services to Intracel,
and Intracel will compensate Lehigh for such Services.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. MEDICAL DIRECTOR SERVICES
1.1 GENERAL DESCRIPTION OF SERVICES
During the Term (as defined in Section 6), Lehigh shall provide the
Services to Intracel through Medical Director, or as described in Section 1.9
below, through the Medical Director's designee. The Services shall include: (a)
assisting Intracel in establishing and enhancing the OncoVax Center, including
assisting with the clinical design of the center and the establishment of
protocols and systems; and (b) serving the OncoVax Center once it is
operational as a medical director, including (1) participating in
administrative meetings and performing other administrative duties as requested
by Intracel, (2) recommending rules and policies for the operation of the
center, (3) serving as a liaison with Lehigh and Lehigh physicians, and (4)
assisting in the assessment of outcomes and other clinical data with respect to
OncoVax and other Intracel products. Medical Director and Lehigh acknowledge
and agree that, depending upon certain development decisions and other
circumstances, some details of Medical Director's duties may change over time.
This Agreement shall remain in effect notwithstanding such changes. Intracel
agrees to discuss any such changes with Medical Director and to consider his
input in these decisions. No activities or services performed by Medical
Director pursuant to this Agreement shall constitute the practice of medicine.
Any evaluations, diagnoses, treatments, procedures or other professional health
care services furnished to patients by Medical Director will be provided in his
individual capacity as a practicing physician or employee of Lehigh or other
entity, and will not be provided by Medical Director in his capacity as an
independent contractor to Intracel pursuant to this Agreement.
1.2 BEST EFFORTS
Medical Director shall devote his best efforts to performing the Services.
In doing so, Medical Director shall use his full education, skills, and
professional energy, consistent with his training and experience, to advance
the business interests of Intracel. During the Term of this Agreement, Medical
Director shall not engage in any other activity or occupation for compensation,
or any non-compensated activity, that in Intracel's reasonable opinion is
competitive with or adverse to the interests of Intracel, without the prior
written consent of Intracel. Notwithstanding the foregoing, nothing in this
Section 1.2 or elsewhere in this Agreement shall prevent
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Medical Director, during the time not required for the performance of the
Services, from maintaining his individual medical practice or performing his
duties as the Chair of Surgery for Lehigh or an employee of Lehigh Valley
Physician Group.
1.3 HOURS AND RECORDS
Notwithstanding any other provision of this Agreement, Medical Director
shall not spend less than 15 hours per month or be required to spend more than
25 hours per month, on average, performing the Services. The Parties agree that
these minimum and maximum numbers are annual averages, and that Medical Director
may spend less than 15 hours or more than 25 hours in any particular month
depending on Intracel's needs and Medical Director's availability. Within ten
(10) days following the end of each calendar month during the Term of this
Agreement, Lehigh shall provide Intracel with a record of time Medical Director
spent performing the Services in the previous month. Such accounting shall
include the dates on which Medical Director performed Services, a description
of the Services performed on each date, and the amount of time spent performing
those Services.
1.4 REPORTING TO INTRACEL
Lehigh and/or Medical Director shall notify Intracel in writing within one
working day of the occurrence of any of the following: (a) Medical Director's
being notified that any written complaint or report concerning him has been
filed with the Pennsylvania state medical board or the National Practitioner
Data Bank; (b) Medical Director's being notified that any written complaint has
been filed against him, or any adverse action has been proposed (whether final
or not), at any hospital, other health care facility, health maintenance
organization, preferred provider organization, insurer or health plan,
professional review organization, professional association or governmental
body; (c) Medical Director's receiving a summons and complaint or a subpoena
relating to his professional practice; (d) Medical Director's being charged
with any crime (excluding minor traffic violations); (e) any other event which
reasonably might be anticipated to expose Intracel to a legal claim or adverse
publicity, or interfere with Medical Director's discharging his
responsibilities under this Agreement; or (f) any other disciplinary or
professional liability actions initiated against Medical Director. Medical
Director acknowledges and agrees that Intracel may inform malpractice carriers
or other appropriate parties of any such occurrence.
1.5 COMPLIANCE WITH LAW
Lehigh and Medical Director shall perform the Services faithfully,
diligently, ethically, in a professional manner and in accordance with all
applicable laws, regulations and currently recognized professional standards.
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1.6 COMPLIANCE WITH INTRACEL RULES
Lehigh and Medical Director shall comply in all material respects with the
reasonable rules and policies of Intracel and the OncoVax Center, as they now
exist or as they may from time to time be amended, including rules and policies
governing the provisions of services, billing, records, and relationships with
OncoVax Center employees.
1.7 COOPERATION IN PROCEEDINGS
During and after the Term (and notwithstanding expiration or termination
of this Agreement for whatever reason), Lehigh and Medical Director shall,
without additional compensation, provide all reasonable assistance requested by
Intracel in order to (a) assert Intracel's rights under any insurance policies;
or (b) assist Intracel in defense of professional liability or other actions.
1.8 PROFESSIONAL LIABILITY INSURANCE
Lehigh covenants that the Medical Director shall at all times during the
Term be covered by professional liability insurance that meets all requirements
of the Pennsylvania Healthcare Malpractice Act, as amended, and that such
coverage will be provided at Lehigh's cost.
1.9 MEDICAL DIRECTOR'S DESIGNEE
The Parties agree that Medical Director may delegate the provision of
Services to a designee, which designee shall be Sarah Stevens, M.D. unless the
Parties mutually agree on another designee. Notwithstanding anything in Section
1.3 to the contrary, Medical Director's designee shall devote a minimum of
fifty percent (50%) of her professional time to the performance of the
Services. In the event of such delegation, Medical Director's designee shall be
subject to all the terms and conditions under this Agreement which are
applicable to Medical Director as if a reference to such designee was expressly
set forth in each provision applicable to Medical Director. Any breach of any
term or condition as applied to any designee shall be a breach thereof in the
same manner as if applied to Medical Director himself.
2. REPRESENTATION AND WARRANTIES OF LEHIGH
2.1 GENERAL REPRESENTATIONS AND WARRANTIES
Lehigh hereby represents and warrants that (a) Medical Director possesses
and throughout the Terms shall maintain, a current, valid, and unencumbered
license to practice medicine in the State of Pennsylvania; (b) Medical Director
either (1) is not
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subject to any actual or threatened investigation, disciplinary proceeding,
ethics action, public or private suit or claim as to malpractice or
professional misconduct, and his performance in his job functions is not
impaired due to a physical or mental condition or substance abuse, or (2) as to
any such matter to which Medical Director is subject, full information has been
disclosed in writing to Intracel; (c) Medical Director either (1) knows of no
existing circumstances that would provide a basis for revoking or suspending
his medical license, or subjecting him to suit, or which would be harmful to
Intracel in engaging Medical Director, or (2) has disclosed the same in writing
to Intracel; (d) Medical Director has adequate malpractice "occurrence"
coverage or "tail" coverage under existing insurance with limits of liability
of not less than $1 million per occurrence and $3 million in the aggregate,
covering any claims relating to activities in his private medical practice, and
Lehigh shall indemnify and hold harmless Intracel from and against any claims,
costs or expenses arising from such activities; and (e) execution and
performance of this Agreement does not violate any contract, agreement,
regulatory ruling or judicial order to which Lehigh or Medical Director is
subject (including both the Medical Director's employment agreement and Lehigh's
agreement with Lehigh Valley Physician Group), or to the best of Lehigh's
knowledge, violate any law.
2.2 Effect of Inaccurate Representations or Warranties
The Parties acknowledge and agree that if any representation or warranty
contained in this Section 2 is untrue or becomes untrue during the Term of this
Agreement, such untrue representation or warranty shall be deemed to be a
material misrepresentation by Medical Director and Intracel shall have the
right to terminate this Agreement pursuant to Section 6.
3. RESPONSIBILITIES OF INTRACEL
3.1 Intracel Facilities
Throughout the Term of this Agreement, Intracel shall provide clerical and
other administrative support, to the extent Intracel deems reasonable, to help
facilitate Medical Director's performance of the Services.
3.2 Business and Property Liability Insurance
Intracel shall maintain general business and property liability insurance
for claims arising from (a) the occupancy of Intracel offices by Medical
Director; and (b) the performance by Medical Director of the Services in
accordance with the terms of this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF INTRACEL
Intracel hereby represents and warrants that (a) it is a corporation duly
organized and validly existing; (b) this Agreement has been duly executed on
behalf of Intracel; (c) this Agreement is a legal, valid and binding obligation
of Intracel; and (d) execution and performance of this Agreement does not
violate any contract, agreement, regulatory ruling, or judicial order to which
Intracel is subject, or to the best of Intracel's knowledge, violate any law.
5. PAYMENT FOR SERVICES
5.1 SERVICE FEE
In return for the Services, Intracel shall pay to Lehigh a monthly service
fee ("SERVICE FEE") payable in arrears at the end of each month during the
Term. The Service Fee shall be $6,250 per month. The Parties agree (i) that the
Service Fee reflects the fair market value for the Services, and (ii) that
Intracel shall annually adjust the Service Fee to reflect the fair market value
of the Services.
5.2 EXPENSES
Subject to reasonable Intracel policies, including advance approval by
Intracel, and up to the reasonable dollar limits specified from time to time by
Intracel, Lehigh shall be entitled to reimbursement by Intracel for reasonable
expenses (including but not limited to reasonable travel expenses) incurred by
Medical Director during the Term of this Agreement in performance of the
Services and upon the presentation of appropriate documentation. It is intended
that all expenses incurred pursuant to this Section 5.2 are to be ordinary and
necessary business expenses. It is therefore agreed that if any expense paid
for, or reimbursed to, Lehigh is disallowed by the Internal Revenue Service as
a federal income tax deduction of Intracel, (1) Intracel shall not be obliged
to contest such ruling, and (2) Lehigh shall reimburse Intracel for such
disallowed expense within sixty (60) days after the final determination of such
disallowance.
6. TERM AND TERMINATION
6.1 TERM
The term of this Agreement (the "TERM") shall commence on the Initial
Closing Date, as that term is defined in the Joint Venture Agreement (the
"EFFECTIVE DATE") and shall end, unless earlier terminated in accordance with
this Section 6, on the Final Closing Date, as that term is defined in the Joint
Venture Agreement.
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6.2 TERMINATION BY INTRACEL
Intracel may terminate this Agreement for Cause at any time during the
Term of this Agreement by giving Lehigh written notice at least thirty (30)
days in advance (the "NOTICE PERIOD") of the effective date of such termination
(the "TERMINATION DATE"). Intracel may (without alteration of payment
obligations under this Agreement during the Notice Period) require that Medical
Director cease his performance of the Services at any time during the Notice
Period. The following shall be Cause for termination pursuant to this Section
6.2 (i) Lehigh itself, or through Medical Director, breaches or fails to
perform a material obligation under this Agreement and that breach or failure
is not cured to the reasonable satisfaction of Intracel within the Notice
Period; (ii) any act or omission constituting fraud or material
misrepresentation by Lehigh or Medical Director in dealing with Intracel or the
OncoVax Center; (iii) Medical Director's license to practice medicine is
suspended, limited or revoked, irrespective of other proceedings, or Medical
Director's DEA license to prescribe controlled substances is revoked, limited
or suspended; (iv) Medical Director is suspended or barred from participation
in Medicare; (v) Herbert C. Hoover, Jr. is no longer the Medical Director
performing the Services on behalf of Lehigh, or he becomes disabled to the
extent that he is unable to perform the Services; (vi) Medical Director becomes
ineligible for professional liability coverage on commercially reasonable
terms; (vii) Lehigh is adjudged insolvent or bankrupt or makes a general
assignment for the benefit of creditors; or (viii) Medical Director is
convicted of a crime bearing on the practice of medicine, any crime involving
moral turpitude or fraud, or Medical Director is convicted of any felony.
6.3 TERMINATION BY LEHIGH
Lehigh may terminate this Agreement for Cause at any time during the Term
of the Agreement by giving Intracel written notice at least thirty (30) days in
advance (the "NOTICE PERIOD") of the effective date of such termination (the
"TERMINATION DATE"). The following shall be Cause for termination pursuant to
this Section 6.3 (i) Intracel becomes insolvent or bankrupt or makes a general
assignment for the benefit of creditors; (ii) Intracel breaches or fails to
perform any material obligation under this Agreement, and such breach or
failure is not cured to the reasonable satisfaction of Lehigh within the Notice
Period; or (iii) Intracel commits fraud or material misrepresentation in its
dealings with Lehigh or Medical Director.
6.4 TERMINATION BY EVENT
Unless the Parties agree in writing to continue this Agreement, this
Agreement shall automatically terminate upon the occurrence, at any time, of
any of the following events: (i) the termination for any reason of the Joint
Venture Agreement, or (ii) in accordance with and only in accordance with the
provisions of Section 8.5, in the event this Agreement is deemed in the
reasonable opinion of either Party to violate law and be incapable of amendment.
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6.5 COOPERATION
In the event of the expiration or termination of this Agreement for any
reason, Lehigh and Medical Director shall, without further compensation, if so
requested by Intracel, thereafter, promptly (a) respond to requests for
information as reasonably may be necessary to ensure appropriate transfer of
their responsibilities; and (b) advise Intracel if either receives a complaint,
summons, subpoena, or similar court order for records or testimony relating to
performance of the Services.
7. CONFIDENTIALITY
7.1 CONFIDENTIALITY
During the course of Lehigh's performance of the Services, Lehigh and/or
Medial Director may come to know certain confidential and proprietary business
or medical information of or about Intracel, the OncoVax Center, and/or
Intracel affiliates and joint venture partners (collectively, "ENTITIES"),
including but not limited to information concerning (a) business, affairs or
operations of the Entities or their customers, (b) entity trade secrets, new
product developments, special or unique processes, protocols, or methods, (c)
Entity marketing, sales, advertising or other concepts or plans, (d) Entity
fees and billing arrangements, (e) Entity finances, (f) Entity management
systems, or (g) entity business plans or prospects ("CONFIDENTIAL
INFORMATION"). The term "Confidential Information" shall exclude any
information that is a matter of public knowledge (except if such public
knowledge resulted form an improper act of Medical Director or Lehigh). Lehigh
agrees that both during the Term of this Agreement and after the expiration or
termination of this Agreement for whatever reason, Lehigh shall hold all such
Confidential Information in the strictest confidence, and shall not disclose,
use, or display, transfer, sell, publish, or otherwise make available to any
other person or entity, any such Confidential Information without the prior
written consent of Intracel, except as may be specifically required by law.
Lehigh shall protect such Confidential Information in a manner consistent with
the usual manner in which the most confidential business and professional
information is protected. Lehigh shall ensure that Medical Director complies
with the provisions of this Section 7.1.
7.2 ENFORCEMENT OF CONFIDENTIALITY REQUIREMENTS
Lehigh agrees that the restrictions contained in Section 7.1 are part of
the consideration for inducing the Intracel to contract with Lehigh to provide
the Services for the fees provided for in this Agreement; that such
restrictions are reasonable and necessary to protect the business interests of
Intracel and the OncoVax Center; and that any violation of such restrictions
will cause substantial and irreparable injury to the Intracel and/or the
OncoVax Center. These restrictions shall be effective and enforceable upon the
execution of this Agreement by Lehigh, irrespective of the
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length of its Term. The Parties agree that Intracel and the OncoVax Center each
are entitled, in addition to any and all other remedies available at law or in
equity, to a restraining order, preliminary and permanent injunctive relief and
specific performance to prevent a breach or contemplated breach of these
restrictions, without the necessity of proving actual damages. In the event of
a breach of these provisions, Lehigh shall be obligated to pay all costs and
expenses, including reasonable attorneys' fees, incurred by Intracel or the
OncoVax Center due to such breach or threatened breach.
7.3 NO ACQUIRED INTERESTS
Lehigh and Medical Director agree that upon termination or expiration
of this Agreement, all proprietary interest of Intracel or the OncoVax Center
in OncoVax or its other products, in customer accounts, lists, copyrighted
items, trade secrets, proprietary information, including all intellectual
property rights in any materials, documents, protocols, systems, reports, or
inventions, and all business assets, tangible or intangible (collectively
"PROPRIETARY INTERESTS"), with which Lehigh or Medical Director deals or has
access to, or that are developed or improved in whole or in part by Lehigh or
Medical Director in performing the Services during the Term of this Agreement,
shall remain the sole and exclusive property of Intracel and/or the OncoVax
Center, and in no event shall Lehigh or Medical Director, by virtue of
performing the Services, acquire any personal interest in the Proprietary
Interests or any right to use the Proprietary Interests except as specifically
set forth in a license agreement or other agreement executed by the Parties.
Lehigh and Medical Director each hereby assign to Intracel all of Lehigh's or
Medical Director's right, title and interest, including all intellectual
property rights, if any, in any Proprietary Interests developed in whole or in
part by Lehigh or by Medical Director in performance of the Services, which
Proprietary Interests all shall be considered works made for hire. Lehigh and
Medical Director agree that upon termination or expiration of this Agreement
each shall promptly return to Intracel all business, corporate, medical or
financial records, documents, forms, contracts, lists and completed work or
work in progress relating to the affairs of Intracel or the OncoVax Center and
any personal property of Intracel or the OncoVax Center in their possession at
the time of termination or expiration.
8. GENERAL PROVISIONS
8.1 NOTICES
All notices and other communications under this Agreement shall be in
writing and shall be deemed given when delivered personally, sent by federal
express or other recognized overnight delivery service or mailed by registered
or certified mail, return receipt requested, to the Parties as follows or to
such other addressee as a party may in writing designate.
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If to Lehigh:
Lehigh Valley Hospital and Health Network
Cedar Crest & I-78
P.O. Box 689
Allentown, Pennsylvania 18105-1556
Attn: Louis L. Leibhaber
Facsimile: (610)402-7253
with a copy to:
Tallman, Hudders & Sorrentino
The Paragon Centre
1611 Pond Road, Suite 300
Allentown, Pennsylvania 18104-2256
Attn: Matthew R. Sorrentino, Esq.
Facsimile: (610)391-1800
If to Intracel or OncoVax Center:
Intracel Corporation
1330 Piccard Drive
Rockville, Maryland 20850
Attn: Daniel S. Reale
Facsimile: (301)296-0082
with a copy to:
Donna Boswell, Esq.
Hogan & Hartson, L.L.P.
555 13th Street, N.W.
Washington, D.C. 20004
Facsimile: (202)637-5910
Each notice, demand, request or communication that shall be given or made
in the manner described in this Section 8.1 shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, or the affidavit of messenger being
deemed conclusive but not exclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation. This Section 8.1
shall survive termination of this Agreement.
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8.2 ENTIRE AGREEMENT; AMENDMENTS
This Agreement sets forth the entire understanding and agreement between
the parties with respect to the subject matter of this Agreement, and
supersedes all prior undertakings of any kind, whether written or oral. No
terms, conditions, or warranties, other than those contained in this Agreement,
and no amendments or modifications to this Agreement, shall be valid unless
made in writing and signed by the Parties.
8.3 EFFECT AND BENEFIT OF AGREEMENT
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns. The covenants,
undertakings, and agreements set forth in this Agreement shall be solely for
the benefit of, and shall be enforceable only by, the Parties and their
permitted assigns, respective heirs, successors or legal representatives.
Nothing in this Agreement is intended to or shall be construed to, confer upon
any person or entity not a Party to this Agreement, any rights or benefits
under this Agreement.
8.4 ASSIGNMENT
This Agreement and its performance shall not be assigned, sublet,
delegated or transferred by either Party in whole or in part without the prior
written consent of the other party, except that Intracel shall have the right
to assign or delegate its rights and responsibilities under this Agreement, in
whole or in part, without Lehigh's consent, to the OncoVax Center (or successor
entity) or to any affiliate or subsidiary of, or successor entity to, Intracel.
8.5 INVALID PROVISIONS
If any provision of this Agreement or other document contemplated in this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws, such provisions shall be fully severable: (a) the appropriate
documents shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of the Agreement; (b) the
remaining provisions shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision; and (c) the
Parties shall in good faith negotiate and substitute a provision as similar in
terms to such illegal, invalid, or unenforceable provision as may be possible
and still be legal, valid and enforceable, unless the effect of such severance
and substitution would be to deprive a Party substantially of the benefits
contemplated under this Agreement, in which case either Party may terminate
this Agreement upon thirty days written notice to the other Party.
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8.6 INDEPENDENT CONTRACTORS
The Parties acknowledge and agree that, with respect to this Agreement
and the arrangements set forth in this Agreement, they are independent
contractors and that except as provided in this Agreement, neither Party has
the right to obligate or bind the other Party in any manner whatsoever. Nothing
in this Agreement shall be interpreted, or is intended, to constitute either
Party as the employee or employer, joint venturer, or partner of the other
Party. The Parties understand and agree that (a) Intracel will not withhold on
behalf of Medical Director any sum for income tax, unemployment insurance,
social security or any other withholding applicable to employees, and Intracel
will not provide Medical Director with any of the benefits provided to
employees of Intracel or its affiliates, (b) as between Intracel and Lehigh,
all such payments, withholdings and benefits, if any, shall be the sole
responsibility of Lehigh; and (c) Lehigh will indemnify and hold Intracel
harmless from any and all loss or liability, cost or expense arising with
respect to any such payments, withholds, and benefits.
8.7 ACCESS TO BOOKS AND RECORDS
Until the expiration of six (6) years after expiration or termination
of this Agreement, Intracel and Medical Director each shall make available to
the Secretary, U.S. Department of Health and Human Services, the U.S.
Comptroller General and their representatives, this Agreement and all books,
documents and records necessary to certify the nature and extent of the costs
of the services furnished hereunder and will provide such additional
documentation as they reasonably require. If Medical Director carries out any
of the duties of this Agreement through a subcontract worth ten thousand
dollars ($10,000) or more over a twelve month period with a related
organization, the subcontract will also contain a clause to permit access by
the Secretary, Comptroller General, and their representatives to the related
organization's books and records. This Section 8.7 shall survive termination of
this Agreement.
8.8 REMEDIES
Any remedies the Parties may have pursuant to this Agreement or by
law shall be cumulative.
8.9 NO WAIVER
The waiver by either Party of any breach of any provision of this
Agreement shall not be construed as a waiver of any subsequent breach of the
same or another provision. The failure to exercise any right under this
Agreement shall not operate as a waiver of such right. Any waiver must be in
writing and signed by the Party to be charged.
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8.10 GOVERNING LAW
This Agreement, to the extent any particular issue is controlled by
state law, shall be governed by and construed in accordance with the laws of the
State of Maryland (but not including choice of law rules thereof).
8.11 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but which together shall constitute one and
the same Agreement.
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IN WITNESS WHEREOF, each of the Parties intending to be legally bound has
caused this Agreement to be duly executed and delivered in its name and on its
behalf as of the date first set forth above.
INTRACEL CORPORATION
By: _________________________________
Name: _______________________________
Title: ______________________________
LEHIGH VALLEY HOSPITAL AND
HEALTH NETWORK
By: _________________________________
Name: _______________________________
Title: ______________________________
ACKNOWLEDGED AND AGREED:
HERBERT C. HOOVER, JR., M.D.
By: _________________________________
ACKNOWLEDGED AND AGREED:
SARAH STEVENS, M.D.
By: _________________________________
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EXHIBIT P-1
CERTIFICATE OF
REPRESENTATIONS AND WARRANTIES OF INTRACEL
In order to induce Lehigh Valley Hospital and Health Network ("LEHIGH") to
enter into the Joint Venture Agreement (the "AGREEMENT") to which this Exhibit
P-1 is attached, Intracel Corporation ("INTRACEL") makes the following
representations and warranties each of which is material to and is being relied
upon by Lehigh:
1. ORGANIZATION AND STANDING.
Intracel is a corporation duly incorporated, validly existing, and in
good standing under the laws of the State of Delaware and has all requisite
power and authority, corporate and otherwise, to own, operate, and lease its
properties and to carry on its business as currently conducted, to execute and
deliver the Agreement and all other agreements and instruments contemplated
thereby and to carry out the transactions contemplated thereby.
2. AUTHORITY AND POWER.
Intracel has full legal right, power and authority to execute and
deliver the Agreement and all other agreements and instruments contemplated
thereby and to consummate the transactions as contemplated thereby in
accordance with the terms and conditions thereof.
3. AUTHORIZATION.
Intracel has taken all corporate action necessary for Intracel to enter
into the Agreement and all other agreements and instruments contemplated
therein and for Intracel to consummate the transactions contemplated therein in
accordance with the terms thereof.
4. ABSENCE OF VIOLATIONS.
The execution, delivery, and performance by Intracel of the Agreement
and all other agreements and instruments contemplated thereby, the fulfillment
of and the compliance with the respective terms and provisions thereof, and the
consummation of the transactions contemplated therein, do not and will not: (i)
conflict with, or violate any provision of, any statute, law, rule, regulation,
order,
<PAGE> 188
judgment, injunction, decree, or award of any arbitrator or governmental
authority having applicability to Intracel or any of its business, assets, or
properties or to any Subsidiary (as defined in the Agreement) of Intracel, or
any provision of the Articles of Incorporation, Bylaws or similar governing
instruments of Intracel or (ii) conflict with, violate, or result in any breach
of, or constitute a default under, any indenture or loan or credit agreement or
any other agreement, to which Intracel is a party or by which Intracel or any
of its business, assets or properties or any Subsidiary of Intracel may be
bound or affected, except for such conflicts, violations, breaches, or defaults
which shall not individually or in the aggregate have a material adverse effect
upon Intracel or upon Intracel's ability to consummate the transactions
contemplated therein.
5. CONSENTS AND APPROVALS.
Intracel is not subject to any statute, law, regulation, rule, order,
judgment, injunction, decree, charter, bylaw, mortgage, deed of trust,
indenture, agreement, or other restriction of any kind or character whatsoever
which (i) would prevent the execution or delivery or performance by Intracel of
the Agreement or any other agreement or instrument contemplated thereby or the
consummation by Intracel of any of the transactions contemplated thereby; or
(ii) would require approval of, or filing with, any governmental or regulatory
authority for the execution, delivery, and performance by Intracel of the
Agreement or any other agreement or instrument contemplated thereby and the
consummation by Intracel of all the transactions contemplated thereby. Intracel
has obtained all consents and approvals which are necessary to permit the
consummation by Intracel of the transactions contemplated in the Agreement or
in any other agreement or instrument contemplated thereby.
6. COMPLIANCE WITH APPLICABLE LAWS.
Intracel has complied in all material respects and remains in
material compliance with all statutes, laws, ordinances, regulations, rules,
orders, determinations, writs, injunctions, awards, judgments, and decrees
applicable to Intracel or to the assets, properties, employees, agents, and
business of Intracel.
7. BINDING OBLIGATION.
The Agreement constitutes a valid and binding obligation of Intracel,
enforceable in accordance with its terms, and each document and instrument to
be executed by Intracel pursuant hereto, when executed and delivered in
accordance with the provisions thereof, shall be a valid and binding obligation
of Intracel, enforceable in accordance with its terms.
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8. LICENSES, ACCREDITATION AND REGULATORY MATTERS.
Intracel and all its professional employees or agents hold, or have
applied for, all material licenses, certificates of need or other regulatory
approvals which are needed or required by law with respect to its business,
operation and facilities as presently conducted and as contemplated under the
Agreement ("LICENSES"). To the extent such Licenses have been issued, such
Licenses are in full force and effect, and Intracel is in compliance in all
material respects with all conditions and requirements of such Licenses and
with all laws, rules and regulations relating thereto. Any and all past
litigation concerning such issued Licenses, and all claims and causes of action
raised therein, has been finally adjudicated. No such issued License has been
revoked, conditioned (except as may be customary) or restricted, and no action
(equitable, legal or administrative), arbitration or other process is pending,
or to the best knowledge of Intracel, threatened, which in any way challenges
the validity of, or seeks to revoke, condition or restrict any such License.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Certificate of Representations and Warranties of Intracel as of December
__, 1998.
INTRACEL CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
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EXHIBIT P-2
CERTIFICATE OF
REPRESENTATIONS AND WARRANTIES OF LEHIGH
In order to induce Intracel Corporation ("INTRACEL") to enter into the
Joint Venture Agreement (the "AGREEMENT") to which this Exhibit P-2 is
attached, Lehigh Valley Hospital and Health Network ("LEHIGH") makes the
following representations and warranties each of which is material to and is
being relied upon by Intracel:
1. ORGANIZATION AND STANDING.
Lehigh is a non-profit corporation duly incorporated, validly
existing, and in good standing under the laws of the Commonwealth of
Pennsylvania and has all requisite power and authority, corporate and
otherwise, to own, operate, and lease its properties and to carry on its
business as currently conducted, to execute and deliver the Agreement and all
other agreements and instruments contemplated thereby and to carry out the
transactions contemplated thereby.
2. AUTHORITY AND POWER.
Lehigh has full legal right, power and authority to execute and
deliver the Agreement and all other agreements and instruments contemplated
thereby and to consummate the transactions as contemplated thereby in
accordance with the terms and conditions thereof.
3. AUTHORIZATION.
Lehigh has taken all corporate action necessary for Lehigh to enter
into the Agreement and all other agreements and instruments contemplated
therein and for Lehigh to consummate the transactions contemplated therein in
accordance with the terms thereof.
4. ABSENCE OF VIOLATIONS.
The execution, delivery, and performance by Lehigh of the Agreement
and all other agreements and instruments contemplated thereby, the fulfillment
of and the compliance with the respective terms and provisions thereof, and the
consummation of the transactions contemplated therein, do not and will not:
(i) conflict with, or violate any provision of, any statute, law, rule,
regulation, order, judgment, injunction, decree, or award of any arbitrator or
governmental authority having applicability to Lehigh or any of its business,
assets, or properties or to any
<PAGE> 191
Subsidiary (as defined in the Agreement) of Lehigh, or any provision of the
Articles of Incorporation, Bylaws or similar governing instruments of Lehigh or
(ii) conflict with, violate, or result in any breach of, or constitute a
default under, any indenture or loan or credit agreement or any other
agreement, to which Lehigh is a party or by which Lehigh or any of its
business, assets or properties or any Subsidiary of Lehigh may be bound or
affected, except for such conflicts, violations, breaches, or defaults which
shall not individually or in the aggregate have a material adverse effect upon
Lehigh or upon Lehigh's ability to consummate the transactions contemplated
therein.
5. CONSENTS AND APPROVALS.
Lehigh is not subject to any statute, law, regulation, rule, order,
judgment, injunction, decree, charter, bylaw, mortgage, deed of trust,
indenture, agreement, or other restriction of any kind or character whatsoever
which (i) would prevent the execution or delivery or performance by Lehigh of
the Agreement or any other agreement or instrument contemplated thereby or the
consummation by Lehigh of any of the transactions contemplated thereby; or (ii)
would require approval of, or filing with, any governmental or regulatory
authority for the execution, delivery, and performance by Lehigh of the
Agreement or any other agreement or instrument contemplated thereby and the
consummation by Lehigh of all the transactions contemplated thereby. Lehigh has
obtained all consents and approvals which are necessary to permit the
consummation by Lehigh of the transactions contemplated in the Agreement or in
any other agreement or instrument contemplated thereby.
6. COMPLIANCE WITH APPLICABLE LAWS.
Lehigh has complied in all material respects and remains in material
compliance with all statutes, laws, ordinances, regulations, rules, orders,
determinations, writs, injunctions, awards, judgments, and decrees applicable
to Lehigh or to the assets, properties, employees, agents, and business of
Lehigh.
7. BINDING OBLIGATION.
The Agreement constitutes a valid and binding obligation of Lehigh,
enforceable in accordance with its terms, and each document and instrument to
be executed by Lehigh pursuant hereto, when executed and delivered in
accordance with the provisions thereof, shall be a valid and binding obligation
of Lehigh, enforceable in accordance with its terms.
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8. LICENSES, ACCREDITATION AND REGULATORY MATTERS.
Lehigh and its Subsidiaries and all professional employees or
agents of each hold all material licenses, certificates of need or other
regulatory approvals which are needed or required by law with respect to their
respective businesses, operations and facilities as presently conducted and as
contemplated under the Agreement ("LICENSES"). All such Licenses are in full
force and effect, and each of Lehigh and its Subsidiaries is in compliance in
all material respects with all conditions and requirements of the Licenses and
with all laws, rules and regulations relating thereto. Any and all past
litigation concerning such Licenses, and all claims and causes of action raised
therein, has been finally adjudicated. No such License has been revoked,
conditioned (except as may be customary) or restricted, and no action
(equitable, legal or administrative), arbitration or other process is pending,
or to the best knowledge of Lehigh, threatened, which in any way challenges the
validity of, or seeks to revoke, condition or restrict any such License. Lehigh
and its Subsidiaries are, to the extent applicable to their operations, (i)
eligible to receive payments under Titles XVIII and XIX of the Social Security
Act for covered services furnished to eligible beneficiaries by physicians
employed by a hospital, (ii) suppliers under existing supplier agreements with
the Medicare program through applicable Medicare contractors and (iii) in
compliance in all material respects with the applicable conditions of
participation in the Medicare program and the third party payor contracts to
which they are a party. Lehigh and its Subsidiaries have timely filed all
requisite, claims and other reports required to be filed in connection with the
Medicare or Medicaid programs and, other governmental health programs, or by
third party payors contracts which were due on or before the date hereof, all of
which were, when filed, complete and correct in all material respects. There are
no current claims, actions or appeals pending, and neither Lehigh nor its
Subsidiaries have filed any claims or reports which would be reasonably likely
to result in such claims, actions or appeals, before any commission, board or
agency, including, without limitation, any Medicare carrier or the Administrator
of the Health Care Financing Administration with respect to any Medicare claims,
or any disallowances in connection with any audit of such which would be
reasonably likely to have a material adverse effect on Lehigh or its
Subsidiaries in the aggregate. To the best of the Lehigh's knowledge, neither
Lehigh nor its Subsidiaries nor their respective employees or shareholders have
committed a violation of the Medicare or Medicaid fraud and abuse provisions of
the Social Security Act or have violated the terms of the third party payor
contracts to which they are a party.
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IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Certificate of Representations and Warranties of Lehigh Valley Hospital
and Health Network as of December __, 1998.
LEHIGH VALLEY HOSPITAL
\ AND HEALTH NETWORK
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
4
<PAGE> 1
EXHIBIT 10.42
SENIOR NOTE PURCHASE AGREEMENT
This SENIOR NOTE PURCHASE AGREEMENT (this "Agreement"), dated this 27th
day of January 1999 by and among INTRACEL CORPORATION, a Delaware corporation
("Seller") and DUBLIND INVESTMENTS LLC, a Delaware limited liability corporation
(the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser the
Company's 15% Senior Note, substantially in the form attached hereto as Exhibit
A-1, in the original principal amount of $2,000,000 (the "Senior Note"),
WHEREAS, the Purchaser is to purchase the Senior Note on the terms and
subject to the conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained the parties hereto hereby agree as follows:
1. Purchase and Sale. The Company hereby issues and sells to the
Purchaser, and the Purchaser hereby purchases from the Company, the Senior Note.
Simultaneously with the execution of this agreement, each Purchaser has
delivered to the Company, by wire transfer, cash in the amount of $2,000,0000,
representing the original principal amount of the Senior Note purchased
hereunder.
2. Representations and Warranties of the Company.
(a) The Company (i) is duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation; (ii) it
has the full power and authority to enter into this Agreement and to perform all
of its obligations hereunder; (iii) the execution, delivery and performance of
this Agreement by the Company has been duly authorized by all necessary
corporate action of the Company; (iv) the execution, delivery and performance by
the Company of this Agreement and the sale and delivery of the Senior Note will
not violate, conflict with or result in a breach of the Certificate or Articles
of Incorporation or By-Laws of the Company or any agreement, instrument,
judgment, or judicial decree or order to which the Company is a party or by
which the Company or any of its assets is bound and (v) this Agreement and the
Senior Note constitute the legal, valid and binding obligations of the Seller,
enforceable in accordance with their respective terms, except (a) to the extent
that enforceability may be limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (b) that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceedings therefor may be brought.
<PAGE> 2
3. Representations, Warranties and Covenants of the Purchaser. The
Purchaser hereby represents and warrants to the Company as follows:
(a) Purchase of Securities.
(i) It is an "accredited investor" within the meaning of Rule 501
under the Securities Act and was not organized for the specific purpose of
acquiring the Senior Note.
(ii) It has sufficient knowledge and experience in investing in
companies in a similar stage of development to the Company so as to be able to
evaluate the risks and merits of its investment in the Company and it is able
financially to bear the risks thereof, including a complete loss thereof.
(iii) It has had an opportunity to discuss the Company's
business, management and financial condition with the management of the
Company's and its subsidiaries.
(iv) It is acquiring the Senior Note for its own account for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof.
(v) It understands that (i) the Senior Note has not been
registered under the Securities Act by reason of its issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof, (ii) the Senior Note must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Senior Note will bear a legend to such
effect and (iv) the Company will make a notation on its transfer books to such
effect.
(b) Authority. It has all requisite power and authority to execute,
deliver and perform this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. Purchaser (i) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) it has the full power and authority to
enter into this Agreement and to perform all of its obligations hereunder; (iii)
the execution, delivery and performance of this Agreement by the Purchaser has
been duly authorized by all necessary corporate action of Purchaser; and (iv)
the execution, delivery and performance by the Purchaser of this Agreement and
the purchase of the Senior Note will not violate, conflict with or result in a
breach of the Certificate or Articles of Incorporation or By-Laws of Purchaser
or any agreement, instrument, judgment, or judicial decree or order to which the
Purchaser is a party or by which the Purchaser or any of its assets is bound, or
result in the creation of any lien or encumbrance on the Senior Note.
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<PAGE> 3
(c) Projections. Purchaser understands that any and all financial
projections and other estimates delivered to it were based on the Company's
experience in the industry and on assumptions of fact and opinion which the
Company believes to have been, and to be, as of the date hereof, reasonable. It
understands that the Company cannot and does not assure or guarantee the
attainment of such projections or other estimates.
(d) Risk Factors. Purchaser understands that the Senior Note is
subject to certain risk factors and has fully and independently evaluated to its
satisfaction each risk factor prior to making a decision to invest in the Senior
Note.
4. Miscellaneous
(a) This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
(b) This Agreement constitutes the sole agreement between or among
the parties hereto relating to the subject matter hereof and merge with and
supersede any and all prior agreements between them relating to such subject
matter. This Agreement cannot be altered or amended except by a writing duly
executed by the party against whom such alteration or amendment is sought to be
enforced.
(c) This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(d) The headings in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
(e) This Agreement shall be governed by and construed under the laws
of the state of New York applicable to contracts made and to be performed
entirely within such state.
(f) The representations, warranties and covenants contained herein
shall survive the sale and purchase of the Senior Note hereunder and any
disposition thereof, notwithstanding any investigation made at any time by any
of the parties hereto.
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<PAGE> 4
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
INTRACEL CORPORATION
By: /s/ SIMON R. MCKENZIE
------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
DUBLIND INVESTMENTS LLC
By:________________________
Name:
Title:
<PAGE> 5
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. IT
MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS
REGISTERED UNDER SUCH ACT OR IN COMPLIANCE WITH ANY EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT, IN EACH CASE IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS.
INTRACEL CORPORATION
15% SENIOR PROMISSORY NOTE
January 27, 1999 $2,000,000
FOR VALUE RECEIVED, INTRACEL CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to the order of DUBLIND INVESTMENTS LLC, its
successors or assigns (the "Noteholder"), the Principal Amount (as defined
below) payable on April 1, 2000 (the "Principal Payment Date") with interest
payable pursuant to Section 2. Capitalized terms used in this Senior Note have
the meanings provided in Section 9. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Securities Purchase Agreement
dated August 25, 1998 by and among the Company and the other parties thereto
(the "Securities Purchase Agreement"), a copy of which has been delivered to the
Noteholder.
SECTION 1. Payments of Principal.
(a) Principal Amount. The principal amount of this Note is Two
Million Dollars ($2,000,000) (the "Principal Amount").
(b) Principal Payment Date. Subject to earlier redemption or
prepayment as provided herein, the Principal Amount of this Senior Note and all
other theretofore unpaid amounts due hereunder shall be due and payable on the
Principal Payment Date.
(c) Mandatory Redemption Upon Consummation of the Initial Public
Offering. Upon the closing date of the first offering of equity securities of
the Company to the public pursuant to a registration statement declared
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended, the Company shall redeem this Senior Note by paying to the
Noteholder all principal, accrued and unpaid interest thereon and any other
amount due to the Noteholder hereunder.
(d) Optional Prepayment. The principal amount of this Senior Note may
be prepaid at the option of the Company at any time, in part or in full,
together with accrued interest through the date of prepayment on the principal
amount so prepaid.
<PAGE> 6
SECTION 2. Payments of Interest.
(a) Interest Rate. Except as otherwise expressly provided in Section
4(b), interest shall accrue from the Closing Date at the rate of fifteen percent
(15%) per annum on the Unpaid Principal Amount. All computations of interest
shall be made on the basis of a year of three hundred and sixty (360) days for
the actual number of days including the first day but excluding the last day for
which any interest period is calculated.
(b) Interest Payment Date. All accrued and unpaid interest shall be
payable semi-annually in arrears on each Interest Payment Date beginning on July
27, 1999.
SECTION 3. Covenants.
The Company hereby agrees that, so long as any amount is owing to the
Noteholder, it shall and shall cause its Subsidiaries to perform the covenants
set forth in Article V of the Securities Purchase Agreement.
SECTION 4. Events of Default.
(a) Definition. For purposes of this Senior Note, an Event of Default
shall have occurred and shall be deemed to have occurred if:
(i) the Company shall fail to pay any principal when due in
accordance with the terms hereof; or
(ii) the Company shall fail to pay any interest or any other
amount payable hereunder when due in accordance with terms hereof by a date
which is five calendar days after such interest or other amount payable
hereunder is due and payable in accordance with the terms hereof; or
(iii) the Company or any Subsidiary (whether as primary obligor
or as a guarantor or other surety) shall (A) default in any payment of principal
of or interest on any Debt (after giving effect to any applicable grace period);
or (B) default in the observance or performance of any other agreement or
condition relating to any such Debt or any Guarantee Obligation or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to give the holder thereof the right to cause such Debt to
become due prior to its stated maturity or such Guarantee Obligation to become
payable (whether by the terms of any document evidencing such Debt or Guarantee
Obligation, upon the election of any holder of Debt or beneficiary of any
Guarantee Obligation or otherwise); provided, that the aggregate amount of all
obligations as to which such payment Default shall occur and be continuing or
other event causing or permitting acceleration thereof exceeds $500,000; or
(iv) (A) the Company or any Subsidiary shall commence any case,
proceeding or other action (1) under any existing or future Law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of
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<PAGE> 7
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (2) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its Assets, or the Company shall make a
general assignment for the benefit of its creditors; or (B) there shall be
commenced against the Company any case, proceeding or other action of a nature
referred to in clause (A) above which (1) results in the entry of an order for
relief or any such adjudication or appointment or (2) remains undismissed,
undischarged or unbonded for a period of sixty (60) days; or (C) there shall be
commenced against the Company any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its Assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within sixty (60) days from the entry thereof;
or (D) the Company shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(A), (B) or (C) above; or (E) the Company shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(v) one or more final judgments or decrees shall be entered
against the Company or any Subsidiary involving in the aggregate a liability
(not paid or fully covered by insurance) of two hundred fifty thousand dollars
($250,000) or more; or
(vi) any judgment or decree is entered in any proceedings against
the Company or any Subsidiary decreeing a split-up of the Company or such
Subsidiary which requires the divestiture of Assets representing more than
33 1/3%, or the divestiture of the stock of a Subsidiary whose Assets
represent more than 33 1/3%, of the consolidated Assets of the Company and its
Subsidiaries (determined in accordance with GAAP) or which requires the
divestiture of Assets, or stock of a Subsidiary, which shall have contributed
more than 33 1/3% of the consolidated net income of the Company and its
Subsidiaries (determined in accordance with GAAP) during the three fiscal years
then most recently ended, and such order, judgment or decree remains unstayed
and in effect for more than 120 days; or
(vii) the Company or any Community Controlled Entity, in its
capacity as an employer under a Multiemployer Plan, makes a complete or partial
withdrawal from such Multiemployer Plan resulting in the incurrence by such
withdrawing employer of a withdrawal liability in an amount exceeding $500,000;
or
(viii) the Company shall have not consummated on or prior to
December 31, 1999 a sale of its Common Stock, whether in a public offering
registered under the Securities Act or otherwise, which sale has an aggregate
offering price of not less than $40,000,000 and results in aggregate proceeds to
the Company (net of selling expenses and underwriter's discount or selling
agent's commission) of not less than $35,000,000; or
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<PAGE> 8
(ix) (A) the Securities Purchase Agreement or any Ancillary
Agreement shall cease in any material respect, for any reason, to be in full
force and effect or the Company or any subsidiary shall assert that any of such
Agreements has ceased in any material respect to be in full force and effect,
(B) the Liens created by any Security Documents shall cease, in any material
respect, for any reason other than a release executed and delivered by each
Noteholder, to be enforceable and of the same effect and first priority
purported to be created thereby (unless otherwise contemplated thereby), or (C)
any breach, default or event of default occurs under any Securities Purchase
Agreement or any Ancillary Agreement and the same is not remedied within the
applicable period of grace (if any) provided in such Agreement; or
(x) the Company shall fail to redeem the Senior Note in
accordance with the terms of Section 1(c) hereof.
(b) Consequences of Events of Default.
(i) When any Event of Default has occurred and is continuing, the
interest rate on this Senior Note shall increase to the Default Interest Rate.
Any increase of the interest rate resulting from the operation of this clause
shall terminate as of the close of business on the date on which no Events of
Default exist (subject to subsequent increases pursuant to this clause),
provided, however, that nothing herein shall prevent subsequent increases of the
interest rate to the Default Interest Rate upon any subsequent Defaults or
Events of Default by the Company.
(ii) If an Event of Default of the type described in Section
4(a)(iv) has occurred, the aggregate principal amount of this Senior Note
(together with all accrued interest thereon and all other amounts due and
payable with respect thereto) shall become immediately due and payable without
any action on the part of the Noteholder, and the Company shall immediately pay
to the Noteholder all amounts due and payable hereunder.
(iii) If any Event of Default has occurred (other than under
Section 4(a)(iv)), the Noteholder may declare this Senior Note to be immediately
due and payable and may demand immediate payment of the Unpaid Principal Amount
(together with all accrued and unpaid interest and all other amounts due and
payable with respect thereto).
(iv) If any Event of Default or Default shall occur and be
continuing, the Noteholder may proceed to protect and enforce its rights under
the Senior Note by exercising such remedies as are available to such Noteholder
in respect thereof, under applicable Law, whether for specific performance of
any covenant or other agreement contained in this Senior Note or otherwise; no
remedy is intended to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every other remedy
conferred herein or now or hereafter existing at Law or in equity or by statute
or otherwise.
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<PAGE> 9
(v) If an Event of Default or Default shall occur and be
continuing, payments by the Company of amounts due to the Noteholder shall be
made in the following order or priority:
(A) all accrued unpaid past due interest on the Senior Notes;
(B) all accrued unpaid interest due on the Senior Notes; and
(C) the principal amount due under the Senior Notes.
(c) Rescission of Acceleration. At any time after any or all of the
Senior Notes shall have been declared immediately due and payable pursuant to
subsection (b), the Required Holders may, by notice in writing to the Company,
rescind and annul such declaration and its consequences if (i) the Company shall
have paid all overdue interest on the Senior Notes, the principal of any Senior
Notes which have become due otherwise than by reason of such declaration, and
interest on such overdue interest and overdue principal at the rate specified in
the Senior Notes, (ii) the Company shall have paid any amounts, other than
principal and interest, which have become due solely by reason of such
declaration, (iii) all Events of Default and Defaults, other than non-payment of
amounts which have become due solely by reason of such declaration, shall have
been cured or waived and (iv) no judgment or decree shall have been entered for
the payment of any amounts due pursuant to the Senior Notes. No such rescission
or annulment shall extend to or affect any subsequent Event of Default or
Default or impair any right arising therefrom.
(d) Notice of Acceleration or Rescission. Whenever any Senior Note
shall be declared immediately due and payable pursuant to subsection (b) or any
such declaration shall be rescinded and annulled pursuant to subsection (c), the
Company shall forthwith give written notice thereof to each Noteholder at the
time outstanding.
SECTION 5. Waiver of Certain Rights. The Company hereby waives diligence,
presentment, protest and demand and notice of protest and demand, dishonor and
nonpayment of this Senior Note, and expressly agrees that this Senior Note, or
any payment hereunder, may be extended from time to time and that the Noteholder
hereof may accept security for this Senior Note or release security for this
Senior Note, all without in any way affecting the liability of the Company
hereunder.
SECTION 6. Transfer of this Senior Note. Upon surrender for registration of
transfer of this Senior Note at the principal office of the Company, the Company
shall, execute and deliver one or more new Senior Notes of like tenor and of
like aggregate principal amount, registered in the name of such transferee or
transferees and or the Noteholder, as the case may be. At the time this Senior
Note is surrendered for registration of transfer, it shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed, by the
Noteholder or such holder's attorney duly authorized in writing. Any Senior Note
or Senior Notes issued upon transfer of this Senior Note shall carry the rights
to unpaid interest and the accrual of interest which were carried by this Senior
Note, so that neither gain nor loss of interest shall result from any such
transfer. In the event that the Noteholder shall transfer less than the full
amount of the
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<PAGE> 10
Note, the Company shall execute and deliver a replacement Note of like tenor for
the balance of the amount of the Note due to the Noteholder. In addition, on
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note and, in the case of any such loss, theft
or destruction of this Note, and delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company in the case of such
mutilation, on delivery and cancellation of this Note, the Company at its
expense, will execute and deliver in lieu thereof, a replacement Note of like
tenor.
SECTION 7. Assignment. The rights and obligations of the Company and the
Noteholder shall be binding upon and benefit the permitted successors, assigns
and transferees of the parties; provided that (i) in no event shall the Company
assign its rights hereunder without the prior written consent of the Noteholder,
(ii) the Noteholder may sell, assign, convey, or otherwise transfer this Senior
Note with the consent of the Company, which consent will not be unreasonably
withheld, and (iii) notwithstanding Section 7(ii), the Noteholder may at all
times, without the consent of the Company, sell, assign, convey or otherwise
transfer this Senior Note to an Affiliate of the Noteholder.
SECTION 8. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Senior Note may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company has obtained the written consent of the
Required Holders. No failure or delay on the part of the Noteholder in
exercising any power or right under this Senior Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right.
SECTION 9. Definitions. For purposes of this Senior Note, the following
capitalized terms have the following meaning:
"Affiliate" means, with reference to a specified person or entity, any
person or entity that directly or indirectly through one or more intermediaries
controls or is controlled by or is under common control with the specified
person or entity. For purposes of this definition, "control" (including, with
correlative meaning, the terms "controlled by" and "under common control with"),
as used with respect to any person or entity, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership
of voting securities or by contract or otherwise.
"Business Day" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Common Stock" means the common stock of the Company.
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with the Company within the meaning of Section
4001 of ERISA or is
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<PAGE> 11
part of a group which includes the Company and which is treated as a single
employer under Section 414 of the Code.
"Company" is defined in the preamble.
"Debt" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Default" means any of the events specified in Section 4, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Default Interest Rate" means a rate of interest equal to seventeen and
one-half percent (17.5%) per annum.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means each of the events described in Section 4;
provided, however, that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"GAAP" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Debt, leases, dividends or other obligations (the "primary
obligations") of any other third Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of any
such primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (x) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (y) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such
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<PAGE> 12
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith.
"Senior Notes" means this 15% Senior Promissory Note and any additional
15% Senior Promissory Notes issued simultaneously herewith.
"Interest Payment Dates" mean, for any year, July 27 and January 27,
beginning with the Interest Payment Date of July 27, 1999.
"Lien" has the meaning specified in Section 1.1 of the Securities
Purchase Agreement.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Noteholder" means the Person defined as such in the first paragraph
hereof and its permitted successors, transferees and assigns.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Principal Amount" is defined in Section 1(a).
"Principal Payment Date" is defined in the preamble.
"Required Holders" means that number of holders of Senior Notes
constituting not less a majority of the aggregate Unpaid Principal Amount due
under all outstanding Senior Notes at that time.
"Subsidiary" has the meaning specified in Section 1.1 of the
Securities Purchase Agreement.
"Unpaid Principal Amount" means, at any time, the portion of the
Principal Amount outstanding under a Senior Note at such time.
SECTION 10. Cancellation. After all principal, accrued interest thereon
and all other amounts due hereunder at any time owed on this Senior Note has
been paid in full, this Senior Note shall be surrendered to the Company for
cancellation and shall not be reissued.
SECTION 11. Payment of Expenses and Taxes. The Company hereby agrees
(a) to pay or reimburse the Noteholder for all its reasonable and documented
costs and expenses incurred in connection with the enforcement or preservation
of any rights under this Senior Note after the occurrence of any Event of
Default, including, without limitation, the reasonable and documented fees and
disbursements of counsel to the Noteholder and (b) to pay, indemnify, and hold
the Noteholder harmless from, any and all recording and filing fees and any and
all liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if
8
<PAGE> 13
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Senior Note.
SECTION 12. Payments. All payments to be made to the Noteholder shall be
made in the lawful money of the United States of America in immediately
available funds.
SECTION 13. Place of Payment. Payments of principal and interest shall be
delivered to the Noteholder by wire transfer of immediately available funds to
the following account: Fleet Bank, Greenwich Avenue Branch, ABA No. 011900445
for credit to Dublind Partners Inc., Account No. 00-6664-5366, or to such other
Noteholder at such other address or to the attention of such other person or to
such other account as specified by prior written notice to the Company.
SECTION 14. Severability. Whenever possible, each provision of this Senior
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Senior Note is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Senior Note.
SECTION 15. Descriptive Headings; Interpretation. The descriptive headings
of this Senior Note are inserted for convenience only and do not constitute a
substantive part of this Senior Note. The use of the word "including" in this
Senior Note shall be by way of example rather than by limitation.
SECTION 16. Governing Law; Submission to Jurisdiction. This Note shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as permitted by Section 5-401 of the New York General Obligations Law
(or any similar successor provision) without giving effect to any choice of law
rule that would cause the application of the laws of any jurisdiction other than
the State of New York. The Company hereby irrevocably and unconditionally:
(i) submits itself and its properties in any legal action or
proceeding relating to this Note, or for recognition and enforcement of any
judgment in respect thereof, to the general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts of any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially
9
<PAGE> 14
similar form of mail), postage prepaid, to it at its address set forth in
or delivered pursuant to Section 18 or at such other address of which the
Noteholders shall have been notified pursuant thereto;
(iv) waives, to the maximum extent not prohibited by Law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section 18 any punitive or exemplary damages and any
damages which are not proximately caused by or the reasonably foreseeable
result of the breach which is the subject of such action or proceeding.
The Company hereby acknowledges that:
(v) it has been advised by counsel in the negotiation, execution
and delivery of this Note;
(vi) the Noteholders do not have any fiduciary relationship with
or duty to the Company arising out of or in connection with this Note; and
(vii) no joint venture or partnership exists between the Noteholders, on
the one hand, and the Company, on the other hand and the relationship of
the Company and the Noteholders is that of inter alia, debtor and creditor.
THE COMPANY AND THE NOTEHOLDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS NOTE, AND
FOR ANY COUNTERCLAIM THEREIN.
THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
SECTION 17. Other Jurisdictions. The Company agrees that the Noteholder
shall have the right to proceed against the Company in a court in any location
to enable such Noteholder to enforce a judgment or other court order entered in
favor of such holder. The Company waives any objection that it may have to the
location of the court in which the Noteholder has commenced a proceeding
described in this Section 17.
SECTION 18. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Senior Note shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (c) sent by next-day or overnight
courier:
10
<PAGE> 15
If to the Noteholder:
Dublind Investments LLC
80 Field Point Road
Greenwich, Connecticut 06830
Attn: Charles Lindsay
Fax Number: (203) 869-5444
Confirm Number: (203) 869-6345
with a copy, which will
not constitute notice to
the Noteholder, to:
Sullivan & Worcester
767 Third Avenue, 39th Floor
New York, New York 10017
Attn: Charles Dubroff, Esq.
Fax Number: (212) 758-2151
Confirm Number: (212) 486-8210
11
<PAGE> 16
If to the Company:
Intracel Corporation
2005 NW Sammamish Road, Suite 107
Issaquah, Washington 98027
Attn: Simon R. McKenzie
Fax Number: (425) 392-2992
Confirm Number: (425) 557-1894
with a copy, which will
not constitute notice to
the Company, to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Joseph W. Bartlett, Esq.
Fax Number: (212) 468-7900
Confirm Number: (212) 468-8240
or at such other address as may be specified in writing to the other parties in
accordance with this Section 18.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been delivered if by personal delivery or by courier on the date
of such delivery and if by certified or registered mail, on the third (3rd)
Business Day after the mailing thereof.
SECTION 19. Business Days. If any payment is due, or any time period for
giving notice or taking action expires, on a day which is not a Business Day,
the payment shall be due and payable on, and the time period shall automatically
be extended to, the next Business Day immediately following such day, and
interest shall continue to accrue at the required rate hereunder until any such
payment is made.
SECTION 20. Usury Laws. The Company and each Noteholder intend to comply
with applicable usury Laws from time to time in effect. At no time shall the
interest rate payable on the Senior Notes exceed the maximum rate of interest,
if any, that at any time or from time to time may be contracted for, taken,
charged or received on the Senior Notes or on any amount which may be owing to
the Noteholders under the Laws applicable to such Noteholders and this
transaction. In the event that the interest rate payable on the Senior Notes
shall exceed the maximum rate of interest allowable under applicable usury Laws,
then the rate of interest shall automatically be reduced to the maximum rate
permitted by Law.
* * * * *
12
<PAGE> 17
IN WITNESS WHEREOF, the Company has executed and delivered this Senior
Note on January 27, 1999.
INTRACEL CORPORATION
By: /s/ SIMON R. MCKENZIE
------------------------------
Name: Simon R. McKenzie
Title: Chief Executive Officer
<PAGE> 1
Exhibit 10.43
[INTRACEL LETTERHEAD]
December 10, 1998
Norman Urmy
Executive Vice President, Clinical Affairs
Vanderbilt University Medical Center
D3300 Medical Center North
Nashville, TN 37232-2102
Dear Mr. Urmy:
This Letter of Intent ("Letter"), when accepted by Intracel Corporation
("Intracel") and Vanderbilt University Medical Center ("Medical Center") shall
confirm the understandings between the parties with respect to the development
of an OncoVAX(R) center.
1. The scope of the Venture is described as follows: The creation of a cGMP
laboratory facility and support areas including administrative space and
storage for the commercialization of Intracel's OncoVAX(R), research on
OncoVAX(R) line extensions, and such other products as Intracel and
Medical Center agree are appropriate for the Venture.
2. It is intended that the Venture shall commence upon the execution of a
Definitive Agreement between Medical Center and Intracel.
3. Each of the parties to this Letter hereby represents to the other that
neither it nor any of its respective affiliates to the best of its
knowledge has entered into or is bound by the terms of any understanding,
agreement, judgment, order or settlement which is inconsistent with the
terms or intent of this Letter, or which would preclude it from entering
into and performing in accordance with the terms of a Definitive
Agreement consistent with the terms or intent of this Letter. Promptly
after the terms of this Letter are mutually agreed to, each party will
cause its attorneys to commence preparation of a draft of the Definitive
Agreement and shall deliver the same to a representative of each party as
promptly as reasonably possible thereafter.
4. The scope of this project is described as follows:
- Medical Center will provide the Venture with Medical Director
service. Medical Director compensation shall be set based upon the
projected time commitment.
- Intracel will operate the laboratory.
- Intracel will purchase additional services from Medical Center,
when agreeable and feasible to Medical Center including but not
limited to:
<PAGE> 2
- Support services such as bioengineering and housekeeping.
- Specialized laboratory testing.
- Hospital networking support.
- Support in developing relationships with managed care entities
and physician groups.
o Intracel and Medical Center agree to coordinate publicity with
respect to the opening of the center.
5. The parties acknowledge that each may provide confidential information to
the other. Each party agrees to be bound by the terms and the conditions
of the separately executed Confidentiality Agreement attached to and made
part of this Letter.
6. Each of the parties hereto shall bear its own legal, accounting, and other
fees and expenses incurred in connection with this project.
7. Although this Letter does express the understanding of the parties with
respect to the Venture, with the exception of the terms of paragraphs 5
and 6, nothing herein will be construed or deemed to constitute any
legally enforceable or binding right or obligation of the parties hereto.
All such rights and obligations shall arise only in connection with the
Definitive Agreement.
8. In the event that the Definitive Agreement is not entered into by January
8, 1999, at the election of any of the parties hereto, this Letter shall
immediately terminate upon written notice given by the terminating party
to the other by messenger or overnight mail, and with the exception of the
terms of the paragraphs 5 and 6 above, shall be of no further force or
effect.
AGREED TO THIS 10 DAY OF DECEMBER, 1996
VANDERBILT UNIVERSITY MEDICAL CENTER
/s/ NORMAN URMY
- --------------------------------------
Norman Urmy
Executive Vice President,
Clinical Affairs
INTRACEL CORPORATION
/s/ DANIEL S. REALE
- --------------------------------------
Daniel S. Reale
Senior Vice President
<PAGE> 1
Exhibit 10.44
[INTRACEL LETTERHEAD]
January 5, 1999
Steven T. Rosen, M.D.
Director
The Robert H. Lurie Comprehensive Cancer Center
Of Northwestern University
Olson Pavilion 8250
303 East Chicago Avenue
Chicago, IL 60611
Dear Dr. Rosen:
This Letter of Intent ("Letter"), when accepted by Intracel Corporation
("Intracel") and Northwestern University ("University") shall confirm the
understandings between the parties with respect to the development of an
OncoVAX(R) Center.
1. The scope of the proposed affiliation is described as follows: The
creation of a cGMP laboratory facility and support areas including
administrative space and storage for the commercialization of Intracel's
OncoVAX(R).
2. It is intended that the proposed affiliation shall commence upon the
execution of a Definitive Agreement between University and Intracel.
3. Each of the parties to this Letter hereby represents to the other that
neither it (directly or indirectly) nor any of its respective affiliates
(directly or indirectly) has entered into or is bound by the terms of any
understanding, agreement, judgment, order or settlement which is
inconsistent with the terms or intent of this Letter, or which would
preclude it from entering into and performing in accordance with the terms
of a Definitive Agreement consistent with the terms or intent of this
Letter. Promptly after the terms of this Letter are mutually agreed to,
each party will cause its attorneys to commence preparation of a draft of
the Definitive Agreement and shall deliver the same to a representative of
each party as promptly as reasonably possible thereafter.
4. The scope of this project is described as follows:
o University and/or Evanston Hospital will provide the proposed
affiliation with Medical Director and physician advisory
services. Medical Director compensation shall be set based upon
this projected time commitment.
o Intracel will rent space from a facility controlled by
University, or Evanston Hospital, or Northwestern Medical Faculty
Foundation.
o Intracel will operate the laboratory.
<PAGE> 2
o Intracel will purchase additional services from University,
including but no limited to:
- Support services such as bioengineering and housekeeping.
- Specialized laboratory testing.
- Sales and marketing support.
- Support in developing relationships with managed care
entities and physician groups.
o Intracel and University agree to coordinate publicity with
respect to the opening of the center.
5. Each of the parties hereto shall bear its own legal, accounting, and other
fees and expenses incurred in connection with this project.
6. Although this Letter does express the understanding of the parties with
respect to the proposed affiliation, with the exception of the terms of
paragraph 5, nothing herein will be construed or deemed to constitute any
legally enforceable or binding right or obligation of the parties hereto.
All such rights and obligations shall arise only in connection with the
Definitive Agreement.
7. In the event that the Definitive Agreement is not entered into by February
15, 1999, at the election of any of the parties hereto, this Letter shall
immediately terminate upon written notice given by the terminating party
to the other by messenger of overnight mail, and with the exception of the
terms of the paragraph 5 above, shall be of no further force or effect.
AGREED TO THIS 5th DAY OF JANUARY, 1999
NORTHWESTERN UNIVERSITY
/s/ STEVEN T. ROSEN
- ------------------------------------------
Steven T. Rosen, M.D.
INTRACEL CORPORATION
/s/ DANIEL S. REALE
- ------------------------------------------
Daniel S. Reale
Senior Vice President
<PAGE> 1
EXHIBIT 10.45
[INTRACEL LETTERHEAD]
December 23, 1998
Lowell Goldsmith, M.D.
Box 706
University of Rochester Medical Center
601 Elmwood Avenue
Rochester, NY 14642
Dear Dr. Goldsmith:
This Letter of Intent ("Letter"), when accepted by Intracel Corporation
("Intracel") and the University of Rochester Medical Center of the University
of Rochester ("Hospital") shall confirm the understandings between the parties
with respect to the development of an OncoVAX(R) center.
1. The scope of the Venture is described as follows: The creation of a cGMP
laboratory facility, in Hospital space designated by the Hospital with
renovations, that meet the Hospital's standards, to be paid by Intracel,
and support areas including administrative space and storage for the
commercialization of Intracel's OncoVAX(R), and such other products as
Intracel and Hospital agree are appropriate for the Venture. Any new
academic research conducted at the laboratory by Hospital faculty or staff
shall be owned by the Hospital, (i.e., excluding any research relating to
OncoVAX(R) or any product related directly thereto.)
2. It is intended that the Venture shall commence upon the execution of a
Definitive Agreement between Hospital and Intracel and shall be for an
initial five year term, renewable upon mutual agreement of the parties.
3. Each of the parties to this Letter hereby represents to the other that it
shall conduct due diligence to assure that neither it (directly or
indirectly) nor any of its respective affiliates (directly or indirectly)
has entered into or is bound by the terms of any understanding, agreement,
judgment, order or settlement which is inconsistent with the terms or
intent of this Letter, or which would preclude it from entering into and
performing in accordance with the terms of a Definitive Agreement
consistent with the terms or intent of this Letter.
4. Promptly after the terms of this Letter are mutually agreed to, each party
will cause its attorneys to commence preparation of a draft of the
Definitive Agreement and shall deliver the same to a representative of each
party as promptly as reasonably possible thereafter.
5. The scope of this project is described as follows:
* Hospital will provide the Venture with Medical Director service. Medical
Director compensation shall be per the parties' mutual agreement and
shall be set based upon the projected time commitment.
<PAGE> 2
o Intracel will operate the laboratory and have full control over
its operations but shall comply with reasonable Hospital
policies.
o Intracel will purchase additional services from Hospital, at a
mutually agreed upon fee structure, including but not limited to:
- Support services such as bioengineering and housekeeping.
- Specialized laboratory testing.
- Sales and marketing support.
- Support in developing relationships with managed care
entities and physician groups.
o Intracel and Hospital agree to coordinate publicity with respect
to the opening of the center.
6. The parties acknowledge that each may provide confidential information to
the other and that each will execute a mutually-agreed upon Confidentiality
Agreement.
7. Each of the parties hereto shall bear its own legal, accounting, and other
fees and expenses authorized by that respective party and incurred in
connection with this project.
8. Although this Letter does express the mutual understandings of the parties
with respect to the Venture, with the exception of the terms of paragraphs
6 and 7 (which shall be enforced in Monroe County under Maryland law),
nothing herein will be construed or deemed to constitute any legally
enforceable or binding right or obligation of the parties hereto and this
letter does not contain all of the matters upon which the agreement of the
parties must be reached in order for the venture to be consummated. All
such rights and obligations shall arise only in connection with the
Definitive Agreement.
9. In the event that the Definitive Agreement is not entered into by January
31, 1999, at the election of any of the parties hereto, this Letter shall
immediately terminate upon written notice given by the terminating party to
the other by messenger or overnight mail, and with the exception of the
terms of the paragraphs 6 and 7 above, shall be of no further force or
effect.
AGREED TO THIS 23 DAY OF DEC., 1998
UNIVERSITY OF ROCHESTER MEDICAL CENTER
/s/ LOWELL GOLDSMITH
- ---------------------------------
Lowell Goldsmith, M.D.
INTRACEL CORPORATION
/s/ DANIEL S. REALE
- ---------------------------------
Daniel S. Reale
Senior Vice President
<PAGE> 1
[INTRACEL LETTERHEAD]
EXHIBIT 10.46
October 9, 1998
Ms. Victoria Wilson, Vice President
Hoag Memorial Hospital Presbyterian
One Hoag Drive
P.O. Box 6100
Newport Beach, CA 92658
Dear Ms. Wilson:
This Letter of Intent ("Letter"), when accepted by Intracel Corporation
("Intracel") and Hoag Memorial Hospital Presbyterian ("Hoag") shall confirm the
understandings between the parties with respect to the development of an
OncoVax(R) center.
1. The scope of the Venture is described as follows: The creation of a cGMP
laboratory facility.
2. It is intended that the Venture shall commence upon the execution of a
Definitive Agreement between Hoag and Intracel.
3. Each of the parties to this Letter hereby represents to the other that
neither it (directly or indirectly) nor any of its respective affiliates
(directly or indirectly) has entered into or is bound by the terms of any
understanding, agreement, judgment, order or settlement which is
inconsistent with the terms or intent of this Letter, or which would
preclude it from entering into and performing in accordance with the terms
of a Definitive Agreement consistent with the terms or intent of this
Letter. Promptly after the terms of this Letter are mutually agreed to,
each party will cause its attorneys to commence preparation of a draft of
the Definitive Agreement and shall deliver the same to a representative of
each party as promptly as reasonable possible thereafter.
4. The scope of this project is described as follows:
o Hoag will provide the Venture with Medical Director service.
Medical Director compensation shall be based upon the projected
time commitment.
o Intracel will operate the laboratory.
o Intracel will purchase additional services from Hoag, including but
not limited to:
-- Support services such as bioengineering and housekeeping.
-- Specialized laboratory testing.
-- Sales and marketing support.
<PAGE> 2
Letter to Victoria Wilson
October 9, 1998
- Support in developing relationships with managed care entities
and physician groups.
- Intracel and Hoag agree to coordinate publicity with respect to
the opening of the center.
4.1 See attached
5. The parties acknowledge that each may provide confidential information to
the other. Each party agrees to be bound by the terms and the conditions
of the separately executed Confidentiality Agreement attached to and made
part of this Letter.
6. Each of the parties hereto shall bear its own legal, accounting, and other
fees and expenses incurred in connection with this project.
7. Although this Letter does express the understanding of the parties with
respect to the Venture, with the exception of the terms of paragraphs 5
and 6, nothing herein will be construed or deemed to constitute any
legally enforceable or binding right or obligation of the parties hereto.
All such rights and obligations shall arise only in connection with the
Definitive Agreement.
8. In the event that the Definitive Agreement is not entered into by March 1,
1999, at the election of any of the parties hereto, this Letter shall
immediately terminate upon written notice given by the terminating party
to the other by messenger or overnight mail, and with the exception of the
terms of the paragraphs 5 and 6 above, shall be of no further force or
effect.
AGREED TO THIS 23 DAY OF NOVEMBER, 1998
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
/s/ [SIG]
- ----------------------------------------
INTRACEL CORPORATION
/s/ DANIEL S. REALE
- ----------------------------------------
Daniel S. Reale
President of OncoVAX Division
-2-
<PAGE> 3
Addendum to Intracel Letter of Intent
4.1 Intracel will be solely responsible for all costs related to the design,
construction, inspection and approvals for the designated space as well
as facility modifications that must be made to accommodate the service.
<PAGE> 1
EXHIBIT 10.47
[INTRACEL LOGO]
August 25, 1998
Patricia A. Barnett
23 West Springhollow Drive
Hopewell, NJ 08525
Dear Pat:
I am pleased to extend the offer outlined below for you to become the Vice
President, Reimbursement of Intracel Corporation. The terms of our offer are as
follows:
Title: Vice President, Reimbursement
Supervision/ Daniel Reale, President, OncoVax Division
Reporting:
Responsibilities: You will oversee the development and implementation of
strategies for attaining reimbursement for OncoVAX Division
products in the United States and Europe. You will be
responsible for the development and implementation of
systems to process claims and collect receivables in a
timely fashion. You will be expected to work with
consulting groups to develop strategies for addressing the
requirements in all countries where OncoVAX is established
as well as to oversee the development of health economic
studies to support reimbursement. You will be responsible
for making presentations to appropriate reimbursement
authorities and for developing case management programs to
handle prior authorizations and inquiries from pairs and
for developing standards to measure success in attaining
collection goals by country and pair group. You will also be
responsible for overseeing the development of billing
procedures and hiring of appropriate staff to support the
timely processing of claims. Finally, you will be a member
of the OncoVAX Division management group.
Salary: $132,500/annually with a 6 month salary review.
<PAGE> 2
Patricia A. Barnett
August 13, 1998
Page 2
<TABLE>
<S> <C>
Performance Bonus
Incentives: You will be eligible to receive a
performance-based bonus up to 50% of your base salary.
Bonus guarantee: We will effectively guarantee the
amount of $25,000 as your bonus for 1998. This bonus
will be paid to you during the first quarter of 1999.
Incentive Stock You will receive 35,000 Incentive Stock Options at the
Options: minimum exercise price to vest in accordance with the
following:
Employment 25%
At 1st Anniversary 25%
At 2nd Anniversary 25%
At 3rd Anniversary 25%
Accelerated Vesting: If you achieve your first year's
objectives, you will also vest 50% of the Year 2
Options. If you achieve your second year's objectives,
you will also vest 50% of the Year 3 Options.
Performance Review: A performance review will be completed six months
following commencement of employment with the Company
and annually, thereafter.
Vacation: Three weeks per year.
Other Benefits: You will become eligible for participating in the
following benefits following a 90-day waiting period
o The Company's Health Plan
o 401K Plan
Relocation Allowance: The Company will reimburse your moving and housing
expenses up to a maximum of $35,000. The Company will
work with you to provide reasonable assistance, if
necessary, in connection with your relocation to the
Rockville area. The Company will also reimburse you for
reasonable costs relating to temporary housing until
you purchase a residence or for up to three months
(whichever comes first). Any reasonable expenses in
excess of $35,000 will be negotiable.
</TABLE>
<PAGE> 3
Patricia A. Barnett
August 13, 1998
Page 3
Severance: Six months, if for no cause.
Change in Control: A Change-In-Control is defined as including a merger of
the Company whereby the Company no longer exists as a
separate entity, the Company survives the merger only
as a subsidiary of another corporation, or for the
merger of another corporation into the Company which
survives if; as a result of such merger less than sixty
percent (60%) of the outstanding voting securities of
the Company shall be owned in the aggregate immediately
after such merger by the owners of the voting shares of
the Company outstanding immediately prior to such
merger. In the event of a Change-In-Control, all of
your stock options will be vested 100% and your salary
for one year paid to you in lump sum immediately after
the Change-In-Control occurs. A letter will be provided
that will further describe additional definitions of a
Change-In-Control and any additional benefits that will
become payable.
Start Date: September 1, 1998.
At the commencement of your employment, you will also be required to sign an
Employment and Confidentiality Agreement under the terms of which you will
agree, amongst other things, that everything you develop at Intracel will be
the sole property of the Company and that you will not disclose any
confidential or proprietary information to third parties.
As a condition of employment, you must meet the requirements of the Immigration
Reform and Control Act of 1986. Employment is also contingent upon submitting
to a drug screening test, for which a negative result is required.
Please review the terms of this offer carefully, call me with any questions,
and if you are in agreement with these terms of employment, please return a
signed duplicate copy of this offer letter to me indicating your acceptance. By
signing this letter, you will agree that this letter contains the entire
agreement between Intracel Corporation and yourself and that you have not been
offered, either verbally or in writing, any additional inducements or been made
any other promises relating to your employment with the Company.
<PAGE> 4
Patricia A. Barnett
August 13, 1998
Page 4
Pat, it has been our pleasure to make your acquaintance during the course of
our recruitment for this position. We have full confidence in your ability to
be a very successful Vice President, Reimbursement at Intracel and we look
forward to working with you in the near future.
Sincerely yours,
/s/ Daniel Reale
Daniel Reale
President, OncoVax Division
Agreed to and Accepted:
8/26/98 /s/ Patricia A. Barnett
- ---------------------- -------------------------------
Date Patricia A. Barnett
<PAGE> 1
EXHIBIT 10.48
DISTRIBUTION AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of April 1, 1997, by and
between Syncor International Corporation, a Delaware corporation with its
principal place of business at 6464 Canoga Avenue, Woodland Hills, California
91367 ("Syncor"), and PerImmune, Inc. ("PerImmune"), a Delaware corporation with
its principal place of business at 1330 Piccard Drive, Rockville, Maryland
20850-4396.
WHEREAS, PerImmune is a biotechnology development company specializing in
the use of immunology for the diagnosis and treatment of disease;
WHEREAS, PerImmune has developed HumaSPECT(R)/CR, a human monoclonal
antibody for the diagnosis and staging of colorectal cancer;
WHEREAS, Syncor is in the business of compounding and distributing
individual unit dose radiopharmaceutical prescriptions, as well as acting as
distributor for certain bulk form radiopharmaceutical products; and
WHEREAS, Syncor desires to act as the exclusive distributor of
HumaSPECT(R)/CR and other PerImmune invivo imaging and direct labeled (including
linker) antibody conjugated radiotherapeutic products throughout the world, and
PerImmune desires to appoint Syncor as the exclusive distributor of its invivo
imaging and direct labeled (including linker) antibody conjugated
radiotherapeutic products throughout the world, in accordance with the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants, rights,
and obligations set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
APPOINTMENT
1.01 Appointment of Distributor; Territory. Commencing as soon as
practicable following the execution hereof (the "Commencement Date") and
continuing until the expiration or sooner termination hereof, subject to the
terms and conditions hereof, PerImmune hereby appoints Syncor, and Syncor
accepts such appointment and agrees to act, as PerImmune's exclusive distributor
of the Products (as defined below in Section 2.01) to any pharmacy or other end
user who purchases the Products, for retail sale thereof or for their own
internal research use (a "Purchaser") located within the Territory. For purposes
of this Agreement, the Territory shall be the world.
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1.02 Risk of Loss. Title to the Products delivered to Syncor by
PerImmune hereunder will transfer upon acceptance of the Products by Syncor.
Syncor shall bear the risk of loss of the Products not yet delivered by Syncor
to a Purchaser, whether by fire, theft, or other casualty.
1.03 Right to Enter into Subdistributor Agreements. Syncor may enter
into one or more subdistributor agreements within the Territory to sell or
otherwise distribute the Products at a specified location or locations;
provided, however, that prior to entering into any such agreement, Syncor shall
submit the name of the proposed subdistributor to PerImmune for its approval,
which approval shall not be unreasonably withheld. Upon receipt by PerImmune of
the name of a proposed subdistributor, PerImmune shall have 15 calendar days to
notify Syncor in writing if it disapproves of such proposed subdistributor,
PerImmune shall have 15 calendar days to notify Syncor in writing if it
disapproves of such proposed subdistributor. Syncor shall provide PerImmune
with a copy of each such subdistributor agreement it enters into within 30 days
after execution thereof. For purposes herein, the term "Syncor" shall include
each subdistributor that has executed a subdistribution agreement with Syncor.
1.04 Exclusivity; Scope. The rights granted to Syncor hereunder are
intended to be exclusive to Syncor and, other than as expressly permitted
herein, (a) PerImmune shall not sell or offer for sale the Products, either
directly or indirectly, to any Purchaser other than exclusively through Syncor
and (b) PerImmune shall not, directly or indirectly, sell, offer for sale any
products similar to or competitive with the Products.
ARTICLE 2
PRODUCTS
2.01 Initial Products. Subject to the terms and conditions hereof,
Syncor shall be the exclusive distributor of HumaSPECT(R)/CR and other
PerImmune invivo imaging and direct labeled (including linker) antibody
conjugated radiotherapeutic products (collectively, the "Product Category")
throughout the world. For purposes herein, "Products" shall mean, initially,
the Products to be distributed pursuant to this Agreement that are listed on
Schedule 1 attached hereto, as may be amended from time to time.
2.02 Additional Products. In the event that PerImmune proposes to sell a
product or service within the Product Category other than those set forth on
Schedule 1. PerImmune shall notify Syncor, which shall have a period of 45
calendar days from the date of receipt of such notice to accept or reject the
exclusive distribution of such new product or service pursuant to the terms
hereof, except for the price of such product, which shall be negotiated in good
faith by the parties hereto. In the event that Syncor rejects the distribution
of such new product or service, then PerImmune shall have the right to offer
such product or service to another distributor, provided, however, that prior
to executing an agreement with such other distributor, PerImmune shall once
again offer the exclusive distribution of such product or service to Syncor on
the same terms and conditions
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accepted by such other distributor. If, after 45 calendar days, Syncor fails to
accept such terms, PerImmune shall have the right to execute an agreement with
such other distributor on the terms presented to and rejected by Syncor. In the
event that Syncor elects to distribute such new product or service, the new
product or service shall be added to and become part of the definition of
Product and shall be distributed by Syncor in accordance with the terms and
conditions of this Agreement, as may be modified in writing from time to time.
ARTICLE 3
PRICES; PAYMENT; SHIPMENTS
3.01 Prices: Payment. Syncor shall fix the prices of individual Products
sold hereunder. On a monthly basis, Syncor shall pay to PerImmune, in United
States Dollars, fifty percent (50%) of the Net Sales, as defined below, received
by Syncor from the sale of the Products, less the Advances, as hereinafter
defined, paid by Syncor to PerImmune during such month. For purposes herein,
"Advances" shall mean an amount equal to the lesser of (i) 25% of the list price
or (ii) 50% of Net sales, per kit, paid by Syncor to PerImmune within 30 days of
Syncor's receipt of kits ordered by it. Unless Syncor and PerImmune otherwise
agree in a writing signed both of them, the payment and other provisions set
forth in this Agreement shall supersede those of any subsequent purchase order,
sales confirmation form or other document hereafter sent by either party hereto
to the other. For purposes hereof, Net Sales shall mean the gross invoiced price
for the sales of the Products to Purchasers by Syncor, its agents or affiliates
("Gross Sales") less (a) any credits and allowances granted by Syncor to
purchasers with respect to the Products, including, without limitation, credits
and allowances on account of price adjustments, returns, discounts, and
chargebacks, (b) any sales, exercise, value added, turnover or similar taxes,
and (c) transportation, insurance and handling expenses if separately invoiced
and directly chargeable to such sales.
3.02 Orders. Syncor's orders shall specify the type and quantity of
Product to be purchased or shipped and shall state the desired shipment date or
dates. Syncor shall be permitted to place orders by telephone or facsimile
transmission and orders shall be deemed to be accepted upon receipt by
PerImmune.
3.03 Packaging and Labeling: Shipment. All Products shall be packaged by
PerImmune and shall bear PerImmune's label plus the words "distributed by Syncor
International Corporation". PerImmune shall deliver, pursuant to applicable
transportation regulations, all Products ordered by Syncor to the distribution
point designated by the party placing such order. All costs, taxes, insurance
premiums and other expenses relating to the transportation and delivery of the
Products shall be at PerImmune's expense. All shipments shall be insured to the
limits of the carrier and properly packaged to ensure the integrity of the
Product, shall include a technical specification sheet (including a manufacture
and expiration date for the Product) for each Product, and shall
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be shipped in accordance with Syncor's instructions. All shipments shall be
marked clearly with a catalog number corresponding to the Product number listed
in Schedule 1 hereto, and a copy of the applicable technical specification
sheets shall be forwarded to Syncor simultaneously upon shipment.
3.04 Returns. In the event that PerImmune ships any Product to
Syncor with an expiration date less than one year following Syncor's receipt of
such Product, or in the event of termination of this Agreement pursuant to
Article 9 below, then any such Products that expire while in Syncor's
inventory, or are in Syncor's inventory at the time of termination, as the
case may be, shall be returned to PerImmune for full credit by contacting
PerImmune for a return authorization number, shipped pursuant to PerImmune's
instructions at PerImmune's cost.
ARTICLE 4
OBLIGATIONS OF PERIMMUNE
4.01 Regulatory Approvals. PerImmune shall obtain and maintain all
regulatory approvals required to market and distribute the products throughout
the Territory, including, without limitation, using all reasonable diligence in
pursuing the processing of (a) its existing filing with the FDA to obtain an
approved BLA for the Products and (b) any and all approvals required for
distribution in any country outside of the United States.
4.02 Clinical trials. PerImmune will actively support clinical
trials and other programs required by the FDA for approval of the Products for
specific clinical indications. PerImmune shall encourage clinical investigators
and researchers to publicly disseminate data at professional meetings, as well
as in peer-reviewed professional journals and other publications, to document
the safety and clinical value of products for current and new approved uses.
4.03 Competitiveness. PerImmune shall provide information to Syncor
on the nature of the Products in comparison with the various competing products
and technologies offered by other manufacturers. Such information may include
technical, regulatory or market information relevant to the commercial
competitiveness and clinical utility of the Products. PerImmune shall develop
and maintain relationships with clinical investigators and other physicians and
health care providers, and facilitate Syncor's relationships with such
individuals, to provide a source of advice regarding the Products and market
competition.
4.04 Promotional materials. PerImmune shall provide such quantities
of clinical and educational materials as requested by Syncor for use by Syncor
with physicians, technologists and other purchasers. Whenever possible,
PerImmune shall make such clinical and educational materials available to
Syncor in advance of their production and dissemination to third parties so
that Syncor will have sufficient opportunity to make
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comments and suggest modifications. To the extent that any such materials use
Syncor's name or otherwise refer to Syncor, PerImmune shall obtain the prior
written consent of Syncor.
4.05 Clinical and technical information. PerImmune shall provide
sufficient clinical and technical information to Syncor and its Purchasers as
may be required to assure the safe and effective use of the Products.
4.06 New Information. PerImmune shall provide prompt notification to
Syncor of any new information that would impact the marketability of the
Products or the manner in which the Products should be used in order to be safe
and effective.
4.07 Research and development. Annually, PerImmune shall spend an
amount equal to 15% of sales of the Products on research and development
activities related to the Products in an effort to improve upon and expand the
range of approved uses for the existing Products, and to develop new products
to be distributed hereunder.
4.08 Reimbursement for marketing expenses. In consideration for
Syncor's purchase of the Preferred Stock, as defined in Section 6.01 below,
PerImmune shall reimburse Syncor for (a) all expenses incurred by it in
connection with the marketing, advertising and promotion of the Products
hereunder, up to a maximum amount of $1,500,000 and (b) fifty percent (50%) of
all expenses incurred by it in excess of $1,500,000 (the "Additional Marketing
Expenses"); provided that such Additional Marketing Expenses were incurred by
Syncor in accordance with an annual marketing plan to be prepared by Syncor and
approved in advance by PerImmune.
ARTICLE 5
OBLIGATIONS OF SYNCOR
5.01 Distribution of the Products. Syncor shall act as PerImmune's
exclusive distributor of the Products to the Purchasers throughout the
Territory.
5.02 Promotional materials. Syncor shall produce such promotional
and educational materials it deems necessary to support the marketing, sales
and distribution of the Products. Whenever possible, Syncor shall make such
promotional and educational materials available to PerImmune in advance of
their production and dissemination to third parties so that PerImmune will have
sufficient opportunity to make comments and suggest modifications. To the
extent that any such materials use PerImmune's name or otherwise refer to
PerImmune, Syncor shall obtain the prior written consent of PerImmune.
5.03 Stimulate demand. Syncor shall develop and implement
educational, promotional, and sales programs to stimulate demand for the
Products among Purchasers,
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referring medical specialists, and health care financial intermediaries such as
HMOs, managed care organizations, and fee-for-service payors.
5.04 Training and education. Syncor shall provide training and education
to Purchasers, other health care providers and patients as needed to promote the
safe and effective use of the Products.
5.05 Compliance with laws. Syncor shall comply with any applicable laws,
regulations and other governmental requirements regarding the registration,
storage, distribution, labeling and sale of the Products within the Territory.
5.06 Market information. Develop and maintain relationships with clinical
investigators, and other physicians and health care providers, and facilitate
PerImmune relationships with such individuals, to provide a source of Purchaser
advice and feedback regarding the Products and market competition.
5.07 Market developments. Subject to any limitations stemming from
obligations to third parties to keep confidential certain information, Syncor
shall advise PerImmune of any significant business developments, market trends,
customer response, and competing products and technologies related to current
and potential new uses of the Products.
5.08 Trademarks. Syncor shall use such Product trademarks as directed by
PerImmune and shall ensure that such trademarks are displayed, with an
indication that they are the registered trademarks of PerImmune, in all price
lists and promotional materials prepared and used by Syncor in connection with
the distribution of the Products.
5.09 Consultation with PerImmune. On a regular basis, Syncor shall
consult with PerImmune with respect to market conditions and penetration goals.
ARTICLE 6
EQUITY PARTICIPATION
6.01 Equity participation. The obligations of the parties to perform
hereunder are subject to the execution by Syncor and PerImmune Holdings, Inc.,
on or before April 11, 1997, of a Stock Purchase Agreement, pursuant to which
Syncor shall purchase one hundred (100) shares of PerImmune's Series A
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock")
with an aggregate liquidation preference of Four Million Five Hundred Thousand
Dollars ($4,500,000).
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ARTICLE 7
COMPLAINTS/RECALLS/REGULATORY CHANGES
7.01 Complaints. Copies of all complaints concerning the Products
received or originated by Syncor or otherwise coming to the attention of Syncor
shall be forwarded immediately to PerImmune to the attention of Manager of
Regulatory Affairs. All Product complaints shall be forwarded in a timely
manner by Syncor to PerImmune for action and PerImmune shall act promptly
thereon.
7.02 Recalls. In the event that either party has reason to believe
that one or more lots of Products should be recalled or withdrawn from
distribution, such party shall immediately notify the other party in writing
and verbally. To the extent permitted by the circumstances, the parties will
confer before initiating any recall, but the decision as to whether or not to
initiate recall of Products in the Territory shall be PerImmune's alone. SYNCOR
shall maintain adequate sales and service records to enable it to carry out any
product recall and to conduct such recall. If the recall is required for any
reason other than a negligent act or omission of SYNCOR in handling, storage or
distribution of the Products, PerImmune shall reimburse SYNCOR for the costs
and expenses of such recall and shall replace such recalled Products. If the
recall is required because of a negligent act or omission of SYNCOR in
handling, storage or distribution of the Products, then such recall shall be
conducted by SYNCOR at its sole cost and expense and SYNCOR shall not be
entitled to any such refunds or replacements from PerImmune. If such recall is
required because of a joint act or omission, SYNCOR shall conduct the recall
and the parties shall negotiate in good faith an appropriate allocation of the
costs and expense of such recall.
7.03 Regulatory Records; Adverse Reactions. Each party shall be
responsible for maintaining such records and making such reports as may be
required by the FDA and any other applicable regulatory agency. Each party
shall promptly inform the other of all adverse drug experience reports and
other information relating to the safety or effectiveness of the Products which
come to its attention, in a form and within time periods necessary to permit
compliance with all applicable regulatory requirements under FDA rules and
regulations.
7.04 Regulatory Changes. Each party shall promptly advise the other
party of any known new instructions or specifications relating to the Products
required by the FDA and other applicable authorities, and the parties shall
confer with respect to the best mode of compliance with such new requirements.
Compliance with such new requirements shall be the sole responsibility of
PerImmune.
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ARTICLE 8
WARRANTIES AND INDEMNIFICATION
8.01 Product Warranties. PerImmune shall and hereby does warrant to
Syncor that (a) the Products when shipped will not be adulterated or misbranded
within the meaning of the United States Food, Drug and Cosmetic Act, nor be
articles which may not, under the provisions of Section 505 of that Act, be
introduced into interstate commerce and (b) the Products will be manufactured,
packaged and labeled in compliance with all applicable laws and regulations
throughout the Territory related to distribution of the Products. PerImmune
guarantees all Products to be delivered by it to Syncor as to quality and
identity and shall be laboratory controlled to conform to the quality control
standards contained in the appropriate BLAs, NDAs or any other approvals
required for such Products. The guarantee, together with Product batch numbers,
shall appear on all packing slips included by PerImmune in connection with sales
of products to Syncor. PerImmune shall and hereby does guarantee to Syncor that
the Products when shipped will conform to PerImmune's printed specifications
therefor.
8.02 Corporate Authority. Each party warrants and represents to the other
that it has the full right and authority to enter into this Agreement, that all
corporate action necessary to authorize the execution and delivery of this
Agreement by such party has been duly and properly taken, and that it is not
aware of any impediment that would inhibit its ability to perform its
obligations under this Agreement.
8.03 Patents and Trademarks. PerImmune hereby represents and warrants
that it has no knowledge of the existence of any patent in the Territory owned
or controlled by anyone which covers the Products or would prevent Syncor from
promoting or distributing or PerImmune from making, promoting or distributing,
the Products in the Territory. PerImmune further represents and warrants that
Syncor's promotion and distribution of the Products in the Territory will not
infringe the trademarks of any third party.
8.04 Indemnification. PerImmune agrees to indemnify and hold Syncor, its
officers, directors, agents, successors, and assigns, collectively and
severally, from and against, any and all loss, liability, expense, damages,
claims, suits, proceedings, actions, judgments, assessments, penalties, orders
for specific performance or otherwise, whatsoever and howsoever caused or
incurred, including, without limitation, reasonable attorneys' fees and costs,
arising out of or in connection with (a) any breach by PerImmune of any
provision of this Agreement, (b) any product liability claim, or (c) any patent
violations. If Syncor has actual notice that such a product liability claim is
likely to be asserted against it, Syncor shall promptly notify PerImmune and
give PerImmune or its insurance carrier the opportunity to undertake the defense
of such claim, including any negotiations relating to its settlement.
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8.05 Insurance. PerImmune shall place in effect and maintain products
liability insurance, including vendor's endorsement, providing protection to
Syncor against any period with respect to any Product. Such coverage shall be in
an amount of not less than $1,000,000 for injury or death of one person in any
one accident or occurrence and in an amount not less than $3,000,000 for injury
or death of more than one person in any one accident or occurrence and in an
amount not less than $1,000,000 for property damage. The monetary limits of such
policies shall not limit the liability of PerImmune hereunder. PerImmune shall
supply to Syncor certificates evidencing the existence and amounts of such
insurance.
ARTICLE 9
TERM AND TERMINATION
9.01 Term; Termination. This Agreement shall commence on the Commencement
Date and shall expire upon the fifth anniversary of the Commencement Date;
provided, however, that unless Syncor notifies PerImmune in writing not later
than 90 days prior to the date this Agreement otherwise would expire of its
election to allow this Agreement to expire at the end of the original or any
subsequent term, this Agreement shall be deemed to have been renewed, without
any further action on the part of either party hereto, for successive two-year
terms.
9.02 Early Termination of Agreement.
(a) Breach. If either party should breach this Agreement and
fail to correct the breach to the reasonable satisfaction of the other party
within 30 days following a written notice specifying the breach, the
non-breaching party, in addition to any other rights available to it under law
or equity, may terminate this Agreement any obligations undertaken or any
licenses granted hereunder by written notice to the defaulting party. Remedies
shall be cumulative and there shall be no obligation to exercise a particular
remedy.
(b) Bankruptcy. Either party's insolvency, the appointment of a
custodian for the assets of either party, any assignment of either party's
assets for the benefit of creditors, any filing by either party of a voluntary
petition in bankruptcy or the filing of an involuntary petition in bankruptcy
against either party which is not resolved in that party's favor within 60 days
after filing, any other action for the protection of either party's creditors,
or either party's dissolution or ceasing to conduct business in the normal
course, shall give the other party the right to terminate this Agreement
immediately.
(c) FDA Approval. Without limiting its right to termination for
material breach as contemplated by subsection (a) above, Syncor shall have the
right to terminate this Agreement upon sixty (60) days' prior notice to
PerImmune given at any time the FDA refuses to allow PerImmune to continue
producing the Products for sale in the Territory.
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9.03 Effect of Termination.
(a) Cessation of Marketing. Should this Agreement expire or be
terminated for any reason, all rights granted in this Agreement respecting
marketing, promotion, distribution and sublicensing of the Products shall
cease, and each party shall return to the other within 90 days of the
termination date all written materials provided by such other party relating to
the Products, including the Confidential Information or the destruction of all
such materials shall be certified to the receiving party by an officer of the
returning party; provided, however, that the returning party shall be allowed
to retain one copy of all such materials for archival purposes.
(b) Limit of Liability on account of Termination; No
Consequential Damages. Should this Agreement or any portion thereof expire or
be terminated for any reason, neither party will be liable to the other because
of such expiration or termination for compensation, reimbursement or damages on
account of the loss of prospective profits, anticipated sales, goodwill or on
account of expenditures, investments, leases or commitments in connection with
the business of PerImmune or Syncor, or for any other reason whatsoever flowing
from such termination. Termination of this Agreement shall not release the
parties from liability to pay any fees owing under the terms of this Agreement.
In any event, and whether or not this Agreement or any portion thereof expires
or is terminated for any reason, neither party will be liable to the other for
any lost profits, incidental, consequential or indirect damages of any kind,
even if the party has been advised of the possibility of such damages.
(c) In the event of termination, PerImmune shall refund all
Advances paid by Syncor for Products remaining in Syncor's inventory on the
termination date.
ARTICLE 10
CONFIDENTIALITY
10.01 Confidential Information Defined. For purposes herein,
Confidential Information shall mean written information, marked as
confidential, relating to the business, products or services of a party to this
Agreement which is either non-public, confidential or proprietary in nature;
provided, however, that Confidential Information shall not include (i)
information which has come within the public domain through no fault or action
of the other party; (ii) information that was known to the other party prior to
its disclosure in connection with the negotiation of this Agreement; or (iii)
information which becomes rightfully available to the other party on a
non-confidential basis from any third party, the disclosure of which to such
other party does not violate any contractual or legal obligation the third
party has to the first party with respect to such Confidential Information.
10.02 Nondisclosure. For a period of three (3) years from the
expiration or termination hereof, whichever occurs later.
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(a) each party shall refrain from the use of Confidential
Information furnished by the other party for any purpose inconsistent with this
Agreement; and
(b) each party shall treat Confidential Information furnished by
the other party as if it were its own proprietary information and shall not
disclose it to any third party other than its affiliates, employees, consultants
or agents without the prior written consent of the other party who furnished
such information; provided, however, that such Confidential Information may be
disclosed if in the reasonable opinion of the recipient's counsel, such
disclosure is necessary to comply with the requirements of any law, governmental
order (including a court order), regulation or Internal Revenue Service request.
The recipient shall notify and consult with the disclosing party prior to such
disclosure of information.
10.03 Disclosure Required by Law. In the event that PerImmune or SYNCOR
shall be required to make disclosure of the other's Confidential Information as
a result of the issuance of a court order or other government process, the party
subject to such requirement promptly, but in no event more than forty-eight (48)
hours after learning of such court order or other government process, shall
notify the other party and, at the other party's expense, the party subject to
such requirements shall: (a) take all reasonably necessary steps requested by
the other party to defend against the enforcement of such court order or other
government process and (b) permit the other party to intervene and participate
with counsel of its choice in any proceeding relating to the enforcement
thereof.
ARTICLE II
MISCELLANEOUS
11.01 Notices. All notices and other communications provided for or
permitted to be given under this Agreement shall be in writing and shall be
given by depositing the notice in the United States mail, addressed to the party
to be notified, postage paid, and registered or certified with return receipt
requested, or by such notice being delivered in person or by facsimile
communication to such party. Notices or other communications given or served
pursuant hereto shall be effective upon receipt by the party to be notified. All
notices or other communications to be sent to a party hereto shall be sent to or
made at the address given for that party in the preamble to this Agreement or
such other address as that party may specify by notice to the other party.
11.02 Entire Agreement. This Agreement, together with the Stock Purchase
Agreement referred to in Section 6.01 above, constitute the entire agreement of
the parties relating to the subject matter hereof and supersede any and all
prior written or oral contracts, understandings, negotiations, and agreements
with respect to the subject matter hereof.
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11.03 No Waiver. No delay or failure on the part of any party in
exercising any rights hereunder, and no partial or single exercise thereof,
shall constitute a waiver of such rights or of any other rights hereunder.
11.04 Enforceability. In the event that any provision of this Agreement,
and the application of such provision to any person or circumstance, is
determined by a court, arbitrator or other adjudicator to be invalid or
unenforceable to any extent, the remainder of this Agreement, or the application
of such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and such provision and
each other provision of this Agreement shall be valid and enforceable to the
greatest extent permitted by law.
11.05 Amendments. This Agreement may be amended or modified from time to
time only by a written instrument executed by the parties hereto.
11.06 Assignment. This Agreement and the obligations created hereunder
shall not be assigned or delegated by the parties hereto without the prior
written consent of the other party.
11.07 Governing Law. This Agreement is governed by and shall be construed
in accordance with the laws of the State of California, excluding any
conflicts-of-law rule or principle that might refer the governance or
construction of this Agreement to the law of another jurisdiction.
11.08 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, the parties shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and said transactions.
11.09 Counterparts; Facsimile Transmissions. This Agreement may be
executed in multiple counterparts with the same effect as if the signing parties
had signed the same document. All counterparts shall be construed together and
constitute the same instrument. Delivery of an executed counterpart of this
Agreement by facsimile shall be equally as effective a delivery of a manually
executed counterpart of this Agreement. Upon the request of any party, any party
who shall have delivered an executed counterpart of this Agreement by facsimile
also shall deliver a manually executed counterpart, but the failure to so
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
11.10 Attorney's Fees. In the event of any arbitration, litigation, or
other legal proceeding involving the interpretation of this Agreement or
enforcement of the rights or obligations of the parties hereto, the prevailing
party or parties shall be entitled to recover reasonable attorney's fees and
expenses as determined by the court, arbitrator or other
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adjudicator. In the event that the arbitration, litigation or other legal
proceeding is successful only in part, the court, arbitrator or other
adjudicator shall be entitled to prorate and allocate said fees and expenses
between the parties.
11.11 Taxes. Each party shall bear and pay all federal and state income
taxes on income earned by such party in connection with the sale or other
distribution of Products hereunder. Each party shall be responsible for and
shall prepare and file all returns and pay any and all excise, sales, use or
other similar taxes which may be levied on each party as a result of the
distribution transactions contemplated hereby.
11.12 Headings. The headings in this Agreement are included for
convenience of reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.13 Arbitration. Any controversy or dispute arising under this
Agreement shall be settled by arbitration in Los Angeles, California in
accordance with the rules and procedures of the American Arbitration
Association and judgment upon the award rendered by the arbitrator or
arbitrators may be entered in any Court having jurisdiction thereof. The
arbitration decision shall be final and binding. Written notice of the demand
for arbitration shall be made within a reasonable time after claim, dispute or
other matter in question has arisen, but in no event shall it be made more than
one year after the claim, dispute or matter arose.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PERIMMUNE, INC.
By: /s/ M. G. HANNA, JR.
------------------------------------
Name: M.G. Hanna, Jr.
Its: President & CEO
SYNCOR INTERNATIONAL CORPORATION
By: /s/ ROBERT G. FUNARI
------------------------------------
Name: Robert G. Funari
Its: President & CEO
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SCHEDULE 1
PRICE LIST
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EXTENSION AGREEMENT
In consideration of the terms, covenants and conditions set forth in that
certain Distribution Agreement, dated as of April 1, 1997, by and between
PerImmune Holdings, Inc., a Delaware corporation ("PerImmune"), and Syncor
International Corporation, a Delaware corporation ("Syncor"), and the terms,
covenants and conditions set forth herein, PerImmune and Syncor hereby agree
that the time for execution of a Stock Purchase Agreement, pursuant to which
Syncor shall purchase one hundred (100) shares of PerImmune's Series A
Convertible Preferred Stock, par value $0.01 per share with an aggregate
liquidation preference of Four Million Five Hundred Thousand Dollars
($4,500,000) be, and hereby is, extended through and including Tuesday,
April 25, 1997.
This 11 day of April, 1997.
PERIMMUNE HOLDINGS, INC.
By: [SIG ILLEGIBLE]
----------------------------
SYNCOR INTERNATIONAL CORPORATION
By:
----------------------------
<PAGE> 1
EXHIBIT 10.49
[Letterhead of Intracel Corporation]
January 20, 1999
Intracel Corporation
1330 Piccard Drive
Rockville, MD 20850
This letter confirms our commitment to invest, at the request of
Intracel Corporation (the "Company"), up to $5 million in the Company within the
next six to twelve months. The investment shall be for the Company's
non-convertible debt securities bearing interest at a rate of fifteen percent
(15%) per annum and payable one-year after the funding date.
This commitment will be deemed null and void if not drawn down upon by
the one year anniversary of the consummation of the Company's initial public
offering of its common stock to the public.
IN WITNESS WHEREOF, the parties below have executed this agreement as
the date above first written.
/s/ Raymond J. Schuyler
- ----------------------------------
Raymond J. Schuyler
/s/ Simon R. McKenzie
- ----------------------------------
Simon R. McKenzie
/s/ Michael G. Hanna Jr., Ph.D.
- ----------------------------------
Michael G. Hanna Jr., Ph.D.
/s/ Lawrence A. Bloom
- ----------------------------------
Lawrence A. Bloom
<PAGE> 1
EXHIBIT 10.50
SECOND AMENDMENT AGREEMENT, dated as of the 6th day of February, 1999, by and
among Intracel Corporation, a Delaware corporation (the "Company"), PerImmune
Holdings, Inc., a wholly-owned subsidiary of the Company ("Holdings"), PerImmune
Inc., a wholly-owned subsidiary of Holdings ("PerImmune"), Bartels, Inc., a
wholly-owned subsidiary of the Company ("Bartels"), and the noteholders set
forth on the signature page hereto (the "Noteholders"). Capitalized terms used
but not defined herein shall have the meanings ascribed to such terms in the
Securities Purchase Agreement.
WITNESSETH:
WHEREAS, in connection with that certain Securities Purchase Agreement
dated August 25, 1998 among the Company, Holdings, PerImmune and the Noteholders
(the "Purchase Agreement"), the Company issued and sold (A) those certain 12%
Senior Secured Primary Promissory Notes dated August 25, 1998 in the original
principal amount of (i) $3,841,463 for the benefit of Northstar High Yield Fund;
(ii) $22,195,122 for the benefit of Northstar High Total Return Fund; (iii)
$7,682,927 for the benefit of Northstar High Total Return Fund II and (iv)
$1,280,488 for the benefit of Northstar Strategic Income Fund (collectively, the
"Senior Notes") and (B) those certain 12% Guaranteed Senior Secured Escrow
Promissory Notes dated August 25, 1998 of Intracel Corporation in the original
principal amount of (i) $658,537 for the benefit of Northstar High Yield Fund;
(ii) $3,804,878 for the benefit of Northstar High Total Return Fund; (iii)
$1,317,073 for the benefit of Northstar High Total Return Fund II and (iv)
$219,512 for the benefit of Northstar Strategic Income Fund (collectively, the
"Escrow Notes" and, together with the Senior Notes, the "Notes");
WHEREAS, in January 1999, the Company, Holdings, PerImmune, Bartels and
the Noteholders entered into a First Amendment and Waiver Agreement (the "First
Amendment") which, among other things, (i) amended the terms of the Escrow Notes
to eliminate the Company's obligation to redeem the Escrow Notes with proceeds
received from the Initial Public Offering (as defined below) or any other debt
or equity offering prior to the consummation of the Initial Public Offering,
(ii) amended the Interest Escrow Security Agreement to eliminate the balance
required to be maintained in the escrow account created thereunder and to permit
the next three schedules interest payments to be paid out of amounts currently
held in such escrow account and (iii) waived certain non-payment events of
default and compliance by the covenants set forth in Purchase Agreement, the
Notes and the other Ancillary Agreements.
WHEREAS, pursuant to Sections 5.6(a), (b) and (c) of the Purchase
Agreement, the Company is required to comply with certain financial covenants
regarding Adjusted Debt to EBITDA Ratio, Minimum Tangible Net Worth Levels and
EBITDA to Interest Expense Ratio.
WHEREAS, pursuant to Section 1(d)(i)(B) of the Notes, if Simon McKenzie
should cease to be the principal executive officer of the Company in charge of
the Company's management and policies for a period of 30 days or more and the
holders of
<PAGE> 2
the Notes constituting 70% of the total amount due under all such notes have not
approved a success to Mr. McKenzie within 180 days after the cessation of his
full time service to the Company, the Company will be required, at the request
of the Noteholders, to prepay the Notes at a price equal to 101% of the
principal amount, so prepaid, plus accrued interest to the date of prepayment.
WHEREAS, pursuant to Section 1(e) of each of the Notes, the Company is
required to comply with the respective EBITDA Ratios on each EBITDA Measurement
Period;
WHEREAS, non-compliance with the financial covenants under Sections
5.6(a), (b) and (c) of the Purchase Agreement or Section 1(e) of the Notes could
cause the Notes to become immediately due and payable;
WHEREAS, the Company has filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission on July 9, 1998 relating to the proposed
sale of shares of its Common Stock to the public (the "Initial Public
Offering");
WHEREAS, the representatives for the underwriters in the Initial Public
Offering, Donaldson, Lufkin & Jenrette Securities Corporation and Piper Jaffray
Inc. (the "Representatives") have determined that the financial covenants under
Section 5.6(a)-(c) of the Purchase Agreement and Section 1(e) of the Notes and
any non-compliance thereunder by the Company which could cause the Notes to
become immediately due and payable and Section 1(d)(i)(B) of the Notes requiring
prepayment under the conditions set forth therein, would adversely affect the
marketing of the securities to be sold by the Company in the Initial Public
Offering; and
WHEREAS, the Noteholders acknowledge and agree that it would be in their
best interests for the Company to consummate the Initial Public Offering as
contemplated by the Representatives.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereby agree with each other as follows:
1. AMENDMENT TO NOTES.
(a) In accordance with Section 10 of each of the Notes, Sections
1(d)(i)(B), 1(f), 6(a)(xiv) and Exhibit B of each of the Notes are hereby
deleted in their entirety. All cross-references in the Notes shall be changed as
appropriate to reflect the deletions set forth herein.
(b) As soon as practicable after the date hereof, the Company and the
Noteholders agree to execute Amended and Restated Notes reflecting the amendment
set forth above and otherwise (and with respect to the Escrow Notes, to reflect
the terms and conditions of the First Amendment) on the same terms and
conditions as the Notes (the
2
<PAGE> 3
"Amended Notes"), which Amended and Restated Notes shall be prepared by and at
the expense of the Company and shall be delivered to the respective Noteholders
in exchange for the original Notes which shall be delivered by the Noteholders
to the Company.
2. AMENDMENT TO PURCHASE AGREEMENT. In accordance with Section 8.7 of the
Purchase Agreement, Sections 5.6(a), (b) and (c) of the Purchase
Agreement are hereby deleted in their entirety. All cross-references in
the Purchase Agreement shall be changed as appropriate to reflect the
deletions set forth herein.
3. NO MODIFICATIONS.
Except as amended hereby, the terms and conditions of the Notes and the
Purchase Agreement shall continue in full force and effect and are hereby in all
respects ratified and confirmed.
4. FURTHER ASSURANCES.
The Company and the Noteholders agree to execute and deliver any and all
such additional documents, instruments, as may be necessary or desirable to
confirm and carry into effect the agreements set forth herein.
5. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
6. GOVERNING LAW.
This Agreement shall be construed, and the rights and obligations of the
parties hereunder determined, in accordance with and governed by the internal
laws of the State of New York (as permitted by Section 5-1401 of the New York
General Obligations Law (or any similar successor provision)) without giving
effect to any choice of law rule that would cause the application of the laws of
any jurisdiction other than the internal laws of the State of New York to the
rights and duties of the parties.
7. SEVERABILITY.
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provisions shall be excluded from this Agreement and
the balance of this Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
3
<PAGE> 4
8. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall be deemed to constitute one
and the same instrument.
[Remainder of page intentionally left blank]
4
<PAGE> 5
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first written above.
INTRACEL CORPORATION
By:
-----------------------------------
Name:
Title:
PERIMMUNE HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
PERIMMUNE, INC.
By:
-----------------------------------
Name:
Title:
BARTELS, INC.
By:
-----------------------------------
Name:
Title:
5
<PAGE> 6
NOTEHOLDERS:
NORTHSTAR HIGH YIELD FUND
By:
-----------------------------------
Name:
Title:
NORTHSTAR HIGH TOTAL RETURN FUND
By:
-----------------------------------
Name:
Title:
NORTHSTAR HIGH TOTAL RETURN FUND II
By:
-----------------------------------
Name:
Title:
NORTHSTAR STRATEGIC INCOME FUND
By:
-----------------------------------
Name:
Title:
6
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Intracel Corporation's registration statement on
Form S-1 (File No. 333-58819) of our report dated January 19, 1999, after the
restatement described in Note 15, on our audit of the September 30, 1998 and
December 31, 1997 financial statements of Intracel Corporation. We
also consent to the reference to our firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Seattle, Washington
February 8, 1999
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Intracel Corporation's registration statement on
Form S-1 (File No. 333-58819) of our report dated April 2, 1998, except for the
second paragraph of Note 14 as to which the date is June 8, 1998, on our audit
of the 1997 financial statements of Perimmune Holdings, Inc. and Subsidiary. We
also consent to the reference to our firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
McLean, Virginia
February 8, 1999
<PAGE> 1
Exhibit 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
"Selected Financial Data" and to the use of our report dated December 3, 1997,
except for paragraph 3 of Note 6 and paragraph 10 of Note 10, as to which the
date is January 2, 1998, Note 15, as to which the date is December 10, 1998,
and paragraph 13 of Note 10 as to which the date is February 8, 1999,
included in Amendment No. 4 to the Registration Statement (Form S-1 No.
333-58819) and related Prospectus of Intracel Corporation for the registration
of shares of its common stock.
ERNST & YOUNG LLP
Seattle, Washington
February 8, 1999
<PAGE> 1
EXHIBIT 23.4
The Board of Directors
Intracel Corporation:
We consent to the use of our reports included herein and to the reference to
our firm under the headings "Selected Financial Data for PerImmune Holdings and
Predecessor Companies" and "Experts" in the prospectus.
/s/ KPMG LLP
Baltimore, Maryland
February 8, 1999
