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WASHINGTON, D.C. 20549
FORM 10-SB
General Form for Registration of Securities of Small Business Issuers
Under Section 12(b) or 12(g) of the Securities Act of 1934
IMX PHARMACEUTICALS, INC.
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(Name of Small Business Issuer in its Charter)
Utah 87-0394290
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
2295 Corporate Boulevard, Suite 131, Boca Raton, Florida 33431
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(Address of Principal Executive Offices) (Zip Code)
561.998.5660
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
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(Title of Class)
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PART I
Item 1. Description of Business
General
IMX Pharmaceuticals, Inc. (the "Company") is engaged in the development
and marketing of health and beauty aids and related products for the skin care,
cosmetic and health care industries. The Company was organized under the laws of
the State of Utah in June of 1982, originally for the purpose of engaging in the
acquisition, exploration and development of natural resources. For a period of
time commencing in January 1984, the Company was engaged in the business of
importing and brokering various products and merchandise.
From 1991 until September 1995, the Company had only conducted limited
business and had virtually no assets or liabilities.
In September 1995, the Company entered into an agreement whereby it
acquired the exclusive marketing and distribution rights in the United States
for certain pharmaceutical products manufactured by Meyer-Zall Laboratories of
South Africa ("Meyer-Zall"). The products included an over-the-counter psoriasis
medication developed by Meyer-Zall, Exorex(TM). In connection with the
agreement, the Company also entered into an agreement with Meyer-Zall which gave
the Company certain rights of first refusal for distribution rights in the
United States for new pharmaceutical products developed or manufactured by
Meyer-Zall. (See Item 7. "Certain Relationships and Related Transactions").
Primarily utilizing capital raised during the first six months of 1996 in
a private placement, the Company began to market and distribute the Exorex
psoriasis product line. In 1997 and 1998 product marketing intensified through
capital raised in connection with two subsequent private placements and the
Company also launched its line of Exorex eczema medications.
Effective September 30, 1997, the Company entered into an exclusive supply
agreement with IGI, Inc. and its affiliates ("IGI"). Under the agreement, the
Company acquired the exclusive rights to market IGI's line of therapeutic
topical skin care products utilizing its Novasome(R) technology to mass
merchandisers and through multi-level marketing, direct response advertising
and/or electronic media marketing in the United States, Canada and Puerto Rico.
However, as of December 31, 1998, the Company canceled this product line due to
limited sales. In August 1999, the Company entered into an agreement with IGI,
whereby the Company agreed to register shares of common stock of the Company
held by IGI for resale, and IGI agreed to return shares of the Company it holds
according to a schedule, commencing upon the sale of products using Novasome(R)
technology. No assurances can be given that any products using Novasome(R)
technology will be commercially acceptable.
In June of 1998, the Company completed the formation of a joint venture,
the Exorex Company, LLC (the "LLC") with Medicis Pharmaceutical Corporation of
Phoenix, Arizona
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("Medicis"). The LLC, in which the Company received a 49% interest, acquired
from the Company all of the Company's rights to market the Exorex product line.
The LLC also acquired the use of substantially all of the Company's executive
office and warehouse facilities in Boca Raton, Florida and nearly all of the
Company's current staff, including the Company's Helpline, which is comprised of
health care professionals providing a toll-free 800 service to sufferers of
psoriasis and eczema.
In June 1999, the Company sold its interest in the LLC in return for $3.6
million in cash and the assumption of all liabilities of the Company in the LLC
and certain inventory of the LLC with a shelf life of less than 12 months which
the Company has the right to sell abroad, subject to certain restrictions.
As of the date of this Registration Statement, the Company continues to
develop lines of health and beauty products which the Company believes will
offer superior benefits to consumers, has recently launched its Mother 2 Be(TM)
line of products and anticipates the launch of two (2) additional product lines,
Proctozone(TM) and Podiatrx(TM), by the end of the first quarter of fiscal year
ending December 31, 2000, and the Deep(TM) product line in the second half of
fiscal year 2000.
Sale of Joint Venture Interest
In June 1999, the Company sold its interest in the LLC in return for $3.6
million in cash and the assumption of all liabilities of the Company in the LLC
and certain inventory of the LLC with a shelf life of less than 12 months which
the Company has the right to sell abroad subject to certain restrictions. In
addition, certain ancillary agreements entered into in connection with the
formation of the LLC were terminated, with the exception of the Facility
Agreement (which relates to the leasing of substantially all of the Company's
office and warehouse), which will remain in full force and effect. See "Item 3.
Description of Property".
The determination of the Board of Directors to sell the Company's interest
in the LLC was based principally upon its conclusion that the LLC was not
operating in a manner that was in the best interests of the Company and the cash
infusion to be received by the Company on the closing of such sale. Management
believed that the cash infusion will assist the Company in the marketing and
development of the Company's other products. See "Item 2. Management's
Discussion and Analysis of Results of Operations".
Products
Mother 2 Be(TM). Through its wholly-owned subsidiary, Sarah J., Inc., the
Company has developed and launched in the second quarter of fiscal 1999 (see
"Sales and Marketing") a line of pregnancy skin care products under the
Company's Mother 2 Be brand name, which contains natural, safe and effective
biodegradable ingredients, including Lactoferrenate(TM), (Lactoferrin), a
natural component also found in mother's milk. In nature, Lactoferrin has the
characteristics of an antioxidant to help protect the skin, as well as the
natural anti-inflammatory and antibacterial properties needed to help maintain
the health and beauty of the
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skin. This unique blend of ingredients helps soothe, heal and protect an
expectant mother's skin. All Mother 2 Be products are hypoallergenic, making
them ideal for sensitive skin.
The Mother 2 Be line presently consists of the following products:
Calm(TM), a cream to relieve itchy abdominal conditions associated with
pregnancy which helps relieve dryness, inflammation and irritation; Soothe(TM),
an areola and nipple restorative cream; Restore(TM), a breast firming cream;
Minimize(TM), a stretch-mark minimizer; Rejuvenate(TM), a soothing gel that
refreshes tired legs and feet; Indulge(TM), a unique blend of all-natural
ingredients designed to help relieve and relax the stress associated with the
aches and pains common during pregnancy; and Balance(TM), which helps regulate
oil production by absorbing excess oil, while moisturizing dry facial areas.
Podiatrx(TM). Through its wholly-owned subsidiary, Podiatrix, Inc., the
Company has been working with a leading podiatrist in the development of foot
care products that offer greater comfort and efficacy in the treatment of foot
fungal conditions. As the result of such collaboration, the Company has
developed a line of over-the-counter anti-fungal foot care products, which
includes topical ointments and bath soaks under the brand name Podiatrx(TM).
Podiatrx is a unique two (2) product system designed to increase the
exfoliation and relieve dryness of the foot, which prepares the skin surface for
better delivery of anti-fungal medication. Podiatrx TFM, tri-fective
moisturizer, is a self-terminating exfoliator which gently removes the upper
surface skin when fungal conditions exist, to make the skin more receptive for
Podiatrx AF, antifungal cream, 2% Miconazole Nitrate, to combat fungal
conditions.
The Podiatrx product line takes advantage of the new C2P Technology(TM)
developed at the Company, where over-the-counter active drug substances are
delivered in a cream base that dries to a creamy powder. This new delivery
system, which contains a skin protectant (kaolin), has soothing and calming
effects on the skin and remains in place without significant rub-off.
The Company plans to market the Podiatrx line through podiatrists. While
the Company has not marketed any Podiatrx products as of the date of this
Registration Statement, it plans to launch the line of foot care products during
the first quarter of fiscal 2000. See "Sales and Marketing".
Proctozone(TM). Through its wholly owned subsidiary, Proctozone, Inc., the
Company has been working in conjunction with a leading analrectal surgeon to
develop the Proctozone line of over-the-counter anorectal anti-inflammatory and
anesthetic drug products. Available in two active forms, the Proctozone line
will offer soothing and non-messy alternatives for physicians to recommend to
their patients for post-surgical treatment and general inflammation and
associated pain of the anorectal area. Proctozone, which uses the Company's
proprietary C2P delivery system, is unlike most greasy competitive ointments on
the market today.
The Company plans to market the Proctozone line through pharmaceutical
wholesalers. While the Company has not marketed any Proctozone products as of
the date of this
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Registration Statement, it plans to launch the line in the first quarter of
fiscal 2000. See "Sales and Marketing".
Deep(TM). Deep(TM) is a line of over-the-counter, temporary topical
analgesic products for minor arthritis and sore muscle pain with the active
ingredient, Capsaicin. The Company plans to market these products through
physicians. While the Company has not marketed any Deep products as of the date
of this Registration Statement, it plans to launch a market for the temporary
pain reliever products in the second half of fiscal year 2000. See "Sales and
Marketing".
The Company is presently negotiating to acquire a license for an
over-the-counter psoriasis medication. No assurances can be given that the
license will be acquired, or that the products will be commercially marketable.
Sales and Marketing
In the second quarter of fiscal 1999, the Company launched its Mother 2 Be
product line, which is being marketed and sold to spas, salons, specialty
retailers and catalogue companies, both domestically and abroad, and continues
to develop referrals by professional birthing consultants, such as nurses,
mid-wives, La Leche League instructors, lactation consultants, child birth
educators, Lamaze International instructors, general practice physicians,
gynecologists, as well as prenatal specialty stores. In order to further develop
its professional referrals, the Company is developing a "Physician Script
Program" which facilitates the recommendation of Mother 2 Be products by
physicians and ordering of such products by patients, as well as direct mail and
conventional retail marketing programs. In addition, the Company intends to
market the Mother 2 Be product line abroad, principally through foreign
distributors.
Although the Company has not marketed any Podiatrx, Proctozone or Deep
products as of the date of this Registration Statement, it plans to launch the
Podiatrx foot care line and the Proctozone line of analrectal products in the
first quarter of fiscal 2000 and the Deep line of topical analgesic products in
the second half of fiscal 2000. The Company plans to market these products
through physicians using a Physician Script Program which facilitates the
recommendation of such products by physicians and ordering of such products by
patients from their local pharmacies, or through toll-free helpline telephone
numbers being established by the Company. No distribution agreements have been
signed for the sale of the any of such brands as of the date of this
Registration Statement.
The Company has previously marketed over-the-counter products to
conventional retail outlets, first on its own in November 1996, when the Company
launched its national retail sales program for Exorex products, and secondly,
through the LLC commencing in June 1998. Through the efforts of the Company's
executive sales personnel and a number of independent national sales
representatives, the Exorex products were carried by several major national and
regional Drugstore chains and national wholesalers, as well as independent
pharmacies and health food stores.
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However, management recognizes that the Company does not have the
financial resources to sustain a major national advertising campaign to market
its products to conventional retail outlets. There can be no assurance that the
Company will be able to achieve widespread commercial acceptance of any of the
Company's products. Conventional retail distribution is a very difficult medium
for products without significant consumer brand recognition. Shelf space at
retail outlets is at a premium, returns can be significant, payment terms are
extended, and offsets, credits against invoices and allowances are the norm.
Without significant brand recognition, the Company will not have any meaningful
conventional retail distribution.
In August 1999, the Company announced that it launched its Mother 2 Be web
site, www.mother2be.com, which permits consumers to purchase the Mother 2 Be
products over the Internet, as well as providing information regarding skin care
during pregnancy. In addition, the Company intends to market additional products
through its web site over the Internet. Although there have been numerous
statements and reports concerning the potential of the Internet as a vehicle for
commercial transactions, its potential has yet to be properly and successfully
exploited to any significant degree by any health and beauty company. Some
anticipated problems include limited Internet access by certain consumers,
unreliable technology, and the reluctance of consumers to provide their credit
card numbers over the Internet to consummate sales. No assurances can be given
that Internet marketing will be successful to any degree.
For the six (6) month period ended June 30, 1999, two (2) customers,
Nature's Choice and Elizabeth Arden, accounted for 12.7% and 10.1% of net sales,
respectively. During fiscal year ended December 31, 1998, Walgreen's accounted
for 10.1% of net sales. During fiscal year ended December 31, 1997, each of
Eckerd's and Walgreen's accounted for 16% of net sales.
Manufacturing and Supplies
All of the Company's products are presently manufactured exclusively for
the Company by independent third parties in the United States. Although the
Company does not own a factory or production plant, it acts as a general
contractor, and supervises each stage of production from the creation of the
product, design and creation of the packaging, filling of same and packing, all
as performed by various subcontractors. Management believes that its
relationships with such subcontractors are good, and that there are sufficient
alternate subcontractors should one or more subcontractors become unavailable.
In addition, the Company has commenced manufacturing its samples of its
products in its warehouse facilities, and all required permits have been
received to permit the Company to commence manufacturing its products, should
management determine to do so in the future.
All raw materials and packaging components for the Company's product lines
are readily available to the Company.
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Inventory
At June 30, 1999, the Company maintained inventory valued at approximately
$430,000, as compared to approximately $160,000 at December 31, 1998. The low
level of inventory maintained by the Company resulted from sale of substantially
all of the Company's inventory to the LLC in June 1998.
The Company has generally delivered its orders within one (1) day of the
date orders are booked. As a result thereof, The Company had no backlog of firm
booked orders at December 31, 1998 or December 31, 1997. The business of the
Company is not seasonal.
As the result of the cash infusion of $3.6 million from the sale of its
interest in the LLC, management does not anticipate any difficulty in financing
foreseeable inventory requirements within the next twelve (12) months.
Competition
The health and beauty market in which the Company operates is
characterized by intense competition and there are numerous prescription and
non-prescription drugs available from which consumers may chose. The Company
competes against established pharmaceutical and consumer product companies which
market products with equivalent or functionally similar ingredients and which
have national and/or regional brand name recognition. Most of the Company's
competitors possess substantially greater financial, technical and other
resources than the Company. Moreover, these companies possess greater marketing
capabilities than the Company, including the ability to implement extensive
advertising campaigns.
Management recognizes that the Company does not have the financial
resources to sustain a major national advertising campaign to market its
products to conventional retail outlets. There can be no assurance that the
Company will be able to achieve widespread commercial acceptance of any of the
Company's products.
The Company's success will be dependent upon its ability to demonstrate
the effectiveness of its products and the acceptance of the Company's method of
treatment, as well as the Company's distribution plans. There can be no
assurance that the Company will be able to compete successfully.
Government Regulation
Under the Federal Food, Drug and Cosmetic Act ("FDA Act"), an
over-the-counter non-prescription pharmaceutical product may not be
commercialized or otherwise distributed in the United States without the prior
approval of the FDA, upon submission to it of a new drug application or
abbreviated new drug application, unless the combination of active ingredients
in such products have been determined to be recognized as generally safe and
effective for uses under the conditions prescribed, recommended or suggested in
the FDA prescribed labeling in accordance with final monograph rules promulgated
by the FDA and the labeling is in
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compliance therewith. The Company presently intends to market non-prescription
products which contain active ingredients in the products that have been
recognized as generally safe and effective for the recommended uses by panels of
medical experts appointed by the government in the monograph rule making
proceedings.
In addition, each of the Mother 2 Be products is also a "cosmetic" as that
term is defined under the FDA Act, and must comply with the labeling
requirements of the FDA Act, the Fair Packaging and Labeling Act, and the
regulations thereunder.
Advertising of the Company's products is also subject to the review of the
Federal Trade Commission ("FTC") pursuant to the authority of the FTC to monitor
and prevent unfair and deceptive trade practices.
Management believes that its products are in compliance with all
applicable regulatory requirements.
Licenses, Patents and Trademarks
Trademark applications have been filed for the Mother 2 Be, Podiatrx,
Proctozone, and Deep product lines as well as for C2P Technology, the Company's
proprietary cream to powder over-the-counter drug delivery system.
Research and Development
During fiscal 1999, the Company's research and development program
completed development of the Mother 2Be product line, and the Podiatrx,
Proctozone and Deep product lines are anticipated to be completed by the end of
fiscal 1999.
Several of the Company's product lines incorporate the new C2P delivery
technology developed at the Company, where over-the-counter active drug
substances are delivered in a cream base that dries to a creamy powder. This new
delivery system, which contains a skin protectant (kaolin), has soothing and
calming effects on the skin and remains in place without significant rub-off.
Management believes that C2P drug delivery technology has capabilities for
several new over-the-counter drug applications.
Developmental efforts are continuing for numerous other personal
care/cosmetic products. These efforts include product formulation, packaging
design and prototypes, product safety and stability testing, along with certain
efficacy studies to support product claims. However, no assurances can be given
that any commercially acceptable products will be developed.
The Company's has contracted with R.F. Technology Consultants, Inc.
("RFTC") to conduct its research and development program. The principal of RFTC
is Ray Figueroa. From 1994 to the present, he has been the President and
Technology Director of RFTC, which provides product development services to
cosmetic and dermatological marketers, with specialization in topical dosage
forms for therapeutic and personal care applications. Mr.
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Figueroa has twenty-five (25) years of experience in topical care management as
a formulation chemist with several fortune 500 companies. From 1990 through
1994, he was the Vice President of Research and Development for Baker Cummins
Dermatological, Inc. He previously worked for Richardson Vicks, Proctor &
Gamble, IVAX Pharmaceuticals, Estee Lauder, Almay and Revlon International. Mr.
Figueroa has an A.A.S. degree in medical technology and a B.S. Degree in
Chemistry.
The Company has entered into a series of product development agreements
with RFTC, which provides for compensation to RFTC in the form of cash, options
to purchase shares of the Company's common stock which vest as products are
developed, royalties based upon net sales of products, a royalty based upon the
sale of the rights to the products developed and an interest in any patents
granted on products developed by RFTC for the Company.
Employees
As of the date of this registration statement, the Company had twenty-one
(21) full-time employees. The Company believes that its relationship with its
employees is good.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company is engaged in the development and marketing of health and
beauty aids and related products for the skin care, cosmetic and health care
industries. As of the date of this Registration Statement, the Company is
developing lines of health and beauty products which the Company believes will
offer superior benefits to consumers, has recently launched its Mother 2 Be(TM)
line of products and anticipates the launch of two (2) additional product lines,
Proctozone(TM) and Podiatrx(TM), by the end of the first quarter of fiscal year
ending December 31, 2000, and the Deep(TM) product line in the second half of
fiscal year 2000.
Results of Operations
During 1997 and for the first six (6) months of 1998, the Company's
business consisted of primarily marketing its Exorex product line, utilizing
capital raised during 1996 and 1997 in private placement financings. However,
commencing in June 1998, the Company completed the formation of a joint venture,
the Exorex Company, LLC (the "LLC") with Medicis Pharmaceutical Corporation of
Phoenix, Arizona ("Medicis"). The LLC, in which the Company received a 49%
interest, acquired from the Company all of the Company's rights to market the
Exorex product line.
For the six month period ending June 30, 1999, consolidated net sales were
approximately $51,000, as compared to approximately $2.9 million for the same
period of the preceding year. The decrease of approximately $2.8 million
resulting primarily from the Company's conveyance of the Exorex product line to
the LLC in June 1998.
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Consolidated net sales aggregated approximately $3.9 million in 1998, as
compared to $4.3 million in 1997. The decrease of approximately $400,000 also
resulted from the conveyance of the Exorex product line to the LLC in June 1998.
Although net sales increased, management is of the belief that the market
experienced intense competition for over-the-counter drugs in general, and
psoriasis medication in competition with the Exorex line in particular. The
Company competed against established pharmaceutical and consumer product
companies which market numerous prescription and non prescription drugs products
with equivalent or functionally similar ingredients and which have national
and/or regional brand name recognition, from which consumers may choose.
Management initially believed that aligning the Company with Medicis, a
substantially larger pharmaceutical concern, would assist the Company in
bringing its products to market, building brand recognition and gaining
widespread commercial acceptance. Accordingly, in June 1998 the Company acquired
its interest in the LLC in return for conveyance of all of the Company's
interest in the Exorex product line. However, management's expectations for the
marketing of the Exorex line by the LLC and Medicis were not met during the
first year of the LLC's operations, and therefore, the Company sold its interest
in the LLC for $3.6 million in cash and other consideration. Management intends
to use the cash received from the sale of the Company's interest in the LLC for
development of the Company's proprietary brands.
During April 1999, the Company launched its line of pregnancy skin care
products under the Company's Mother 2 Be brand name. Net sales for the initial
two (2) months of this new line in May and June 1999 were approximately $29,000.
The Company is also preparing new product introductions for 2000, and
anticipates the launch of two (2) additional product lines during the first
quarter of fiscal 2000, Proctozone, an over-the-counter line of medications for
various anal-rectal aliments and Podiatrx an over-the-counter line of
medications for various foot ailments, as well as Deep, a line of
over-the-counter, temporary topical analgesic products for minor arthritis and
sore muscle pain with the active ingredient, Capsaicin, in the second half of
fiscal 2000.
Management is also actively pursuing the development and/or acquisition of
new product lines and technologies in order to expand its lines of health and
beauty products. However, no assurances can be given that any new products or
lines of products will be developed or acquired, or if developed or acquired,
that they will be profitable.
Gross profit margin decreased to 56% of net sales for the six (6) month
period ending June 30, 1999, as compared to 74% of net sales for the same period
of the preceding year. Gross profit margin decreased to 72% of net sales in
1998, as compared to 77% of net sales in 1997. Gross profit margins fluctuated
with the changes in the Company's product mix.
Selling, general and administrative expenses incurred by the Company
increased to $5.1 million 1998 as compared to $3.9 million in 1997. For the six
(6) month period ending June 30, 1999, selling, general and administrative
expenses incurred by the Company decreased to approximately $1.5 million, as
compared to approximately $2.8 million, for the
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corresponding period of the prior year. Increases from 1997 to 1998 reflect
expenses incurred to support new product development and introductions,
including approximately$256,000 of expense in 1998 as compared to $-0- in 1997.
The decrease for the six (6) month comparable periods reflect the absorption of
a significant amount of overhead as the result of the conveyance of the Exorex
product line to the LLC. Such decreases for the six months ended June 30, 1999
as compared to June 30, 1998 included a decrease in advertising expense of
$627,000 from approximately $744,000 to $117,000. In addition, there was a
decrease in amortization of original issue discount from $185,000 to $-0-.
Net loss was approximately $2.0 million or $.45 per basic and diluted
share in 1998 as compared to approximately $580,000 or $.20 per basic and
diluted share in 1997. Results for 1998 included approximately $884,000 as an
impairment loss, as the result of management's decision to cancel the product
line developed under the agreement with IGI due to disappointing product sales.
Results for 1998 were also impacted by a decrease in gross profit of
approximately $488,000 compared to 1997 due primarily to the transfer of the
Exorex product line to the LLC in June 1998.
For the six month period ending June 30, 1999, net income was
approximately $1.99 million, as compared to net loss of approximately $(650,000)
for the same period of the preceding year. The results for the six month period
ending June 30, 1999 include a gain of approximately $3.4 million on the sale of
the Company's interest in the LLC. For such six month period, the Company had a
loss of $(1.4) million from operations, exclusive of such gain, compared to a
loss from operations of approximately $(652,000) for the six months ended June
30, 1998.
As the Company anticipates developing additional product lines, it will
necessarily incur additional expenses normally associated with start-up of new
lines. Further, substantial time may be necessary to build brand awareness and
sales. Accordingly, the likelihood of the success of the Company's operations
must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered in connection with the formation
and development of a new business, the commencement and expansion of operations
and the regulatory and competitive environment in which the Company will
operate. As a result of the foregoing, operating losses are anticipated for the
balance of fiscal 1999.
Liquidity and Capital Resources
At June 30, 1999, the Company's financial condition included working
capital of approximately $4.5 million, as compared to approximately $2.1 million
at December 31, 1998. In June 1999, the Company sold its interest in the LLC in
return for approximately $3.6 million in cash and other consideration. It is
management's intention that the cash received from the sale of the Company's
interest in the LLC is to be used in connection with development of the
Company's proprietary brands.
During 1997 and 1998, the Company raised capital from investors to finance
its capital requirements. In 1997 the Company commenced a private placement
offering, which was extended to February 1998, at which time the Company raised
net proceeds of approximately
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$947,000. In June 1998 and in connection with the Company's acquisition of its
equity interest in the LLC, Medicis purchased 400,000 shares of Common Stock for
$1,000,000 or $2.50 per share, the estimated fair market value at the time of
such sale.
At the present time and for the foreseeable future, the Company's
short-term capital requirements are expected to be met by available cash. For
fiscal 1998, net cash generated from operations was approximately $1.2 million.
Such amount includes approximately $2.26 million of cash for the sale of trade
accounts receivable and $1.367 million for the sale of inventory in connection
with the acquisition by the Company of its equity interest in the LLC. For
fiscal 1997, operating activities used cash of approximately $1.9 million.
The Company intends to develop and market through various channels, its
proprietary over-the-counter drugs and health and beauty products. However,
management recognizes that the Company does not have the financial resources to
sustain a major national advertising campaign to market its products to
conventional retail outlets. Further, in the event of a significant increase in
capital requirements, the Company may require additional financing. However, no
assurances can be given that the Company will be able to raise sufficient
capital should the need arise. In the absence of such additional financing,
there can be no assurance that the Company will be able to achieve widespread
commercial acceptance of any of the Company's products.
Year 2000 Readiness
Many currently installed computer systems and software products are coded
to accept or recognize only 2-digit entries in the date code field. Such systems
and software products will need to accept 4-digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and/or
software used by many companies and governmental agencies may need to be
upgraded to comply with such Year 2000 requirements or risk system failure or
miscalculations, causing disruptions of normal business activities.
We have made an assessment of the Year 2000 readiness of our operating and
administrative systems. Our assessment plan consisted of testing of our
internally developed information and computing systems with special attention to
their representation and manipulation of calendar dates. We have confirmed that
our software avoids Year 2000 concerns. In addition, in our assessment plan, we
contacted third-party vendors, which have indicated that the products and
services used by us are currently Year 2000 compliant.
To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the operating costs associated with
time spent by employees in the evaluation process and Year 2000 compliance
matters generally. We do not presently anticipate that such expenditures will be
material.
While, based on our assessment to date, we believe that our internal
systems are Year 2000 compliant and will not produce erroneous results, fail to
function or interrupt performance, despite our testing, our systems may contain
undetectable errors or defects
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associated with Year 2000 and operational difficulties may result. In addition,
while vendors of our material software, hardware and services have indicated
that they are in compliance, we cannot assure you that third-party software,
hardware or services incorporated into our systems upon which we are reliant
will not need to be revised or replaced, which could be time consuming and
expensive.
In addition, no assurances can be given that governmental agencies,
utility companies, Internet access companies, third-party service provides and
others outside of our control will be Year 2000 compliant. The failure by such
entities to be Year 2000 compliant could result in a systematic failure beyond
our control, such as telecommunications or electrical failure, which could also
prevent us from producing or delivering our products, which would have a
material adverse effect on our business, results of operations and financial
condition.
The likely worse-case Year 2000 scenario is a systematic failure beyond
our control, such as a prolonged telecommunications or electrical failure. Such
a failure could prevent us from operating our business. We believe that the
primary business risks, in the event of such a failure, would include delays in
product production, lost revenue, increased operating costs, or other business
interruptions of a material nature, as well as claims of mismanagement,
misrepresentation or breach of contract, any of which could have a material
adverse effect on our business, results of operations and financial condition.
We have not made any contingency plans to address such worse-case scenario.
Inflation
Inflation rates in the U.S. have not had a significant impact on operating
results for the year ended December 31, 1998.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this item and elsewhere in this
Registration Statement regarding matters that are not historical facts are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Because such forward-looking statements include
risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. All statements which
address operating performance, events or developments that management expects or
anticipates to incur in the future, including statements relating to sales and
earnings growth or statements expressing general optimism about future operating
results, are forward-looking statements. The forward-looking statements are
based on management's current views and assumptions regarding future events and
operating performance. Many factors could cause actual results to differ
materially from estimates contained in management's forward-looking statements.
The differences may be caused by a variety of factors, including but not limited
to adverse economic conditions, competitive pressures, inadequate capital,
unexpected costs, lower revenues and net incomes and forecasts, the possibility
of fluctuation and volatility of the Company's operating results and financial
condition, inability to carry out marketing and sales plans, and loss of key
executives, among other things.
12
<PAGE>
Item 3. Description of Property
The Company leases a total of 3,590 square feet of office space in Boca
Raton, Florida pursuant to leases, all of which terminate on March 31, 2001. In
addition, the Company leases approximately 3,000 square feet of warehouse space
in Boca Raton, Florida pursuant to a lease that terminates on December 31, 1999.
Monthly lease payments are approximately $5,400 and $2,100, respectively.
In connection with the organization of the LLC, the Company entered into a
Facility Agreement, whereby the Company subleased to the LLC, substantially all
of its office space, furniture, computer hardware, all utilities, including
telephone and fax services and warehouse facilities, and equipment leased and
owned and occupied by the Company for substantially the Company's cost. From
June 1998 through June 1999, the LLC paid a substantial portion of the office
rent and warehouse rent.
In connection with the sale of the Company's equity interest in the LLC,
the Company entered into a Transition Services Agreement, whereby the LLC will
continue to sublease the Company's premises for a period not to exceed six (6)
months.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of October 22, 1999 with
respect to the beneficial ownership of the Company's Common Stock by (a) each
person known by the Company to be the beneficial owner of more than five percent
(5%) of the Company's outstanding Common Stock, (b) the executive officers and
directors of the Company and (c) the directors and officers of the Company as a
group. The address of each of the persons set forth below is 2295 Corporate
Boulevard, Suite 131, Boca Raton, Florida 33431, except as otherwise noted.
- - --------------------------------------------------------------------------------
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership (1) of Class (1)
- - --------------------------------------------------------------------------------
William A. Forster 1,196,261 (2) 18.7%
- - --------------------------------------------------------------------------------
Meyer-Zall Laboratories (PTY), Ltd. 645,544 (3) 11.0%
JCC House, First Floor
27 Owl Street
Auckland Park, Johannesburg 2192
Private Bag X7
Auckland Park, 2008 South Africa
- - --------------------------------------------------------------------------------
East Asia Development, Ltd. 400,000 (3) 6.8%
Passage Max Meuron 1
Neuchatel, Switzerland 2001
- - --------------------------------------------------------------------------------
13
<PAGE>
- - --------------------------------------------------------------------------------
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership (1) of Class (1)
- - --------------------------------------------------------------------------------
Tandilly Company Ltd. 400,000 (3) 6.8%
c/o Primeway S.A.
7, Rue Du Rhone
GH-1204 Geneva, Switzerland
- - --------------------------------------------------------------------------------
Medicis Pharmaceuticals Corporation 400,000 6.8%
4343 E. Camelback, Suite 250
Phoenix, Arizona 85018
- - --------------------------------------------------------------------------------
Benson Holdings Limited 389,268 (3) 6.6%
P.O. Box 932
Suite 932, Europort, Gibraltar
- - --------------------------------------------------------------------------------
IGI, Inc. 271,714 4.6%
Wheat Road & Lincoln Avenue
P.O. Box 687
Buena, New Jersey 08310
- - --------------------------------------------------------------------------------
Sanfurd G. Bluestein, M.D. 322,700 (4) 5.4%
309 Upper Mountain Avenue
Upper Mountain, New Jersey 07043
- - --------------------------------------------------------------------------------
David A. Gross, M.D. 149,548 (5) 2.5%
16244 S. Military Trail, #610
Delray Beach, Florida 33484
- - --------------------------------------------------------------------------------
Michael Holick, Ph.D, M.D. 107,980 (6) 1.8%
Boston University Medical Center
80 Concord St. M-1013
Boston, Massachusetts 02118
- - --------------------------------------------------------------------------------
Eugene Miller 97,516 (7) 1.6%
7351 Ballantrae Court
Boca Raton, Florida 33496
- - --------------------------------------------------------------------------------
Westby J. Rogers 148,068 (8) 2.4%
2881 East Oakland Park Boulevard
Ft. Lauderdale, FL 33306
- - --------------------------------------------------------------------------------
Lawrence D. Russell 186,480 (9) 3.1%
800 Palm Trail, No. 200
Delray Beach, FL 33483
- - --------------------------------------------------------------------------------
Marc Falkin 210,558 (10) 3.5%
- - --------------------------------------------------------------------------------
Gary Spielfogel 258,000 (11) 3.9%
- - --------------------------------------------------------------------------------
Leonard F. Kaplan 10,000 (12) Less than 1%
- - --------------------------------------------------------------------------------
All officers and directors 2,687,111 (13) 35.5%
as a group (10 persons)
- - --------------------------------------------------------------------------------
- - ----------
(1) Based upon information furnished to the Company by the security holders or
obtained from the stock transfer books of the Company. Other than
indicated in the notes, the Company has been informed that such persons
have sole voting and dispositive power with respect to their shares.
Certain options disclosed hereunder may not have been fully vested as of
the date of this registration statement.
(2) Consists of 609,741 shares held directly; 31,100 shares held by Mr.
Forster's wife; 15,551 shares held by Mr. Forster in trust for a minor
child; 520,000 shares which may be acquired pursuant to the exercise of
vested stock options; and 19,869 warrants to purchase shares of Common.
14
<PAGE>
(3) Meyer-Zall Laboratories, East Asia Development, Ltd., Tandilly Company,
Ltd. and Benson Holdings Limited are shareholders of Interderm Limited,
the company that previously licensed exclusive marketing and distribution
rights to the Meyer-Zall products to the Company. As such, they may be
deemed affiliates and the beneficial owners of each others shares of
Common Stock.
(4) Consists of 147,850 shares held directly, options to purchase 20,000
shares and warrants to purchase 154,850 shares.
(5) Consists of options to purchase 127,500 shares, 11,490 shares indirectly
as a beneficiary of a profit sharing plan and warrants to purchase 10,558
shares.
(6) Consists of 61,490 shares held directly, options to purchase 35,000 shares
and warrants to purchase 11,490 shares. (Includes 50,000 shares in the
process of being transferred from Meyer-Zall).
(7) Consists of 16,990 shares held indirectly as a trust beneficiary, options
to purchase 45,000 shares and warrants to purchase 35,526 shares.
(8) Consists of 75,000 shares held directly, an option to purchase 5,000
shares and warrants to purchase 68,068 shares.
(9) Consists of 10,000 shares held jointly with his spouse and warrants to
purchase 176,480 shares.
(10) Consists of options to purchase 200,000 shares and warrants to purchase
10,558 shares.
(11) Consists of options to purchase 258,000 shares.
(12) Consists of options to purchase 10,000 shares.
(13) Consists of 967,722 shares held directly or indirectly, and options and
warrants to purchase 1,719,389 shares of Common Stock.
Item 5. Directors, Executive Officers, Promoters and Control
The following table sets forth the names, positions with the Company and
ages of the executive officers and directors of the Company. All directors serve
until the next annual meeting of the Company's shareholders or until their
successors are elected and qualify. Officers are elected by the Board and their
terms of office are, except to the extent governed by employment contract, at
the discretion of the Board.
================================================================================
Name Age Position
- - --------------------------------------------------------------------------------
William A. Forster 54 Chairman of the Board, President and
Chief Executive Officer
- - --------------------------------------------------------------------------------
David A. Gross, M.D. 52 Director
- - --------------------------------------------------------------------------------
Eugene Miller 73 Director
- - --------------------------------------------------------------------------------
Michael F. Holick, Ph.D., M.D. 53 Director
- - --------------------------------------------------------------------------------
Sanford Bluestein, M.D. 78 Director
- - --------------------------------------------------------------------------------
Westby J. Rogers 57 Director
- - --------------------------------------------------------------------------------
Lawrence D. Russell 41 Director
- - --------------------------------------------------------------------------------
Gary P. Spielfogel 44 Executive Vice President
- - --------------------------------------------------------------------------------
Marc Falkin 28 Senior Vice President
- - --------------------------------------------------------------------------------
Leonard F. Kaplan 52 Chief Financial Officer
================================================================================
15
<PAGE>
Mr. Forster has served as a Director of the Company since 1987. Dr. Gross
and Mr. Miller were elected Directors by the shareholders at a shareholder's
meeting held in November 1995. Dr. Holick was elected to the Board in January
1996, Dr. Bluestein was elected in November 1997, Mr. Rogers was elected to the
Board in June 1999 and Mr. Russell was appointed to the Board in October 1999.
All Directors hold office until the next annual meeting of stockholders and the
election and qualification of their successors. During 1998, the Compensation
Committee of the Board of Directors consisted of Messrs. Eugene Miller and David
Natan, a former director. David Walt, a former director was a member of the
Compensation Committee until September 1998.
Marc Falkin, the Company's Senior Vice President, is the son-in-law of
William Forster, the Company's Chairman of the Board, President and Chief
Executive Officer. Apart from this relationship, there is no family relationship
between any of the officers and directors of the Company.
The following sets forth biographical information as to the business
experience of each executive officer and director of the Company for at least
the past five (5) years.
William A. Forster, age 54, a Director, has been the Chairman of the Board
since 1987, and is also President and Chief Executive Officer and founder of the
Company. From September 1992 until May 1994, he was the President and Chief
Executive Officer of MBF U.S.A., a publicly held marketer of infection control
products. He is also actively involved in many city, state, national and
international non-profit organizations.
Dr. David A. Gross, M.D., F.A.P.A., age 52, has been a Director since
November 1995, is a physician in private practice, the Director of the Palm
Beach Evaluation Center and was previously Chairman of the IMX Medical Advisory
Panel. He is a Fellow, American Psychiatric Association, listed in Best Doctors
in America 1995, Southeastern Edition, and was commissioned by then Florida
Governor, Lawton Chiles, to the Physicians Input Panel. He is also
President-Elect of the Florida Psychiatric Society. Dr. Gross was appointed by
President William Clinton to the Executive Advisory Panel to the Office of
National Drug Control. He also serves on the Advisory Panel on Community Health
Care Purchasing Alliance. He holds degrees from the University of Rochester
(A.B. Magna Cum Laude), the University of Florida College of Medicine (M.D.) and
has completed his residency at Yale University School of Medicine.
Eugene Miller, age 73, has been a Director since November 1995, is an
Executive-in-Residence and Adjunct Professor of the College of Business at
Florida Atlantic University and a director of MFRI, Inc., a publicly held
company. Prior to affiliating with Florida Atlantic University, he served as
Vice-Chairman and Chief Financial Officer of USG Corporation (formerly United
States Gypsum Company), Senior Vice President of the New York Stock Exchange,
Senior Vice President of CNA Financial Corporation and Vice President of
McGraw-Hill, Inc. He holds degrees from Bethany College (A.B.), Georgia Tech
(B.S.), Columbia University (M.S.) New York University (M.B.A.) and Bethany
College (hon. LL.D).
16
<PAGE>
Dr. Michael F. Holick, Ph.D., M.D., age 53, has been a Director since
January 1996, is a Professor of Dermatology and Physiology since 1990 and a
Professor of Medicine since 1987 at the Boston University School of Medicine. He
is also Chief of the Endocrinology, Diabetes and Metabolism Section of Boston
University School of Medicine. Since 1987, he has served as a Director of the
Bone Health Clinic at the Boston University Medical Center Hospital, a Director
of the Vitamin D, Skin and Bone Research Laboratory and Program Director of the
General Clinical Research Center at the Boston University School of Medicine.
Prior to that, he was a Professor of Nutrition, Medicine and Physiology at Tufts
University Medical School and a Director of the Vitamin D, Skin and Bone
Research Laboratory, USDA/Human Nutrition Research Center On Aging at Tufts
University. From 1982 to 1985, he was the Associate Director of the Clinical
Research Center at the Massachusetts Institute of Technology. From 1981 to 1985
he was Associate Professor of Medicine and Associate Professor of Nutritional
Biochemistry at Harvard Medical School. From 1978 to 1981 he was Assistant
Professor of Medicine at Harvard Medical School and from 1979 to 1981, a
lecturer at the Massachusetts Institute of Technology. From 1976 to 1978 he was
a Clinical Fellow in Medicine at Harvard Medical School. He holds degrees from
Seton Hall University (B.S.) and the University of Wisconsin (M.S. Ph.D. and
M.D.). He completed his residency at the Massachusetts General Hospital.
Dr. Sanfurd Bluestein, M.D., age 78, has been a Director since November
1997, is a Director of Pharmachem Corp. in Allentown, Pennsylvania and a member
of the Medical Advisory Counsel of Mark Solutions in Bloomfield, New Jersey.
Presently retired from the practice of medicine, Dr. Bluestein is a partner of
Estate Associates, a privately held company. He has also served as the Chairman
and Director of Radiology Barnert Hospital in Patterson, New Jersey, and as
Chairman and Director of Radiology, Chilton Hospital in Pompton Plains, New
Jersey. He is a member emeritus of the Passaic County Medical Society and a
member emeritus of the American Medical Association. He holds degrees from
Lafayette College (B.A.), Yale Medical School (M.D.) and has completed his
residency at Mt. Sinai Hospital in New York City, New York.
Westby J. Rogers, age 57, has been a Director since June 1999. Mr. Rogers
is the District Manager of Florida for Metronic Inc. From 1987 through May 1999,
Mr. Rogers was the President of Implant Specialties of Fort Lauderdale, Florida,
and was responsible for sales, marketing and financial aspects of such business.
Lawrence D. Russell, age 41, was appointed as a Director in October 1999.
From December 1996 to the present, Mr. Russell has been the President of Freedom
Management Group, a corporate consulting firm. In addition, from January 1998 to
the present, Mr. Russell has also been a registered representative with
Brookstreet Securities, an investment banking firm. From January 1997 through
January 1998, Mr. Russell was a registered representative with Delta Equity
Services, an investment banking firm. In addition, for the five year period
ending December 1996, Mr. Russell was the Senior Vice President at Euro-Atlantic
Securities, a stock brokerage firm.
Gary P. Spielfogel, age 44, has 20 years of business management experience
in the chain drug industry. Before joining the Company in March 1997 as a Senior
Vice President,
17
<PAGE>
Mr. Spielfogel served as President and Chief Operating Officer of Medicap
Pharmacy Express, the Florida master franchisee of Medicap Pharmacies, Inc. the
12th largest U.S. drug chain. Prior to Medicap, for 5 years until 1990, Mr.
Spielfogel served as President of Austin Drugs, a $42 million regional drug
chain. In addition, for 10 years until 1987, Mr. Spielfogel acted as Vice
President of Interstate Cigar Company, a national wholesale drug distributor,
and had oversight of a $40 million division responsible for sales and
purchasing. Mr. Spielfogel became the Company's Executive Vice President in
September of 1998.
Marc Falkin, age 28, joined the Company in September of 1996 and is the
Senior Vice President. Prior to that, and from August, 1993, he was Project
Manager of International Sales for Taylor Environmental International, a New
Jersey based environmental wastewater management company. His responsibilities
included managing environmental industrial wastewater treatment projects
worldwide and building a distribution network of international representatives.
He graduated from George Washington University in 1993, with a Bachelor of
Business Administration in international business.
Leonard F. Kaplan, age 52, a C.P.A., has been the Company's Chief
Financial Officer since July 1, 1999, and was the company's controller from
September 1998 through June 1999. From February 1998 through August 1998, Mr.
Kaplan was the controller of Southern Service Corp., and from July 1983 through
March 1998, he was the owner of a printing company.
Item 6. Executive Compensation
Cash Compensation
The following table sets forth a summary of all compensation awarded to,
earned by or paid to, the Company's Chief Executive Officer and the other
executive officer of the Company whose compensation exceeded $100,000 per annum
for services rendered in all capacities to the Company and its subsidiaries
during fiscal years ended December 31, 1998, December 31, 1997 and December 31,
1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Awards
- - ------------------------------------------------------------------------------------------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($)(1) Options (#) Compensation
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William A. Forster, Chief 1998 237,500 150,000 $12,000(2) 20,000 -0-
Executive Officer 1997
1996
- - ------------------------------------------------------------------------------------------------------------------
Gary Spielfogel, Executive 1998 125,000 -0- $12,000(3) 50,000 -0-
Vice President 1997
1996
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
- - --------
(1) Excludes perquisites and other personal benefits that in the aggregate do
not exceed 10% of the named officer's total salary and bonus.
(2) Consists of a nonaccountable automobile expense allowance.
(3) Consists of a nonaccountable automobile expense allowance.
18
<PAGE>
Option Grants in the Last Fiscal Year
The following table sets forth certain information relating to stock
option grants during Fiscal 1998 to the Company's Chief Executive Officer and
the other executive officer of the Company whose compensation exceeded $100,000
per annum for services rendered in all capacities to the Company and its
subsidiaries during Fiscal 1998:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realized Value
at Assumed Annual Rates
of Stock Price
Appreciation
Individualized Grants for Option Terms
- - ---------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or Five (5%) Ten (10%)
Options Employees in Base Price Expiration Percent Percent
Name Granted (#) Fiscal Year ($/Sh) Date ($) ($)
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William A. Forster 20,000 6.57 1.75 9/01/08 3,878 5,895
- - ---------------------------------------------------------------------------------------------------------------
Gary Spielfogel 50,000 16.42 1.75 7/01/08 9,696 14,737
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
Option Exercises and Holdings
The following table sets forth certain information relating to option
exercises effected during Fiscal 1998, and the value of options held as of such
date by each of the Chief Executive Officer and the other executive officer of
the Company whose compensation exceeded $100,000 per annum for services rendered
in all capacities to the Company and its subsidiaries during Fiscal 1998:
AGGREGATE OPTION EXERCISES FOR FISCAL 1998
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
---------------------------------------------
Value(1) of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1998 (#) December 31, 1998 ($)
- - ------------------------------------------------------------------------------------------------
Shares
Acquired Value ($) Exercisable/ Exercisable/
Name on Exercise Realized(2) Unexercisable Unexercisable
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William A. Forster -0- -0- 500,000/20,000 262,500/2,500
- - ------------------------------------------------------------------------------------------------
Gary Spielfogel -0- -0- 158,000/50,000 -0-/6,250
- - ------------------------------------------------------------------------------------------------
</TABLE>
(1) Total value of unexercised options is based upon the fair market value of
the Common Stock as reported by the over-the-counter Bulletin Board of
$1.875 on December 31, 1998.
19
<PAGE>
(2) Value realized in dollars is based upon the difference between the fair
market value of the Common Stock on the date of exercise, and the exercise
price of the option.
Executive Employment Agreements
Mr. Forster currently serves as the Company's Chief Executive Officer,
President and Chairman of the Board of Directors under a 3-year Employment
Agreement entered into as of July 1, 1998, which superseded a prior employment
contract. Under the Agreement, Mr. Forster receives an annual base salary of
$225,000, and at the discretion of the Company's Board of Directors, he may be
awarded annual bonuses up to an amount of 100% of his base salary depending upon
his performance and certain other factors. In the event the Company does not
renew his agreement for an additional term of 2 years, Mr. Forster will receive
an amount equal to his base salary for the third year of the term of the
agreement, plus the annual cash value of all other benefits provided to him in
that third year, payable in full at the time of expiration of the Agreement.
As of July 1, 1998, the Company entered into a 3-year Employment Agreement
with Gary P. Spielfogel relating to his services as the Company's Executive Vice
President. This Agreement superseded a prior employment agreement. Mr.
Spielfogel receives an annual base salary of $125,000. In connection with the
sale of the Company's interest in the LLC in June 1999, Mr. Spielfogel received
bonus compensation of $144,000.
As of August 1, 1998, the Company entered into a 3-year Employment
Agreement with Marc Falkin, relating to his service as the Company's Senior Vice
President. This Agreement superseded a prior employment agreement. Mr. Falkin
receives an annual base salary of $80,000. In connection with the sale of the
Company's interest in the LLC in June 1999, Mr. Falkin received bonus
compensation of $114,012.
Board of Directors
In September 1998, each current member of the board of directors was
granted options to purchase twenty thousand (20,000) shares of Common Stock at a
price equal to $1.75, one hundred percent (100%) of the fair market value as of
the date of grant. In addition, each member of the board of directors elected
subsequently, as of the date of his or her election, shall be granted
automatically options to purchase twenty thousand (20,000) shares of Common
Stock at a price equal to one hundred percent (100%) of the fair market value as
of the date of grant. On each year anniversary of the each such grant, each
member of the board of directors shall be entitled to an automatic grant of
options to purchase five thousand (5,000) shares of Common Stock, at a price
equal to one hundred percent (100%) of the Fair Market Value as of the date of
grant. The shares subject to the options granted to board members are
exercisable over a period of 10 years from the date of grant, and vest over a
2-year period.
20
<PAGE>
Item 7. Certain Relationships and Related Transactions
The Exorex Company, L.L.C.
Formation of Joint Venture. Effective June 1998, the Company and Medicis
Partners Incorporated, a wholly-owned subsidiary of Medicis Pharmaceutical
Corporation ("Medicis") formed a joint venture pursuant to the terms of a Joint
Venture Agreement, the purpose of which was to develop and market skin care
products through Medicis Consumer Products Company, L.L.C., which was
subsequently known as The Exorex Company, L.L.C. (the "LLC"). On the closing
date of the Joint Venture Agreement, Medicis Partners contributed to the LLC
cash in the sum of $4,000,000, and received a 51% interest in the LLC. The
Company contributed all assets and property and associated rights and interest
used in connection with the development, manufacture, marketing and sale of the
Exorex Product Line and the Helpline and product fulfillment center (the
"Contributed Assets"). The assets included certain of the Company's receivables
and inventory relating to the Exorex Product Line. In consideration for the
Contributed Assets, except for the inventory and the receivables, the Company
received a 49% interest in the LLC with a basis valuation of $4,000,000. As
consideration for the Receivables and the Inventory, the LLC paid to the Company
approximately $2,258,000 and $1,367,000, respectively. In connection with the
transfer of the Contributed Assets, the LLC did not assume any of the Company's
liabilities, except for certain of the liabilities related to the business of
the Contributed Assets incurred in the ordinary course of the business.
As an additional condition to the Company's participation in the joint
venture, at the closing, Medicis purchased 400,000 shares of the Company's
Common Stock at $2.50 per share for a total purchase price of $1,000,000.
Certain ancillary agreements were entered into in connection with the
Joint Venture. The Company entered into a Consulting, Confidentiality and
Non-Compete Agreement under the terms of which the LLC agreed to pay to the
Company a fee equal to 6% of the LLC's net sales. In addition, pursuant to the
terms of a Facility Agreement, the Company subleased to the LLC, the office
space, furniture, computer hardware, all utilities, including telephone and fax
services and warehouse facilities, and equipment leased and owned and occupied
by the Company for substantially the Company's cost.
For the period from inception, June 18, 1998 through the date of its sale,
June 30, 1999, Medicis Partners was responsible for the day-to-day operations of
the LLC and it entered into a Service Agreement to provide additional support
services to the LLC. The support services may include the following: general and
administrative support, financial reporting, provision of manufacturing
facilities, provision of warehousing facilities, product distribution, sales
support, customer service and product research and development. The compensation
paid Medicis Partners under the Service Agreement was a fee in an amount equal
to 6% of the LLC's net sales and include reimbursement of its actual costs.
21
<PAGE>
Sale of Joint Venture Interest
In June 1999, the Company sold its interest in the LLC in return for $3.6
million in cash and the assumption of all liabilities of the Company in the LLC
and certain inventory of the LLC with a shelf life of less than 12 months which
the Company has the right to sell abroad, subject to certain restrictions. In
addition, certain ancillary agreements entered into in connection with the
formation of the LLC were terminated, with the exception of the Facility
Agreement (which relates to the leasing of substantially all of the Company's
office and warehouse), which will remain in full force and effect. See "Item 3.
Description of Property".
Meyer-Zall
During fiscal years ended December 31, 1997 and December 31, 1998, the
Company purchased inventory from Meyer-Zall in the approximate amounts of
$1,170,000 and $569,000, respectively.
On or about July 15, 1998, the Company loaned $120,000 to Meyer-Zall,
which loan was secured by all of Meyer-Zall's accounts receivable in sales of
products to the LLC and 900,000 shares of common stock of the Company. In
addition, the Company reserved the right, pursuant to the terms of the Loan
Agreement, at any time within 6 months of execution of the Agreement, to convert
all of the principal amount of the loan into 2% of Meyer-Zall's outstanding
voting securities. Initially, interest at a rate of 18% per annum was due on the
principal amount of the loan from the Company to Meyer-Zall, and the principal
was in four equal monthly installments of $30,000 to be paid commencing February
1, 1999. However, after November 11, 1998, interest no longer accrued, and
repayment of the principal amount was postponed indefinitely. In September 1999,
Meyer-Zall returned to the Company 76,000 shares of the Company's Common Stock
which Meyer-Zall held, in return for cancellation of the outstanding debt of
$125,400, inclusive of accrued interest.
IGI
Effective September 30, 1997, the Company acquired certain exclusive
marketing rights from IGI. and its affiliates to a line of therapeutic topical
skin care products. Pursuant to the terms of an Exclusive Supply Agreement
between the Company and IGI, as amended, the Company paid IGI the sum of $50,000
and issued to IGI 271,770 shares of Common Stock.
However, as of December 31, 1998, the Company canceled this product line
due to limited sales. In August 1999, the Company entered into an agreement with
IGI, whereby the Company agreed to register shares of common stock of the
Company held by IGI for resale, and IGI agreed to return shares of the Company
it holds according to a schedule, commencing upon the sale of products using
Novasome(R) technology. No assurances can be given that any products using
Novasome(R) technology will be commercially acceptable.
Recapitalization Agreement
On October 16, 1997, the Company entered into a Recapitalization Agreement
with
22
<PAGE>
Meyer-Zall, Tandilly Company Ltd., East Church Limited, Omaha Investments Ltd.,
Interderm Limited, Benson Holdings Ltd., William A. Forster, Gary Spielfogel,
Marc Falkin and Adele Folk. Under the terms of the Agreement, in consideration
of a payment in the aggregate amount of $200,000 and certain commitments with
respect to registration of a portion of their remaining shares, Meyer-Zall, East
Asia, Tandilly, East Church, Omaha, Interderm and Benson, who in the aggregate
held 5,828,013 shares of the Company's Common Stock, agreed to a redemption and
cancellation of an aggregate of 3,524,557 shares. As part of the
Recapitalization Agreement, which closed in February 1998, a prior voting trust
agreement with William A. Forster and certain other agreements were terminated.
In addition, as part of the Recapitalization Agreement, William Forster,
Gary Spielfogel, Marc Falkin and Adele Folk agreed to a cancellation of an
aggregate of 400,000 stock options and Mr. Forster has agreed to amend certain
bonus provisions in his prior employment agreement.
Loans To and From Officers and Directors
The Company made a loan in the sum of $22,500 to a corporation controlled
by William A. Forster, the Chief Executive Officer and Chairman of the Board.
Repayment of the loan, together with interest at the rate of ten (10%) percent
per annum, is due and payable on December 31, 1999.
In November 1997, the Company received an aggregate of $550,000 of
short-term bridge loans. $100,000 of the loans came from a family partnership of
Dr. Sanford G. Bluestein, a Director of the Company, $100,000 of the loans came
from Westby Rogers, who became a Director in June 1999, $125,000 of the loans
came from William A. Forster, the Company's Chief Executive Officer, President
and Chairman of the Board, $50,000 came from Eugene Miller, a Director and
$25,000 came from Marc Falkin, Senior Vice President. Dr. Bluestein's loan was
repaid to him together with 18% interest in December 1997, Mr. Rogers loan was
repaid to him together with 18% interest in June 1998, Mr. Forster's loan was
repaid to him together with 18% interest in February 1998 and June 1998, Mr.
Miller's loan was repaid to him with 18% interest in June 1998 and Mr. Falkin's
loan was repaid to him together with 18% interest in June 1998. In addition,
each bridge lender received warrants to purchase shares of common stock at a
purchase price of $3.50 per share at any time up to June 2003. The amount of
Warrants was based on the period of time in which the loan was outstanding. Dr.
Bluestein received 7,000 warrants, Mr. Rogers received 48,068 warrants, Mr.
Forster received 19,869 warrants, Mr. Miller received 24,036 warrants and Mr.
Falkin received 10,558 warrants.
In December 1997, the Company advanced approximately $17,800 to companies
affiliated with the President, which was repaid during 1998.
Issuances of Unregistered Securities
In connection with 1997 Preferred Stock Private Placement, the Company
issued to Delta Equity Services Corporation and Roundhill Securities, Inc., the
placement and selling agents and their affiliates, warrants to purchase 7,586.25
shares of Convertible Preferred Stock were issued to placement and selling
agents, with an exercise price of $30 per share, and are
23
<PAGE>
exercisable for the five year period ending July 2002. Each share of Preferred
Stock is convertible into 10 shares of Common Stock at $3.50 per share, and 10
warrants, each warrant to purchase one share of Common Stock at $6.50 per share.
Mr. Lawrence D. Russell, who is presently a Director of the Company, was a
registered representative of Delta Equity Services Corporation, and received
2,152.50 warrants.
During July 1997, in connection with an agreement with a financial
advisor, the Company issued warrants to six (6) persons purchase an aggregate of
50,000 shares of Common Stock at $4.75 per share, exercisable for the period
ending July 2002. Mr. Lawrence D. Russell, who is presently a Director of the
Company, received 25,750 warrants.
In connection with October 1997 Private Placement, the Company raised gross
proceeds of $1,088,300. Placement agent commissions aggregated $113,188.
Brookstreet Securities Corporation and Delta Equity Services Corporation acted
as placement agents. Mr. Lawrence D. Russell, who is presently a Director of the
Company, was a registered representative of the placement agents. In addition,
the Company issued 20,180 warrants issued to placement agents and their
affiliates (four (4) persons) in the 1997 October Private Placement on February
28, 1998. Mr. Russell received 6,180 warrants.
Item 8. Description of Securities
General
Under the Company's Articles of Incorporation, the Company is authorized
to issue 51,000,000 shares of capital stock, comprised of 50,000,000 shares of
Common Stock, par value $.001 per share and 1,000,000 shares of Preferred Stock,
par value $.001 per share.
Common Stock
As of September 22, 1999, 5,853,371 shares of the Company's common stock,
$.001 par value per share ("Common Stock") were outstanding, inclusive of an
aggregate of 249,820 shares of Common Stock issuable on conversion of Preferred
Stock effected on March 31, 1999, for which certificates have not yet delivered.
Each shareholder is entitled to one vote for each share of Common Stock
owned of record. The holders of shares of Common Stock do not possess cumulative
voting rights, which means that the holders of more than 50% of the outstanding
shares voting for the election of directors can elect all of the directors, and
in such event the holders of the remaining shares will be unable to elect any of
the Company's directors. Holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board of Directors may from time to time
determine. Upon the liquidation, dissolution, or winding up of the Company, the
assets legally available for distribution to the shareholders will be
distributable ratably among the holders of the shares outstanding at the time.
Holders of the shares of Common Stock have no preemptive, conversion, or
subscription rights,
24
<PAGE>
and shares are not subject to redemption. All outstanding shares of Common Stock
will be fully paid and non-assessable.
Preferred Stock
Under its Articles of Incorporation, the Company is authorized to issue
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors will be empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's stock. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change of control of the Company. There are presently no shares of
preferred stock outstanding.
Common Stock Purchase Warrants
In connection with the Company's 1996 Private Offering, the Company issued
580,000 warrants. Each warrant entitles the holder to purchase at any time
during a period of three (3) years, commencing on July 9, 1996, one (1) share of
common stock at a price of $5.00 per share. In July 1999, the Company extended
the expiration date of the warrants for a period of one year, until July 9,
2000. The warrants may be redeemed by the Company on 30 days' prior notice at a
price of ten cents per warrant at any time during the warrant exercise period,
if a Registration Statement covering the resale of the shares of common stock,
issuable upon exercise of the warrants, is effective with the Securities and
Exchange Commission as of that date.
In connection with the conversion of the outstanding shares of the Series
A Preferred Stock as of March 31, 1999, in addition to receipt of ten shares of
Common Stock, the holders received ten Common Stock Purchase Warrants. Each
Warrant entitles the holder thereof to purchase at any time during a period of
five years commencing on the date of issuance (the "Warrant Exercise Period"),
ten shares of Common Stock. Each Warrant may be exercised for a price of $6.50
per share. The Warrants may be redeemed by the Company upon 30 days prior
written notice at a price of $.10 per Warrant at any time during the Warrant
Exercise Period, if a Registration Statement covering the resale of the shares
of Common Stock issuable upon exercise of the Warrants is effective with the
Securities and Exchange Commission as of that date.
25
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
The Company's shares of Common Stock are traded over-the-counter and
quoted in the over-the-counter Electronic Bulletin Board on a limited and
sporadic basis under the symbol "IMXN". The reported high and low bid prices for
the Common Stock are as shown below for fiscal year ended December 31, 1997,
fiscal year ended December 31, 1998 and for the six (6) months ended June 30,
1999. The quotations reflect inter-dealer prices and do not include retail
mark-ups, mark-downs or commissions. The prices do not necessarily reflect
actual transactions.
- - --------------------------------------------------------------------------------
High Bid Low Bid
- - --------------------------------------------------------------------------------
1997
First Quarter $ 5 $ 3 1/4
Second Quarter $ 5 $ 3 1/4
Third Quarter $ 6 $ 4 3/4
Fourth Quarter $ 6 $ 4 1/4
- - --------------------------------------------------------------------------------
1998
First Quarter $ 5 1/2 $ 4
Second Quarter $ 5 1/2 $ 3
Third Quarter $ 4 $ 1 1/4
Fourth Quarter $ 1 7/8 $ 5/8
- - --------------------------------------------------------------------------------
1999
First Quarter $ 3 1/2 $ 1
Second Quarter $ 2 1/8 $ 1 1/2
- - --------------------------------------------------------------------------------
The closing bid and asked prices of the Company's Common Stock on
September 26, 1999, were 1 3/8 and 1 7/8, respectively, as quoted on the
over-the-counter Electronic Bulletin Board. As of the June 16, 1999, there were
336 shareholders of record of the Company's Common Stock.
Dividends
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain future earnings to finance the expansion of its
business and does not anticipate that any cash dividends will be paid in the
foreseeable future. The future dividend policy will depend on the Company's
earnings, capital requirements, expansion plans, financial condition and other
relevant factors.
26
<PAGE>
Shares of Series A Preferred Stock were issued in July 1997, which accrued
an annual 8% dividend, which the company paid in additional shares of Preferred
Stock. Each of the shares of Preferred Stock were converted into ten (10) shares
of Common Stock and ten (10) warrants to purchase Common Stock in March 1999.
Transfer Agent
The Transfer Agent of the Company's Common Stock is Interwest Transfer
Co., Inc., 1981 East Murray Holladay Road, P. O. Box 17136, Salt Lake City, Utah
84117.
Item 2. Legal Proceedings
There are no material pending legal proceedings to which the Company is a
party, or to which any of its properties or assets are subject.
Item 3. Changes In and Disagreements With Accountants
Not applicable.
Item 4. Recent Sales of Unregistered Securities
1996 Private Placement
In July 1996, the Company issued an aggregate of 580,000 shares of Common
Stock and 580,000 Warrants to purchase common stock to forty-three (43)
investors, pursuant to the terms of a private placement memorandum dated
February 9, 1996 (the "1996 Private Placement"). Each investor warranted and
represented to the Company in connection with their subscriptions for the
aforementioned securities that they were purchasing the securities for
investment and not with a view towards distribution. The offering was conducted
without a general solicitation or advertisement, was made solely to
sophisticated investors or accredited investors (as defined in Rule 501 of
Regulation D) and accordingly, the Company relied upon the exemption from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, pursuant to the provisions of Section 4(2) of the Securities Act and
Regulation D, promulgated thereunder.
In connection with 1996 Private Placement, Euro-Atlantic Securities, Inc.
acted as the placement agent on a best efforts basis. The Company raised gross
proceeds of $1,450,000, paid placement agent commissions of $145,000, and issued
58,000 warrants to Euro-Atlantic Securities, Inc. to purchase 58,000 shares of
Common Stock and 58,000 warrants to purchase common stock.
1997 Preferred Stock Private Placement
On February 28, 1997, the Company offered to sell, through a private
placement, 200 units at a price of $25,000 per unit without any requirement that
a specified number of units be sold (the "1997 Preferred Stock Private
Placement"). Each unit consisted of
27
<PAGE>
1,000 shares of Series A Convertible Preferred Stock ("Preferred Stock"), $.001
par value, with a price of $25 per share. Each share of Preferred Stock was
convertible into 10 shares of Common Stock and 10 Common Stock Purchase
Warrants. Each warrant is exercisable until July 10, 2002 and entitles the
holder to purchase one share of Common Stock at a price of $6.50 per share. As
of July 10, 1997, the Company sold 76,750 shares of Preferred Stock and received
gross proceeds of $1,918,750 less costs of approximately $217,000. On March 31,
1999, each of the outstanding shares of this series was converted on a mandatory
basis into ten shares of Common Stock and ten warrants to purchase Common Stock.
Each investor warranted and represented to the Company in connection with
their subscriptions for the aforementioned securities that they were purchasing
the securities for investment and not with a view towards distribution. The
offering was conducted without a general solicitation or advertisement, was made
solely to accredited investors (as defined in Rule 501 of Regulation D) and
accordingly, the Company relied upon the exemption from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) of the Securities Act and Regulation D,
promulgated thereunder.
In connection with 1997 Preferred Stock Private Placement, the Company
issued to Delta Equity Services Corporation and Roundhill Securities, Inc., the
placement and selling agents and their affiliates (fifteen (15) persons),
warrants to purchase 7,586.25 shares of Convertible Preferred Stock were issued
to placement and selling agents, with an exercise price of $30 per share, and
are exercisable for the five year period ending July 2002. Each share of
Preferred Stock is convertible into 10 shares of Common Stock at $3.50 per
share, and 10 warrants, each warrant to purchase one share of Common Stock at
$6.50 per share.
Financial Advisor Warrants
During July 1997, in connection with an agreement with a financial
advisor, the Company issued warrants to six (6) persons purchase an aggregate of
50,000 shares of Common Stock at $4.75 per share, exercisable for the period
ending July 2002.
October 1997 Private Placement
From December 1997 through February 1998, the Company issued an aggregate
of 310,941 shares of Common Stock, pursuant to the terms of a private placement
memorandum dated October 30, 1997 (the "October 1997 Private Placement"). Each
investor warranted and represented to the Company in connection with their
subscriptions for the aforementioned securities that they were purchasing the
securities for investment and not with a view towards distribution. The offering
was conducted without a general solicitation or advertisement, was made solely
to accredited investors (as defined in Rule 501 of Regulation D) and
accordingly, the Company relied upon the exemption from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) of the Securities Act and Regulation D,
promulgated thereunder.
In connection with October 1997 Private Placement, the Company raised
gross proceeds of $1,088,300. Placement agent commissions aggregated $113,188.
Brookstreet Securities Corporation and Delta Equity Services Corporation acted
as placement agents. In
28
<PAGE>
addition, the Company issued 20,180 warrants issued to placement agents and
their affiliates (four (4) persons) in the 1997 October Private Placement on
February 28, 1998.
1998 Sale to Medicis
As a condition of the Joint Venture Agreement (See Business, Item 1), in
June 1998 Medicis purchased 400,000 shares of Common Stock at the estimated fair
value of $2.50 per share. Medicis was an accredited investor, and warranted and
represented to the Company in connection with its purchase of the aforementioned
securities that it was purchasing the securities for investment and not with a
view towards distribution. The offering was conducted without a general
solicitation or advertisement and accordingly, the Company relied upon the
exemption from the registration requirements of Section 5 of the Securities Act
of 1933, as amended, pursuant to the provisions of Section 4(2) of the
Securities Act and Regulation D, promulgated thereunder.
1998 Miscellaneous
On July 29, 1998, the Company issued 14,286 shares of its Common Stock to
Dr. Marta Rendon in connection with her services as a finder for the Company. On
or about that same date, the Company granted to Dr. Spencer Kellogg 25,000 stock
options at an exercise price of $3.00 per share, with all options expiring 2003
in connection with his services to the Company's subsidiary, Sarah J., Inc. In
addition, the Company granted 6,000 stock options to R.F. Technology
Consultants, which options are exercisable at $2.00 per share for a period of
five years, with 3,000 stock options vesting upon the completion of each of the
products listed in an agreement between the Company and R.F. Technology
Consultants. These options were granted in connection with R.F. Technology
Consultants' preparation and development of seven products for the Company's
subsidiary, Sarah J., Inc. The foregoing issuances were conducted without a
general solicitation or advertisement to sophisticated investors, and
accordingly, the Company relied upon the exemption from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) of the Securities Act and Regulation D,
promulgated thereunder.
Item 5. Indemnification of Directors and Officers
Pursuant to ss.16-10a-902 of the Utah Revised Business Corporation Act and
our Company's Articles of Incorporation, as amended, we may indemnify an
individual made a party to a proceeding because he is or was a director, against
liability incurred in the proceeding if: (i) his conduct was in good faith; (ii)
he reasonably believed that his conduct was in, or not opposed to, the
Corporation's best interest; and (iii) in the case of criminal proceeding, he
had no reasonable cause to believe his conduct was unlawful. The indemnification
provided herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any statute, by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such office
and shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
29
<PAGE>
We may purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of our Company or is or was serving
at our request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not our Company would have the power to indemnify
him against such liability under the provisions of the Utah Revised Business
Corporation Act or of these by-laws.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for directors, officers and controlling persons of our
Company pursuant to the above-described provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange 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 our payment of expenses incurred or paid by
the director, officer or controlling person of our Company the most successful
defense in any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, we
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 indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
30
<PAGE>
PART F/S
The financial statements and supplementary data are included herein.
Financial Statements and Exhibits
The following consolidated financial statements of the Company, include
the audited balance sheet at December 31, 1998 and the related audited
statements of operations, changes in stockholders' equity, and cash flows for
each of the years in the two-year period ended December 31, 1998 and the
unaudited balance sheet at June 30, 1999 and the related unaudited statements of
operations, changes in stockholders' equity, and cash flows for each of the six
months ended June 30, 1999 and June 30, 1998.
IMX PHARMACEUTICALS, INC.
CONTENTS
Page
----
Report of Independent Certified Public Accountants F- 3
Consolidated Balance Sheets F- 4
Consolidated Statements of Operations F- 6
Consolidated Statements of Stockholders' Equity F- 7
Consolidated Statements of Cash Flows F- 9
Notes to Consolidated Financial Statements F- 10
31
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
=================================
Consolidated Financial Statements
Six Month Periods Ended June 30, 1998 and 1999
Years Ended December 31, 1997 and 1998
F-1
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Contents
================================================================================
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements
Balance Sheets F-4 to 5
Statements of Operations F-6
Statements of Changes in Stockholders' Equity F-7 to 8
Statements of Cash Flows F-9
Notes to Financial Statements F-10 to 35
F-2
<PAGE>
[LETTERHEAD OF BDO SEIDMAN, LLP]
Report of Independent Certified Public Accountants
To the Board of Directors of
IMX Pharmaceuticals, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheets of IMX
Pharmaceuticals, Inc. and subsidiaries (the "Company") as of December 31, 1997
and 1998 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years then ended. 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 consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of IMX Pharmaceuticals,
Inc. and subsidiaries as of December 31, 1997 and 1998 and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
West Palm Beach, Florida /s/ BDO Seidman, LLP
April 21, 1999
F-3
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Consolidated Balance Sheets
================================================================================
<TABLE>
<CAPTION>
(Unaudited)
December 31, June 30,
----------------------- -----------
1997 1998 1999
=============================================================================================================
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 25,306 $ 623,860 $ 945,816
Securities available for sale (Note 5) -- 1,689,200 25,000
Accounts receivable, net of allowance for doubtful accounts of
$10,000, $13,647, and $0 1,159,136 194,405 52,795
Inventory (Note 6) 1,300,054 160,152 429,074
Loan receivable - related party (Note 17) -- 120,000 120,000
Prepaid expenses and other 68,875 38,858 78,209
Receivable from sale agreement (Note 9) -- -- 3,600,000
- - -------------------------------------------------------------------------------------------------------------
Total current assets 2,553,371 2,826,475 5,250,894
- - -------------------------------------------------------------------------------------------------------------
Property and equipment, net (Note 7) 109,460 119,176 123,396
- - -------------------------------------------------------------------------------------------------------------
Other assets:
Deposits and other 111,720 42,720 8,220
Licensing and supply agreements, net (Note 8) 1,053,593 44,598 --
Investment in and advances to unconsolidated subsidiary (Note 9) -- 348,016 --
- - -------------------------------------------------------------------------------------------------------------
Total other assets 1,165,313 435,334 8,220
- - -------------------------------------------------------------------------------------------------------------
$3,828,144 $3,380,985 $5,382,510
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Consolidated Balance Sheets
================================================================================
<TABLE>
<CAPTION>
(Unaudited)
December 31, June, 30
-------------------------- -----------
1997 1998 1999
=============================================================================================================
<S> <C> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 588,217 $ 267,208 $ 208,772
Accrued expenses 171,378 214,414 584,443
Recourse obligation (Note 11) -- 269,705 --
Supply agreement payable (Note 8) 50,000 -- --
Notes payable (Note 12) 295,158 -- --
- - -------------------------------------------------------------------------------------------------------------
Total current liabilities 1,104,753 751,327 793,215
- - -------------------------------------------------------------------------------------------------------------
Long-term Liabilities:
Supply agreement payable (Note 8) 950,999 -- --
- - -------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 9, 11, 13 and 18) -- -- --
- - -------------------------------------------------------------------------------------------------------------
Redeemable common stock (Note 13) -- 70,000 --
- - -------------------------------------------------------------------------------------------------------------
Stockholders' equity (Notes 13, 14, 15, 16 and 18):
Series A convertible preferred stock $.001 par value,
1,000,000 shares authorized; 76,750, 86,424 and
0 shares issued and outstanding 77 86 --
Common stock, $.001 par value, 50,000,000 shares
authorized, 7,741,166, 8,728,108 and 9,629,707 shares
issued; 4,216,609, 5,003,351 and 5,884,951 outstanding 7,741 8,728 9,630
Additional paid-in capital 4,662,168 7,780,988 7,939,880
Deficit (2,697,594) (4,883,487) (2,932,558)
Treasury stock, at cost - 3,524,557, 3,724,757 and
3,744,756 shares (200,000) (357,657) (427,657)
Accumulated other comprehensive income -- 11,000 --
- - -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,772,392 2,559,658 4,589,295
- - -------------------------------------------------------------------------------------------------------------
$ 3,828,144 $ 3,380,985 $ 5,382,510
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Consolidated Statements of Operations
================================================================================
<TABLE>
<CAPTION>
(Unaudited)
Years Ended Six Months Ended
December 31, June 30,
-------------------------- --------------------------
1997 1998 1998 1999
=============================================================================================================
<S> <C> <C> <C> <C>
Net sales $ 4,344,907 $ 3,942,371 $ 2,892,291 $ 50,718
Cost of sales (Note 17) 1,021,014 1,106,261 759,572 22,365
- - -------------------------------------------------------------------------------------------------------------
Gross profit 3,323,893 2,836,110 2,132,719 28,353
- - -------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling 1,357,234 1,594,588 1,079,469 486,796
Advertising 1,131,986 1,006,557 744,091 116,538
General and administrative 1,365,012 1,412,841 912,641 785,597
Supply agreement impairment loss (Note 8) -- 884,199 -- 43,348
Depreciation and amortization 44,064 172,106 48,685 27,204
- - -------------------------------------------------------------------------------------------------------------
Total operating expenses 3,898,296 5,070,291 2,784,886 1,459,483
- - -------------------------------------------------------------------------------------------------------------
Loss from operations (574,403) (2,234,181) (652,167) (1,431,130)
Other income (expenses):
Equity in earnings (loss) of unconsolidated
subsidiary (Note 9) -- 81,474 -- (12,887)
Gain on sale of investment in unconsolidated
subsidiary (Note 9) -- -- -- 3,356,005
Other (5,618) 135,664 2,566 82,341
- - -------------------------------------------------------------------------------------------------------------
Net (loss) income before income taxes (580,021) (2,017,043) (649,601) 1,994,329
Provision for income taxes (Note 10) -- -- -- --
- - -------------------------------------------------------------------------------------------------------------
Net (loss) income (580,021) (2,017,043) (649,601) 1,994,329
Dividends on preferred stock
(Note 13) (840,496) (168,850) (76,500) (43,400)
- - -------------------------------------------------------------------------------------------------------------
Net (loss) income available to common
Stockholders $(1,420,517) $(2,185,893) $ (726,101) $ 1,950,929
=============================================================================================================
Weighted average number of shares of
common stock outstanding
Basic 6,995,622 4,879,622 4,530,253 5,430,340
Diluted 6,995,622 4,879,622 4,530,253 5,718,584
=============================================================================================================
Net (loss) income per common share - (Note 16)
Basic $ (.20) $ (.45) $ (.16) $ .36
Diluted $ (.20) $ (.45) $ (.16) $ .34
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
================================================================================
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------- -----------------------
Number Number Additional
of of Paid-in
Shares Amount Shares Amount Capital
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 -- $ -- 7,738,666 $ 7,738 $ 1,596,801
Comprehensive income:
Net loss -- -- -- -- --
Total comprehensive income (loss) -- -- -- -- --
Preferred stock:
Net proceeds from sale 76,750 77 -- -- 1,702,121
Dividends declared -- -- -- -- 72,996
Deemed dividends -- -- -- -- 767,500
Purchase of treasury stock -- -- -- -- --
Exercise of common stock options -- -- 2,500 3 6,247
Compensation - fair value of common stock options and
warrants issued to non-employees -- -- -- -- 214,810
Original issue discount for fair value of warrants
issued with notes payable -- -- -- -- 141,121
Net proceeds from common stock subscriptions -- -- -- -- 160,572
- - ------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 76,750 77 7,741,166 7,741 4,662,168
Comprehensive income:
Net loss -- -- -- -- --
Other comprehensive income - unrealized gain on
securities available for sale -- -- -- -- --
Total comprehensive income (loss) -- -- -- -- --
Preferred stock dividends declared 9,674 9 -- -- 168,841
Purchase of treasury stock -- -- -- -- --
Compensation - fair value of common stock options issued
to non-employees -- -- -- -- 78,332
Issuance of common stock for consulting service -- -- 24,286 24 96,176
Issuance of common stock to settle supply agreement payable -- -- 271,714 272 950,727
Original issue discount for fair value of warrants issued
with notes payable -- -- -- -- 108,595
Net proceeds from sale of common stock -- -- 710,941 711 1,786,129
Reclassification of redeemable common stock -- -- (19,999) (20) (69,980)
- - ------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 86,424 86 8,728,108 8,728 7,780,988
<CAPTION>
Accumulated
Other Total
Treasury Comprehensive Stockholders'
Deficit Stock Income Equity
=================================================================================================================
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $(1,277,077) $ -- $ -- $ 327,462
Comprehensive income:
Net loss (580,021) -- -- (580,021)
-----------
Total comprehensive income (loss) -- -- -- (580,021)
Preferred stock:
Net proceeds from sale -- -- -- 1,702,198
Dividends declared (72,996) -- -- --
Deemed dividends (767,500) -- -- --
Purchase of treasury stock -- (200,000) -- (200,000)
Exercise of common stock options -- -- -- 6,250
Compensation - fair value of common stock options and
warrants issued to non-employees -- -- -- 214,810
Original issue discount for fair value of warrants
issued with notes payable -- -- -- 141,121
Net proceeds from common stock subscriptions -- -- -- 160,572
- - -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 (2,697,594) (200,000) -- 1,772,392
Comprehensive income:
Net loss (2,017,043) -- -- (2,017,043)
Other comprehensive income - unrealized gain on
securities available for sale -- -- 11,000 11,000
-----------
Total comprehensive income (loss) -- -- -- (2,006,043)
Preferred stock dividends declared (168,850) -- -- --
Purchase of treasury stock -- (157,657) -- (157,657)
Compensation - fair value of common stock options issued
to non-employees -- -- -- 78,332
Issuance of common stock for consulting service -- -- -- 96,200
Issuance of common stock to settle supply agreement payable -- -- -- 950,999
Original issue discount for fair value of warrants issued
with notes payable -- -- -- 108,595
Net proceeds from sale of common stock -- -- -- 1,786,840
Reclassification of redeemable common stock -- -- -- (70,000)
- - -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 (4,883,487) (357,657) 11,000 2,559,658
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
================================================================================
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------------
Number Number Additional
of of Paid-in
Shares Amount Shares Amount Capital Deficit
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 86,424 $ 86 8,728,108 $8,728 $ 7,780,988 $(4,883,487)
Six months ended June 30, 1999 (Unaudited)
Comprehensive income:
Net income -- -- -- -- -- 1,994,329
Change in other comprehensive income -- -- -- -- -- --
Total comprehensive income -- -- -- -- -- --
Preferred stock dividends declared 1,736 2 -- -- 43,398 (43,400)
Compensation -fair value of common stock options
issued to non-employees -- -- -- -- 46,308 --
Conversion of preferred stock to common stock (88,160) (88) 881,600 882 (794) --
Transfer of redeemed common stock to treasury stock -- -- 19,999 20 69,980 --
- - ------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999 (Unaudited) -- $ -- 9,629,707 $9,630 $ 7,939,880 $(2,932,558)
========================================================================================================================
<CAPTION>
Accumulated
Other Total
Treasury Comprehensive Stockholders'
Stock Income Equity
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1998 $(357,657) $ 11,000 $ 2,559,658
Six months ended June 30, 1999 (Unaudited)
Comprehensive income:
Net income -- -- 1,994,329
Change in other comprehensive income -- (11,000) (11,000)
-----------
Total comprehensive income -- -- 1,983,329
Preferred stock dividends declared -- -- --
Compensation -fair value of common stock options
issued to non-employees -- -- 46,308
Conversion of preferred stock to common stock -- -- --
Transfer of redeemed common stock to treasury stock (70,000) -- --
- - ----------------------------------------------------------------------------------------------
Balance, June 30, 1999 (Unaudited) $(427,657) $ -- $ 4,589,295
==============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
================================================================================
<TABLE>
<CAPTION>
(Unaudited)
Years Ended Six Months Ended
December 31, June 30,
-------------------------- --------------------------
1997 1998 1998 1999
==================================================================================================================================
<S> <C> <C> <C> <C>
Operating Activities:
Net (loss) income $ (580,021) $(2,017,043) $ (649,601) $ 1,994,329
Adjustments to reconcile net (loss) income to net cash (used)
provided by operating activities:
Depreciation and amortization 44,064 172,106 48,685 27,204
Provision of doubtful accounts 10,000 3,647 49,234 (13,647)
Deferred income taxes -- -- -- (25,000)
Amortization of original issue discount 64,279 185,437 185,437 --
Compensation, fair value of stock, stock options and warrants 105,560 174,532 142,588 46,308
Equity in loss of unconsolidated subsidiary -- 96,970 -- 167,338
Accretion of investment in unconsolidated subsidiary -- (100,598) -- (97,740)
Gain on sale of investment in unconsolidated subsidiary -- -- -- (3,356,005)
Impairment loss on supply and licensing agreements -- 884,199 -- 43,348
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (991,649) 1,166,456 1,740,274 105,451
Decrease ( increase) in inventory (1,071,893) 1,204,235 1,292,197 (333,255)
Increase in prepaid expenses (1,287) (15,530) -- (30,625)
Decrease (increase) in deposits (19,574) 104,704 67,392 25,774
Decrease in other assets 2,908 17,839 23,033 --
(Decrease) increase in accounts payable and accrued expenses 511,523 (672,361) (1,937,272) 145,450
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by operating activities (1,926,090) 1,204,593 961,967 (1,301,070)
- - ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Purchase of furniture and equipment (77,749) (65,022) (30,324) (30,174)
Loan to related party -- (120,000) -- --
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (77,749) (185,022) (30,324) (30,174)
- - ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Net proceeds (repayments) under notes payable 314,500 (372,000) (372,000) --
Proceeds from sale of preferred stock 1,702,198 -- -- --
Proceeds from sale of common stock 160,572 1,786,840 1,786,840 --
Purchase of securities available for sale -- (1,678,200) -- (25,000)
Proceeds from maturity of securities -- -- -- 1,678,200
Proceeds from exercise of common stock options 6,250 -- -- --
Purchase of treasury stock (200,000) (157,657) -- --
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 1,983,520 (421,017) 1,414,840 1,653,200
- - ----------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (20,319) 598,554 2,346,483 321,956
Cash and cash equivalents - beginning of period 45,625 25,306 25,306 623,860
- - ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 25,306 $ 623,860 $ 2,371,789 $ 945,816
==================================================================================================================================
Supplemental Schedule of Cash Flow Information:
Cash paid for interest $ 11,690 $ 38,265 $ 37,237 $ 12,218
Cash paid for income taxes -- -- -- --
==================================================================================================================================
Supplemental Schedule of Noncash Activities:
Common stock issued to settle supply agreement payable $ -- $ 950,999 $ 950,999 $ --
Acquisition of supply agreement for payable 1,000,999 -- -- --
Dividends on preferred stock:
Preferred stock issued in lieu of cash for dividends
payable on preferred stock 72,996 168,850 76,500 43,400
Deemed dividend 767,500 -- -- --
Contribution of non-cash assets to unconsolidated subsidiary -- 5,194 5,194 --
Exchange of loan receivable to reduce licensing fees payable 72,151 -- -- --
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
1. Nature of Business IMX Pharmaceuticals, Inc. (the "Company"), formerly IMX
Corporation, was organized under the laws of the State
of Utah on June 2, 1982. The Company changed its name to
IMX Pharmaceuticals, Inc. on June 30, 1997. The
consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant
intercompany balances and transactions have been
eliminated in consolidation.
In 1995, the Company entered into an acquisition
agreement, (the "Agreement"), with Interderm, LTD.,
("Interderm"), for the assignment of the exclusive
marketing and distribution rights in the United States
for certain pharmaceutical products manufactured by
Meyer-Zall Laboratories of South Africa, ("Meyer-Zall").
The products included, Exorex, an over-the-counter
psoriasis medication.
In connection with the Agreement, the Company also
entered into an agreement with Meyer-Zall, which
provides the Company with the right of first refusal for
distribution rights in the United States for new
pharmaceutical products developed or manufactured by
Meyer-Zall.
During 1996 and 1997, the Company began a campaign to
market and distribute Exorex and other related products
in the retail market using capital raised in private
placements.
Effective June 24, 1998, the Company entered into an
agreement (the "Joint Venture Agreement") with various
affiliates of Medicis Pharmaceutical Corporation
("Medicis") to form a joint venture, Medicis Consumer
Products Company, LLC (the "LLC"), to develop and market
skin care products.
Under the terms of the Joint Venture Agreement, Medicis
contributed cash of $4,000,000 to the joint venture in
return for a 51% interest. The Company contributed all
of the assets, property and associated rights in
connection with the Exorex product line, with an
unamortized cost of approximately $5,200 in return for a
49% interest in the LLC (see Note 8).
F-10
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
1. Nature of Business Effective June 30, 1999, the Company entered a Sale and
(Concluded) Transfer Agreement (the "Sale Agreement") with Medicis,
whereby the Company sold its 49% interest in the LLC to
Medicis (Note 9).
2. Summary of Interim Financial Statements
Significant
Accounting The accompanying unaudited consolidated financial
Policies statements as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 have been prepared
in accordance with generally accepted accounting
principles for interim financial information. In the
opinion of management, all adjustments consisting of
normal recurring accruals considered necessary for a
fair presentation have been included. Operating results
for the six-month period ended June 30, 1999 are not
necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
Accounting Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make certain 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.
Cash and Cash Equivalents
For purposes of reporting cash flow, the Company
considers all highly liquid investments purchased with
an original maturity of three months or less to be cash
equivalents.
F-11
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
2. Summary of Securities Available for Sale
Significant
Accounting Securities available for sale are carried at estimated
Policies market value. Unrealized holding gains and losses on
(Continued) securities available for sale are reported as a net
amount in a separate component of stockholders' equity
until realized. Gains and losses realized from the sale
of investment securities are computed by the
specific-identification method.
Inventory
Inventory is stated at the lower of cost or market
value. Cost is determined using the first-in, first-out
method.
Property and Equipment
Property and equipment are recorded at cost.
Depreciation and amortization are computed using methods
that approximate the straight-line method over the
assets' estimated useful lives.
Licensing and Supply Agreements
Licensing and supply agreements are recorded at cost,
including the estimated fair value of common stock
issued by the Company to acquire the agreements. The
agreements are amortized over the estimated useful life
of the agreements, which range from 5 to 20 years.
The Company reviews the carrying values of its
long-lived and identifiable intangible assets for
possible impairment whenever events or changes in
circumstances indicate that the carrying amount of the
assets may not be recoverable.
Investment in Unconsolidated Subsidiary
The Company's 49% interest in the LLC was accounted for
using the equity method.
F-12
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
2. Summary of Revenue Recognition
Significant
Accounting Sales are generally recorded upon shipment of goods to
Policies customers, except for goods shipped to certain retail
(Continued) customers under holdback arrangements. Under such
holdback arrangements, the Company has agreed to allow
these retail customers to hold payment for goods shipped
until a subsequent review of resales of the Company's
products by the retailers. Goods shipped under the
holdback arrangements are accounted for as consigned
inventory until the holdback payment is received, at
which time a sale is recorded.
Production Development Costs
Costs incurred for the development of new product lines
are expensed as incurred.
Stock-Based Compensation
The Company accounts for stock based compensation as set
forth in Accounting Principles Board ("APB") Opinion 25,
"Accounting for Stock Issued to Employees," and
discloses the proforma effect on net (loss) income and
(loss) income per share of adopting the full provisions
of Statement of Financial Accounting Standards ("SFAS")
No. 123 "Accounting for Stock-Based Compensation".
Accordingly, the Company has elected to continue using
APB Opinion 25 and has disclosed in the footnotes
proforma (loss) income and (loss) income per share
information as if the fair value method had been
applied.
Income Taxes
The Company files consolidated Federal income tax
returns. Income taxes are calculated using the liability
method specified by SFAS No. 109, "Accounting for Income
Taxes".
F-13
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
2. Summary of Net Income (Loss) Per Common Share
Significant
Accounting Net income (loss) per common share is calculated
Policies according to SFAS No.128, "Earnings Per Share" which
(Concluded) requires companies to present basic and diluted earnings
per share. Net income (loss) per common share - basic is
based on the weighted average number of common shares
outstanding during the year. Net income (loss) per
common share - diluted is based on the weighted average
number of common shares and dilutive potential common
shares outstanding during the year.
Convertible preferred stock, common stock options and
common stock warrants are excluded from the computations
of net loss per share for the years ended December 31,
1997 and 1998, and the six months ended June 30, 1998,
because the effect of their inclusion would be
anti-dilutive.
Fair Value of Financial Instruments
SFAS No. 107 requires the disclosure of fair value of
financial instruments. The estimated fair value amounts
have been determined by the Company's management using
available market information and other valuation
methods. However, considerable judgment is required to
interpret market data in developing the estimates of
fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts the
Company could realize in a current market exchange.
The following methods and assumptions were used in
estimating fair value disclosure for financial
instruments:
Cash and Cash Equivalents, Accounts and Loan Receivable,
Accounts Payable, Accrued Expenses and Notes Payable -
the carrying amounts reported in the consolidated
balance sheets approximate fair value because of the
short maturity of those instruments.
Securities Available for Sale - the fair values are
based on quoted market prices at the reporting date of
those or similar investments (Note 5).
F-14
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
3. Recent Accounting In June 1997, the Financial Accounting Standards Board
Pronouncements (the "FASB") issued SFAS No. 130, "Reporting
Comprehensive Income" which became effective in 1998.
SFAS No. 130 establishes standards for reporting and
presentation of comprehensive income and its components
in a full set of general-purpose financial statements.
The Company adopted SFAS No. 130 on January 1, 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information"
which became effective in 1998. SFAS No. 131 establishes
standards for the way public enterprises are to report
operating segments in annual financial statements and
requires reporting of selected information about
operating segments in interim reports. The Company's
adoption of SFAS No. 131 did not effect the Company's
consolidated financial statements.
In April 1998, the American Institute of Certified
Public Accountants issued Statement of Position No.
98-5, "Reporting for the Costs of Start - Up
Activities", ("SOP 98-5"). The Company is required to
expense all start-up costs related to new operations as
incurred. In addition, all start-up costs that were
capitalized in the past must be written off when SOP
98-5 is adopted. The Company's adoption of SOP 98-5 did
not have a material impact on its financial position or
results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". The
Company is required to adopt SFAS 133, as amended by
SFAS 137, for the year ending December 31, 2001. SFAS
133 establishes methods of accounting for derivative
financial instruments and hedging activities related to
those instruments as well as other hedging activities.
Because the Company currently holds no derivative
financial instruments and does not currently engage in
hedging activities, adoption of SFAS 133 is expected to
have no material impact on the Company's financial
condition or results of operations.
F-15
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
4. Exorex Product The accompanying consolidated pro forma statement of
Line Pro Forma operations for the year ended December 31, 1998
Information illustrates the effect on the statement of operations
had the Joint Venture Agreement of June 24, 1998 (Note
1), and the Consulting Agreement (Note 9) occurred
effective January 1, 1998. The pro forma statement of
operations sets out revenue and expenses related to the
Exorex product line for the period from January 1, 1998
to June 24, 1998, and adjusts for the equity in earnings
from unconsolidated subsidiary that the LLC would have
contributed to the Company during that same period. This
statement of operations has been prepared to
substantially comply with rules and regulations of the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1998
=============================================================================================
Historical
Statement Exorex
of Product
Operations Line Adjustment Pro Forma
=============================================================================================
<S> <C> <C> <C> <C>
Net sales $ 3,942,371 $(3,745,994) $ -- $ 196,377
Cost of sales 1,106,261 (953,263) -- 152,998
- - ---------------------------------------------------------------------------------------------
Gross profit 2,836,110 (2,792,731) -- 43,379
- - ---------------------------------------------------------------------------------------------
Operating Expenses:
Selling 1,594,588 (989,817) -- 604,771
Advertising 1,006,557 (744,091) -- 262,466
General and administrative 1,412,841 (614,795) -- 798,046
Supply agreement impairment loss 884,199 -- -- 884,199
Depreciation and amortization 172,106 (30,000) -- 142,106
- - ---------------------------------------------------------------------------------------------
Total operating expenses 5,070,291 (2,378,703) -- 2,691,588
- - ---------------------------------------------------------------------------------------------
(Loss) income from operations (2,234,181) (414,028) -- (2,648,209)
Other income (expenses):
Equity in earnings (loss) of
unconsolidated subsidiary 81,474 -- (240,850) (159,376)
Other 135,664 (2,565) -- 133,099
- - ---------------------------------------------------------------------------------------------
Net (loss) income (2,017,043) (416,593) (240,850) (2,674,486)
Dividends on preferred stock (168,850) -- -- (168,850)
- - ---------------------------------------------------------------------------------------------
Net (loss) income applicable to
common stockholders $(2,185,893) $ (416,593) $(240,850) $(2,843,336)
=============================================================================================
Weighted average number of shares
of common stock outstanding 4,879,622 4,879,622
=============================================================================================
Net loss per common share - basic
and diluted $ (0.45) $ (0.58)
=============================================================================================
</TABLE>
F-16
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
4. Exorex Product The adjustment assumes the provisions of the Joint
Line Pro Forma Venture Agreement were in place for the period January
Information 1, 1998 through June 24, 1998, and includes a 12%
(Concluded) management fee expense on net sales ($449,500),
management fee income of $224,750 to the Company, and
49% of the equity in loss of the product line, after the
$449,500 management fee expense ($16,100), for a total
of $240,850.
5. Securities Securities available for sale consist of Federal Home
Available Loan Bank discount notes that matured in January, 1999.
For Sale At December 31, 1998, the estimated market value of
$1,689,200 of these securities exceeded their cost basis
by $11,000.
6. Inventory Inventory consists of the following:
December 31,
--------------------- June 30,
1997 1998 1999
-----------------------------------------------------
Finished goods $ 644,628 $ 64,333 $255,113
Raw materials 480,262 -- 4,434
Packaging supplies 175,164 95,819 169,527
-----------------------------------------------------
$1,300,054 $160,152 $429,074
=====================================================
At December 31, 1997 and 1998, and June 30, 1999,
finished goods inventory included approximately
$380,000, $64,000 and $0, respectively, of goods shipped
to retail customers on consignment.
F-17
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
7. Property and Property and equipment consists of the following:
Equipment
December 31,
------------------- June 30,
1997 1998 1999
--------------------------------------------------------
Computer and office
equipment $113,080 $163,457 $184,526
Furniture, fixtures and
improvements 55,137 66,980 76,085
--------------------------------------------------------
168,217 230,437 260,611
Accumulated depreciation
and amortization 58,757 111,261 137,215
--------------------------------------------------------
$109,460 $119,176 $123,396
========================================================
8. Licensing and Licensing and supply agreements consist of the
Supply Agreements following:
December 31,
-------------------- June 30,
1997 1998 1999
--------------------------------------------------------
Supply agreement $1,000,999 $ -- $ --
Licensing agreements 56,021 50,000 --
--------------------------------------------------------
1,057,020 50,000 --
Accumulated amortization 3,427 5,402 --
--------------------------------------------------------
$1,053,593 $44,598 $ --
========================================================
F-18
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
8. Licensing and On September 30, 1997, the Company entered into an
Supply Agreements agreement with a term of five years with IGI, Inc.
(Concluded) ("IGI") to acquire exclusive rights to market IGI's skin
care products, in exchange for $50,000 in cash and
$950,999 of the Company's Common Stock (See Note 13). A
supply agreement payable of $1,000,999 was recorded as
of December 31, 1997, which was paid during March 1998,
with cash and Common Stock as described above. During
1998, approximately $116,800 of amortization expense was
recorded beginning with the first order of goods in May
1998. Effective December 31, 1998, due to limited sales
of such products, management cancelled this product
line, and recorded an impairment loss of $884,199.
During 1998, the Company contributed its licensing
rights to Exorex with an unamortized cost of
approximately $5,200 in exchange for a 49% interest in
the LLC (Notes 1 and 9).
9. Unconsolidated The Company had a 49% ownership interest in the LLC
Subsidiary (Note 1), a skin care joint venture located in Phoenix,
Arizona, which was sold effective June 30, 1999.
December 31,
------------------- June 30,
1997 1998 1999
--------------------------------------------------------
Company's share of net
loss on LLC $ -- $ (96,970) $ --
Investment in LLC -- 105,792 --
Advances to LLC -- 339,194 --
--------------------------------------------------------
$ -- $ 348,016 $ --
========================================================
F-19
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
9. Unconsolidated At December 31, 1998, the unaccreted excess of the
Subsidiary Company's equity in the underlying net assets of the LLC
(Concluded) over its investment at the date of acquisition was
approximately $1,859,000, which was netted against the
investment for balance sheet presentation purposes. The
excess was being accreted to income over a ten year
period. During 1998 and the six months ended June 30,
1999, approximately $100,600 and $97,700, respectively,
of accretion was included in the caption Equity in
Earnings of Unconsolidated Subsidiary in the
accompanying consolidated statements of operations.
Under the terms of a Consulting Agreement with the LLC,
the Company received a management fee from the LLC of 6%
of the LLC's Net Sales (as defined) for certain
consulting services related to their specialized
knowledge of the Exorex line. The Company recorded
management fee income of approximately $159,000 and
$77,000 for the year ended December 31, 1998 and the six
months ended June 30, 1999, respectively, of which
approximately $77,800 and $37,600 (49%) is included in
the caption Equity in Earnings of Unconsolidated
Subsidiary in the accompanying consolidated statements
of operations.
Effective June 30, 1999, the Company entered into the
Sale Agreement with Medicis, whereby the Company sold
its 49% interest in the LLC to Medicis. The Company
received $3,600,000 on July 1, 1999 for its interest and
has recorded a gain of approximately $3,356,000 from the
sale, net of the Company's basis of ($36,000) and
expenses of approximately $280,000.
F-20
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
10. Income Taxes The provision for income taxes in the consolidated
statements of operations is as follows:
Years Ended Six Months Ended
December 31, June 30,
------------------- -------------------
1997 1998 1998 1999
-------------------------------------------------------
Current:
Federal $ -- $ -- $ -- $ 25,000
State -- -- -- --
-------------------------------------------------------
-- -- -- 25,000
-------------------------------------------------------
Deferred
Federal -- -- -- (25,000)
State -- -- -- --
-------------------------------------------------------
-- -- -- (25,000)
-------------------------------------------------------
$ -- $ -- $ -- $ --
=======================================================
Applicable income taxes for financial reporting purposes
differ from the amount computed by applying the
statutory federal income tax rate as follows:
Years Ended Six Months Ended
December 31, June 30,
--------------------- ---------------------
1997 1998 1998 1999
- - -----------------------------------------------------------------------------
Tax at statutory rate $(197,200) $(685,800) $(220,900) $ 678,100
Increase (decrease) in tax
resulting from:
State income tax, net
of federal tax benefit (21,100) (73,200) (23,600) 72,400
Other 3,000 3,600 1,800 4,900
Increase (decrease) in
Valuation allowance 215,300 755,400 242,700 (755,400)
- - -----------------------------------------------------------------------------
Income taxes $ -- $ -- $ -- $ --
=============================================================================
F-21
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
10. Income Taxes The approximate tax effects of temporary differences
(Concluded) that give rise to the deferred tax assets and deferred
tax (liabilities) are as follows:
December 31, June 30,
------------------------- ---------
1997 1998 1999
- - -----------------------------------------------------------------------------
Supply agreement impairment loss $ -- $ 332,700 $ --
Fair value of common stock options and
Warrants 39,700 95,200 125,600
Start-up costs -- 97,200 139,100
Depreciation and amortization 4,700 (26,600) (72,200)
Other 13,800 6,800 11,800
Net operating loss carryforwards 532,500 840,800 386,500
- - -----------------------------------------------------------------------------
590,700 1,346,100 590,800
Less valuation allowance (590,700) (1,346,100) (590,800)
- - -----------------------------------------------------------------------------
Total net deferred tax asset $ -- $ -- $ --
=============================================================================
At December 31, 1997 and 1998, the Company had net
operating loss carryforwards of approximately $1,415,000
and $2,234,000, respectively, for income tax purposes.
Those losses are available for carryforward for periods
ranging from fifteen to twenty years, and will expire
beginning in 2011. Any future significant changes in
ownership of the Company may limit the annual
utilization of the tax net operating loss carryforwards.
11. Recourse Effective June 18, 1998 the Company sold approximately
Obligation $2,509,000 of accounts receivable related to Exorex, to
the LLC for cash of approximately $2,259,000 (90%), and
Exorex inventory with a cost of approximately $1,367,000
for cash. The LLC had the right to assign any accounts
receivable not collected by August 18, 1998 back to the
Company. As of December 31, 1998, the LLC had made no
such assignment, however the Company recorded a recourse
obligation of approximately $269,700 for the amount of
accounts receivable that were uncollected. Pursuant to
the Sale Agreement (Note 9), the Company was relieved of
the recourse obligation effective June 30, 1999.
F-22
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
12. Notes Payable At December 31, 1997, the Company had notes payable
totaling $372,000, bearing interest at 18%, to six
individuals, including notes to two officers of the
Company totaling $75,000 (see Note 17). In addition, for
each $25,000 borrowed, the Company issued warrants with
a five year exercise period from the origination date of
the notes payable, to purchase 1,750 shares of the
Company's common stock for $3.50 per share, for each
month the notes payable were outstanding (Note 13). The
Company repaid all of the notes payable during 1998, and
150,598 of such warrants were issued. Using the
Black-Scholes option pricing model, the fair market
value of the warrants was calculated as approximately
$249,700 with the following assumptions: 45% volatility,
5 year expected life, and a 6% risk-free interest rate.
The fair value of the warrants represents an original
issue discount of which approximately $64,300 and
$185,400 was amortized during 1997 and 1998,
respectively.
13. Capital Stock Common Stock
Common Stock has one vote per share for the election of
directors and all other matters submitted to a vote of
stockholders. Shares of Common Stock do not have
cumulative voting, preemptive, redemption or conversion
rights.
At December 31, 1997 and 1998, and June 30, 1999, the
Company has reserved 2,966,483, 3,385,856 and 3,450,716
shares of Common Stock, respectively, for issuance
relating to unexpired options and warrants.
F-23
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
13. Capital Stock 1997 Private Placement
(Continued)
On October 30, 1997, and as amended November 24, 1997,
the Company offered to sell, through a private
placement, 100 units at a price of $50,000 per unit
(consisting of 14,285 shares of Common Stock at $3.50
per share), with no requirement for a minimum number of
units to be sold. At December 31, 1997, net proceeds of
approximately $160,600 had been received ($162,500 of
proceeds less expenses of approximately $1,900). The
closing date of the offering was extended to February
28, 1998, at which time the gross proceeds totaled
approximately $1,088,000 less offering costs of
approximately $141,000.
1997 Recapitalization Agreement
On October 16, 1997, the Company entered into a
Recapitalization Agreement with Interderm, Meyer-Zall,
and certain of their affiliates (the "sellers"), whereby
the Company repurchased 3,524,557 shares of the
Company's Common Stock for $200,000 from the sellers.
The significant terms of the agreement were as follows:
the option agreements with the sellers dated January 21,
1997 for the Company's purchase of 2,359,113 shares for
$1.00 per share were terminated; the January 1996 voting
agreement between the sellers and the Company's
President, granting voting rights of the 6,107,432
shares previously held by the sellers to the President
was terminated; the President and three other officers
agreed to a recission of employee stock options for the
purchase of 400,000 shares of Common Stock at exercise
prices ranging from $5.00 to $6.50 per share, and had
$1,500,000 of proceeds from the Company's October 1997
Private Placement of Common Stock been reached,
1,000,000 shares of Common Stock owned by the sellers
would be included in a planned registration statement
upon completion (as defined) of the private placement.
F-24
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
13. Capital Stock 1997 Supply Agreement
(Continued)
On March 20, 1998, the Company completed the supply
agreement transaction with IGI (Note 8), for the
issuance of 271,714 shares of Common Stock valued at
$3.50 per share to IGI.
In August 1999, the Company entered into an agreement
with IGI, whereby the Company agreed to register certain
shares of Common Stock of the Company held by IGI for
resale, and IGI agreed to return certain other shares of
the Company's Common Stock it holds according to a
schedule, commencing upon the sale of certain IGI
products by the Company. No assurances can be given that
any such products will be commercially acceptable.
1998 Stock Purchase Agreement
As a condition of the Joint Venture Agreement (Note 1),
in June 1998 Medicis purchased 400,000 shares of Common
Stock at the estimated fair value of $2.50 per share.
Recission Offer
The State of Maryland requested that the Company offer
to repurchase up to 69,998 of the Company's Common Stock
from residents of Maryland that purchased Common Stock
in the 1997 Private Placement. The Company commenced a
recission offer to repurchase these shares for $3.50 per
share ending on February 26, 1999. Two stockholders with
a total of 19,999 shares accepted the offer by the
expiration date and were paid approximately $70,000. At
December 31, 1998, $70,000 is reflected as redeemable
common stock in the accompanying consolidated balance
sheet. During the six months ended June 30, 1999, the
19,999 shares of Common Stock were transferred to
treasury stock.
F-25
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
13. Capital Stock Preferred Stock
(Concluded)
On February 28, 1997, the Company offered to sell,
through a private placement, 200 units at a price of
$25,000 per unit without any requirement that a
specified number of units be sold. Each unit consisted
of 1,000 shares of Series A Convertible Preferred Stock
("Preferred Stock"), $.001 par value, with a price of
$25 per share. The Preferred Stock accrued cumulative
annual dividends of 8% per annum ($2 per share) payable
quarterly. Initial dividends accrued from July 10, 1997,
the date of issuance and are payable in cash or
additional shares of Preferred Stock, at the option of
the Company. In the event of liquidation, each holder of
Preferred Stock is entitled to a liquidating
distribution of $25 per share after payment of
liabilities. Each share of the Preferred Stock is
convertible at the option of the holder into ten shares
of Common Stock (at a price of $2.50 per share) and ten
warrants to purchase Common Stock. Each warrant is
exercisable until July 10, 2002 and entitles the holder
to purchase one share of Common Stock at a price of
$6.50 per share. Holders of each share of Preferred
Stock are entitled to ten votes and both the common and
preferred classes of stock will vote as a single class.
As of July 10, 1997, the Company sold 76,750 shares of
Preferred Stock and received gross proceeds of
$1,918,750 less costs of approximately $217,000. On
March 31, 1999, each of the outstanding shares of this
series was converted into ten shares of Common Stock and
ten warrants to purchase Common Stock.
At December 31, 1997 and 1998, and March 31, 1999, the
Company accrued dividends payable on the Preferred Stock
of approximately $73,000, $169,000, and $43,400 for the
period July 10, 1997 to December 31, 1997, the year
ended December 31, 1998 and six months ended June 30,
1999, respectively. The Company elected to pay the
dividends, by issuing additional shares of Preferred
Stock.
For the year ended December 31, 1997 the Company also
recorded a deemed Preferred Stock dividend of $767,500
representing a $1.00 discount on conversion (from a
market price of $3.50 per share at the February, 1997
offering date) on the 767,500 shares of Common Stock
into which the Preferred Stock is convertible.
F-26
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
14. Stock Options On January 21, 1996, the Company adopted a stock option
plan with 2,000,000 shares of Common Stock reserved for
the grant of options to key employees, non-employees,
officers and directors of the Company. On September 9,
1998, the Company adopted a stock option plan with
1,200,000 shares of common stock reserved for grant of
options to key employees, non-employees, officers and
directors of the Company. Options under these plans are
exercisable over a period of ten years with various
vesting terms. All shares granted are subject to
significant restrictions as to disposition by the
optionee.
A summary of the Company's stock option activity is as
follows:
<TABLE>
<CAPTION>
Years Ended
December 31, Six Months Ended
------------------------------------------ June 30,
1997 1998 1999
- - ----------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of
period 1,095,000 $2.39 1,350,000 $2.72 1,586,975 $2.71
Granted 640,000 4.91 246,975 2.73 119,500 1.83
Exercised (2,500) 2.50 -- -- -- --
Forfeited/canceled (382,500) 5.44 (10,000) 4.06 (72,000) 5.44
- - ----------------------------------------------------------------------------------------
Outstanding at end of
period 1,350,000 $2.72 1,586,975 $2.71 1,634,475 $2.55
========================================================================================
Exercisable at end of
period 821,750 $1.93 1,235,725 $2.49 1,410,725 $2.64
========================================================================================
Weighted average fair
market value of
options granted
period $ .81 $ .87 $ .90
========================================================================================
</TABLE>
F-27
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
14. Stock Options The following table summarizes information about fixed
(Continued) stock options outstanding as follows:
<TABLE>
<CAPTION>
Weighted
Average
Remaining Weighted Weighted
Range of Options Contractual Average Options Average
Exercise Price Outstanding Life in Years Exercise Price Exercisable Exercise Price
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1997
- - -------------------------------------------------------------------------------------------------
$1.00 - 2.50 820,000 8.00 $ 1.54 711,250 $ 1.51
3.87 - 4.00 280,000 9.35 3.99 60,000 3.98
5.00 - 6.50 250,000 9.00 5.16 50,500 5.50
- - -------------------------------------------------------------------------------------------------
$1.00 - 6.50 1,350,000 8.50 $ 2.72 821,750 $ 1.93
=================================================================================================
December 31, 1998
- - -------------------------------------------------------------------------------------------------
$1.00 - 3.00 1,006,000 7.34 $ 1.60 834,750 $ 1.56
3.87 - 4.00 270,000 8.17 4.00 270,000 4.00
4.78 - 6.50 310,975 7.64 5.18 130,975 5.32
- - -------------------------------------------------------------------------------------------------
$1.00 - 6.50 1,586,975 7.54 $ 2.71 1,235,725 $ 2.49
=================================================================================================
June 30, 1999
- - -------------------------------------------------------------------------------------------------
$1.00 - 3.00 1,105,500 7.26 $ 1.61 892,375 $ 1.58
3.87 - 4.00 270,000 7.99 4.00 270,000 4.00
4.78 - 6.50 258,975 7.56 5.03 248,350 4.97
- - -------------------------------------------------------------------------------------------------
$1.00 - 6.50 1,634,475 7.46 $ 2.55 1,410,725 $ 2.64
=================================================================================================
</TABLE>
SFAS No. 123, "Accounting for Stock-Based Compensation",
requires the Company to provide pro forma information
regarding net income (loss) and income (loss) per share
as if compensation cost for the Company's employee stock
option plans had been determined in accordance with the
fair value based method prescribed in SFAS No. 123. The
Company estimates the fair value of each option at the
grant date by using the Black-Scholes option pricing
model with the following weighted-average assumptions
used for grants in 1997, 1998 and 1999, expected
volatility ranging from 45% to 46%; risk-free interest
rates ranging from 4.35% to 6% and expected lives
ranging from 2 to 10 years, respectively.
F-28
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
14. Stock Options Under accounting provisions of SFAS 123, the Company's
(Concluded) net income (loss) and income (loss) per share would have
changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended June 30,
-------------------------- -------------------------
1997 1998 1998 1999
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) applicable to
common stockholders
As Reported $(1,420,517) $(2,185,893) $ (726,101) $1,950,929
Pro forma (1,591,000) (2,555,000) (1,027,000) 1,748,000
Income (loss) per share - basic
As Reported (.20) (.45) (.16) .36
Pro forma (.23) (.52) (.23) .32
Income (loss) per share - diluted
As Reported (.20) (.45) (.16) .34
Pro forma $ (.23) $ (.52) $ (.23) $ .31
===============================================================================================
</TABLE>
15. Stock Warrants In connection with a 1996 private placement offering of
Common Stock, the Company issued 580,000 warrants, each
redeemable for one share of Common Stock, at any time
during a period of three years, commencing on July 9,
1996 for $5.00 per share. The warrants may be redeemed
by the Company with 30 days prior notice at a price of
ten cents per warrant at any time during the warrant
exercise period, under certain conditions (as defined).
During July 1999, the Company extended the exercise
period one year to July 9, 2000.
In addition, 58,000 warrants, each to purchase one share
of Common Stock for $3.00 per share, and exercisable for
the three year period ending July 9, 1999, were issued
to placement agents in connection with the 1996 Private
Placement. During July 1997, in connection with a
financial advisory agreement with the placement agents,
the exercise price of the 58,000 warrants was reduced to
$2.50 per share, and the exercise period was extended to
February 9, 2001. The Company recorded approximately
$71,000 as deferred consulting expense for the estimated
fair value of warrants which is being amortized over the
two year term of the agreement.
F-29
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
15. Stock Warrants On March 31, 1999, in connection with the Company's 1997
(Continued) Private Placement of Convertible Preferred Stock (Note
13), 88,160 (76,750 original shares, plus 11,410 shares
issued in lieu of cash as preferred stock dividends)
shares outstanding at March 31, 1999 were converted into
ten shares of Common Stock and warrants to purchase ten
shares of Common Stock at any time during the period
ending July 2002 for $6.50 per share. At June 30, 1999,
no warrants to purchase Common Stock have been
exercised.
In addition to warrants issued to investors in the
February 1997 Private Placement, warrants to purchase
7,586.25 shares of Convertible Preferred Stock were
issued to placement and selling agents, with an exercise
price of $30 per share, and are exercisable for the five
year period ending July 2002. Each share of Preferred
Stock is convertible into 10 shares of Common Stock at
$3.50 per share, and 10 warrants, each warrant to
purchase one share of Common Stock at $6.50 per share.
Prior to the March 31, 1999 conversion, no warrants to
purchase Preferred Stock had been exercised.
During July 1997, in connection with an agreement with a
financial advisor, the Company issued warrants to
purchase 50,000 shares of Common Stock at $4.75 per
share, exercisable for the period ending July 2002. The
Company recorded approximately $67,000 as deferred
consulting expense for the estimated fair value of the
warrants, which is being amortized over the two year
term of the agreement.
In connection with notes payable issued during 1997
(Note 12), as of December 31, 1998 and 1997, warrants to
purchase 65,478 and 85,120 shares of Common Stock have
been issued. Also, in connection with February, 1998
closing of the October 1997 Private Placement, warrants
to purchase 20,180 shares of Common Stock were issued to
placement and selling agents. Each of the warrants
mentioned above has an exercise price of $3.50 per
share, and expires five years from the date of issuance.
At December 31, 1998 and June 30, 1999, no warrants have
been exercised.
F-30
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
15. Stock Warrants The aggregate number of common shares reserved for
(Concluded) issuance upon the exercise of warrants is 1,816,241 as
of June 30, 1999. The expiration date and exercise
prices of the outstanding warrants are as follows:
Outstanding Expiration Exercise
Warrants Date Price
--------------------------------------------------------
580,000 2000 $ 5.00
58,000 2001 2.50
1,007,463 2002 3.00 - 6.50
170,778 2003 3.50
========================================================
16. Net Income (Loss) The following table sets forth the computation of basic
Per Common and diluted net income per common share:
Share
Six Months Ended
June 30,
1999
--------------------------------------------------------
Numerator:
Numerator for basic and diluted
Earnings per share-income available
to common stockholders $ 1,950,929
========================================================
Denominator:
Denominator for basic earnings per
share-weighted-average shares 5,430,340
Effect of dilutive securities:
Common stock options 288,244
--------------------------------------------------------
Denominator for diluted earnings per
share-adjusted weighted-average
shares and assumed conversions 5,718,584
========================================================
Basic net income per common share $ .36
========================================================
Diluted net income per common share $ .34
========================================================
F-31
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
16. Net Income (Loss) Net income (loss) per common share is calculated by
Per Common dividing the net income (loss) by the weighted-average
Share shares of Common Stock and common stock equivalents
(Concluded) outstanding during the period. Excluded from the
computation of net loss per common share - diluted at
December 31, 1998 and June 30, 1999, were convertible
preferred stock of 864,240 and 0, outstanding options of
1,586,975 and 859,475, and warrants to purchase
1,798,881 and 1,816,241 shares of Common Stock,
respectively, at exercise prices ranging from $1.00 to
$6.50, and from $2.00 to $6.50, because to do so would
be anti-dilutive.
17. Related Party The Company purchased inventory from Meyer-Zall of
Transactions approximately $1,170,000 and $569,000 for the years
ended December 31, 1997 and 1998, respectively.
During July 1998, the Company loaned $120,000 to
Meyer-Zall, which loan was secured by all of
Meyer-Zall's accounts receivable in sales of products to
the LLC and 900,000 shares of the Company's Common
Stock. In addition, the Company reserved the right,
pursuant to the terms of the loan agreement, at any time
within six months of execution of the loan agreement, to
convert all of the principal amount of the loan into 2%
of Meyer-Zall's outstanding voting securities.
Initially, interest at a rate of 18% per annum was due
on the principal amount of the loan, and the principal
was due in four equal monthly installments of $30,000 to
be paid commencing February 1, 1999. However, after
November 11, 1998, interest no longer accrued, and
repayment of the principal amount was postponed
indefinitely. In September 1999, Meyer-Zall returned to
the Company 76,000 shares of the Company's Common Stock
which Meyer-Zall held, in return for cancellation of the
outstanding debt of $125,400 ($1.65 per share),
inclusive of accrued interest.
F-32
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
17. Related Party See Notes 9 and 11 regarding transactions during 1998
Transactions and the six months ended June 30, 1999 with Medicis and
(Concluded) the LLC.
At December 31, 1997, the Company advanced approximately
$17,800 to companies affiliated to the President. At
June 30, 1999 approximately $8,000 of such advances were
outstanding and to be repaid during 1999.
During 1997 the Company issued notes payable and
warrants (Note 12) totaling approximately $175,000 to
officers and directors. The notes and warrants were
issued under the same terms as those to unrelated
parties. One note payable in the amount of $100,000 to a
director was repaid during December, 1997. The remaining
$75,000 of notes were repaid during 1998.
18. Commitments and The Company leases its facility and certain equipment
Contingencies under non-cancelable operating leases. The Company has a
sub-lease agreement for certain facilities and
equipment. The future minimum rental payments required
under these operating leases that have initial or
remaining noncancelable lease terms in excess of one
year, and the future minimum rental receipts required
under noncanceable sub-leases of December 31, 1998 are
approximately as follows:
Future Future Net Future
Minimum Minimum Minimum
Rental Rental Rental
Payment Receipt Payment
--------------------------------------------------------
1999 $ 126,000 $ 61,000 $ 65,000
2000 91,000 61,000 30,000
2001 44,000 15,000 29,000
2002 25,000 - 25,000
2003 14,000 - 14,000
========================================================
Total rent expense for all non-cancelable operating
leases having a term of more than one year was
approximately $100,000 and $61,000 for the years ended
December 31, 1997 and 1998, and $36,000 and $15,000 the
six month periods ended June 30, 1998 and 1999,
respectively.
F-33
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
18. Commitments and On July 1, 1998, the Company entered into an employment
Contingencies agreement for a period of three years with William
(Concluded) Forster, the Company's Chairman of the Board, President
and Chief Executive Officer. By virtue of a voting
agreement entered into with principal stockholders, Mr.
Forster had voting control of approximately 86.8% of the
outstanding shares of the Company's Common Stock as of
January 21, 1996. As a result of the termination of the
voting agreement under the terms of the October 1997
Recapitalization Agreement with Interderm, Meyer-Zall,
and certain of their affiliates and new issuances of
Common Stock (Note 13), Mr. Forster's voting control was
reduced to approximately 13%. Mr. Forster is entitled to
receive an annual salary of $225,000 and a bonus based
on a percentage of the Company's sales (as defined).
Effective July 1, and August 1, 1998, the Company
entered into employment agreements with two officers for
annual salaries totaling approximately $205,000, plus
discretionary bonuses, and bonuses upon the sale of the
Company's interest in the LLC (as defined). The term of
each agreement is three years. In connection with the
Sale Agreement, bonuses of approximately $258,000 are
included as an expense of the gain on sale of investment
in unconsolidated subsidiary in the accompanying
consolidated statement of operations for the six months
ended June 30, 1999.
The Company has entered into a series of product
development agreements with a consultant, which provides
for compensation to the consultant in the form of cash,
options to purchase shares of the Company's Common Stock
which vest as products are developed, royalties based
upon net sales of products, a royalty based upon the
sale of the rights to the products developed, and an
interest in any patents granted on products developed by
the consultant for the Company.
The Company is a party to litigation and claims arising
in the normal course of business. Management, after
consultation with legal counsel, believes that the
liabilities, if any, arising form such litigation and
claims will not be material to the consolidated
financial position of the Company.
F-34
<PAGE>
IMX Pharmaceuticals, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of June 30, 1999 and for the six month
periods ended June 30, 1998 and 1999 are unaudited)
================================================================================
19. Sales To One During 1997 the Company had net sales to two large
Customer retail drug chains each representing approximately 16%
of total net sales for the year. During 1998 the Company
had net sales to a retail drug chain representing
approximately 10% of net sales for the year. During the
six months ended June 30, 1999 the Company had net sales
to two customers representing approximately 10% and 13%
of net sales for the period.
F-35
<PAGE>
PART III
Item 2. Index to Exhibits
Exhibit No. Description
3.1 Restated Articles of Incorporation
3.2 Amended and Restated By-Laws
4.1 Long Term Incentive Plan
10.1 Agreement dated September 18, 1995 between Interderm Limited
and IMX Corporation
10.1.1 Amendment Agreement dated September 18, 1995 among Meyer-Zall
Laboratories, Interderm Limited and IMX Corporation
10.2 First Refusal Agreement dated October 13, 1995 between
Meyer-Zall Laboratories (PTY), Ltd. and IMX Corporation
10.2.1 Amendment Agreement between Meyer-Zall Laboratories (PTY),
Ltd. and IMX Pharmaceuticals, Inc. dated January 15, 1998
10.3 Exclusive Supply Agreement dated as of September 30, 1997
among IGI, Inc., IGEN, Inc., Immunogenetics, Inc. and IMX
Pharmaceuticals, Inc.
10.3.1 Amendment to Exclusive Supply Agreement dated March 20, 1998
among IGI, Inc., IGEN, Inc., Immunogenetics, Inc. and IMX
Pharmaceuticals, Inc.
10.3.2 Letter Agreement dated August 3, 1999 between IGI, Inc. and
IMX Pharmaceuticals, Inc.
10.4 Joint Venture Agreement between (sic) Medicis Pharmaceutical
Corporation, Medicis Consumer Products Company, LLC and IMX
Pharmaceuticals, Inc. dated June 12, 1998
10.4.1 Limited Liability Company Agreement of Medics Consumer
Products Company, LLC dated as of June 18, 1998
10.4.2 New Products Agreement between Medicis Pharmaceutical
Corporation and IMX Pharmaceuticals, Inc. dated as of June 18,
1998
10.4.3 Facility Agreement between Medics Consumer Products Company,
LLC and IMX Pharmaceuticals, Inc. dated as of June 18, 1998
10.5 Asset Purchase Agreement by and among The Exorex Company, LLC,
Bioglan Pharma PLC, Medicis Pharmaceutical Corporation and IMX
Pharmaceuticals, Inc.
10.5.1 Sale and Transfer Agreement by and between Medicis
Pharmaceutical Corporation and IMX Pharmaceuticasl, Inc.
10.5.2 Transition Services Agreement by and among The Exorex Company,
LLC, Bioglan Pharma PLC, Medicis Pharmaceutical Corporation
and IMX Pharmaceutical, Inc.
10.6 Lease dated March 29, 1996 between Aspen Realty and Management
Co. and IMX Corporation
10.6.1 Addendum to Lease dated March 11, 1997 between Aspen Realty
and Management Co. and IMX Corporation
10.6.2 Addendum to Lease dated August 28, 1997 between Aspen Realty
and Management Co. and IMX Corporation
32
<PAGE>
10.7 Lease Agreement between Lewis Rental Properties and IMX
Corporation dated December 18, 1998
10.8 Employment Agreement by and between IMX Pharmaceuticals, Inc.
and William A. Forster dated as of July 1, 1998
10.9 Employment Agreement by and between IMX Pharmaceuticals, Inc.
and Gary Spielfogel dated as of July 1, 1998
10.10 Employment Agreement by and between IMX Pharmaceuticals, Inc.
and Marc Falkin dated as of August 1, 1998
21 Subsidiaries
33
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
IMX PHARMACEUTICALS, INC.
By: /s/ William A. Forster
-------------------------------------------
William A. Forster, Chief Executive Officer
Date: October 8, 1999
In accordance with Section 12 of the Securities Exchange Act of 1934, this
registration statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated; and
Further, that each of the persons who signed below hereby appoints and
constitutes William A. Forster, his true and lawful attorney-in-fact and agent,
with fully power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to execute the any and all
amendments to this registration statement, and to file the same, together with
all exhibits thereto, with the Securities and Exchange Commission, and such
other agencies, offices and persons as may be required by applicable law, and to
execute such other documents in connection therewith as may be required by
applicable law, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ William A. Forster Chief Executive Officer
- - ---------------------------------- and Chairman of the Board October 8, 1999
William A. Forster
/s/ Leonard F. Kaplan Chief Financial and
- - ---------------------------------- Accounting Officer October 8, 1999
Leonard F. Kaplan
/s/ David A. Gross, M.D. Director October 8, 1999
- - ----------------------------------
David A. Gross, M.D.
/s/ Eugene Miller Director October 18, 1999
- - ----------------------------------
Eugene Miller
/s/ Michael F. Holick, Ph.D., M.D. Director October 13, 1999
- - ----------------------------------
Michael F. Holick, Ph.D., M.D.
/s/ Sanfurd Bluestein, M.D. Director October 13, 1999
- - ----------------------------------
Sanford Bluestein, M.D.
/s/ Westby J. Rogers Director October 14, 1999
- - ----------------------------------
Westby J. Rogers
/s/ Lawrence D. Russell Director October 14, 1999
- - ----------------------------------
Lawrence D. Russell
34
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
IMX PHARMACEUTICALS, INC.
The above corporation (the "Corporation") existing pursuant to Corporation
law of the State of Utah, desiring to give notice of corporate action
effectuating the restatement of its Articles of Incorporation, set forth the
following facts:
ARTICLE I
INCORPORATION
The date of incorporation of the Corporation is June 2, 1982
ARTICLE II
NAME
The name of the Corporation following this restatement is:
IMX PHARMACEUTICALS, INC.
ARTICLE II
DURATION
The duration of this Corporation is perpetual.
ARTICLE III
PURPOSES
The purpose or purposes for which this corporation is organized are:
(a) To engage in any lawful act or activity for which the corporation may
be organized under the general corporation law of Utah.
(b) To act as an exclusive distributor in the United States and a number
of foreign countries of certain pharmaceutical products. The products
distributed by the Company include an over-the-counter products related to the
treatment of eczema and a pain reliever for muscle and joint related
discomforts. In addition, the Corporation has the exclusive marketing rights to
a line of topical therapeutic skin care products.
<PAGE>
(c) To do each and every thing necessary suitable or proper for the
accomplishment of any of the purposes or the attainment of any one or more of
the subjects herein enumerated or which at any time may appear conducive to or
expedient for the protection or benefit of this corporation and to do said acts
as fully and to he same extent as natural persons might or could do in any part
of the world as principles, agents, partners, trustees or otherwise, either
alone or in conjunction with any other person, association or corporation.
ARTICLE IV
STOCK
The total number of shares of stock, which the Corporation shall have the
authority to issue is 51,000,000 shares of stock which shall be classified as
follows:
(i) 50,000,000 shares of Common Stock, $.001 par value per share; and
(ii) 1,000,000 shares of Preferred Stock, $.001 par value per share, which
may be issued from time to time in one or more series. The number of
shares, the stated value and dividend rate, if any, of each such series
and the preferences and relative, participating and special rights and the
qualifications, limitations or restrictions shall be fixed in the case of
each series by resolution of the Board of Directors at the time of
issuance subject in all cases to the laws of the State of Utah applicable
thereto, and set forth in a Certificate of Designation filed and recorded
with respect to each series in accordance with the laws of the State of
Utah.
The Corporation shall have the authority to issue 200,000 shares of Series
A Convertible Preferred Stock ("Series A Preferred") which shall have the
following preferences and rights, qualifications, limitations and restrictions:
1. Voting Rights. Except as otherwise provided by law, the holders of
Series A Preferred, by virtue of their ownership thereof, shall be entitled to
cast the number of votes per share thereof on each matter submitted to the
Corporation's shareholders for voting which equals the number of votes which
could be cast by the holders of the number of shares of Common Stock into which
such shares of Series A Preferred could be converted pursuant to Section 4
hereof immediately prior to the taking of such vote. Such vote shall be cast
together with those cast by the holders of Common Stock and not as a separate
class except as otherwise provided by law. The Series A Preferred shall not have
cumulative voting rights.
2. Liquidation Rights. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up, at any time any Series A
Preferred shall be outstanding, the holders of the then outstanding Series A
Preferred shall have a preference against the property of the Corporation
available for distribution to the holders of the Corporation's equity securities
equal to the amount of $25.00 per share, together with an amount equal to all
unpaid dividends accrued thereon to the date of payment of such preference (the
"Preferential
2
<PAGE>
Amount"), whether or not funds of the Corporation are legally available therefor
and whether or not declared by the Board of Directors. In addition, the holders
of the Series A Preferred shall be entitled to receive a participating share of
any further assets available for distribution to holders of Common Stock,
whether by reason of declared and unpaid dividends or otherwise, which
participating share shall be the same as that which such holders would have been
entitled to receive if, on the record date for determining the recipients of
such distributions, such holders were the holders of record of the number of
shares of Common Stock into which the outstanding shares of Series A Preferred
were then convertible. In the event the assets of the Corporation available for
distribution to the holders of shares of the Series A Preferred upon
dissolution, liquidation or winding up of the Corporation shall be insufficient
to pay in full all amounts to which such holders are entitled pursuant to the
immediately preceding portions of this paragraph, no such distribution shall be
made on account of any shares of any other class or series of capital stock of
the Corporation ranking on a parity with or junior to the shares of the Series A
Preferred and any other class of shares ranking on a parity with the Series A
Preferred, ratably, in proportion to the full distributable amounts for which
holders of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
3. Dividends. Holders of record of shares of Series A Preferred, out of
funds legally available therefor, shall be entitled to receive dividends on
their shares, which dividends shall accrue at the rate per share of 8% per annum
of the stated amount of $25.00 ($2.00 per share per year for each full year)
commencing on the date of issuance, in cash or, at the option of the
Corporation, by the issuance of that number of whole shares of Series A
Preferred computed by dividing the amount of the dividend by the stated amount
of $25.00, dated the date such dividend is payable. Dividends on shares of
Series A Preferred shall be cumulative, and no dividends or other distributions
shall be paid or declared and set aside for payment on the Common Stock or any
other capital stock of the Corporation ranking junior to the Series A Preferred
until full cumulative dividends on all outstanding shares of Series A Preferred
shall have been paid or declared and set aside for payment. Dividends shall be
payable in arrears at the rate of $.50 per share for each full calendar quarter
on each March 31, June 30, September 30 and December 31 of each calendar year,
to the holders of record of the Series A Preferred as they appear on the stock
record books of the Corporation on such record dates not more than sixty (60)
nor less than ten (10) days preceding the payment dates thereof, as shall be
fixed by the Board of Directors of Directors of the Corporation or a duly
authorized committee thereof; provided, however, that the initial dividend for
the Series A Preferred shall accrue for the period commencing the date of
issuance through June 30, 1997. If, in any quarter, insufficient funds are
available to pay such dividends as are then due and payable with respect to the
Series A Preferred and all other classes and series of capital stock ranking in
parity thereof (or such payment is otherwise prohibited by provisions of the
Utah Revised Business Corporation Law as then in effect), such funds (or shares
of Series A Preferred) as are legally available to pay such dividends shall be
paid to the holders of the Series A Preferred and to the holders of such other
classes and series of capital stock, on a pro rata basis, in accordance with the
rights of each such holder, and the balance of accrued but undeclared and/or
unpaid dividends shall be declared and paid on the next succeeding dividend date
to the extent that funds (or shares of Series A Preferred) are then legally
available for such
3
<PAGE>
purpose. Each reference herein to the Common Stock includes each other class or
series of capital stock, if any, ranking junior to the Series A Preferred that
may be authorized form time to time.
4. Conversion.
(A) General. For the purposes of conversion, the Series A Preferred
shall be valued at $25.00 per share ("Value"), and, if converted, the Series A
Preferred shall be converted into ten (10) shares of Common Stock (the
"Conversion Stock") at the price per share of Conversion Stock of $2.50 ("Common
Stock Conversion Price"), subject to adjustment pursuant to the provisions of
this Section 4, and ten (10) Common Stock Purchase Warrants (the "Common Stock
Purchase Warrants"), exercisable until July 10, 2002, at a price per Common
Stock Purchase Warrant of $6.50 ("Common Stock Purchase Warrant Price"), subject
to adjustment pursuant to the provisions of this Section 4.
(B) Right to Conversion. At any time from and after the date of
issuance, any holder of the Series A Preferred shall have the right, at such
holder's option, to convert such shares into Conversion Stock and Common Stock
Purchase Warrants, if such Warrants are still then exercisable. If, by operation
of the adjustment provisions of this Section 4, the number of shares of Common
Stock issuable upon conversion of the Series A Preferred shall change, then the
number of Common Stock Purchase Warrants to be issued together with the shares
of Common Stock shall change similarly, so that the number shall stay the same
as the number of shares of Common Stock to be issued.
(C) Method of Exercise; Payment; Issuance of new Series A Preferred;
Transfer and Exchange. The conversion right granted by Section 4(B) hereof may
be exercised, in whole or in part, by the surrender of the stock certificate or
stock certificates representing Series A Preferred to be converted at the
principal office of the Corporation (or at such other place as the Corporation
may designate in a written notice sent to the holder by first-class mail,
postage prepaid, at its address shown on the books of the Corporation)
accompanied by written notice of election to convert against delivery of that
number of whole shares of Common Stock and Common Stock Purchase Warrants as
shall be computed by dividing (1) the aggregate Value of the Series A Preferred
so surrendered by (2) the Common Stock Conversion Price in effect at the time of
such surrender. At the time of conversion of a share of Series A Preferred, the
Corporation shall pay in cash to the holder thereof an amount equal to all
unpaid dividends accrued thereon to the date of conversion, or at the
Corporation's option additional shares of Common Stock calculated based on the
assumption that the unpaid dividends were satisfied by the issuance of
additional shares of Series A Preferred which were surrendered for conversion,
whether or not funds of the Corporation are legally available therefor and
whether or not declared by the Board of Directors. Each Series A Preferred stock
certificate surrendered for conversion shall be endorsed by its holder. In the
event of any exercise of the conversion right of the Series A Preferred granted
herein, (i) stock certificates for the shares of Common Stock purchased by
virtue of such exercise shall be delivered to such holder forthwith, along with
a Common Stock Purchase Warrant Certificate, and (ii) unless the Series A
Preferred has been fully converted, a new Series A Preferred stock certificate,
4
<PAGE>
representing the Series A Preferred not so converted, if any, shall also be
delivered to such holder forthwith. The stock certificates for the shares of
Common Stock and Common Stock Purchase Warrants so purchased shall be dated the
date of such surrender and the holder making such surrender shall be deemed for
all purposes to be the holder of the shares of Common Stock and Common Stock
Purchase Warrants so purchased as of the date of such surrender.
(D) Mandatory Conversion. On March 31, 1999, all shares of Series A
Preferred outstanding, not previously converted into Common Stock, and Common
Stock Purchase Warrants shall be converted without any further action on the
part of the Corporation or the holders of such Series A Preferred ("Mandatory
Conversion") into a number of shares of Common Stock and Common Stock Purchase
Warrants as shall be computed by dividing (1) the aggregate Value of the Series
A Preferred so surrendered by (2) the sum of the Conversion Price in effect at
the time of such surrender. At the time of Mandatory Conversion, the Corporation
shall pay in cash to each holder thereof an amount equal to all unpaid dividends
accrued thereon to the date of Mandatory Conversion, or at the Corporation's
option additional shares of Common Stock calculated based on the assumption that
the unpaid dividends were satisfied by the issuance of additional shares of
Series A Preferred which were surrendered for conversion, whether or not funds
of the Corporation are legally available therefor and whether or not declared by
the Board of Directors. Notice shall be mailed within ten (10) days after March
31, 1999, by the Corporation to each holder of Series A Preferred by first-class
mail, postage prepaid, to such holder's most current address shown on the books
of the Corporation. Such notice shall specify the date on which Mandatory
Conversion occurred and call upon such holder to surrender to the Corporation,
in the manner and at the place designated in such notice, the certificate or
certificates representing the shares of Series A Preferred so converted. In the
event of Mandatory Conversion, the Corporation shall forthwith transmit to each
holder of Series A Preferred upon surrender of the certificate(s) representing
such shares, stock certificates for the shares of Common Stock and warrant
certificates representing the Common Stock Purchase Warrants issued as a result
thereof, the date of Mandatory Conversion, and such holder shall be deemed for
all purposes to be the holder of such Common Stock and Common Stock Purchase
Warrants as of the date of Mandatory Conversion.
(E) Stock Fully Paid; Reservation of Shares. All shares of Common
Stock which may be issued upon conversion of Series A Preferred will, upon
issuance, by duly issued, fully paid and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof. At all times that any
Series A Preferred is outstanding, the Corporation shall have authorized, and
shall have reserved for the purpose of issuance upon such conversion, a
sufficient number of shares of Common Stock to provide for the conversion into
Common Stock of all Series A Preferred then outstanding at the then effective
Conversion Price. Without limiting the generality of the foregoing, if, at any
time, the Conversion Price is decreased, the number of shares of Common Stock
authorized and reserved for issuance upon the conversion of Series A Preferred
shall be proportionately increased.
5
<PAGE>
(F) Adjustment of Conversion Price and Number of Shares. The number
of shares of Common Stock issuable upon conversion of Series A Preferred and the
Conversion Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
(1) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding Common Stock issuable upon conversion
of Series A Preferred (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of subdivision or
combination), or in case of any consolidation or merger of the Corporation with
or into another corporation (other than a merger with another corporation in
which the Corporation is the surviving corporation and which does not result in
any reclassification or change -- other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination -- of outstanding Common Stock issuable upon such
conversion) the rights of the holders of the outstanding Series A Preferred
shall be adjusted in the manner described below:
(a) In the event that the Corporation is the surviving
corporation, the Series A Preferred shall, without payment of additional
consideration therefor, be deemed modified so as to provide that upon conversion
thereof the holder of the Series A Preferred being converted shall procure, in
lieu of each share of Common Stock theretofore issuable upon such conversion,
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change, consolidation or merger by the
holder of one share of Common Stock issuable upon such conversion had conversion
occurred immediately prior to such reclassification, change, consolidation or
merger. The Series A Preferred shall be deemed thereafter to provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this clause (a)
shall apply in the mane manner to successive reclassifications, changes,
consolidations and mergers.
(b) In the event that the Corporation is not the
surviving corporation, the surviving corporation shall, without payment of any
additional consideration thereof, issue new Series A Preferred, providing that
upon conversion thereof, the holder thereof shall procure in lieu of each share
of Common Stock theretofore issuable upon conversion of the Series A Preferred,
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change, consolidation or merger by the
holder of one share of Corporation issuable upon conversion of the Series A
Preferred had such conversion occurred immediately prior to such
reclassification, change, consolidation or merger. Such new Series A Preferred
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. The provisions of
this clause (b) shall apply in the same manner to successive reclassifications,
changes, consolidations and mergers.
(2) Subdivision or Combination of Shares. If the Corporation,
at any time while any of the Series A Preferred is outstanding, shall subdivide
or combine its
6
<PAGE>
Common Stock, the Conversion Price shall be proportionately reduced, in case of
subdivision of shares, as of the effective date of such subdivision, or if the
Corporation shall take a record of holders of its Common Stock for the purpose
of a subdividing, as of such record date, whichever is earlier, or shall be
proportionately increased, in the case of combination of shares, as of the
effective date of such combination or, if the Corporation shall take a record of
holders of this Common Stock for the purpose of so combining, as of such record
date, whichever is earlier.
(3) Certain Dividends and Distributions. If the Corporation,
at any time while any of the Series A Preferred is outstanding, shall:
(a) Stock Dividends. Pay a dividend payable in Common
Stock, effect a stock split or make any other distribution of Common Stock in
respect of its Common Stock, the Conversion Price shall be adjusted, as of the
date the Corporation shall take a record of the holders of its Common Stock for
the purpose of receiving such dividend, stock split or other distribution (or if
no such record is taken, as of the date of such payment or other distribution),
to that price determined by multiplying the Conversion Price theretofore in
effect by a fraction (1) the numerator of which shall be the total number of
shares of Common Stock outstanding immediately prior to such dividend, stock
split or distribution and (2) the denominator of which shall be the total number
of shares of Common Stock outstanding immediately after such dividend, stock
split or distribution (plus in the event that the Corporation paid cash for
fractional shares, the number of additional shares which would have been
outstanding had the Corporation issued fractional shares in connection with said
dividend, stock split or distribution); or
(b) Liquidating Dividends, Etc. Make a distribution of
its property to the holders of its Common Stock as a dividend in liquidation or
partial liquidation or by way of return of capital or other than as a dividend
payable out of funds legally available for dividends under the Articles of
Incorporation and the laws of the State of Utah, the holders of the Series A
Preferred shall, upon conversion thereof, be entitled to receive, in addition to
the number of shares of Common Stock receivable thereupon, and without payment
of any consideration therefor, a sum equal to the amount of such property as
would have been payable to them as owners of that number of shares of Common
Stock of the Corporation receivable upon such conversion, had they been the
holders of record of such Common Stock on the record date for such distribution
and an appropriate provision therefor shall be made a part of any such
distribution.
(G) Notice of Adjustments. Whenever the Conversion Price shall be
adjusted pursuant to Subsection 4(F) hereof, the Corporation shall make a
certificate signed by its President or a Vice President and by its Treasurer,
Assistant Treasurer, Security or Assistant Secretary, setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board of Directors of Directors made any
determination hereunder), and the Conversion Price after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by
first-class mail, postage prepaid) to each holder of
7
<PAGE>
Series A Preferred at its address shown on the books of the Corporation. The
Corporation shall make such certificate and mail it to each such holder promptly
after each adjustment.
(H) Fractional shares. No fractional shares of Common Stock shall be
issued in connection with any conversion of Series A Preferred, but in lieu of
such fractional shares, the Corporation shall make a cash payment therefor equal
in amount to the product of the applicable fraction multiplied by the Conversion
Price then in effect.
(I) No Reissuance of Series A Preferred. No shares of Series A
Preferred which have been converted into Common Stock shall be reissued by the
Corporation; provided however, that each such share, after being retired and
canceled, shall be restored to the status of an authorized but unissued share of
Preferred Stock without designation as to series and may thereafter be issued as
a share of Preferred Stock not designated Series A Preferred."
ARTICLE V
MANNER OF ADOPTION AND VOTE
These Amended and Restated Articles of Incorporation do not contain an
amendment requiring shareholder approval and the board of directors adopted the
restatement.
IN WITNESS WHEREOF, the undersigned being the President of said
Corporation executes this Amended and Restated Articles of Incorporation and
verifies, subject to penalties of perjury that the statements contained herein
are true.
DATED: October ____, 1999
IMX PHARMACEUTICALS, INC., a Utah corporation
By: ______________________________________
William A. Forster, President
8
<PAGE>
Exhibit 3.2
RESTATED BY-LAWS
OF
IMX PHARMACEUTICALS, INC.
ARTICLE I
OFFICES
The office of the Corporation shall be located in the City and State
designated in the Articles of Incorporation. The Corporation may also maintain
offices at such other places within or without the United States as the Board of
Directors may, from time to time, determine.
ARTICLE II
MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the shareholders of the Corporation shall be held
within five months after the close of the fiscal year of the Corporation, for
the purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
Special meetings of the shareholders may be called at any time by the
Board of Directors or by the President, and shall be called by the President or
the Secretary at the written request of the holders of ten per cent (10%) of the
shares then outstanding and entitled to vote thereat, or as otherwise required
under the provisions of the Law of the State of Utah ("Corporation Law").
Section 3 - Place of Meetings:
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
Section 4 - Notice of Meetings:
(a) Written notice of each meeting of shareholders, whether annual or
special, stating the time when and place where it is to be held, shall be served
either personally or by mail, not less than ten or more than fifty days before
the meeting, upon each shareholder of record entitled to vote at such meeting,
and to any other shareholder to whom the giving of
<PAGE>
notice may be required by law. Notice of a special meeting shall also state the
purpose or purposes for which the meeting is called, and shall indicate that it
is being issued by, or at the direction of, the person or persons calling the
meeting. If, at any meeting, action is proposed to be taken that would, if
taken, entitle shareholders to receive payment for their shares pursuant to the
Business Corporation Act, the notice of such meeting shall include a statement
of that purpose and to that effect. If mailed, such notice shall be directed to
each such shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to some other address, in which case, it shall be mailed to the address
designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in the Articles
of Incorporation (such Articles and any amendments thereof being hereinafter
collectively referred to as the "Articles of Incorporation"), at all meetings of
shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called if a quorum
had been present.
Section 6 - Voting:
(a) Except as otherwise provided by statute or by the Articles of
Incorporation, any corporate action, other than the election of directors to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Articles of
Incorporation, at each meeting of shareholders, each holder of record of shares
of the Corporation entitled to
2
<PAGE>
vote thereat, shall be entitled to one vote for each share registered in his
name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent
without a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
shareholder himself, or by his attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven months from the
date of its execution, unless the persons executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the records of
the Corporation.
(d) (1) Any resolution in writing, signed by a majority of the
shareholders entitled to vote thereon, shall be and constitute action by such
shareholders to the effect therein expressed, with the same force and effect as
if the same had been duly passed by unanimous vote at a duly called meeting of
shareholders and such resolution so signed shall be inserted in the Minute Book
of the Corporation under its proper date.
(2) Unless the written consents of all shareholders entitled to vote have
been obtained, notice of any shareholder approval without a meeting shall be
given at least ten days before the consummation of the transaction, or event
authorized by the shareholder action to those shareholders entitled to vote who
have not consented in writing.
(3) Notwithstanding Subsection (1), directors may not be elected by
written consent except by unanimous written consent of all shares entitled to
vote for the election of directors.
ARTICLE III
BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be eleven (11),
unless and until otherwise determined by vote of a majority of the entire Board
of Directors. The number of Directors shall not be less than three (3), unless
all of the outstanding shares are owned beneficially and of record by less than
three (3) shareholders, in which event the number of directors shall not be less
than the number of shareholders.
(b) Except as may otherwise be provided herein or in the Articles of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares entitled to vote in the
election.
(c) Each director shall hold office until the annual meeting of the
shareholders next succeeding his election., and until his successor is elected
and qualified, or until his prior death, resignation or removal.
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Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and management
of the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Articles of Incorporation or by
statute expressly conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular Meetings; Notice:
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders, at the place of
such annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution
for the holding of other regular meetings of the Board of Directors, and may fix
the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) of Section 4 of this Article III, with respect to special
meetings, unless such notice shall be waived in the manner set forth in
paragraph (c) of such Section 4.
Section 4 - Special Meetings; Notice:
(a) Special Meetings of the Board of Directors shall be held whenever
called by the President or by one of the directors, at such time and place as
may be specified in the respective notices or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to each director,
addressed to him at his residence or usual place of business, at least two (2)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegram, radio or cable, or shall be delivered to him
personally or given to him orally, not later than the day before the day on
which the meeting is to be held. A notice, or waiver of notice, except as
required by Section 8 of this Article III, need not specify the purpose of the
meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
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Section 5 - Chairman:
At all meetings of the Board of Directors, the Chairman of the Board, if
any and if present, shall preside. If there shall be no Chairman, or he shall be
absent, then the President shall preside, and in his absence, a Chairman chosen
by the Directors shall preside.
Section 6 - Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of a majority
of the entire Board shall be necessary and sufficient to constitute a quorum for
the transaction of business, except as otherwise provided by law, by the
Articles of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the same
from time to time without notice, until a quorum shall be present.
Section 7 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director present shall
have one vote, irrespective of the number of shares of stock, if any, which he
may hold.
(b) Except as otherwise provided by statute, by the Articles of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 8 - Vacancies:
Any vacancy in the Board of Directors occurring by reason of an increase
in the number of directors, or by reason of the death, resignation,
disqualification, removal (unless a vacancy created by the removal of a director
by the shareholders shall be filled by the shareholders at the meeting at which
the removal was effected) or inability to act of any director, or otherwise,
shall be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
Any director may resign at any time by giving written notice to the Board
of Directors, the President or the Secretary of the Corporation. Unless
otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
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Section 10 - Removal:
Any director may be removed with or without cause at any time by the
shareholders, at a special meeting of the shareholders called for that purpose,
and may be removed for cause by action of the Board.
Section 11 - Salary:
No stated salary shall be paid to directors, as such, for their services,
but by resolution of the Board of Directors a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board; provided, however, that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 12 - Contracts:
(a) No contract or other transaction between this Corporation and any
other Corporation shall be impaired, affected or invalidated, nor shall any
director be liable in any way by reason of the fact that any one or more of the
directors of this Corporation is or are interested in, or is a director or
officer, or are directors or officers of such other Corporation, provided that
such facts are disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section shall not
be construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law (common, statutory or
otherwise) applicable thereto.
Section 13 - Committees:
The Board of Directors, by resolution adopted by a majority of the entire
Board, may from time to time designate from among its members an executive
committee and such other committees, and alternate members thereof, as they deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
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ARTICLE IV
OFFICERS
Section 1 -Number, Qualifications, Election and Term of Office:
(a) The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and such other officers, including a Chairman of the
Board of Directors, and one or more vice Presidents, as the Board of Directors
may from time to time deem advisable. Any officer other than the Chairman of the
Board of Directors may be, but is not required to be, a director of the
Corporation. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
(b) The officers of the Corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of shareholders.
(c) Each officer shall hold office until the annual meeting of the Board
of Directors next succeeding his election, and until his successor shall have
been elected and qualified, or until his death, resignation or removal.
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of such
resignation to the Board of Directors, or to the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a successor
elected by the Board at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the Board of Directors.
Section 5 - Duties of Officers:
Officers of the Corporation shall, unless otherwise provided by the Board
of Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these By-Laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
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Section 6 - Sureties and Bonds:
In case the Board of Directors shall so require, any officer, employee or
agent of the Corporation shall execute to the Corporation a bond in such sum,
and with such surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the Corporation,
including responsibility for negligence and for the accounting for all property,
funds or securities of the Corporation which may come into his hands.
Section 7 - Share of Other Corporations:
Whenever the Corporation is the holder of shares of any other corporation,
any right or power of the Corporation as such shareholder (including the
attendance, acting and voting at shareholders' meetings and execution of
waivers, consents, proxies or other instruments) may be exercised on behalf of
the Corporation by the President, any Vice President or such other person as the
Board of Directors may authorize.
ARTICLE V
SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The certificates representing shares of the Corporation shall be in
such form as shall be adopted by the Board of Directors, and shall be numbered
and registered in the order issued. They shall bear the holder's name and the
number of shares, and shall be signed by (i) the Chairman of the board or the
President or a Vice President, and (ii) the Secretary, or any Assistant
Secretary, and may bear the corporate seal.
(b) No certificate representing shares shall be issued until the full
amount of consideration therefor has been paid, except as otherwise permitted by
law.
(c) The Board of Directors may authorize the issuance of certificates for
fractions of a share which shall entitle the holder to exercise voting rights,
receive dividends and participate in liquidating distributions, in proportion to
the fractional holdings; or it may authorize the payment in cash of the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined; or it may authorize the issuance, subject to such
conditions as may be permitted by law, of scrip in registered or bearer form
over the signature of an officer or agent of the Corporation, exchangeable as
therein provided for full shares, but such scrip shall not entitle the holder to
any rights of a shareholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The
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Corporation may issue a new certificate in the place of any certificate
theretofore issued by it, alleged to have been lost or destroyed. On production
of such evidence of loss or destruction as the Board of Directors in its
discretion may require, the Board of Directors may, in its discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the Corporation a bond in such sum as the Board may direct, and with such
surety or sureties as may be satisfactory to the Board, to indemnify the
Corporation against any claims, loss, liability or damage it may suffer on
account of the issuance of the new certificate. A new certificate may be issued
without requiring any such evidence or bond when, in the judgment of the Board
of Directors, it is proper so to do.
Section 3 - Transfers of Shares:
(a) Transfers of shares of the Corporation shall be made on the share
records of the Corporation only by the holder of record thereof, in person or by
his duly authorized attorney, upon surrender for cancellation of the certificate
or certificates representing such shares, with an assignment or power of
transfer endorsed thereon or delivered therewith duly executed, with such proof
of the authenticity of the signature and of authority to transfer and of payment
of transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and, accordingly,
shall not be bound to recognize any legal, 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 expressly
provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the Corporation, the Board of
Directors may fix, in advance, a date not exceeding fifty days, nor less than
ten days, as the record date for the determination of shareholders entitled to
receive notice of, or to vote at, any meeting of shareholders, or to consent to
any proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividends, or allotment of any rights, or for
the purpose of any other action. If no record date is fixed, the record date for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of shareholders
of record entitled to notice of or to vote at any meeting of shareholders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
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ARTICLE VI
DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any
funds available therefor, as often, in such amounts, and at such time or times
as the Board of Directors may determine.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of
Directors from time to time, subject to applicable law.
ARTICLE VIII
CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved
from time to time by the Board of Directors.
ARTICLE IX
AMENDMENTS
Section 1 - By Shareholders:
All by-laws of the Corporation shall be subject to alteration or repeal,
and new by-laws may be made, by a majority vote of the shareholders at the time
entitled to vote in the election of directors.
Section 2 - By Directors:
The Board of Directors shall have power to make, adopt, alter, amend and
repeal, from time to time, by-laws of the Corporation; provided, however, that
the shareholders entitled to vote with respect thereto as in this Article IX
above-provided may alter, amend or repeal by-laws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of Directors, or to change
any provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-laws regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
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ARTICLE X
INDEMNIFICATION
The Company shall, to the fullest extent permitted by the Revised Business
Corporation Act (the "Act") of Utah indemnify all directors, officers, employees
and agents from and against any and all expenses and liabilities, as defined by
the Act.
Dated: ______________
<PAGE>
Exhibit 4.1
IMX PHARMACEUTICALS, INC.
LONG-TERM INCENTIVE PLAN
I. PURPOSE
IMX Pharmaceuticals, Inc. Long-Term Incentive Plan is designed to attract
and retain selected Key Employees and Key Non-Employees of the Company and its
Affiliates, and reward them for making major contributions to the success of the
Company and its Affiliates. These objectives are accomplished by making
long-term incentive awards under the Plan that will offer Participants an
opportunity to have a greater proprietary interest in, and closer identity with,
the Company and its Affiliates and their financial success.
The Awards may consist of:
(i) Incentive Options;
(ii) Nonstatutory Options;
(iii) Director Formula Options;
(iv) Restricted Stock;
(v) Rights
or any combination of the foregoing, as the Committee may determine.
II. DEFINITIONS
A. Affiliate means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated association or other entity (other
than the Company) that is a parent or subsidiary of the Company or an entity in
which the Company holds a joint venture interest, direct or indirect, including
Medicis Consumer Products Company, L.L.C. However, in connection with any grant
of Incentive Options, the term "Affiliate" shall have the meaning set forth in
Section 422 of the Code.
B. Award means the grant to any Key Employee or Key Non-Employee of any
form of Option, Restricted Stock or Right, whether granted singly, in
combination, or in tandem, and pursuant to such terms, conditions, and
limitations as the Committee may establish in order to fulfill the objectives of
the Plan.
C. Award Agreement means an agreement entered into between the Company and
a Participant under which an Award is granted and which sets forth the terms,
conditions, and limitations applicable to the Award.
<PAGE>
D. Board means the Board of Directors of the Company.
E. Code means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
F. Committee means the committee to which the Board delegates the power to
act under or pursuant to the provisions of the Plan, or the Board if no
committee is selected. If the Board delegates powers to a committee, and if the
Company is or becomes subject to Section 16 of the Exchange Act, then, if
necessary for compliance therewith, such committee shall consist initially of
not less than two (2) members of the Board, each member of which must be a
"non-employee director," within the meaning of the applicable rules promulgated
pursuant to the Exchange Act. If the Company is or becomes subject to Section 16
of the Exchange Act, no member of the Committee shall receive any Award pursuant
to the Plan or any similar plan of the Company or any Affiliate while serving on
the Committee, unless the Board determines that the grant of such an Award
satisfies the then current Rule 16b-3 requirements under the Exchange Act.
G. Common Stock means the common stock of the Company.
H. Company means IMX Pharmaceuticals, Inc., a Utah corporation. For all
purposes hereunder, Company includes any successor or assignee corporation or
corporations into which the Company may be merged, changed, or consolidated; any
corporation for whose securities the securities of the Company shall be
exchanged; and any assignee of or successor to substantially all of the assets
of the Company.
I. Disability or Disabled means a permanent and total disability as
defined in Section 22(e)(3) of the Code.
J. Exchange Act means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute thereto.
K. Fair Market Value means, if the Shares are listed on any national
securities exchange, the closing sales price, if any, on the largest such
exchange on the valuation date, or, if none, on the most recent trade date
immediately prior to the valuation date provided such trade date is no more than
thirty (30) days prior to the valuation date. If the Shares are not then listed
on any such exchange, the fair market value of such Shares shall be the closing
sales price if such is reported, or otherwise the mean between the closing "Bid"
and the closing "Ask" prices, if any, as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the valuation date,
or if none, on the most recent trade date immediately prior to the valuation
date provided such trade date is no more than thirty (30) days prior to the
valuation date. If the Shares are not then either listed on any such exchange or
quoted in NASDAQ, the fair market value shall be the closing "bid" price, if
any, as quoted by a source designated by the Committee for the valuation date,
or, if none, for the most recent date thirty (30) days or less prior to the
valuation date for which quotations are
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reported. If the fair market value cannot be determined under the preceding
three sentences, it shall be determined in good faith by the Committee.
L. Formula Option means a Nonstatutory Option granted automatically under
Article VIII of the Plan.
M. Incentive Option means an Option that, when granted, is intended to be
an "incentive stock option," as defined in Section 422 of the Code.
N. Key Employee means an employee of the Company or of an Affiliate who is
designated by the Committee as being eligible to be granted one or more Awards
under the Plan.
O. Key Non-Employee means a Non-Employee Board Member, consultant, advisor
or independent contractor of the Company or of an Affiliate who is designated by
the Committee as being eligible to be granted one or more Awards under the Plan.
P. Nonstatutory Option means an Option that, when granted, is not intended
to be an "incentive stock option," as defined in Section 422 of the Code.
Q. Option means a right or option to purchase Common Stock, including
Restricted Stock if the Committee so determines.
R. Participant means a Key Employee or Key Non-Employee to whom one or
more Awards are granted under the Plan.
S. Plan means IMX Pharmaceuticals, Inc. Long-Term Incentive Plan, as
amended from time to time.
T. Restricted Stock means an Award made in Common Stock or denominated in
units of Common Stock and delivered under the Plan, subject to the requirements
of Article IX, such other restrictions as the Committee deems appropriate or
desirable, and as awarded in accordance with the terms of the Plan.
U. Right means a stock appreciation right delivered under the Plan,
subject to the requirements of Article X and as awarded in accordance with the
terms of the Plan.
V. Shares means the following shares of the capital stock of the Company
as to which Options or Restricted Stock have been or may be granted under the
Plan and upon which Rights or units of Restricted Stock may be based: treasury
or authorized but unissued Common Stock, $.001 par value, of the Company, or any
shares of capital stock into which the Shares are changed or for which they are
exchanged within the provisions of Article XVI of the Plan.
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III. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares as to which Awards may be granted from time
to time shall be One Million, Two Hundred Thousand (1,200,000) Shares.
From time to time, the Committee and appropriate officers of the Company
shall take whatever actions are necessary to file required documents with
governmental authorities and stock exchanges so as to make Shares available for
issuance pursuant to the Plan. Shares subject to Awards that are forfeited,
terminated, expire unexercised, canceled by agreement of the Company and the
Participant, settled in cash in lieu of Common Stock or in such manner that all
or some of the Shares covered by such Awards are not issued to a Participant, or
are exchanged for Awards that do not involve Common Stock, shall immediately
become available for Awards. Awards payable in cash shall not reduce the number
of Shares available for Awards under the Plan.
IV. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum at any meeting thereof (including by
telephone conference) and the acts of a majority of the members present, or acts
approved in writing by a majority of the entire Committee without a meeting,
shall be the acts of the Committee for purposes of this Plan. The Committee may
authorize one or more of its members or an officer of the Company to execute and
deliver documents on behalf of the Committee. A member of the Committee shall
not exercise any discretion respecting himself or herself under the Plan. The
Board shall have the authority to remove, replace or fill any vacancy of any
member of the Committee upon notice to the Committee and the affected member.
Any member of the Committee may resign upon notice to the Board. The Committee
may allocate among one or more of its members, or may delegate to one or more of
its agents, such duties and responsibilities as it determines. Subject to the
provisions of the Plan, the Committee is authorized to:
A. Interpret the provisions of the Plan and any Award or Award Agreement,
and make all rules and determinations that it deems necessary or advisable to
the administration of the Plan;
B. Determine which employees of the Company or an Affiliate shall be
designated as Key Employees and which of the Key Employees shall be granted
Awards;
C. Determine the Key Non-Employees to whom Awards, other than Incentive
Options and Performance Awards for which Key Non-Employees shall not be
eligible, shall be granted;
D. Determine whether an Option to be granted shall be an Incentive Option
or Nonstatutory Option;
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E. Determine the number of Shares for which an Option or Restricted Stock
shall be granted;
F. Determine the number of Rights to be granted;
G. Provide for the acceleration of the right to exercise any Award, other
than an Award for Formula Options, which may not be accelerated; and
H. Specify the terms, conditions, and limitations upon which Awards may be
granted;
provided, however, that with respect to Incentive Options, all such
interpretations, rules, determinations, terms, and conditions shall be made and
prescribed in the context of preserving the tax status of the Incentive Options
as incentive stock options within the meaning of Section 422 of the Code.
The Committee may delegate to the chief executive officer and to other
senior officers of the Company or its Affiliates its duties under the Plan
pursuant to such conditions or limitations as the Committee may establish,
except that only the Committee may select, and grant Awards to, Participants who
are subject to Section 16 of the Exchange Act. All determinations of the
Committee shall be made by a majority of its members. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Award.
The Committee shall have the authority at any time to cancel Awards for
reasonable cause and to provide for the conditions and circumstances under which
Awards shall be forfeited.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
the Participants.
V. ELIGIBILITY FOR PARTICIPATION
Awards may be granted under this Plan only to Key Employees and Key
Non-Employees of the Company or its Affiliates. The foregoing notwithstanding,
each Participant receiving an Incentive Option must be a Key Employee of the
Company or of an Affiliate at the time the Incentive Option is granted.
The Committee may at any time and from time to time grant one or more
Awards to one or more Key Employees or Key Non-Employees and may designate the
number of Shares, if applicable, to be subject to each Award so granted,
provided, however that no Incentive
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Option shall be granted after the expiration of ten (10) years from the earlier
of the date of the adoption of the Plan by the Company or the approval of the
Plan by the stockholders of the Company, and provided further, that the Fair
Market Value of the Shares (determined at the time the Option is granted) as to
which Incentive Options are exercisable for the first time by any Key Employee
during any single calendar year (under the Plan and under any other incentive
stock option plan of the Company or an Affiliate) shall not exceed One Hundred
Thousand Dollars ($100,000). To the extent that the Fair Market Value of such
Shares exceeds One Hundred Thousand Dollars ($100,000), the Shares subject to
Option in excess of One Hundred Thousand Dollars ($100,000) shall, without
further action by the Committee, automatically be converted to Nonstatutory
Options.
Notwithstanding any of the foregoing provisions, the Committee may
authorize the grant of an Award to a person not then in the employ of, or
engaged by, the Company or of an Affiliate, conditioned upon such person
becoming eligible to be granted an Award at or prior to the execution of the
Award Agreement evidencing the actual grant of such Award.
VI. AWARDS UNDER THIS PLAN
As the Committee may determine, the following types of Awards may be
granted under the Plan on a stand alone, combination, or tandem basis:
A. Incentive Option. An Award in the form of an Option that shall comply
with the requirements of Section 422 of the Code.
B. Nonstatutory Option. An Award in the form of an Option that shall not
be intended to comply with the requirements of Section 422 of the Code.
C. Formula Option. An Award in the form of an Option granted to a Board
Member pursuant to Section VIII below.
D. Restricted Stock. An Award made to a Participant in Common Stock or
denominated in units of Common Stock, subject to future service and such other
restrictions and conditions as may be established by the Committee, and as set
forth in the Award Agreement, including but not limited to continuous service
with the Company or its Affiliates, achievement of specific business objectives,
increases in specified indices, attaining growth rates, and other measurements
of Company or Affiliate performance.
E. Stock Appreciation Right. An Award in the form of a Right to receive
the excess of the Fair Market Value of a Share on the date the Right is
exercised over the Fair Market Value of a Share on the date the Right was
granted.
Each Award under the Plan shall be evidenced by an Award Agreement. Delivery of
an Award Agreement to each Participant shall constitute an agreement between the
Company and the Participant as to the terms and conditions of the Award.
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VII. TERMS AND CONDITIONS OF INCENTIVE OPTIONS AND NONSTATUTORY OPTIONS
Each Option shall be set forth in an Award Agreement, duly executed on
behalf of the Company and by the Participant to whom such Option is granted.
Except for the setting of the Option price under Paragraph A, no Option shall be
granted and no purported grant of any Option shall be effective until such Award
Agreement shall have been duly executed on behalf of the Company and by the
Participant. Each such Award Agreement shall be subject to at least the
following terms and conditions:
A. Option Price. The purchase price of the Shares covered by each Option
granted under the Plan shall be determined by the Committee. The Option price
per share of the Shares covered by each Nonstatutory Option shall be at such
amount as may be determined by the Committee in its sole discretion on the date
of the grant of the Option. In the case of an Incentive Option, if the
Participant owns directly or by reason of the applicable attribution rules ten
percent (10%) or less of the total combined voting power of all classes of share
capital of the Company, the Option price per share of the Shares covered by each
Incentive Option shall be not less than the Fair Market Value of the Shares on
the date of the grant of the Incentive Option. In all other cases of Incentive
Options, the Option price shall be not less than one hundred ten percent (110%)
of the Fair Market Value on the date of grant.
B. Number of Shares. Each Option shall state the number of Shares to which
it pertains.
C. Term of Option. Each Incentive Option shall terminate not more than ten
(10) years from the date of the grant thereof, or at such earlier time as the
Award Agreement may provide, and shall be subject to earlier termination as
herein provided, except that if the Option price is required under Paragraph A
of this Article VII to be at least one hundred ten percent (110%) of Fair Market
Value, each such Incentive Option shall terminate not more than five (5) years
from the date of the grant thereof, and shall be subject to earlier termination
as herein provided. The Committee shall determine the time at which a
Nonstatutory Option shall terminate.
D. Date of Exercise. Upon the authorization of the grant of an Option, or
at any time thereafter, the Committee may, subject to the provisions of
Paragraph C of this Article VII, prescribe the date or dates on which the Option
becomes exercisable, and may provide that the Option become exercisable in
installments over a period of years, or upon the attainment of stated goals.
E. Medium of Payment. The Option price shall be payable upon the exercise
of the Option, as set forth in Paragraph I. It shall be payable in such form
(permitted by Section 422 of the Code in the case of Incentive Options) as the
Committee shall, either by rules promulgated pursuant to the provisions of
Article IV of the Plan, or in the particular Award Agreement, provide.
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F. Termination of Employment.
1. A Participant who ceases to be an employee or Key Non-Employee of
the Company or of an Affiliate for any reason other than death, Disability, or
termination "for cause," as defined in subparagraph (2) below, may exercise any
Option granted to such Participant, to the extent that the right to purchase
Shares thereunder has become exercisable on the date of such termination, but
only within three (3) months after such date, or, if earlier, within the
originally prescribed term of the Option. A Participant's employment shall not
be deemed terminated by reason of a transfer to another employer that is the
Company or an Affiliate.
2. A Participant who ceases to be an employee or Key Non-Employee of
the Company or of an Affiliate "for cause" shall, upon such termination, cease
to have any right to exercise any Option. For purposes of this Plan, cause shall
mean (i) a Participant's theft or embezzlement, or attempted theft or
embezzlement, of money or property of the Company, a Participant's perpetration
or attempted perpetration of fraud, or a Participant's participation in a fraud
or attempted fraud, on the Company or a Participant's unauthorized appropriation
of, or a Participant's attempt to misappropriate, any tangible or intangible
assets or property of the Company; (ii) any act or acts of disloyalty,
dishonesty, misconduct, moral turpitude, or any other act or acts by a
Participant injurious to the interest, property, operations, business or
reputation of the Company; (iii) a Participant's commission of a felony or any
other crime the commission of which results in injury to the Company; or (iv)
any violation of any restriction on the disclosure or use of confidential
information of the Company or on competition with the Company or any of its
businesses as then conducted. The determination of the Committee as to the
existence of cause shall be conclusive and binding upon the Participant and the
Company.
3. A Participant who is absent from work with the Company or an
Affiliate because of temporary disability (any disability other than a
Disability), or who is on leave of absence for any purpose permitted by any
authoritative interpretation (i.e., regulation, ruling, case law, etc.) of
Section 422 of the Code, shall not, during the period of any such absence, be
deemed, by virtue of such absence alone, to have terminated his or her
employment or relationship with the Company or with an Affiliate, except as the
Committee may otherwise expressly provide or determine.
4. Paragraph F(l) shall control and fix the rights of a Participant
who ceases to be an employee or Key Non-Employee of the Company or of an
Affiliate for any reason other than Disability, death, or termination "for
cause," and who subsequently becomes Disabled or dies. Nothing in Paragraphs G
and H of this Article VII shall be applicable in any such case except that, in
the event of such a subsequent Disability or death within the three (3) month
period after the termination of employment or, if earlier, within the originally
prescribed term of the Option, the Participant or the Participant's estate or
personal representative may exercise the Option permitted by this Paragraph F
within twelve (12) months after the date of Disability or death of such
Participant, but in no event beyond the originally prescribed term of the
Option.
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G. Total and Permanent Disability. A Participant who ceases to be an
employee or Key Non-Employee of the Company or of an Affiliate by reason of
Disability may exercise any Option granted to such Participant (i) to the extent
that the right to purchase Shares thereunder has become exercisable on or before
the date such Participant becomes Disabled as determined by the Committee, and
(ii) if the Option becomes exercisable periodically, to the extent of any
additional rights that would have become exercisable had the Participant not
become so Disabled until after the close of business on the next periodic
exercise date.
A Disabled Participant shall exercise such rights, if at all, only within
a period of not more than twelve (12) months after the date that the Participant
became Disabled as determined by the Committee (notwithstanding that the
Participant might have been able to exercise the Option as to some or all of the
Shares on a later date if the Participant had not become Disabled) or, if
earlier, within the originally prescribed term of the Option.
H. Death. In the event that a Participant to whom an Option has been
granted ceases to be an employee or Key Non-Employee of the Company or of an
Affiliate by reason of such Participant's death, such Option, to the extent that
the right is exercisable but not exercised on the date of death, may be
exercised by the Participant's estate or personal representative within twelve
(12) months after the date of death of such Participant or, if earlier, within
the originally prescribed term of the Option, notwithstanding that the decedent
might have been able to exercise the Option as to some or all of the Shares on a
later date if the Participant were alive and had continued to be an employee or
Key Non-Employee of the Company or of an Affiliate.
I. Exercise of Option and Issuance of Stock. Options shall be exercised by
giving written notice to the Company. Such written notice shall: (i) be signed
by the person exercising the Option, (ii) state the number of Shares with
respect to which the Option is being exercised, (iii) contain the warranty
required by Paragraph M of this Article VII, if applicable, and (iv) specify a
date (other than a Saturday, Sunday or legal holiday) not less than five (5) nor
more than ten (10) days after the date of such written notice, as the date on
which the Shares will be purchased. Such tender and conveyance shall take place
at the principal office of the Company during ordinary business hours, or at
such other hour and place agreed upon by the Company and the person or persons
exercising the Option. On the date specified in such written notice (which date
may be extended by the Company in order to comply with any law or regulation
that requires the Company to take any action with respect to the Option Shares
prior to the issuance thereof), the Company shall accept payment for the Option
Shares in cash, by bank or certified check, by wire transfer, or by such other
means as may be approved by the Committee and shall deliver to the person or
persons exercising the Option in exchange therefor an appropriate certificate or
certificates for fully paid nonassessable Shares or undertake to deliver
certificates within a reasonable period of time. In the event of any failure to
take up and pay for the number of Shares specified in such written notice on the
date set forth therein (or on the extended date as above provided), the right to
exercise the Option shall terminate with respect to such number of Shares, but
shall continue with respect to the remaining Shares covered by the Option and
not yet acquired pursuant thereto.
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If approved in advance by the Committee, payment in full or in part also
may be made (i) by delivering Shares already owned by the Participant having a
total Fair Market Value on the date of such delivery equal to the Option price;
(ii) by the execution and delivery of a note or other evidence of indebtedness
(and any security agreement thereunder) satisfactory to the Committee; (iii) by
authorizing the Company to retain Shares that otherwise would be issuable upon
exercise of the Option having a total Fair Market Value on the date of delivery
equal to the Option price; (iv) by the delivery of cash or the extension of
credit by a broker-dealer to whom the Participant has submitted a notice of
exercise or otherwise indicated an intent to exercise an Option (a so-called
"cashless" exercise); or (v) by any combination of the foregoing.
J. Rights as a Stockholder. No Participant to whom an Option has been
granted shall have rights as a stockholder with respect to any Shares covered by
such Option except as to such Shares as have been registered in the Company's
share register in the name of such Participant upon the due exercise of the
Option and tender of the full Option price.
K. Assignability and Transferability of Option. Unless otherwise permitted
by the Code and by Rule 16b-3 of the Exchange Act, if applicable, and approved
in advance by the Committee, an Option granted to a Participant shall not be
transferable by the Participant and shall be exercisable, during the
Participant's lifetime, only by such Participant or, in the event of the
Participant's incapacity, his guardian or legal representative. Except as
otherwise permitted herein, such Option shall not be assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment, or similar process and any attempted
transfer, assignment, pledge, hypothecation or other disposition of any Option
or of any rights granted thereunder contrary to the provisions of this Paragraph
K, or the levy of any attachment or similar process upon an Option or such
rights, shall be null and void.
L. Other Provisions. The Award Agreement for an Incentive Option shall
contain such limitations and restrictions upon the exercise of the Option as
shall be necessary in order that such Option can be an "incentive stock option"
within the meaning of Section 422 of the Code. Further, the Award Agreements
authorized under the Plan shall be subject to such other terms and conditions
including, without limitation, restrictions upon the exercise of the Option, as
the Committee shall deem advisable and which, in the case of Incentive Options,
are not inconsistent with the requirements of Section 422 of the Code.
M. Purchase for Investment. If Shares to be issued upon the particular
exercise of an Option shall not have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended, the Company shall
be under no obligation to issue the Shares covered by such exercise unless and
until the following conditions have been fulfilled. The person who exercises
such Option shall warrant to the Company that, at the time of such exercise,
such person is acquiring his or her Option Shares for investment and not with a
view to, or for sale in connection with, the distribution of any such Shares,
and shall make such other representations, warranties, acknowledgments, and
affirmations, if any, as the
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Committee may require. In such event, the person acquiring such Shares shall be
bound by the provisions of the following legend (or similar legend) which shall
be endorsed upon the certificate(s) evidencing his or her Option Shares issued
pursuant to such exercise.
"The shares represented by this certificate have been acquired for
investment and they may not be sold or otherwise transferred by any
person, including a pledgee, in the absence of an effective
registration statement for the shares under the Securities Act of
1933 or an opinion of counsel satisfactory to the Company that an
exemption from registration is then available."
Without limiting the generality of the foregoing, the Company may delay issuance
of the Shares until completion of any action or obtaining any consent that the
Company deems necessary under any applicable law (including without limitation
state securities or "blue sky" laws).
VIII. FORMULA OPTIONS
A. As of the enactment of the Plan, each current Board Member shall be
granted automatically Twenty Thousand (20,000) Formula Options at a price set
forth in Section B herein. In addition, each Board Member elected subsequent to
the enactment of the Plan shall be granted automatically Twenty Thousand
(20,000) Formula Options as of the date of his or her election at a price set
forth in Section B herein. On each year anniversary of the Formula Options
grant, a Board Member shall be entitled to an automatic renewal grant of Five
Thousand (5,000) renewal Formula Options, at a price set forth in Section B
herein.
B. The purchase price of the Shares subject to the Formula Option shall be
equal to one hundred percent (100%) of the Fair Market Value as of the date of
grant.
C. The Shares subject to the Formula Option granted to a Board Member
shall become exercisable cumulatively over a period of ten years from the date
of grant, in accordance with:
Months Elapsed Since Cumulative Number of Shares for Which
Date of Grant Formula Option May be Exercised
------------- -------------------------------
Six Months One-Fourth
One Year One-Half
Eighteen Months Three-Quarters
Two Years Remaining One-Fourth
D. Formula Options shall be evidenced by an Award Agreement which shall
conform to the requirements of the Plan, and may contain such other provisions
not inconsistent therewith, as the Committee shall deem advisable. The
provisions of Article VII
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governing Nonstatutory Options, and the exercise and issuance thereof, shall
apply to Formula Options to the extent such provisions are not inconsistent with
this Article VIII.
IX. REQUIRED TERMS AND CONDITIONS OF RESTRICTED STOCK
A. The Committee may from time to time grant an Award in Shares of Common
Stock or grant an Award denominated in units of Common Stock, for such
consideration, if any, as the Committee deems appropriate (which amount may be
less than the Fair Market Value of the Common Stock on the date of the Award),
and subject to such restrictions and conditions and other terms as the Committee
may determine at the time of the Award (including, but not limited to,
continuous service with the Company or its Affiliates, achievement of specific
business objectives, increases in specified indices, attaining growth rates, and
other measurements of Company or Affiliate performance), and subject further to
the general provisions of the Plan, the applicable Award Agreement, and the
following specific rules.
B. If Shares of Restricted Stock are awarded, such Shares cannot be
assigned, sold, transferred, pledged, or hypothecated prior to the lapse of the
restrictions applicable thereto. The Company shall issue, in the name of the
Participant, stock certificates representing the total number of Shares of
Restricted Stock awarded to the Participant, as soon as may be reasonably
practicable after the grant of the Award, which certificates shall be held by
the Secretary of the Company as provided in Paragraph G.
C. Restricted Stock issued to a Participant under the Plan shall be
governed by an Award Agreement that shall specify whether Shares of Common Stock
are awarded to the Participant, or whether the Award shall be one not of Shares
of Common Stock but one denominated in units of Common Stock, any consideration
required thereto, and such other provisions as the Committee shall determine.
D. Subject to the provisions of Paragraphs B and E hereof and the
restrictions set forth in the related Award Agreement, the Participant receiving
an Award of Shares of Restricted Stock shall thereupon be a stockholder with
respect to all of the Shares represented by such certificate or certificates and
shall have the rights of a stockholder with respect to such Shares, including
the right to vote such Shares and to receive dividends and other distributions
made with respect to such Shares. All Common Stock received by a Participant as
the result of any dividend on the Shares of Restricted Stock, or as the result
of any stock split, stock distribution, or combination of the Shares affecting
Restricted Stock, shall be subject to the restrictions set forth in the related
Award Agreement.
E. Restricted Stock awarded to a Participant pursuant to the Plan will be
forfeited, and any Shares of Restricted Stock or units of Restricted Stock sold
to a Participant pursuant to the Plan may, at the Company's option, be resold to
the Company for an amount equal to the price paid therefor, and in either case,
such Restricted Stock shall revert to the Company, if the Company so determines
in accordance with Article XII or any other condition set forth in the Award
Agreement, or, alternatively, if the Participant's employment with the Company
or
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its Affiliates terminates, other than for reasons set forth in Article XI, prior
to the expiration of the forfeiture or restriction provisions set forth in the
Award Agreement.
F. The Committee, in its discretion, shall have the power to accelerate
the date on which the restrictions contained in the Award Agreement shall lapse
with respect to any or all Restricted Stock awarded under the Plan.
G. The Secretary of the Company shall hold the certificate or certificates
representing Shares of Restricted Stock issued under the Plan, properly endorsed
for transfer, on behalf of each Participant who holds such Shares, until such
time as the Shares of Restricted Stock are forfeited, resold to the Company, or
the restrictions lapse. Any Restricted Stock denominated in units of Common
Stock, if not previously forfeited, shall be payable in accordance with Article
XIII as soon as practicable after the restrictions lapse.
H. The Committee may prescribe such other restrictions, conditions, and
terms applicable to Restricted Stock issued to a Participant under the Plan that
are neither inconsistent with nor prohibited by the Plan or the Award Agreement,
including, without limitation, terms providing for a lapse of the restrictions
of this Article or any Award Agreement in installments.
X. REQUIRED TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
If deemed by the Committee to be in the best interests of the Company, a
Participant may be granted a Right. Each Right shall be granted subject to such
restrictions and conditions and other terms as the Committee may specify in the
Award Agreement at the time the Right is granted, subject to the general
provisions of the Plan, and the following specific rules.
A. Rights may be granted, if at all, either singly, in combination with
another Award, or in tandem with another Award. At the time of grant of a Right,
the Committee shall specify the base price of Common Stock to be used in
connection with the calculation described in Paragraph B below, provided that
the base price shall not be less than one hundred percent (100%) of the Fair
Market Value of a Share of Common Stock on the date of grant, unless approved by
the Board.
B. Upon exercise of a Right, the Participant shall be entitled to receive
in accordance with Article XIII, and as soon as practicable, the excess of the
Fair Market Value of one Share of Common Stock on the date of exercise over the
base price specified in such Right, multiplied by the number of Shares of Common
Stock then subject to the Right, or the portion thereof being exercised.
C. Notwithstanding anything herein to the contrary, if the Award granted
to a Participant allows him or her to elect to cancel all or any portion of an
unexercised Option by exercising an additional or tandem Right, then the Option
price per Share of Common Stock shall be used as the base price specified in
Paragraph A to determine the value of the Right upon such exercise and, in the
event of the exercise of such Right, the Company's obligation
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<PAGE>
with respect to such Option or portion thereof shall be discharged by payment of
the Right so exercised. In the event of such a cancellation, the number of
Shares as to which such Option was canceled shall become available for use under
the Plan, less the number of Shares, if any, received by the Participant upon
such cancellation.
D. A Right may be exercised only by the Participant (or, if applicable
under Article XI, by a legatee or legatees of such Right, or by the
Participant's executors, personal representatives, or distributees).
XI. TERMINATION OF EMPLOYMENT
Except as may otherwise be (i) provided in Article VII for Options, (ii)
provided for under the Award Agreement, or (iii) permitted pursuant to
Paragraphs A through C of this Article XI (subject to the limitations under the
Code for Incentive Options), if the employment of a Participant terminates, all
unexpired, unpaid, unexercised, or deferred Awards shall be canceled
immediately.
A. Retirement under a Company or Affiliate Retirement Plan. When a
Participant's employment terminates as a result of retirement as defined under a
Company or Affiliate retirement plan, the Committee may permit Awards to
continue in effect beyond the date of retirement in accordance with the
applicable Award Agreement, and/or the exercisability and vesting of any Award
may be accelerated.
B. Resignation in the Best Interests of the Company or an Affiliate. When
a Participant resigns from the Company or an Affiliate and, in the judgment of
the chief executive officer or other senior officer designated by the Committee,
the acceleration and/or continuation of outstanding Awards would be in the best
interests of the Company, the Committee may (i) authorize, where appropriate,
the acceleration and/or continuation of all or any part of Awards granted prior
to such termination and (ii) permit the exercise, vesting, and payment of such
Awards for such period as may be set forth in the applicable Award Agreement,
subject to earlier cancellation pursuant to Article XII or at such time as the
Committee shall deem the continuation of all or any part of the Participant's
Awards are not in the Company's or its Affiliate's best interests.
C. Death or Disability of a Participant
1. In the event of a Participant's death, the Participant's estate
or beneficiaries shall have a period up to the earlier of (i) the expiration
date specified in the Award Agreement, or (ii) the expiration date specified in
Paragraph H of Article VII, within which to receive or exercise any outstanding
Awards held by the Participant under such terms as may be specified in the
applicable Award Agreement. Rights to any such outstanding Awards shall pass by
will or the laws of descent and distribution in the following order: (a) to
beneficiaries so designated by the Participant; (b) to a legal representative of
the Participant; or (c) to the persons entitled thereto as determined by a court
of competent jurisdiction. Awards so passing shall be made at such times and in
such manner as if the Participant were living.
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2. In the event a Participant is determined by the Company to be
Disabled, and subject to the limitations of Paragraph G of Article VII, Awards
may be paid to, or exercised by, the Participant, if legally competent, or by a
legally designated guardian or other representative if the Participant is
legally incompetent by virtue of such Disability.
3. After the death or Disability of a Participant, the Committee may
in its sole discretion at any time (i) terminate restrictions in Award
Agreements; (ii) accelerate any or all installments and rights; and/or (iii)
instruct the Company to pay the total of any accelerated payments in a lump sum
to the Participant, the Participant's estate, beneficiaries or representative,
notwithstanding that, in the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due under the Awards
ultimately might have become payable to other beneficiaries.
XII. CANCELLATION AND RESCISSION OF AWARDS
Unless the Award Agreement specifies otherwise, the Committee may cancel
any unexpired, unpaid, unexercised, or deferred Awards at any time if the
Participant is not in compliance with the applicable provisions of the Award
Agreement, the Plan, or with the following conditions:
A. A Participant shall not breach any protective agreement entered into
between him or her and the Company or any Affiliates, or render services for any
organization or engage directly or indirectly in any business which, in the
judgment of the chief executive officer of the Company or other senior officer
designated by the Committee, is or becomes competitive with the Company, or
which organization or business, or the rendering of services to such
organization or business, is or becomes otherwise prejudicial to or in conflict
with the interests of the Company. For a Participant whose employment has
terminated, the judgment of the chief executive officer shall be based on terms
of the protective agreement, if applicable, or on the Participant's position and
responsibilities while employed by the Company or its Affiliates, the
Participant's post-employment responsibilities and position with the other
organization or business, the extent of past, current, and potential competition
or conflict between the Company and other organization or business, the effect
of the Participant's assuming the post-employment position on the Company's or
its Affiliate's customers, suppliers, investors and competitors, and such other
considerations as are deemed relevant given the applicable facts and
circumstances. A Participant may, however, purchase as an investment or
otherwise, stock or other securities of any organization or business so long as
they are listed upon a recognized securities exchange or traded
over-the-counter, and such investment does not represent a substantial
investment to the Participant or a greater than one percent (1%) equity interest
in the organization or business.
B. A Participant shall not, without prior written authorization from the
Company, disclose to anyone outside the Company or its Affiliates, or use in
other than the Company's or Affiliate's business, any confidential information
or materials relating to the business of the
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<PAGE>
Company or its Affiliates, acquired by the Participant either during or after
employment with the Company or its Affiliates.
C. A Participant shall disclose promptly and assign to the Company all
right, title, and interest in any invention or idea, patentable or not, made or
conceived by the Participant during employment with the Company or an Affiliate,
relating in any manner to the actual or anticipated business, research, or
development work of the Company or its Affiliates, and shall do anything
reasonably necessary to enable the Company or its Affiliates to secure a patent,
trademark, copyright, or other protectable interest where appropriate in the
United States and in foreign countries.
Upon exercise, payment, or delivery pursuant to an Award, the Participant shall
certify on a form acceptable to the Committee that he or she is in compliance
with the terms and conditions of the Plan, including the provisions of
Paragraphs A, B or C of this Article XII. Failure to comply with the provisions
of Paragraphs A, B or C of this Article XII prior to, or during the one (1) year
period after, any exercise, payment, or delivery pursuant to an Award shall
cause such exercise, payment, or delivery to be rescinded. The Company shall
notify the Participant in writing of any such rescission within two (2) years
after such exercise, payment, or delivery. Within ten (10) days after receiving
such a notice from the Company, the Participant shall pay to the Company the
amount of any gain realized or payment received as a result of the rescinded
exercise, payment, or delivery pursuant to the Award. Such payment shall be made
either in cash or by returning to the Company the number of Shares of Common
Stock that the Participant received in connection with the rescinded exercise,
payment, or delivery.
XIII. PAYMENT OF RESTRICTED STOCK AND RIGHTS
Payment of Restricted Stock and Rights may be made, as the Committee shall
specify, in the form of cash, Shares of Common Stock, or combinations thereof;
provided, however, that a fractional Share of Common Stock shall be paid in cash
equal to the Fair Market Value of the fractional Share of Common Stock at the
time of payment.
XIV. WITHHOLDING
Except as otherwise provided by the Committee:
A. The Company shall have the power and right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan; and
B. In the case of payments of Awards, or upon any other taxable event
hereunder, a Participant may elect, subject to the approval in advance by the
Committee, to satisfy the withholding requirement, if any, in whole or in part,
by having the Company withhold Shares of Common Stock that would otherwise be
transferred to the Participant having a Fair Market Value, on the date the tax
is to be determined, equal to the minimum marginal tax that could be
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imposed on the transaction. All elections shall be made in writing and signed by
the Participant.
XV. SAVINGS CLAUSE
This Plan is intended to comply in all respects with applicable law and
regulations, including, (i) with respect to those Participants who are officers
or directors for purposes of Section 16 of the Exchange Act, Rule 16b-3 of the
Securities and Exchange Commission, if applicable. In case any one or more
provisions of this Plan shall be held invalid, illegal, or unenforceable in any
respect under applicable law and regulation, including Rule 16b-3, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby and the invalid, illegal, or unenforceable
provision shall be deemed null and void; however, to the extent permitted by
law, any provision that could be deemed null and void shall first be construed,
interpreted, or revised retroactively to permit this Plan to be construed in
compliance with all applicable law, including Rule 16b-3, and so as to foster
the intent of this Plan. Notwithstanding anything herein to the contrary, with
respect to Participants who are officers and directors for purposes of Section
16 of the Exchange Act, if applicable, and if required to comply with rules
promulgated thereunder, no grant of, or Option to purchase, Shares shall permit
unrestricted ownership of Shares by the Participant for at least six (6) months
from the date of grant or Option, unless the Board determines that the grant of,
or Option to purchase, Shares otherwise satisfies the then current Rule 16b-3
requirements.
XVI. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS
In the event that the outstanding Shares of the Company are changed into
or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, change in par value, stock
split-up, combination of shares or dividends payable in capital stock, or the
like, appropriate adjustments to prevent dilution or enlargement of the Awards
granted to, or available for, Participants shall be made in the manner and kind
of Shares for the purchase of which Awards may be granted under the Plan, and,
in addition, appropriate adjustment shall be made in the number and kind of
Shares and in the Option price per share subject to outstanding Options. The
foregoing notwithstanding, no such adjustment shall be made in an Incentive
Option which shall, within the meaning of Section 424 of the Code, constitute
such a modification, extension, or renewal of an Option as to cause it to be
considered as the grant of a new Option.
Notwithstanding anything herein to the contrary, the Company may, in its
sole discretion, accelerate the timing of the exercise provisions of any Award
in the event of a tender offer for the Company's Shares, the adoption of a plan
of merger or consolidation under which a majority of the Shares of the Company
would be eliminated, or a sale of all or any portion of the Company's assets or
capital stock. Alternatively, the Company may, in its sole discretion, cancel
any or all Awards upon any of the foregoing events and provide for the
17
<PAGE>
payment to Participants in cash of an amount equal to the value or appreciated
value, whichever is applicable, of the Award, as determined in good faith by the
Committee, at the close of business on the date of such event.
Upon a business combination by the Company or any of its Affiliates with
any corporation or other entity through the adoption of a plan of merger or
consolidation or a share exchange or through the purchase of all or
substantially all of the capital stock or assets of such other corporation or
entity, the Board or the Committee may, in its sole discretion, grant Options
pursuant hereto to all or any persons who, on the effective date of such
transaction, hold outstanding options to purchase securities of such other
corporation or entity and who, on and after the effective date of such
transaction, will become employees or directors of, or consultants or advisors
to, the Company or its Affiliates. The number of Shares subject to such
substitute Options shall be determined in accordance with the terms of the
transaction by which the business combination is effected. Notwithstanding the
other provisions of this Plan, the other terms of such substitute Options shall
be substantially the same as or economically equivalent to the terms of the
options for which such Options are substituted, all as determined by the Board
or by the Committee, as the case may be. Upon the grant of substitute Options
pursuant hereto, the options to purchase securities of such other corporation or
entity for which such Options are substituted shall be cancelled immediately.
XVII. DISSOLUTION OR LIQUIDATION OF THE COMPANY
Upon the dissolution or liquidation of the Company other than in
connection with a transaction to which Article XVI is applicable, all Awards
granted hereunder shall terminate and become null and void; provided, however,
that if the rights of a Participant under the applicable Award have not
otherwise terminated and expired, the Participant may, if the Committee, in its
sole discretion, so permits, have the right immediately prior to such
dissolution or liquidation to exercise any Award granted hereunder to the extent
that the right thereunder has become exercisable as of the date immediately
prior to such dissolution or liquidation.
XVIII. TERMINATION OF THE PLAN
The Plan shall terminate (10) years from the earlier of the date of its
adoption by the Board or the date of its approval by the stockholders. The Plan
may be terminated at an earlier date by vote of the stockholders or the Board;
provided, however, that any such earlier termination shall not affect any Award
Agreements executed prior to the effective date of such termination.
Notwithstanding anything in this Plan to the contrary, any Options granted prior
to the effective date of the Plan's termination may be exercised until the
earlier of (i) the date set forth in the Award Agreement, or (ii) in the case of
an Incentive Option, ten (10) years from the date the Option is granted; and the
provisions of the Plan with respect to the full and final authority of the
Committee under the Plan shall continue to control.
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<PAGE>
XIX. AMENDMENT OF THE PLAN
The Plan may be amended by the Board and such amendment shall become
effective upon adoption by the Board; provided, however, that any amendment that
(i) increases the numbers of Shares that may be granted under this Plan, other
than as provided by Article XVI, (ii) materially modifies the requirements as to
eligibility to participate in the Plan, (iii) materially increases the benefits
to Participants, (iv) extends the period during which Incentive Options may be
granted or exercised, or (v) changes the designation of the class of employees
eligible to receive Incentive Options, or otherwise causes the Incentive Options
to no longer qualify as "incentive stock options" as defined in Section 422 of
the Code, also shall be subject to the approval of the stockholders of the
Company within one (1) year either before or after such adoption by the Board.
XX. EMPLOYMENT RELATIONSHIP
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment of a Participant, nor to prevent a
Participant from terminating the Participant's employment with the Company or an
Affiliate.
XXI. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against all reasonable expenses, including attorneys'
fees, actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken by them as
directors or members of the Committee and against all amounts paid by them in
settlement thereof (provided such settlement is approved by the Board) or paid
by them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that the director or Committee member is liable for gross
negligence or willful misconduct in the performance of his or her duties. To
receive such indemnification, a director or Committee member must first offer in
writing to the Company the opportunity, at its own expense, to defend any such
action, suit or proceeding.
Company to any Participant with respect to a grant of cash, Common Stock,
or rights thereto under the Plan shall be based solely upon any contractual
obligations that may be created by the Plan and any Award Agreement; no such
obligation of the Company shall be deemed to be secured by any pledge or other
encumbrance on any property of the Company. Neither the Company nor the Board
nor the Committee shall be required to give any security or bond for the
performance of any obligation that may be created by the Plan.
XXII. EFFECTIVE DATE
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This Plan shall become effective upon adoption by the Board. If necessary
under the Code in connection with the grant of Incentive Options, the Plan shall
be approved by the stockholders of the Company within the time period required
under the Code.
XXIII. GOVERNING LAW
This Plan shall be governed by the laws of the State of Florida and
construed in accordance therewith.
Adopted this 9th day of September, 1998.
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Exhibit 10.1
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made and entered into as
of the 18th day of September, 1995 by and between INTERDERM LIMITED, a company
organized under the laws of Gibraltar ("INTERDERM") and IMX CORPORATION, a Utah
corporation ("IMX").
W I T N E S S E T H:
WHEREAS, pursuant to an agreement dated June 23, 1995 with Meyer-Zall
Laboratories, formerly known as Pegasus Dermasearch ("PTY") Limited
("MEYER-ZALL"), (the "License Agreement"), Interderm has acquired exclusive
marketing and distribution rights in the United States for certain products
manufactured by Meyer-Zall; and
WHEREAS, Interderm has agreed to assign and transfer all its rights under
the License Agreement, as amended as provided below, to IMX in return for the
acquisition of a controlling stock interest in IMX, and IMX has agreed to the
acquisition and stock issuance upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises, as well as the mutual
covenants hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Amendment of Agreement. Simultaneously with execution of this
Agreement, Interderm, Meyer-Zall and IMX have entered into an agreement, a copy
of which is annexed hereto as Exhibit "1", under the terms of which the License
Agreement shall be amended in certain respects, effective as of the closing
hereunder.
2. Assignment of License Agreement. Effective upon the closing, Interderm
shall assign all of its right, title and interest in and to the License
Agreement to IMX and IMX shall assume all of Interderm's obligations thereunder.
3. Issuance of Shares to Interderm. In consideration for the assignment
provided in the preceding paragraph 2, at the closing, IMX shall issue to
Interderm or its affiliates or shareholders 5,734,683 shares (post-split, see
paragraph 5 below) of newly issued IMX common stock, par value $.001 per share.
4. Additional Stock Purchase. Interderm shall purchase an additional
86,019 shares of IMX common stock for the purchase price of $75,000 at closing.
Interderm has previously deposited the sum of $25,000 in the trust account of
counsel to IMX. Upon execution of this Agreement, Interderm will place an
additional $50,000 in the trust account. The funds will be utilized toward the
purchase of the stock in accordance with this paragraph. In
<PAGE>
the event that the closing does not occur, the monies will be used to pay IMX's
legal and accounting expenses incurred in connection with the transaction and
the balance shall be returned to Interderm.
5. IMX Stockholder Approval. The acquisition of the rights under the
License Agreement and issuance of shares to Interderm shall be subject to the
approval of the IMX stockholders at a stockholders' meeting. In addition, the
following matters will be presented to the stockholders of IMX for their
approval:
(a) A reverse four-to-one stock split which will result in 1,021,162
shares outstanding; and
(b) election of a Board of Directors and Officers to be mutually
agreed upon by the parties.
6. Finder's Fee. The parties represent and acknowledge that neither has
engaged any broker or finder in connection with the transactions except for
Dermasearch Holdings Limited, a company registered in Jersey, Channel Islands,
or its assigns, which will receive 286,730 shares (post-split) of IMX common
stock as a finder's fee.
7. Capitalization After Transaction. At closing, the capitalization of IMX
shall be as follows:
Total Outstanding 7,128,594
Interderm 5,820,702
Finder's Fee 286,730
William Forster and Family 687,488
All Others 333,674
8. Due Diligence Review. Interderm and IMX shall permit each other and/or
their representatives full access to all facilities, equipment, books and
records of each other at any reasonable times, and shall forthwith supply each
other with copies of all contracts and documents reasonably requested by each of
them.
9. Representations and Warranties of IMX. IMX represents and warrants to
Interderm as follows:
(a) Organization. IMX is a corporation duly organized under the laws
of the State of Utah and by closing will be validly existing and in good
standing under the laws of the State of Utah. IMX has the full power and
authority to own all its assets and to conduct the business in which it
will engage upon completion of the transaction contemplated herein.
2
<PAGE>
(b) Capitalization. The authorized capitalization of IMX consists of
50,000,000 shares of common stock, par value $.001 per share, of which
4,084,647 shares (pre-split) are currently issued and outstanding.
(c) Subsidiaries. IMX does not have any subsidiaries and does not
own, beneficially or of record, shares of any other corporation.
(d) Financial Statements. As soon as practicable, IMX shall deliver
audited financial statements (including audited balance sheets, related
audited statements of operations and changes in financial position) for
the fiscal years ended December 31, 1993 and December 31, 1994 (the
"Financial Statements"). The Financial Statements shall be true, correct
and complete, and prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
indicated. The Financial Statements shall present fairly as of their
respective dates the financial condition of IMX.
(e) Absence of Certain Changes or Events. Since the date of the
latest balance sheet included in the Financial Statements, there has not
been any material adverse change in the business operations, properties,
assets or condition of IMX.
(f) Real Property. IMX neither owns nor leases, and has never owned
or leased any real property.
(g) Litigation. There are no actions, suits or proceedings pending
or, to the knowledge of IMX, threatened by or against or effecting IMX, at
law or in equity, before any court or other governmental agency or
instrumentality.
(h) No Conflict With Other Instruments. The consummation of the
transactions contemplated by this Agreement will not result in the breach
of any term or provision of, or constitute a default under, any indenture,
mortgage, deed of trust, or other material agreement or instrument to
which IMX is a party or to which any of its assets or operations are
subject.
(i) Consents. The execution, delivery and performance by IMX of this
Agreement and the consummation by IMX of the transactions contemplated
hereby does not require any consent that will not have been received prior
to the closing.
(j) Enforceability. This Agreement and each of the other documents,
instruments and agreements executed by IMX in connection herewith,
constitutes the valid and legally
3
<PAGE>
binding agreements of IMX, enforceable against it in accordance with its
terms except that:
i) enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
application effecting the enforcement of the rights and remedies of
creditors; and
ii) The availability of equitable remedies may be limited by
equitable principles.
10. Representations of Interderm. Interderm hereby represents and warrants
to IMX as follows:
(a) Organization. Interderm is a corporation duly organized, validly
existing and in good standing under the laws of Gibraltar. Interderm has
full power and authority to own all its assets and to conduct its business
as and where its business is presently conducted.
(b) Authority and Approval of Agreement. The execution and delivery
of this Agreement by Interderm and performance of all Interderm's
obligations hereunder have been duly authorized and approved by all
requisite corporate action on the part of Interderm pursuant to applicable
law. Interderm has the power and authority to execute and deliver this
Agreement and to perform all its obligations hereunder.
(c) Enforceability. This Agreement and each of the other documents,
instruments and agreements executed by Interderm in connection herewith
constitutes the valid and legally binding agreements of Interderm,
enforceable against it in accordance with its terms, except that:
i) enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
application affecting the enforcement of the rights and remedies of
creditors; and
ii) the availability of equitable remedies may be limited by
equitable principles.
(d) Consents. The execution, delivery and performance by Interderm
of this Agreement and the consummation by Interderm of the transactions
contemplated hereby does not require any consent that has not been
received or will be prior to the closing.
4
<PAGE>
(e) Default Under License Agreement. Interderm is not in default in
any respect under the terms of the License Agreement and there is no event
of default or other event which, with notice or lapse of time, or both,
would constitute a default under the License Agreement. The License
Agreement is valid and binding and in full force and effect.
(f) No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage,
deed of trust, or other material contract, agreement, or instrument to
which Interderm is a party or to which any of its properties or operations
are subject.
(g) No Securities Registration. Interderm acknowledges and agrees
that the IMX stock is being issued to it (and/or its shareholders or
affiliates) without registration under the Securities Act of 1933, as
amended, (the "Act") or any state securities law (the "Securities Laws")
in reliance upon certain exemptions from registration under such
Securities Laws. As such, the shares may not be offered or sold in the
United States or to U.S. persons unless the shares are registered under
the Act or an exemption from the registration requirements of the Act is
available.
11. Special Covenants.
(a) Subsequent Conduct of Business. Both Interderm and IMX shall
maintain their respective businesses in the same condition as on this date
and shall not, without the other party's permission, materially alter the
method of operation of their businesses or enter into any material
agreement related thereto.
(b) Loan to IMX. Subsequent to the closing hereunder, Interderm
agrees that it shall lend to IMX up to U.S. $2.5 million to initiate a
marketing program after the Board of Directors of Interderm has approved
the launching of the marketing plan for IMX and if the Board of Directors
of IMX deems the loan necessary. The loan will be for a term of ten years
and shall be unsecured. No payments of principal or interest need be made
for the first three years, although interest shall accrue from inception
at the rate of 10% per annum. Principal and interest shall be amortized
over the last seven years of the loan in equal monthly installments. The
loan shall be convertible at any time in whole or in part into shares of
IMX stock at the conversion price of $5 per
5
<PAGE>
share.
(c) Stockholder Meeting of IMX. IMX shall, at a meeting of its
stockholders duly called by the Board of Directors of IMX to be held as
soon as practicable following execution of this Agreement, present the
following proposals for the authorization and approval of the stockholders
of IMX: ratification of this Agreement; a recapitalization providing for
reverse four-to-one split; and the election of directors to be mutually
agreed upon.
(d) Rebate of Price Discount to Interderm. Under the terms of the
License Agreement, IMX will be receiving 10% price discounts (the
"Discounts") from Meyer-Zall in connection with sales of the products to
IMX. IMX agrees that it shall pay to Interderm the amount of all of the
Discounts it receives from Meyer-Zall until it has paid Interderm the sum
of R1,000,000. For purposes of determining the amounts paid to Interderm
pursuant to this section, each payment made by IMX in U.S. dollars will be
converted on the day of payment to South African Rand based on the
exchange rate in effect on the day of payment. Rebate of the Discounts
shall continue to be made until the aggregate amount of R1,000,000 has
been paid to Interderm.
12. Conditions Precedent to Closing. The parties obligations to proceed to
closing shall be conditioned upon the following:
(a) Approval by the stockholders of IMX.
(b) The absence of any pending or threatened litigation concerning
Interderm or IMX as of the closing date which would adversely affect the
transactions contemplated hereunder.
(c) No additional shares of any type of security shall be issued by
either Interderm or IMX.
(d) The warranties and representations made by each party shall be
true and correct in all material respect and each party shall have
performed and complied with all covenants and conditions in all material
respects required to be performed by it hereunder.
(e) There shall have occurred no adverse event, which materially
affects the condition or value of either IMX or Interderm.
(f) Interderm and each affiliate or shareholder of Interderm
receiving shares of IMX stock at the closing shall
6
<PAGE>
execute a questionnaire and/or letter agreement in the form required by
IMX's counsel to confirm that the shares have been issued in accordance
with exemptions from registration under the Securities Laws.
13. Governing Law. This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the State of Florida and
venue for purposes of litigation shall be Palm Beach County.
14. Confidentiality. The parties agree to keep all communications and
informations which are not in the public domain regarding each other
confidential. No press releases shall be made by either party without the
express written consent of the other party, except as may be required by law.
15. Closing. The closing ("Closing") of the transaction contemplated by
this Agreement shall be in at a date and at such time as the parties may agree
("Closing Date") within ten days after the IMX shareholder's meeting. The
Closing shall take place at a mutually agreeable time and place. At the Closing
each of the respective parties hereto shall execute, acknowledge and deliver (or
shall cause to be executed, acknowledged and delivered) any and all
certificates, financial statements, schedules, agreements, resolutions, or other
instruments required by this Agreement to be so delivered at or prior to the
Closing, together with such other items as may be reasonably requested by the
parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby.
16. Survival of Covenants, Representations and Warranties. The covenants,
agreements, representations and warranties made by the parties in this Agreement
and in any other certificates and documents delivered in connection herewith,
shall survive the Closing under this Agreement.
17. Notices. Unless otherwise specified herein, all notices, requests and
other communications hereunder shall be in writing and shall be deemed to have
been duly given upon receipt when delivered by hand or three days after mailing
when sent by certified mail, postage prepaid, return receipt requested (or by
such comparable method including overnight express delivery services), at the
respective addresses of the parties set forth below (or to such other address as
a party may hereafter designate by notice given in accordance with this
paragraph 17.
a. If to Interderm:
Stephen Paul Tollman, President
Interderm Limited
The Coach House, St. Michaels
7
<PAGE>
Wildhill Road
Woodside Heits, Great Britain AL9 6DL
With a Copy To:
_______________________________________
_______________________________________
_______________________________________
b. If to IMX:
William A. Forster, President
IMX Corporation
2295 Corporate Boulevard, Suite 131
Boca Raton, Florida 33431
With a Copy To:
Gary N. Gerson, Esquire
Nason, Gildan, Yeager, Gerson & White, P.A.
1645 Palm Beach Lakes Boulevard
Suite 1200
West Palm Beach, Florida 33401
18. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other party.
19. Entire Agreement. This Agreement, including any exhibits, schedules,
or other documents delivered pursuant to the terms hereof, set forth the entire
agreement and understanding of the parties hereto in respect to the subject
matter continued herein and therein, and supersede all prior agreements,
understandings, arrangements, communications, representations or warranties,
whether oral or written, made by or between the parties hereto. This Agreement
may be amended, and any provision of this Agreement may be waived, only pursuant
to a writing signed by the party against whom such amendment or waiver is
claimed.
20. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
8
<PAGE>
21. Headings. The headings of the Sections and Articles of this Agreement
are inserted for convenience only and shall not constitute a part hereof or
affect in any way the meaning or interpretation of this Agreement.
22. 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.
23. Enforcement Costs. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any provision of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorney's fees, court costs and all expenses even if not taxable as
court costs (including, without limitation, all such fees, taxes, costs and
expenses incident to arbitration, appellate, bankruptcy and post-judgment
proceedings), incurred in that action or proceeding, in addition to any other
relief to which such party or parties may be entitled. Attorney's fees shall
include, without limitation, paralegal fees, investigative fees, administrative
costs, sales and use taxes and all other charges billed by the attorney to the
prevailing party.
24. Further Assurances. The parties agree from time to time as may be
reasonably required to consummate the terms and provisions of this Agreement, to
execute and deliver such conveyance and other transfers, assignments and
documents and do all matters and other things which may be convenient and
necessary to more effectively and completely carry out the intention of this
Agreement.
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of
the day and year first above written.
INTERDERM LIMITED
BY:/s/ [unintelligible]
--------------------------------------
its: President
IMX CORPORATION
BY:/s/ William A. Forster
--------------------------------------
its: President
9
<PAGE>
Exhibit 10.1.1
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT is made and entered as of the 18th day of
September, 1995 by and among MeyerZall Laboratories, formerly known as Pegasus
Dermasearch Pty Limited ("MEYERZALL"), Interderm Limited ("INTERDERM") and IMX
Corporation ("IMX").
W I T N E S S E T H:
WHEREAS, MeyerZall and Interderm have entered into an Agreement dated June
23, 1995 under the terms of which MeyerZall granted, and Interderm acquired the
exclusive marketing and distribution rights for certain products of MeyerZall in
the United States (the "Distribution Agreement"); and
WHEREAS, Interderm and IMX shall enter into an Acquisition Agreement under
the terms of which Interderm shall assign all of its rights under the
Distribution Agreement to IMX; and
WHEREAS, the parties desire to implement certain amendments in the
Distribution Agreement in connection with the assignment to IMX as set forth
below.
NOW, THEREFORE, in consideration of the premises, as well as the mutual
covenants set forth below, the parties hereto agree as follows:
1. Amendment of Distribution Agreement
The Distribution Agreement shall be amended in the following respects:
a) Sections 3.7, 4.5, and 5.2 shall be deleted in their entirety; and
b) There shall be added an additional paragraph 1.3 as follows:
"It is recorded that a separate Agreement is being negotiated
with IMX, in terms of which MeyerZall proposes to grant IMX
exclusive marketing and distribution rights in the U.S.A. to
all new products it develops during the term of this
Agreement, upon terms and conditions to be negotiated between
MeyerZall and IMX."
c) Side Agreement on R1,000,000-00 pre-export financing to be incorporated
in IMX/Interderm Agreement.
<PAGE>
2. Consent to Assignment
MeyerZall hereby consents to the assignment to IMX of the Distribution
Agreement, as amended by this Amendment Agreement and assumes all the
obligations impaired on Interderm in terms of the original Agreement between
Interderm and MeyerZall.
3. Effective Date
This Amendment Agreement shall become effective upon (and only in the
event of) the closing of the Acquisition Agreement.
4. Miscellaneous
a) Except as modified and amended by this Amendment Agreement, the
Distributions Agreement shall remain in full force and effect and unmodified.
b) This Amendment Agreement shall be governed by and interpreted according
to South African Law:
IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to be
executed as of the date and year set forth above.
MEYERZALL LABORATORIES (PTY) LTD
By:____________________________________
INTERDERM LIMITED
By:____________________________________
IMX CORPORATION
By:____________________________________
William A. Forster, President
2
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Exhibit 10.2
FIRST REFUSAL AGREEMENT
between
MEYER ZALL LABORATORIES (PTY.) LIMITED
[Registration Number 92/04344/07]
of 18 Lona Street, Malanshof, 2194 RANDBURG
Republic of South Africa
[hereinafter referred to as "MZ"]
and
IMX CORPORATION
a corporation organised under the laws of
the State of Utah, United States of America,
and having its principle place of business at
2295 Corporate Boulevard #131, Boca Raton,
FLORIDA 33431, United States of America
[hereinafter referred to as "IMX"]
- - - - oOo - - - -
MATTERS RECORDED:
A. MZ is the exclusive licensee world-wide in respect of pharmaceutical
preparations developed by Mr. Piet Meyer and in respect of which
preparations Pitmy International NV hold certain patent rights and is the
proprietor of pending applications including U.S. Patent Application
08/318,626;
B. MZ has granted distribution rights for the U.S.A. in respect of some of
the preparations which are the subject of the aforementioned patent rights
and patent applications to
<PAGE>
Interderm Limited, a company organised under the laws of Gibraltar, which
company has in turn ceded such rights, with the consent of MZ, to IMX;
C. MZ and Pitmy International NV are continuing to develop new preparations
failing within the scope of the aforementioned patents and patent
applications;
D. IMX wishes to be given an opportunity to be appointed as exclusive
distributor for such new products as may in future be developed by MZ
and/or Pitmy International.
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
1.
Definitions
In this agreement
1. "New Products" shall mean all new pharmaceutical
formulations in respect of which MZ may in
future acquire the right to manufacture, and
sell as being products failing under the
licence which MZ has in terms of its
agreement with Pitmy.
2. "The Territory" is the United States of America.
2.
First Refusal Rights
MZ hereby undertakes in favour of IMX that for as long as IMX enjoys the rights
to distribute the products which it is to distribute in terms of its agreement
with Interderm Limited, MZ shall not market any new product in the territory
without first offering the exclusive right to distribute such new product to IMX
and allowing IMX a period of 60 days to accept such distributorship.
3.
3.1 The offer of distributorship contemplated in clause 2 shall -
3.1.1 be made in writing;
3.1.2 be accompanied by a sample of the product offered for distribution;
3.1.3 set out the price at which the product is offered which price shall
be applicable for a period of one year from the date upon which IMX
received FDA approval or any other approvals it needs in order to
market the product in the Territory;
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<PAGE>
3.1.4 be accompanied by such product documentation as MZ may at that time
have in its possession and which may serve to assist IMX in
procuring product registration and FDA or other approval for the
marketing of the product in the territory;
3.1.5 specify a time period within which FDA or other regulatory approval
shall be obtained as specified in clause 4 below.
3.2 Such offer shall be effective only after IMX has given a written
confirmation that it has procured that all personnel of and consultants to
IMX who shall be involved with the evaluation of the product or to whom
the information is to be communicated for any other reason have signed
written undertakings that they will maintain confidentiality in respect of
the information to be communicated and developed by them in respect of the
New Product.
4.
Should IMX elect to be appointed distributor of the new product offered to it,
it shall
4.1 notify MZ in writing within 60 days of it having received the offer as
contemplated in clause 3 above;
4.2 pay MZ an amount of U.S. $500,000 in cash, or at the election of MZ
procure the acquisition of IMX stock to the value to U.S. $500,000 in the
name of MZ at no cost to MZ;
4.3 confirm that the period to obtain regulatory approval as specified by MZ
in terms of clause 3.1.5 is in its opinion a reasonable period for that
purpose.
5.
It is an explicit term of this agreement despite anything to the contrary herein
contained, that should IMX not be able to procure the requisite marketing
approval for the new product in the territory within the term stipulated by MZ
in terms of clause 3.1.5 and agreed to by IMX in terms of clause 4.3, then in
that event:
5.1 IMX shall notify MZ in writing of such inability;
5.2 MZ shall repay the amount of $500,000 to IMX within a period of 60 days,
free of interest, or in the event of MZ having received IMX stock to the
value of $500,000, it shall take immediate steps to dispose of such stock
to the value of $500,000 and repay IMX the amount of $500,000 and in the
event of there being a shortfall on the proceeds of such sale, it shall
repay the balance of the amount owing to IMX within 60 days of the date of
it being notified of IMX's inability to procure marketing approval;
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5.3 Against the due repayment of the amount specified in 5.2 above, IMX shall
hand over free of charge to MZ all its records in connection with its
attempts to procure marketing approval;
5.4 MZ shall thereafter be at liberty to market the new product itself or
appoint another distributor and shall be entitled to utilise any part of
the records acquired in terms of clause 5.3.
6.
In the event of IMX not accepting the distributorship offered to it:
6.1 MZ shall be at liberty to offer such distributorship to any other party;
6.2 IMX shall return all samples and documentation handed to it in respect of
the new product and shall thereafter refrain from utilising such
information in any manner whatsoever;
6.3 IMX shall maintain confidentiality with regard to all confidential
information in respect of the new product.
7.
The rights granted to IMX are personal to IMX and shall not be assigned to any
other party without the prior written consent of MZ.
8.
This agreement will be governed by the laws of the Republic of South Africa.
THUS DONE AND SIGNED at Costa Mesu on this 17th day of October, 1995.
AS WITNESSES: _______________________________________
MEYER ZALL (PTY.) LIMITED
1. ________________________________ herein represented by
2. ________________________________ he being duly authorised to do so
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THUS DONE AND SIGNED AT Boca Raton, Fla on this 13th day of October, 1995.
AS WITNESSES: BY William A. Forster, President /s/
1. ________________________________ herein represented by William. A.
Forster, President,
2. ________________________________ he being duly authorised to do so
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Exhibit 10.2.1
AMENDMENT AGREEMENT
between
MEYER ZALL LABORATORIES (PTY) LIMITED
(Registration Number 92/04344/07)
of
18 Lona Street, Malanshof, RANDBURG, 2194
Republic of South Africa
(hereinafter referred to as "MZL")
and
IMX PHARMACEUTICALS, INC.
a corporation organized under the laws of
the State of Utah, United States of America,
and having its principal place of business at
2295 Corporate Boulevard #131
Boca Raton, Florida 33431
United States of America
(hereinafter referred to as "IMX")
MATTERS RECORDED:
A. MZL is the exclusive licensee world-wide in respect of pharmaceutical
preparations developed by Mr. Piet Meyer and in respect of which
preparations Pitmy International NV hold certain patent rights and is the
proprietor of pending applications including U.S. Patent Application
08/318,626;
B. MZL has granted distribution rights for the USA and Israel and has options
on certain other countries in respect of some of the preparations which
are the subject of the aforementioned patent rights and patent
applications to Interderm Limited, a company organized under the laws of
Gibraltar, which company has in turn ceded such rights, with the consent
of MZL, to IMX;
C. MZL and Pitmy International NV are continuing to develop new preparations
falling within the scope of the aforementioned patents and patent
applications;
D. IMX was appointed as exclusive distributor for such new products as may in
future be developed by MZL and/or Pitmy International - under First
Renewal Agreement dated October 17, 1995, and amended August 7, 1996.
<PAGE>
E. MZL wishes to announce its annual reviewed prices in terms of its current
international distribution contract.
F. Pursuant to a Recapitalization Agreement dated October 16, 1997, among
IMX, MZL and certain other shareholders of IMX, at the closing of the
transactions contemplated in the Recapitalization Agreement, MZL shall
shortly receive the sum of $50,000 for the transfer to IMX of 512,252
shares of IMX's common stock. In addition, IMX has agreed to include
400,000 shares of IMX's common stock owned by MZL in a Registration
Statement to enable the shares to be publicly sold by MZL in accordance
with the terms of the Recapitalization Agreement.
G. Pursuant to the terms of Paragraph F and with the view towards increased
market penetration as well as a lower price to the consumer, it has been
decided to implement a substantial price decrease.
H. MZL wishes to enhance the profitability of its distributors by increasing
product range without the cost of an up-front fee.
THEREFORE, the parties agree as follows:
DEFINITIONS:
a. The "Territory" is the USA, Israel and any other countries IMX acquires
distribution rights to pursuant to the Distributorship Agreement dated
June 23, 1995, as amended.
b. "New Products": Those products currently classified as "fast track topical
OTC products as defined in terms of the USA Code of Federal Regulations 21
as selected and developed by MZL" excluding products that MZL may develop
for outside parties that may fall in the above classification but not
competing with any products already licensed; and
c. "Current Products": Those products forming part of the distributorship
agreement dated June 23, 1995, as amended.
1. RIGHTS GRANTED
MZL hereby undertakes in favor of IMX that as long as IMX enjoys the
rights to distribute the products in terms of its current distribution
agreement the exclusive right to distribute new products will first be
offered to IMX allowing IMX a period of 60 days to accept such
distributorship as per procedure and terms contained in Paragraph 2.2.
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2. TERMS OF SALE TO DISTRIBUTOR
For the sake of clarity, terms of sale will be distinguished between
current products and new products.
2.1 CURRENT PRODUCTS
2.1.1 Effective January 1, 1998, MZL shall discount the prices on
current products sold to IMX pursuant to Exhibit A attached
hereto on all orders placed by IMX with MZL. In the event that
MZL has not received at least the sum of $2,000,000 in gross
proceeds from the sale of its shares pursuant to the
Registration Statement, MZL shall have the option to terminate
the discount on all orders placed subsequent to its
notification to IMX of the termination of the discount and
increase the prices by 20% of the prices as referred to in
Exhibit A. However, at such time as MZL receives at least
$2,000,000 in gross proceeds of its shares pursuant to the
Registration Statement, the Exhibit A discount shall be
reinstated. MZL agrees that it will provide the same reduction
to all of its existing licensees, upon the conditions set
forth in this Paragraph 2.1.1.
2.1.2 On or before the seventh day of the following month, IMX will
submit to MZL a monthly report, in the form attached hereto as
Exhibit "1", which will reflect sales made on MZL product
units for the previous month. The report shall constitute an
irrevocable purchase order for MZL to ship products to IMX for
the next month. IMX may increase the size of the order placed
in any month to satisfy its market requirements. In the event
that there are material adverse business conditions that
affect IMX's business, it shall have the right to decrease the
size of its orders. Material adverse conditions shall include,
but shall not be limited to, loss of a major customer(s),
material decrease in sales and force majeure.
2.1.3 Should no orders be received for three consecutive months,
then MZL will place the distributor on 30-day terms and MZL
will have the right to cancel the distributors agreement at
its election, should the distributor remain in breach.
2.1.4 In the event that IMX wishes to market a new product which
will not be manufactured by MZL as an FDA OTC product under
the Exorex name, it shall send to MZL a copy of the FDA
application for the new product. MZL shall have 14 days to
review the application. If MZL determines that marketing of
the new product under the Exorex name will be harmful to the
Exorex goodwill, it must advise IMX within 14 days of its
receipt of the FDA application of its determination. If it
does not so notify IMX, IMX shall be free to proceed with its
marketing of the new product under the Exorex name. If it does
notify IMX within this time
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period, then IMX shall have 14 subsequent days to respond to
MZL to persuade MZL to change its determination. If agreement
can not be reached within that period of time, the matter
shall be turned over to arbitration before a mutually
agreeable third party pharmaceutical company which will make a
determination that will be binding upon the parties as to
whether marketing of the new product under the Exorex name
will be harmful to the goodwill attached to the Exorex name.
IMX shall have the right at any point during this process to
elect not to market the product under the Exorex name and
proceed to market it under a different name.
2.2 NEW PRODUCTS
2.2.1 Effective as of January 1, 1998, MZL shall eliminate any
up-front charges in connection with new products to be
marketed by IMX. In the event, however, that MZL does not
receive at least $2,000,000 of gross proceeds from the sale of
shares under the Registration Statement by April 30, 1998, it
may, at its option, reinstitute an up-front charge policy for
new products and may keep it in effect until it does receive
$2,000,000 of gross proceeds.
The offer of distributorship contemplated in Paragraph 1 shall:
2.2.2 Be made in writing; however, upon receipt of the offer in
writing in the event that IMX is contemplating marketing a
similar product to be manufactured by others, it shall have
the right to advise MZL of this and may proceed with its
efforts to market its product without any claim of violation
of confidentiality obligations to MZL. If IMX desires to
proceed with discussions on marketing of the MZL new product,
then following steps shall be taken:
2.2.3 MZL shall supply a sample of the product offered for
distribution;
2.2.4 MZL shall set out the price at which the product is offered,
which price shall be applicable for a period of one year from
the date upon which IMX received regulatory approval or any
other approvals it needs in order to market the product in the
Territory;
2.2.5 MZL shall supply such product documentation as MZL at the time
has in its possession and which may serve to assist IMX in
procuring product registration and FDA or other approval for
the marketing of the product in the Territory;
2.2.6 MZL shall specify a time period within which FDA or other
regulatory approval shall be obtained as specified in the
paragraph below;
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2.2.7 All product registrations in Europe to be applied through
RX-Holdings Gibraltar who will then cede the license to the
relevant distributor for the term of the distribution
agreement;
2.2.8 RX-Holdings will be the standardizing and coordinating body
for all marketing activities in Europe.
2.3 Should IMX elect to be appointed distributor of the new product
offered to it, it shall:
2.3.1 notify MZL in writing within 60 days of it having received the
offer as contemplated above;
2.3.2 confirm that the period to obtain regulatory approval as
specified by MZL, which shall be at least 90 days, as provided
in Paragraph 2.2.6 above, in its opinion a reasonable period
for that purpose;
2.3.3 present MZL with minimum purchase quantities for the next five
years to be agreed upon by both parties;
2.3.4 If actual purchases by IMX are fifteen percent (15%) lower
than the agreed level during two consecutive years, MZL will
have the option of terminating IMX sales rights 60 days
following the end of the second of those years. In considering
the exercise of these rights, MZL agrees to take reasonable
extenuating circumstances into account. Furthermore, if IMX's
sales rights are terminated for any reason, IMX shall have the
right to sell off its inventory of the product in an orderly
manner, or alternatively, MZL can repurchase the product at
IMX's cost.
2.4 It is an explicit term of this Agreement despite anything to the
contrary herein contained, that should IMX not be able to procure
the requisite marketing approval for the product in the territory
within the term stipulated by MZL in terms of Paragraph 2.2.6 and
agreed to by IMX in terms of Paragraph 2.3.2, then in that event:
2.4.1 IMX shall notify MZL in writing of such inability;
2.4.2 IMX shall hand over, free of charge to MZL, all records in
connection with its attempts to procure marketing approval;
2.4.3 MZL shall thereafter be at liberty to market the new product
itself or appoint another distributor and shall be entitled to
utilize any part of the records acquired in terms of Paragraph
2.4.2.
2.5 In the event of IMX not accepting the distributorship offered to it:
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2.5.1 MZL shall be at liberty to offer such distributorship to any
party;
2.5.2 IMX shall return all samples and documentation handed to it in
respect of the new product and shall thereafter refrain from
utilizing such information in any manner whatsoever;
2.5.3 IMX shall maintain confidentiality with regard to all
confidential information in respect of the new product.
2.6 The rights granted to IMX are personal to IMX and shall not be
assigned to any other party without the prior written consent of
MZL, which consent shall not be unreasonably withheld. In this
regard, it shall be unreasonable for MZL to withhold consent if the
proposed assignee has a net worth at least three times as great as
the net worth of IMX, or the proposed sales of products through the
prospective assignee represents a significant increase in IMX's
business.
2.7 IMX binds itself to operate within the acts promulgated by the
relevant regulatory authorities be they domestic or international.
2.8 This Agreement will be governed by the laws of the Republic of South
Africa.
THUS DONE AND SIGNED at ____________________________________________ on
this _____ day of _______________, 1998.
Witnessed: MEYER ZALL LABORATORIES (PTY)
LIMITED
_______________________________ By:________________________________________
___________________, its ______________,
he being duly authorized to do.
THUS DONE AND SIGNED at ____________________________________________ on
this _____ day of _______________, 1998.
Witnessed: IMX PHARMACEUTICALS, INC.
_______________________________ By:________________________________________
___________________, its ______________,
_______________________________ he being duly authorized to do.
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Exhibit 10.3
EXCLUSIVE SUPPLY AGREEMENT
This EXCLUSIVE SUPPLY AGREEMENT, dated as of the 30th day of September,
1997 (the "Effective Date"), among IGI, INC., a Delaware corporation, having a
principal place of business at Wheat Road & Lincoln Avenue, Buena, New Jersey
08310, IGEN, INC., a Delaware corporation, having a principal place of business
at 103 Springer Building, 3411 Silverside Road, Wilmington, Delaware
(hereinafter referred to as "Igen"), IMMUNOGENETICS, INC., a Delaware
corporation, having a principal place of business at Wheat Road & Lincoln
Avenue, Buena, New Jersey 08310 (hereinafter referred to as "Immunogenetics")
IGI, Inc. and its Affiliates (including but not limited to Igen and
Immunogenetics are hereinafter collectively referred to as "IGI"), IMX
PHARMACEUTICALS, INC., a Utah corporation, having a principal place of business
at 2295 Corporate Boulevard, Boca Raton, Florida 33431 (hereinafter referred to
as "IMX").
W I T N E S S E T H:
WHEREAS, U.S. letters patent as set forth in Exhibit F, attached hereto,
for certain topical skin care products (the "Products"), utilizing "NOVASOME(R)
Technology" were issued to IGI;
WHEREAS, IGI is the manufacturer of the Products listed on Exhibit A
attached hereto, which are to be manufactured in accordance with the
specifications and other requirements described in this Agreement;
WHEREAS, IGI desires to sell to IMX, and IMX desires to purchase from IGI,
the Products for sale in the Field, on the terms and conditions set forth in
this Agreement;
NOW, THEREFORE in consideration of the mutual promises, terms and
conditions hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1. Manufacturing Obligations.
1.1 Requirements. During the term of this Agreement, IMX shall
purchase from IGI one hundred percent (100%) of IMX's requirements of Products
in the Field for sale in the Territory, and IGI agrees to supply and sell to IMX
one hundred percent (100%) of IMX's requirements of Products in the Field for
sale in the Territory.
1.2 Exclusivity. During the term of this Agreement, IGI shall
manufacture for and supply the Products exclusively to IMX for its sale in the
Field.
1.3 Forecasts of Quantities. Each calendar month during the term of
this Agreement, IMX shall provide IGI with IMX's forecast of quantity
requirements for Products
<PAGE>
by month for the next twelve (12) months. In developing each such forecast, IMX
and IGI will cooperate with each other and act in good faith to provide
estimates of future requirements as accurately as possible in order to supply
IMX's future Product requirements. All forecasts shall be for the sole purpose
of assisting IGI in its production planning, and the forecasts shall not
constitute an obligation of IMX to purchase the quantities of the Products in
the forecasts.
1.4 Shipping and Delivery Terms. All shipments of the Products from
IGI to IMX shall be delivered from IGI's manufacturing facility in Buena, New
Jersey to such location as IMX may designate. All shipping and delivery costs
shall be solely borne by IMX.
1.5 Product Specifications. IGI shall manufacture the Products in
its various presentations in accordance with the product specifications attached
hereto as Exhibit B (the "Product Specifications").
1.6 Indemnification. The Products are manufactured in accordance
with the plans and the Specifications supplied by IMX to IGI together with IGI's
relevant patent numbers. In addition to Section 9.4 herein, IGI warrants that it
exclusively owns the patent rights to the Products and that it shall maintain at
its expense a product liability insurance policy during the manufacturing of the
Products for the term of this Agreement as set forth in Section 11 of at least
$1,000,000 which shall afford coverage for all claims made by any third party
for the operation of the Products, with a copy of the product liability
insurance policy to be made available to IMX upon its request.
1.7 Labeling and Packaging. IGI shall ship and deliver the Products
in such containers and packaging as shall be appropriate for the protection of
the Products. These labels and packaging shall be in accordance with mutually
agreed upon design specifications provided to IGI by IMX.
2. Compensation to IGI for Manufacturing and Other Services.
2.1 Initial Payment.
(a) As payment for the rights granted to IMX by IGI hereunder,
IMX shall pay IGI a non-refundable initial payment of $252,000 (the "Cash") upon
IMX's completion of its Private Placement Offering ("Offering"), the terms of
which are embodied in a Confidential Private Placement Memorandum dated
September 26, 1997 (the "Memorandum"), or December 31, 1997, whichever comes
first. The "Cash" shall be secured by 72,000 shares of restricted common stock
of IMX pursuant to a Pledge Agreement, a copy of which is attached hereto as
Exhibit G.
(b) As part of the Initial Payment, in addition to the Cash,
IMX shall issue to IGI 214,000 shares of IMX's common stock (the "Shares") as
soon as practicable after the execution of this Agreement. The Shares shall be
subject to the same terms, restrictions, rights, and limitations that are set
forth in the Memorandum, a copy of which has been provided to IGI. The 214,000
share amount is based on $3.50 per share value, or an aggregate
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<PAGE>
value of $749,000. In the event that the price per share in the Offering goes
below $3.50 per share, then IGI shall receive such additional shares to give it
$749,000 of value based on the lower price. IGI's rights, if any, to have the
shares registered and certain restrictions on resale are set forth in the
Memorandum. In connection with the issuance of the Shares, IGI shall sign a
Subscription Agreement containing such customary representations as IMX and its
counsel deem necessary to ensure that an exemption form registration is
available.
2.2 Cost Reimbursement as Product Price. During the term of this
Agreement, IMX shall reimburse IGI for its Cost of Manufacture (as defined
below) of the Products. A minimum payment of $350,000 will be paid to IGI at the
time the initial order for Products is placed to offset manufacturing and set-up
costs. The $350,000 payment noted herein will be credited against the cost of
manufacturing for future product shipments.
a. Specified Cost of Manufacture for 1997 and 1998. With
respect to the calendar years 1997 and 1998, IMX shall pay the applicable Cost
of Manufacture set forth on Exhibit C attached hereto for all Products which are
manufactured during such calendar year, except as set forth in Section 11(c)
herein..
b. Cost of Manufacture. With respect to each calendar year
subsequent to 1998, IMX shall pay such prices as are mutually agreed to by the
parties prior to November 30 of the year which immediately precedes the calendar
year for which a determination is being made. It is understood and agreed that
prices for any year subsequent to 1998 are to be determined based on IGI's Cost
of Manufacture of the Products. For purposes of this Agreement, the term "Cost
of Manufacture" shall mean all of IGI's costs and expenses for (i) materials
used in connection with the manufacture of the Products, (ii) direct and
indirect labor used in connection with the manufacture of the Products, and
(iii) overhead incurred in the manufacture of the Products, all as included by
IGI in a manner consistent with its historical cost allocation methods in
determining its costs of goods sold and as determined in accordance with
generally accepted accounting principles consistently applied as between the
periods ending prior to the Effective Date and the periods ending subsequent to
the Effective Date. All Products are manufactured FOB Buena, New Jersey. IMX is
solely responsible for all transportation costs.
c. Research and Development Costs. With respect to outside
laboratory costs incurred by IGI relating to irritation, efficacy and SPF
testing of the Products, IMX agrees to directly reimburse IGI for all of the
costs of these outside services. IGI will advise IMX of the cost of these
outside services prior to sending the Products for testing.
2.3 Royalties on Net Sales and the Products. As additional
compensation to IGI for the supply of Product to IMX, IMX shall pay or cause to
be paid to IGI a royalty on the aggregate of all IMX Net Sales in the Field of
Products in the Territory, using the royalty rates as determined below:
(i) Sixteen percent (16%) of the annual aggregate Net Sales on
all Products that contain Alpha Hydroxy Acids;
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(ii) Ten percent (10%) of the annual aggregate Net Sales on
all Products which are developed by IGI or use IGI's NOVASOME(R) Technology and
do not contain Alpha Hydroxy Acids; and
(iii) Eight percent (8%) of the annual aggregate of Net Sales
of any other skin care or cosmetic products bearing a brand-name to be created
by IMX, which brand-name may or may not include the Exorex name, that IMX brings
to IGI for manufacture and/or development or for other skin care or cosmetic
products bearing the brand-name to be created by IMX, which brand-name may or
may not include the Exorex name, that IGI develops for future marketing and/or
sale by IMX.
3. Payments.
3.1 Non-Royalty Payments. Payments other than royalty payments
required to be made by IMX pursuant to this Agreement shall be made by check in
good funds, payable in US Dollars to the order of IGI, Inc. and shall be
delivered to IGI within thirty (30) days of IGI's submitting its invoice for
such payment to IMX.
3.2 Royalty Payments. IMX shall keep complete and accurate records
of the sales of Products with respect to which a royalty is payable according to
this Agreement and within fifteen (15) days following the end of each month, IMX
shall furnish to IGI a written report setting forth (i) the Net Sales of
Products sold and (ii) royalties which shall have accrued hereunder in respect
to such Net Sales, in accordance with the terms of this Agreement; and (iii) a
current list of returns of the Products for reasons stated in Section 6 herein,
which such returns may result in a reduced payment of royalties to IGI.
Royalties shown to have accrued by each royalty report shall be due and payable
on the date such royalty report is due. Payments of royalties in whole or part
may be made in advance of such due date. Payment of royalties shall be made by
check in good funds, payable in US Dollars to the order of IGI, Inc.
4. Passage of Title.
4.1 Passage of Title. Beneficial ownership of, title and risk of
loss to the Products shall pass to IMX when the Products are loaded onto the
common carrier at IGI's Buena, New Jersey facility.
5. Force Majeure.
5.1 Effects of Force Majeure. Except for obligations for the payment
of money, IMX and IGI shall each be excused for any delay or failure to fulfill
any of their respective obligations under this Agreement if such failure or
delay is caused by any act of God, explosion, fire, storm, earthquake, flood,
drought, riot, embargo, war or seizure, requisition or allocation, any failure
or delay of transportation, shortage of or inability to obtain supplies,
equipment, fuel or labor, or any similar circumstances or event beyond the
reasonable control of the party relying upon such circumstances or event. Any
such excused
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non-performance shall remain excused only for so long as the condition
preventing the performance continues, and upon cessation of such condition, the
affected party shall promptly resume performance hereunder.
5.2 Notice Responsibilities. Each party hereto agrees to give each
other party prompt notice of the occurrence of any condition referred to in
Section 5.1, the nature thereof, and the extent to which the affected party will
be unable fully to perform its obligations hereunder. Each party further agrees
to use reasonable efforts to correct the condition as promptly as possible and
to give the other party prompt notice when it is again fully able to perform
such obligations.
5.3 Termination of Agreement. If, as a result of conditions referred
to in Section 5.1, a party is unable to fully perform its obligations hereunder
for any consecutive period of sixty (60) days, then in such case IGI (in the
case of non-performance by IMX) or IMX (in the case of non-performance by IGI)
shall have the right to terminate this Agreement upon sixty (60) days prior
notice to the non-performing party unless such non-performance is remedied
within such sixty (60) day period.
6. Specifications, Manufacturing Process and Warranties.
6.1 Product Specifications. Each of the Products supplied by IGI to
IMX shall meet the Product Specifications for such Product, as determined in
accordance with the analytical methodology as set forth in Exhibit B hereto.
6.2 Warranties Regarding the Products. IGI hereby warrants to IMX
that all quantities of the Products delivered to IMX hereunder shall (i) conform
to the Specifications, (ii) be labeled, packaged and shipped in accordance with
the Specifications, and (iii) conform to and be manufactured and supplied in all
material respects in accordance with all laws and regulations.
6.3 General Warranty. IGI warrants that, under normal use and
service, the Products shall be free from defects in material and formula design,
if properly handled and stored, for a period of time equivalent to the
shelf-life of the Products. IGI warrants that the Products shall at the time of
delivery as set forth herein be new and free and clear of all liens and
encumbrances. If the Products fail to meet this warranty as described herein,
IGI will make a good faith effort to have the Products conform with the
Specifications as set forth in Section 6.4, below.
6.4 Limited Remedy for Non-Conforming Products as to IMX. In the
event that any of the Products delivered to IMX by IGI hereunder shall fail to
conform or comply with any of the warranties specified in Section 6.2 and 6.3,
IGI's sole obligation with respect to claims of non-conformance or
non-compliance made by IMX shall be at IGI's election (i) to remedy the
non-conformance or non-compliance by replacement of the Products as promptly as
reasonably practicable, but not more than thirty (30) days from the date that
IMX notifies IGI of such non-conformance or non-compliance or (ii) to refund to
IMX the purchase price paid
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by IMX with respect to such non-conforming or non-complying Products. Any claims
by IMX under the warranties specified in this Section 6 shall be made in writing
to IGI within one (1) month after IGI tenders such Products to IMX.
6.5 Limitation of Liability and Waiver of Consequential Damages.
EXCEPT AS PROVIDED IN SECTION 1.6, SECTION 6.3 AND SECTION 9, HEREIN, IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL,
SPECIAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING BUT NOT LIMITED TO, ANY
CLAIM FOR DAMAGES BASED UPON LOSS OF PROFITS. IN ADDITION, IN NO EVENT SHALL
IGI'S LIABILITY TO IMX EXCEED THE TOTAL NET PRICE PAID TO IGI BY IMX FOR
PRODUCTS SUPPLIED TO IMX. THE FOREGOING ALLOCATION OF RISKS IS REFLECTED IN THE
PRICE OF THE PRODUCTS.
7. Confidentiality.
7.1 Confidential Information. Each party acknowledges and agrees
that in the course of its performance of this Agreement, confidential
technology, trade secrets, Product Specifications, or other proprietary
information relating to the development, manufacture, promotion marketing and
sale of the Products (hereinafter "Confidential Information") may be made known
or made available to the other party. Accordingly, during and after the term of
this Agreement, each party hereby represents and agrees to the following:
(a) that all right, title and interest to the Confidential
Information is the sole and exclusive property of the party that disclosed it;
(b) that each party agrees that the other party hereto has a
proprietary interest in its Confidential Information. During and after the term
of this Agreement, all disclosures of Confidential Information to the receiving
party, its agents and employees shall be held in strict confidence by such
receiving party, which shall disclose the Confidential Information only to those
of its agents and employees to whom it is necessary in order to properly carry
out their duties as limited by the terms and conditions hereof. During and after
the term of this Agreement, the receiving party shall not use the Confidential
Information except for the purposes of exercising its rights and carrying out
its duties hereunder. The provision of this Section 7 shall also apply to any
assignees, consultants or subcontractors during and after the term of this
Agreement, that the receiving party may engage in connection with this
Agreement. Each party shall take necessary steps to ensure that its employees
respect the terms of this Section 7;
(c) that notwithstanding the provisions of this Section 7,
each party may, to the extent necessary, disclose and use Confidential
information, consistent with the rights of such party otherwise granted
hereunder, for the purpose of (i) engaging in research and development,
conducting testing and marketing programs, or securing institutional or
government approval to test or market any Product, if required; (ii) subject to
confidentiality agreements typically executed in the industry under comparable
circumstances, sharing trial
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results and the data with third parties conducting trials on the Products; or
(iii) securing patent or other intellectual property protection for an
invention. If disclosure and use of the Confidential Information as contemplated
in this Section 7 is made, the disclosing party shall provide the non-disclosing
party with written notice of the same as well as the identification of the
recipient of the Confidential Information.
(d) that notwithstanding anything contained in this Agreement
to the contrary, neither party shall be liable for disclosure of the other
party's Confidential Information if the information is so disclosed:
(i) was in the public domain without violation of the
rights of the non-disclosing party at the time it was disclosed by the
disclosing party to the receiving party; or
(ii) was known to or contained in the records of the
receiving party from a source with rights thereto not in violation of the rights
of the non-disclosing party at the time of the disclosure by the disclosing
party to the receiving party and can be so demonstrated; or
(iii) becomes known to the receiving party from a source
other than the disclosing party without breach of this Agreement by the
receiving party and can be so demonstrated; or
(iv) was required to be disclosed under legal or
administrative process, provided that the disclosing party has given the
non-disclosing party no less than ten (10) days prior written notice of the
disclosing party's intention to make a disclosure pursuant to this Section
7.1(d)(iv); or
(v) was independently discovered from research and
development efforts of the non-disclosing party, by individuals who have not had
access to the disclosures made hereunder;
(e) that if either party discovers a misappropriation of the
other party's Confidential Information by a third party, it shall give the other
party prompt notice thereof and shall take no other action against the alleged
misappropriator without the prior written consent of the other party. The
discovering party agrees to cooperate with the other party, at no out-of-pocket
expense to the discovering party, in connection with any action taken by the
other party to pursue such misappropriator. Any recovery of damages or
attorneys' fees in such actions, or amounts received at settlement thereof,
shall accrue to the party that owns the Confidential Information, net of any
costs and expenses incurred by the other party in obtaining such recovery; and
(f) that the other party shall have no obligation to institute
suit or take action against any misappropriator. In the event that the other
party declines to take such action for any reason, the discovering party shall
have the right, but not the obligation, to take
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<PAGE>
such action but shall promptly advise the other party of any counterclaims
brought by the alleged misappropriator and give the other party an opportunity
to defend against such counterclaims. In the event of any such counterclaims,
the discovering party shall not enter into settlement with the alleged
misappropriator without the prior written consent of the other party, which
shall not be unreasonably withheld. Notwithstanding anything herein to the
contrary, the provisions of this Section 7 shall no prohibit or otherwise
restrict the right and ability of IGI to use of its Confidential Information in
the development, manufacture and sale of products that do not conflict with the
rights granted to IMX pursuant to this Agreement.
8. Representations and Warranties of the Parties.
8.1 Representations and Warranties of IMX. IMX hereby represents and
warrants to IGI that:
(a) IMX is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Utah, with the corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of IMX. This Agreement has been duly executed and
delivered by IMX and constitutes the valid, binding and enforceable obligation
of IMX, subject to applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally from time to time in effect
and to general principles of equity.
(b) IMX is not subject to, or bound by any provision of:
(i) any articles or certificates of incorporation or
by-laws;
(ii) any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, license, permit, trust, custodianship,
or other instrument, agreement or restriction, or
(iii) any judgment, order, writ, injunction or decree or
any court, governmental body, administrative agency or arbitrator,
that would prevent, or be violated by, or under which there would be a default
as a result of, nor is the consent of any person required for, the execution,
delivery and performance by IGI of this Agreement and the obligations contained
herein, including without limitation, the grant to IMX of the licenses described
hereunder.
8.2 Representations and Warranties of IGI. IGI hereby represents and
warrants to IMX that:
(a) Each of IGI, Inc., Igen and Immunogenetics is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware,
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<PAGE>
with the corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of each of IGI, Inc.,
Igen and Immunogenetics. This Agreement has been duly executed and delivered by
each IGI, Inc., Igen and Immunogenetics and constitutes the valid, binding and
enforceable obligation of each IGI, Inc., Igen and Immunogenetics, as the case
may be, subject to applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally from time to time in effect
and to general principles of equity, Igen and Immonogenetics are each wholly
owned subsidiaries of IGI, Inc.
(b) IGI is not subject to, or bound by any provision of:
(i) any articles or certificates of incorporation or
by-laws;
(ii) any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, license, permit, trust, custodianship,
or other instrument, agreement or restriction, or
(iii) any judgment, order, writ, injunction or decree or
any court, governmental body, administrative agency or arbitrator,
that would prevent, or be violated by, or under which there would be a default
as a result of, nor is the consent of any person required for, the execution,
delivery and performance by IGI of this Agreement and the obligations contained
herein, including without limitation, the grant to IMX of the licenses described
hereunder.
9. Indemnification Regarding Third Party Claims.
9.1 Indemnification by IMX. With respect to claims brought by Third
Parties against IGI related to the Products, IMX agrees, subject to the
compliance by IGI with its obligations set forth in Section 9.3 below, to
indemnify, defend and hold harmless IGI, its Affiliates, and their respective
directors, officers, employees and agents from and against any Damages arising
out of or in connection with any breach of the representations, warranties,
agreements or covenants of IMX hereunder, except to the extent caused by IGI's
negligent acts, willful misconduct or omissions.
9.2 Indemnification by IGI. With respect to claims brought by Third
Parties against IMX related to the Products, IGI agrees, subject to the
compliance by IMX with its obligations set forth in Section 9.3 below, to
indemnify, defend and hold harmless IMX, and its respective directors, officers,
employees and agents from and against any Damages arising out of or in
connection with any breach of the representations, warranties, agreements, or
covenants of IGI hereunder except to the extent caused by IMX's negligent acts,
willful misconduct or omissions.
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<PAGE>
9.3 Indemnification Procedures. A party which intends to seek
indemnification under this Section 9 (such parties any of its Affiliates, or any
of their respective directors, officers, employees or agents, hereinafter
collectively referred to as the "Indemnitee") in respect of an action, suit,
proceeding, claim, liability, demand or assessment asserted against such
indemnity by a Third Party shall promptly give notice thereof to the other party
or parties to this Agreement from which the Indemnitee seeks indemnification
(any such other party hereinafter referred to as the "Indemnitor") within a
reasonable period of time after assertion by any such Third Party thereof;
provided, however, that the failure to provide such notice within a reasonable
period of time shall not relieve the Indemnitor of any of its obligations
hereunder except to the extent that the Indemnitor of any of its obligations
hereunder except to the extent that the Indemnitor is prejudiced by such
failure. The Indemnitor shall have the right to assume the complete control of
the defense, compromise or settlement of any such action, suit, proceeding,
claim, liability, demand or assessment, including, at its own expense,
employment of counsel, and at any time thereafter to exercise, on behalf of the
Indemnitee, any rights which may mitigate any of the foregoing; provided,
however, that if the Indemnitor shall have exercised its right to assume such
control, the Indemnitee; (i) may, in its sole discretion and at its own expense,
employ counsel to represent it (in addition to the counsel employed by the
Indemnitor) in any such matter, and in such event counsel selected by the
Indemnitee shall be required to confer and cooperate with such counsel of the
Indemnitor in such defense, compromise or settlement for the purpose of
informing and sharing information with the Indemnitor; (ii) will, at its own
expense, make available to Indemnitor those employees, officers and directors of
Indemnitee whose assistance, testimony or presence is necessary or appropriate
to assist the Indemnitor in evaluating and in defending any such action, suit,
proceeding, claim, liability, demand or assessment; and (iii) shall otherwise
fully cooperate with the Indemnitor and its counsel in the investigation and
defense of such action, suit, proceeding, claim, liability, demand or
assessment.
9.4 Patent Indemnification. Except as otherwise stated in this
Section 9, IGI will defend, at its own expense any and all suits, actions or
claims, against IMX or its customers, charging that the Products or any process
used in manufacturing any of the Products infringes any patent, industrial
design, trademark, trade secret or copyright of the United States, whether the
alleged infringement pertains to the manufacture, purchase, sale or use of the
Products, and will pay IMX's actual costs, all settlement amounts, and all
damages finally awarded against IMX in any such suit, action or claim and will
indemnify and save harmless IMX's customers from all other expenses thereby
incurred.
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10. Term and Termination.
10.1 Term.
(a) Initial Term. The term of this Agreement shall commence on
the Effective Date and shall continue for twelve (12) months from the date IGI
ships the Initial Order of the Products to IMX (the "Initial Term") unless
sooner terminated as set forth below.
(b) At the end of the Initial Term, IMX must have made a
minimum of $2,000,000 (the "Minimum") in Net Sales of the Products in order for
IMX to retain the exclusivity status granted to it by IGI pursuant to Section
1.2 herein and as applied to the First Renewal Period, as set forth in Section
10.1(c) below. However, if IMX does not reach the Minimum at the expiration of
the Initial Term, IMX shall still be entitled to market the Products as
stipulated herein, but shall forfeit its right to the exclusivity granted to it.
(c) Renewal Terms.
(i) The term of this Agreement may be extended by IMX
for a period of one (1) year, at IMX's option, provided IMX's annual Net Sales
for the first year immediately following the Initial Term exceeds $4,000,000
(the "First Renewal Term").
(ii) In the event that IMX has exercised its option with
respect to the expiration of the First Renewal Term, then at IMX's option and
provided IMX's annual Net Sales have reached or exceeded $6,000,000, then the
term of this Agreement shall be extended (the "Second Renewal Term"), including
IMX's exclusivity rights set forth in Section 1.2 herein.
(iii) In the event that IMX has exercised its option
with respect to the expiration of the Second Renewal Term, then at IMX's option
and provided IMX's annual Net Sales have reached or exceeded $8,000,000, then
the term of this Agreement shall be extended (the "Third Renewal Term"),
including IMX's exclusivity rights set forth in Section 1.2 herein.
(iv) In the event that IMX's Net Sales have reached or
exceeded $10,000,000, at the expiration of the Third Renewal Term and at IMX's
option, IMX may renew the terms of this Agreement and shall be entitled to
retain its exclusivity as set forth in Section 1.2 herein for as long as IMX
shall desire to purchase the Products for sale in the Field.
As concerns Section 10.1(a-c)(i-iv), if IMX falls short
of any of the Net Sales requirements set forth in this Section 10.1, then IMX
shall provide IGI with the following monies, based upon the short-fall
percentage ("Short-Fall Percentages"); within thirty (30) days of the expiration
of the applicable renewal term:
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Short-Fall Percentage Money Due IGI by IMX
--------------------- --------------------
0-25% 5%
25-40% 10%
By way of example, if IMX's annual Net Sales at the
expiration of the Second Renewal Term have reached only $4,500,000, then IMX
shall pay shall pay IGI $300,000, within thirty (30) days of the end of the
Second Renewal Term. The Short-Fall Percentages referenced above apply to all of
the renewal terms mentioned in this Section 10. In addition, so long as IMX pays
IGI its Short-Fall Percentage should the same become due, IMX shall maintain the
exclusivity rights granted to it pursuant to Section 1.2 herein; furthermore,
IMX shall have the right to exercise its option to extend this Agreement in
accordance with the terms set forth in Section 10 above. If IMX does not pay the
Short-Fall Percentage for any applicable Renewal Term, IMX shall forfeit the
exclusivity rights granted to it pursuant to Section 1.2 herein for the duration
of the Renewal Term at issue, but shall be entitled to regain exclusivity status
upon either its meeting the annual Net Sales requirement for the subsequent
Renewal Term or its payment of the applicable Short-Fall Percentage for the
subsequent Renewal Term.
10.2 Breach. In the event of a breach of any provision of this
Agreement, the breaching party shall have thirty (30) days after written notice
thereof by the non-breaching party within which to cure such breach. In the
event that such breach has not been cured within such time period, the
non-breaching party may, on notice to the breach party, terminate this
Agreement.
10.3 Insolvency. Either party may terminate this Agreement on notice
to the other party in the event the other party becomes the subject of a
petition filed for relief under any bankruptcy or insolvency law, which is not
dismissed within thirty (30) days of its filing; any general arrangement with
its creditors; or any liquidation, termination or cessation of its business.
10.4 Survival. Termination of this Agreement for any reason shall
not extinguish the unpaid obligations of any party that accrued prior to the
effective date of termination. The obligations of both parties under Section 7
hereof (with respect to confidentiality) and of both parties under Section 1.6,
Section 6, Section 9 shall survive termination for any reason.
11. Effect of Termination.
11.1 Effects in General. Upon termination of this Agreement for any
reason:
(a) IGI shall immediately terminate production of the Products
and each party shall promptly terminate all use of any Confidential Information
of the other party.
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(b) Each party shall, at the request of the other, either
promptly return to the other party or dispose of all of the other party's
Confidential Information in any form whatsoever which it may have in its
possession, custody or control (whether direct or indirect).
(c) IMX shall, at the request of IGI, purchase all of (i) the
existing inventory of the Products, which inventory shall not exceed four (4)
months forecasted volume as referred to in Section 1.3 above, at the then
existing Cost of Manufacture for such Product, and (ii) the parts, materials and
components which, but for the termination, would have ultimately comprised the
Products to be supplied hereunder. All parts, materials and components of the
Products shall be purchased at the price paid by IGI for such items, plus an
amount equal to the transportation, insurance and warehousing expenses incurred
by IGI in acquiring and storing such parts, materials and components.
(d) IMX shall not be released from its obligation to pay any
sums owing to IGI at the time of termination and neither party shall be released
from the obligation to perform any other duty or to discharge any other
liability that has been incurred prior thereto. Subject to the foregoing,
neither party shall by reason of the termination of this Agreement be liable to
the other for compensation or damages on account of the loss of profits or
sales, or expenditures, investments or commitments in connection therewith.
12. Commercialization.
12.1 Government Approvals. IMX shall undertake all studies necessary
for Registration of the Products. Rights in and to the data contained in such
Registrations shall be the property of IMX.
12.2 Marketing Strategy. IMX shall have the exclusive responsibility
for the overall marketing strategy for the Products. IMX shall communicate the
general marketing strategy to IGI, upon IGI's request of the same. All marketing
material and brand names developed by IMX shall remain the exclusive property of
IMX.
12.3 Advertising and Promotion. IMX shall have the exclusive
responsibility for the preparation and dissemination of all advertising and
promotional materials including the selection and use of trade names and
trademarks in connection with the Products and shall pay all costs in connection
therewith.
13. Miscellaneous Provisions.
13.1 Right of First Refusal. IGI agrees to offer IMX the right to
sell and market any new Products developed during the term of this Agreement
before offering such Products to any other party. The terms under which IGI
agrees to sell and IMX agrees to purchase said new Products is subject to
negotiation between IGI and IMX.
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13.2 Dealings with Other Parties. Nothing contained in this
Agreement shall be construed to limit the right of IGI to utilize the
NOVASOME(R) Technology in product formulations which are owned, licensed or
utilized by other parties.
13.3 Assignment. No party shall assign any or all of its rights or
obligations hereunder to any third party without first obtaining the written
consent thereto of the other party, which consent shall not be unreasonably
withheld or delayed, except that in the event of an assignment in connection
with a sale or transfer of all or substantially all of the assets of the
assigning party relating to this Agreement no such consent shall be required if
the assignee agrees to be bound by the terms hereof within sixty (60) days after
such assignment. The terms and provisions of this Agreement shall inure to the
benefit of, and be binding upon, IMX, IGI and their respective successors and
permitted assigns. Any reference to IMX and IGI hereunder shall be deemed to
include the successors thereto and permitted assigns thereof.
13.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made and to be fully performed therein, without regard to principles
of conflicts of law.
13.5 Amendments. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent to any departure by
IMX or IGI therefrom, shall be effective unless the same shall be in writing
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by IMX and IGI,
and each such amendment, modification, waiver, termination or discharge shall be
effective only in the specific instance and for the specific purpose for which
it is given. No provision of this Agreement shall be varied, contradicted or
explained by any oral agreements, course of dealing or performance or any other
matter not set forth in an agreement in writing and signed by IMX and IGI.
13.6 No Partnership. Nothing herein contained shall be deemed to
create a joint venture, agency, partnership or employer-employee relationship
between the parties hereto. Neither party shall have any power to enter into any
contracts or commitments in the name of, or on behalf of, the other party, or to
bind the other party in any respect whatsoever.
13.7 Notices. All notices, requests and other communications to IMX
or IGI hereunder shall be in writing (including telecopy or similar electronic
transmissions) and shall be personally delivered or sent by telecopy or other
electronic facsimile transmission during normal business hours or by registered
mail or certified mail, return receipt requested, postage prepaid, in each case
to the respective address specified below (or to such other address as may be
specified in writing to the other party hereto):
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If to IMX:
IMX Pharmaceuticals, Inc.
2295 Corporate Boulevard
Boca Raton, Florida 33431
Attention: President
Tel: (561) 998-5660
Fax: (561) 998-5654
If to IGI:
IGI, Inc.
Wheat Road and Lincoln Avenue
P.O. Box 687
Buena, New Jersey 08310
Attention: President
Tel: (609) 697-1441
Fax: (609) 697-1001
Any notice or communication given in conformity with this Section shall be
deemed to be effective when received by the addressee, if delivered by hand,
telecopy or other electronic facsimile transmission, and three (3) days after
mailing, if mailed.
13.8 Entire Agreement. This Agreement constitutes the entire
agreement of IMX and IGI with respect to the subject matter hereof, and all
prior or contemporaneous understandings or agreements, whether written or oral,
between IMX and IGI with respect to such subject matter are hereby superseded in
their entirety.
13.9 Severability. If any provision hereof should be held invalid,
illegal or unenforceable in any respect in any jurisdiction, then, to the
fullest extent permitted by law (i) all other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally construed in
order to carry out the intentions of the parties hereto as nearly as may be
possible and (ii) such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, IMX and IGI hereby
waive any provision of law that would render any provision hereof prohibited or
unenforceable in any respect.
13.10 Waiver. No failure on the part of IMX or IGI to exercise and
no delay in exercising any right, power, remedy or privilege under this
Agreement, or provided by statute or law or in equity or otherwise, shall
impair, prejudice or constitute a waiver of any such right, power, remedy or
privilege or be construed as a waiver of any breach of this Agreement or as an
acquiescence therein, nor shall any single or partial exercise of any such
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<PAGE>
right, power, remedy or privilege preclude any other or further exercise thereof
or the exercise of any other right, power, remedy or privilege.
13.11 Survival. Notwithstanding anything else in this Agreement to
the contrary, the parties agree that sections 5, 6, 7, 8, 9 and 10 shall survive
the termination or expiration of this Agreement, as the case may be, to the
extent required thereby for the full observation and performance by any or all
of the parties hereto.
13.12 Headings. The section headings used herein are for convenience
only and shall not in any way affect the construction of, or be taken into
consideration interpreting, this Agreement.
13.13 Counterparts. This Agreement may be executed in counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original, and all of which counterparts, taken together, shall constitute
one and the same instrument.
14. Defined Terms.
For purposes of this Agreement, the following terms shall have the
meanings set forth below. Certain other terms are defined in the text of this
Agreement.
"Affiliate" shall mean any corporation or non-corporate entity which
controls is controlled by, or is under common control with a party. A
corporation or non-corporate entity shall be regarded as in control of another
corporation if (i) it owns or directly or indirectly controls at least fifty
percent (50%) of the voting stock of the other corporation, or (ii) in the
absence of the ownership of at least fifty percent (50%) of the voting stock of
a corporation or in the case of a non-corporate entity, it has the power to
direct or cause the direction of the management and policies of such corporation
or non-corporate entity, as applicable.
"Agreement" means this Exclusive Supply Agreement.
"Damages" shall mean any damages, losses, claims, liabilities and
expenses (including reasonable attorney's fees and expenses).
"Effective Date" means the date set forth at the beginning of this
Agreement.
"FDA" shall mean the United States Food and Drug Administration, or
any successor entity.
"Field" shall mean mass merchandising market for skin care Products,
multi-level marketing of the Products, direct response advertising of the
Products, and/or marketing through the use of electronic media, excluding
clinics and estheticians, dermatologists and upscale retailers.
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<PAGE>
"Governmental Authority" shall mean any domestic or foreign,
federal, state or local or other governmental, administrative or regulatory
authority, body, agency, court, tribunal, or similar entity.
"Initial Order" shall mean the shipment by IGI to IMX of the first
order consisting of each of the Products as referred to in (i) and (ii) of the
"Products" definition set forth in this Section 14.
"Net Sales" with respect to any Product means the gross sales amount
of such Product billed by IMX to Third Party customers, less:
(i) actual credited allowances to such Third Party customers;
(ii) the amounts of trade and cash discounts on Products, to
the extent such trade and cash discounts are not deducted by IMX at the time of
invoice in order to arrive at the gross invoice prices; and
(iii) all invoiced transportation and handling charges, sales
taxes, excise taxes, use taxes and import/export duties actually paid.
"NOVASOME(R) Technology" shall mean the inventions (as described in
several patents and patent applications), trademarks, and information, know-how
and skill which is unique and confidential relating to organized lipid
structures, and lipid vesicle encapsulation technologies useful in conjunction
with various products including topical dermatological products for localized
usage at the delivery zone and processes for making the same.
"Products" shall mean (i) topical skin care products manufactured
utilizing NOVASOME(R) Technology; (ii) topical skin care products manufactured
according to the formulations set forth in Exhibit B; and (iii) topical skin
care products developed during the course of this Agreement which shall not
include those products pertaining to the treatment of psoriasis, eczema or toe
fungus.
"Product Line" shall mean all of the presentations and unit sizes or
(i) the Products sold by IGI to IMX pursuant to the terms and conditions of this
Agreement, and (ii) such additional products as IMX may sell or market under the
same brand name or trademark as IMX is using to market the Products sold by IGI
to IMX hereunder.
"Registration" in relation to any Product means such Approvals by
government authorities in a country of or community or association of countries
included in the Territory (including, where applicable, price approvals) as may
be legally required before such Product may be commercialized in such country.
"Specifications" shall mean the Product Specifications.
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<PAGE>
"Territory" shall mean the United States of America, Canada, and
Puerto Rico.
"Third Party" shall mean any person or entity other than IGI, IMX,
and their respective Affiliates.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
by their duly authorized officers as of the Effective Date.
IMX PHARMACEUTICALS, INC. IGI, INC.
By:__________________________________ By:____________________________________
Name:________________________________ Name:__________________________________
Title:_______________________________ Title__________________________________
IGEN, INC. IMMUNOGENETICS, INC.
By:__________________________________ By:____________________________________
Name:________________________________ Name:__________________________________
Title:_______________________________ Title__________________________________
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INDEX OF EXHIBITS
Exhibit A List of Current Products
Exhibit B Product Specifications
Exhibit C 1997 - Cost of Manufacture
Exhibit D The Trademark
Exhibit E Inventory Guidelines
Exhibit F List of Patents
Exhibit G Pledge/Escrow Agreement
<PAGE>
EXHIBIT F
List of Patents
US 4,853,228
US 4,855,090
US 4,895,452
US 4,911,928
US 4,917,951
US 4,942,038
US 5,000,960
US 5,019,174
US 5,019,392
US 5,023,086
US 5,032,457
US 5,104,736
US 5,147,723
US 5,160,669
US 5,164,191
US 5,213,805
US 5,219,538
US 5,234,767
US 5,256,422
US 5,260,065
US 5,405,615
US 5,439,967
US 5,474,848
US 5,490,985
US 5,013,497
<PAGE>
Exhibit 10.3.1
AMENDMENT TO EXCLUSIVE SUPPLY AGREEMENT
AMENDMENT made this 20th day of March, 1998, by and between IGI, INC., a
Delaware corporation having a principal place of business at Wheat Road and
Lincoln Avenue, Buena, New Jersey, 08310, IGEN, INC., a Delaware corporation,
having a principal place of business at 103 Springer Boulevard, 3411 Silverside
Road, Wilmington, Delaware, IMMUNOGENETICS, INC., a Delaware corporation, having
a principal place of business at Wheat Road and Lincoln Avenue, Buena, New
Jersey 08310 (collectively, "IGI"), and IMX PHARMACEUTICALS, INC., a Utah
corporation having its principal place of business at 2295 Corporate Boulevard,
Boca Raton, Florida 33431 ("IMX").
W I T N E S S E T H:
WHEREAS, IMX and IGI entered into an Exclusive Supply Agreement dated
September 30, 1997 (the "Agreement"), and the parties thereto wish to amend the
Agreement in the respects set forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
obligations hereinafter set forth, the parties agree as follows:
1. Section 2 of the Agreement shall be amended in the following respects:
(a) Promptly after execution of this Amendment, IMX shall issue to
IGI the 214,000 shares of IMX's common stock referred to in subparagraph 2.1(b)
of the Agreement. In addition, in lieu of the cash payment provided in
subparagraph 2.1(a) of the Agreement, IMX shall pay IGI the sum of $50,000
within five days of full execution of this Amendment and shall also issue 57,714
additional shares of IMX's common stock to IGI, as promptly as possible after
execution of this Amendment.
(b) With respect to the shares issued to it pursuant to the
preceding paragraph, IGI shall be entitled to the same registration rights,
subject to the same conditions on registration and restrictions on resale, as
afforded to the investors in IMX's recently completed private placement pursuant
to a Confidential Private Placement Memorandum dated October 30, 1997.
2. IGI agrees to immediately undertake to conduct tests to quantify how
much more active ingredients are contained in its Novasome(R) products than in
the three comparative competitive products.
3. Except as expressly amended herein, the Agreement shall remain
unmodified, and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Amendment, the
day, month and year first above written.
IMX PHARMACEUTICALS, INC. IGI, INC.
By: /s/ William A. Forster, President By: /s/ Edward B. Hager
--------------------------------- ------------------------------
William A. Forster, President Edward B. Hager, Chairman
IGEN, INC. IMMUNOGENETICS, INC.
By: /s/ Edward B. Hager By: /s/ Edward B. Hager
--------------------------------- ------------------------------
Edward B. Hager, Chairman Edward B. Hager, Chairman
<PAGE>
Exhibit 10.3.2
[LETTERHEAD OF IGI, Inc.]
August 3, 1999
Mr. William Forster
CEO and President
IMX Pharmaceuticals, Inc.
2295 Corporate Boulevard
Boca Raton, Florida 33431
Dear Bill:
I am writing on behalf of IGI, Inc. ("IGI"), to set forth my understanding
of the terms upon which IGI is to return to IMX Pharmaceuticals, Inc. ("IMX")
the 100,000 shares of common stock of IMX now held by IGI (the "Shares").
1. At any time after the date hereof, IMX will, upon written request of
IGI, use its best efforts (i) to prepare and file a Registration
Statement relating to the Shares under the Securities Act of 1933,
as amended, and (ii) to cause the Registration Statement to become
effective. The obligations of IMX set forth in this Paragraph shall
be subject to the customary terms and conditions concerning demand
registration rights contained in a registration rights agreement.
2. Upon the commercialization of IMX of its first product within one
year from the date hereof, IGI will return to IMX 40,000 of the
Shares. "Commercialization by IMX of its first product" shall mean,
for purposes of this letter agreement, the actual sale of, and
receipt by IMX of payment for, a product developed using Novasome(R)
Technology and manufactured by IGI.
3. On the first anniversary of the commercialization by IMX of its
first product, IGI will transfer to IMX a specified number of
Shares. The number of Shares to be so transferred is based on the
aggregate amount then paid by IMX to IGI as follows:
<PAGE>
Amount Paid Shares to be Transferred
-------------------------------------------------
$1.00-300,000 No shares
-------------------------------------------------
301-350,000 2,500 shares
-------------------------------------------------
351-400,000 Additional 2,500
-------------------------------------------------
401-450,000 Additional 3,750
-------------------------------------------------
451-500,000 Additional 3,750
-------------------------------------------------
501-550,000 Additional 3,750
-------------------------------------------------
551-600,000 Additional 3,750
-------------------------------------------------
601-650,000 Additional 3,750
-------------------------------------------------
651-700,000 Additional 3,750
-------------------------------------------------
701-750,000 Additional 3,750
-------------------------------------------------
751-800,000 Additional 3,750
-------------------------------------------------
801-850,000 Additional 3,750
-------------------------------------------------
851-900,000 Additional 3,750
-------------------------------------------------
901-950,000 Additional 3,750
-------------------------------------------------
951-1,000,000 Additional 3,750
-------------------------------------------------
1,000,000+ Additional 10,000
-------------------------------------------------
4. On each of the second and third anniversaries of the
commercialization by IMX of its first product, IGI will transfer to
IMX a specified number of Shares. The number of Shares to be
transferred is based on the portion paid since the last anniversary
of the aggregate amount then paid by IMX to IGI, as set forth in
Paragraph 3.
5. After the third anniversary, any Shares then held by IGI shall be
retained by IGI free of any obligation hereunder to return them to
IMX.
If this letter agreement correctly sets forth your understanding of the
agreement between IMX and IGI, please execute both copies on behalf of IMX, keep
one copy for your files and return one to me. Please call me if you have any
questions.
Very truly yours,
IGI, Inc. Accepted and Acknowledged
- - -------------------------------- --------------------------------
David O'Hara, William Forster
Vice President IMX Pharmaceuticals, Inc.
World Wide Business Development
<PAGE>
Exhibit 10.4
==============================================
JOINT VENTURE AGREEMENT
between
MEDICIS PHARMACEUTICAL CORPORATION
("Medicis")
MEDICIS CONSUMER PRODUCTS COMPANY, L.L.C.
("LLC")
IMX PHARMACEUTICALS, INC.
("IMX")
==============================================
<PAGE>
TABLE OF CONTENTS
of
JOINT VENTURE AGREEMENT
1. DEFINITIONS...............................................................1
1.1 Affiliate.........................................................1
1.2 Balance Sheet.....................................................1
1.3 Balance Sheet Date................................................1
1.4 Business..........................................................2
1.5 Closing...........................................................2
1.6 Contract..........................................................2
1.7 Assets............................................................2
1.8 Environmental Law.................................................3
1.9 Exorex Product Line...............................................3
1.10 Financial Statements..............................................3
1.11 GAAP..............................................................3
1.12 Government........................................................3
1.13 Improvements......................................................4
1.14 IMX Contribution..................................................4
1.15 IMX Intellectual Property.........................................4
1.16 Intellectual Property.............................................4
1.17 Inventory.........................................................4
1.18 Law...............................................................4
1.19 Liabilities.......................................................5
1.20 Lien..............................................................5
1.21 LLC Consideration.................................................5
1.23 Major Agreements..................................................5
1.24 MEDICIS Contribution..............................................5
1.25 New Intellectual Property.........................................5
1.26 New Product.......................................................6
1.27 Ordinary Course...................................................6
1.28 Receivables.......................................................6
1.29 Retained Assets...................................................6
1.30 Significant Employees.............................................6
1.31 Taxes.............................................................6
1.32 Other Defined Terms...............................................6
2. FORMATION AND CAPITALIZATION OF THE JOINT VENTURE.........................7
2.1 MEDICIS Contribution..............................................7
2.2 IMX Contribution..................................................7
2.3 Liabilities of the Business.......................................8
<PAGE>
3. ADDITIONAL AGREEMENT......................................................8
4. BUSINESS PURPOSE AND RIGHTS...............................................8
5. MANAGEMENT AND CONTROL....................................................9
6. IMX SUPPORT OBLIGATIONS...................................................9
6.1 Consulting Services...............................................9
7. MEDICIS SUPPORT OBLIGATIONS...............................................9
8. CLOSING...................................................................9
8.1 Deliveries of IMX at Closing......................................9
8.2 Deliveries of MEDICIS at Closing..................................9
9 REPRESENTATIONS AND WARRANTIES OF IMX.....................................10
9.1 Corporate Existence and Power of IMX.............................10
9.2 Approval and Enforceability of Agreement.........................10
9.3 Financial Statements.............................................10
9.4 Events Subsequent to December 31, 1997...........................11
9.5 Inventories......................................................12
9.6 Receivable.......................................................12
9.7 Undisclosed Liabilities..........................................12
9.8 Taxes............................................................12
9.9 Real Property--Owned.............................................13
9.10 Real and Personal Property--Leased to Seller.....................13
9.11 Intellectual Property............................................14
9.12 Necessary Property and Transfer of Purchased Assets..............15
9.13 Licenses and Permits.............................................15
9.14 Use and Condition of Property....................................15
9.15 Contracts........................................................15
9.16 No Breach of Law or Governing Documents..........................16
9.17 Litigation and Arbitration.......................................16
9.18 Officers, Directors, Employees and Consultants...................17
9.19 Payments, Compensation and Perquisites of Agents and Employees...17
9.20 Labor Matters....................................................17
9.21 Employee Benefit Matters.........................................18
9.22 Discrimination, Workers Compensation and Occupational
Safety and Health .............................................19
9.23 Alien Employment Eligibility.....................................19
9.24 Insurance Policies...............................................19
9.25 Guarantees.......................................................19
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<PAGE>
9.26 Product Warranties...............................................19
9.27 Product Liability Claims.........................................20
9.28 Product Safety Authorities.......................................20
9.29 Environmental Matters............................................20
9.30 Broker's Fees....................................................20
9.31 Foreign Operations and Export Control............................20
9.32 Truthfulness.....................................................20
9.33 Books and Records................................................21
9.34 Hart-Scott-Rodino................................................21
10. OPTION TO PURCHASE......................................................21
11. COVENANTS OF IMX........................................................21
11.1 Payment of Debts.................................................21
11.2 Release of Liens.................................................21
11.3 Operation of the Business........................................21
11.4 Taxes............................................................22
12. INVENTIONS..............................................................23
12.1 New Intellectual Property........................................23
13. NONCOMPETE..............................................................24
13.1 Restrictive Covenants............................................24
13.2 MEDICIS/Meyer-Zall Relationship..................................25
13.3 Severability.....................................................25
14. TERM AND TERMINATION....................................................26
14.1 Term.............................................................26
14.2 Default..........................................................26
14.3 Termination......................................................26
15. CONFIDENTIALITY.........................................................27
16. CONDITIONS TO MEDICIS's OBLIGATIONS.....................................27
16.1 Representations and Warranties of IMX............................28
16.2 Approval by IMX's Shareholders...................................28
16.3 Performance of this Agreement....................................28
16.4 No Material Adverse Change.......................................28
16.5 Certificate of IMX...............................................28
16.6 Documents........................................................28
iii
<PAGE>
16.7 Facility Agreement...............................................29
16.8 Consulting Agreement.............................................29
16.9 New Product Agreement............................................29
16.10 No Lawsuits.....................................................29
16.11 No Restrictions.................................................29
16.12 Consents........................................................29
16.13 Releases........................................................29
16.14 Termination of Employees........................................29
16.15 Bulk Sales......................................................30
16.16 Due Diligence...................................................30
16.17 Further Assurances..............................................30
17. CONDITIONS TO IMX'S OBLIGATIONS.........................................30
17.1 Performance of the Major Agreements..............................30
16.3 Approval by IMX's Shareholders...................................30
17.2 Payment of MEDICIS Contribution and LLC Consideration and
Assumption of Liabilities......................................30
17.3 Facility Agreement...............................................30
17.4 Consulting Agreement.............................................31
17.5 Service Agreement................................................31
17.6 Stock Purchase Agreement.........................................31
17.7 Further Assurances...............................................31
18. INDEMNIFICATION.........................................................31
18.1 Survival of Representations and Warranties.......................31
18.2 Indemnification of MEDICIS and LLC...............................31
18.3 Limitations......................................................32
18.4 Set-off Rights...................................................32
18.5 Participation in Litigation......................................32
18.6 Claims Procedure.................................................32
18.7 Tax Indemnification..............................................33
19. ARBITRATION.............................................................33
20. MISCELLANEOUS...........................................................35
20.1 Choice of Forum and Governing Law................................35
20.2 Severability.....................................................35
20.3 Assignment; Binding Agreement....................................35
20.4 Non-Disclosure of Information....................................35
20.5 Remedies.........................................................36
20.6 Non-Waiver of Rights.............................................36
20.7 Entire Agreement and Modification................................36
iv
<PAGE>
20.8 Counterparts.....................................................36
20.9 Cooperation......................................................36
20.10 Headings; Interpretation........................................36
20.11 Payment of Fees and Expenses....................................36
20.12 Notices.........................................................37
Schedule 1.9 Exorex Product Line
Schedule 2.3 Assumed Liabilities
Exhibit A LLC Agreement
Exhibit B Stock Purchase Agreement
Exhibit C Consulting Agreement
Exhibit D New Product Agreement
Exhibit E Facility Agreement
Exhibit F Service Agreement
Exhibit G Assignment and Assumption Agreement
Exhibit H Assignment of Contributed Intellectual Property
v
<PAGE>
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is entered into as of the 12th day of
June, 1998 by and between MEDICIS PARTNERS INCORPORATED, a Delaware corporation,
("MEDICIS"), MEDICIS CONSUMER PRODUCTS COMPANY, L.L.C., a Delaware limited
liability company ("LLC") and IMX PHARMACEUTICALS, INC. a Utah corporation
("IMX").
A. IMX is a pharmaceutical product design and development company
with expertise in the development of skin care products and other related
products and the methods of their manufacture.
B. MEDICIS is in the business, inter alia, of manufacturing and
selling pharmaceutical products and other products including skin care products.
C. The parties desire to form a joint venture (the "JV") to develop
skin care products and to provide supplemental research and development for the
benefit of MEDICIS according to the terms of this Agreement.
D. MEDICIS and IMX have together formed LLC to act as the entity
through which they will carry out their joint venture arrangement.
E. The parties desire to enter into this Agreement, inter alia, in
order to set forth the manner in which they will cause the JV to be formed,
funded and managed as well as to define their respective rights and obligations
with respect to the conduct of the business of the Joint Venture and their
interests therein.
NOW, THEREFORE, in consideration of the premises and covenants and
subject to all of the terms and conditions herein contained, the parties hereto
hereby agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the respective meanings hereinafter set forth:
1.1 Affiliate. "Affiliate" means any person controlling, controlled
by, or under the common control with, a party hereto.
1.2 Balance Sheet. "Balance Sheet" means the audited balance sheet
of IMX as of December 31, 1997, and all notes and schedules thereto.
1.3 Balance Sheet Date. "Balance Sheet Date" means the date of the
Balance Sheet.
<PAGE>
1.4 Business. "Business" means the development, manufacture,
marketing and sale of the Exorex Product Line and the related telephone product
information and ordering services provided to customers and distributors
("Helpline") and product fulfillment center.
1.5 Closing. "Closing" means the consummation of the transactions
contemplated by this Agreement and "Closing Date" means June 18, 1998 or if the
conditions to Closing are not by then satisfied, on such date within 5 days
following satisfaction of such conditions (other than conditions to be satisfied
at Closing according to the terms hereof).
1.6 Contract. "Contract" means any contract, agreement, arrangement,
understanding, lease, indenture, evidence of indebtedness, binding commitment or
instrument, purchase order, or offer, written or oral, entered into or made by
or on behalf of any IMX in connection with the Contributed Assets.
1.7 Contributed Assets. "Contributed Assets" means all assets and
property and associated rights and interests, real, personal, and mixed,
tangible and intangible, of whatever kind, owned or used by IMX in connection
with the Business other than the Retained Assets. Without limiting the
generality of the foregoing, the Contributed Assets include the following items:
(a) all assets reflected and/or described on the Balance
Sheet, exclusive of any cash and prepaid items which do not relate to any
Contributed Assets, all assets which have been fully depreciated or written off
and all assets acquired since the Balance Sheet Date, except any such assets
which have been disposed of in the Ordinary Course since the Balance Sheet Date;
(b) the Receivables (subject to the provisions of Section 2.2
hereof);
(c) the Inventory (subject to the provisions of Section 2.2
hereof);
(d) all Contracts of IMX with suppliers, customers or sales
representatives in connection with the Business;
(e) all machinery, equipment, supplies and tools of IMX used
in connection solely with the Business which are not also being used by IMX for
purposes other than the Business;
(f) all permits, approvals, licenses and certifications issued
to IMX by a government or by a private testing or certifying authority in
connection with the Business, to the extent assignable under the terms thereof
and applicable Law;
(g) all Intellectual Property related to the Business and
owned or licensed by IMX, including without limitation the computer software
(object and source code) used in relation to the Helpline as well as the
financial system interface and financial data software, and the trademark
"Exorex" and documentation thereof and the right and power to assert, defend and
recover title thereto in the same manner and to the same extent as IMX could
2
<PAGE>
or could cause to be done if the transactions contemplated hereby did not occur,
and the right to recover for past damages on account of the infringement,
misuse, or theft thereof ("Contributed Intellectual Property");
(h) all employees involved in the Business other than the
Significant Employees;
(i) all records, including business, computer, engineering,
and other records, and all associated documents, discs, tapes, and other storage
or recordkeeping media of IMX prepared or held in connection with the Business,
including but not limited to all sales data, customer lists, accounts, bids,
contracts, supplier records, and other data and information of in connection
with the Business, excluding corporate minute books of IMX;
(j) all rights and claims against others under Contracts; and
(k) all other claims against others, rights, and choices in
action, liquidated or unliquidated, of IMX arising from or in connection with
the Business, including those arising under insurance policies.
1.8 Environmental Law. "Environmental Law" means any current, past
or future Law relating to the protection of health or the environment, including
without limitation: the Clean Air Act, the Federal Water Pollution Control Act,
the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Toxic Substance Control Act, any
comparable state or foreign Law, and the common law, including the law of
nuisance and strict liability.
1.9 Exorex Product Line. "Exorex Product Line" shall mean all skin
care products currently developed by IMX for the treatment of and relief from
psoriasis or other dermatological conditions including without limitation
shampoos and cream products and marketed by IMX under the trademark or tradename
"Exorex," including without limitation the products listed on Schedule A.
1.10 Financial Statements. "Financial Statements" means the Balance
Sheet and the other financial statements of IMX including interim management
accounts, related statements of earnings, stockholder's equity and changes in
notes and schedules thereto.
1.11 GAAP. "GAAP" means United States generally accepted accounting
principles consistently applied.
1.12 Government. "Government" means the United States of America,
any other nation or sovereign state, the European Union, any federal, bilateral
or multilateral governmental authority, any state, possession, territory,
county, district, city or other governmental unit or subdivision, and any
branch, agency, or judicial body of any of the foregoing.
3
<PAGE>
1.13 Improvements. "Improvements" means any Intellectual Property
including without limitation any findings, discoveries, inventions, additions,
modifications, or changes (including by way of example and not by way of
limitation, in compositions, formulations, production methods, or processes) or
derivative works invented, discovered or otherwise made, acquired or developed
by any of the parties either individually or jointly with any other person,
relating to the Contributed Intellectual Property, whether or not patentable,
copyrightable, or trademarkable.
1.14 IMX Contribution. "IMX Contribution" means that amount set
forth in Section 2.2.
1.15 IMX Intellectual Property. "IMX Intellectual Property" means
and includes all Intellectual Property which is identified in writing by IMX as
"IMX Intellectual Property", which does not include the Contributed Intellectual
Property and which was (a) created and owned by IMX prior to the Closing Date
(and evidenced by writings or other documentation created prior to such date);
or (b) conceived, created, developed, made or acquired after such date and in a
manner in which: (i) no personnel, equipment, supplies, or facilities provided
or paid for by LLC or MEDICIS were utilized after the Closing Date; (ii) no
Intellectual Property of MEDICIS or LLC was used; or (iii) such Intellectual
Property does not relate to or result from, whether directly or indirectly, any
work performed or to be performed by IMX for, or on behalf of, LLC or MEDICIS.
1.16 Intellectual Property. "Intellectual Property" means and
includes all proprietary intellectual property rights (in whatever form or
medium) including but not limited to algorithms, chemical compounds, conceptual
expressions, copyrights, designs, formulae, ideas, improvements, patents,
inventions, trademarks, service marks, trade names, computer software (both
object and source code), proprietary processes, mask works, know-how (whether or
not publicly known or a trade secret), etc., all registrations and applications
thereof, together with that portion of all media (whether in human or machine
readable form) containing any expression of the proprietary intellectual
property rights and licenses, sublicenses, assignments and agreements in respect
of any of the foregoing.
1.17 Inventory. "Inventory" means all inventories of IMX maintained
in connection with the Business, including but not limited to all raw materials,
component parts, work in process, packaging, all finished goods held by IMX
which have an expiration date of more than 18 months from the Closing Date, and
all finished goods held by IMX which have an expiration date of less than 18
months but more than 12 months from the Closing Date which are to be sold via
the Helpline;
1.18 Law. "Law" means any statute, law, treaty, ordinance, rule,
regulation, instrument, directive, decree, order, or injunction of any
Government, quasi-governmental authority, or Court, and includes rules or
regulations of any regulatory or self-regulatory authority compliance with which
is required by law.
1.19 Liabilities. "Liabilities" means liabilities, debts,
commitments or obligations, known or unknown, contingent or otherwise, whether
or not required to be reflected
4
<PAGE>
on the financial statements of a business, including without limitation claims
brought by employees or former employees, environmental or product liability
claims or tax liabilities (including liabilities related to income, transfer,
sales, use and other taxes arising in connection with the consummation of the
transactions contemplated by this Agreement.
1.20 Lien. "Lien" means any lien, security interest, mortgage,
option, lease, tenancy, occupancy, covenant, condition, easement, agreement,
pledge, hypothecation, charge, claim, restriction, or other encumbrance of every
kind and nature.
1.21 LLC Consideration. "LLC Consideration" means that amount set
forth in Sections 2.2(b) and 2.2(c) of this Agreement.
1.22 LLC Net Sales. "1.22 LLC Net Sales" means the gross amount
invoiced by LLC on all sales of LLC's products less deductions for: (i) sales
taxes, value-added taxes and excise taxes, tariffs, import or export duties, and
duties paid or allowed by a selling party and any other governmental charges
imposed upon the importation, use or sale of such products which are included in
the gross amount invoiced; (ii) allowed customary trade and quantity discounts
and allocated sales discounts; (iii) allocated transportation, bulk packaging,
handling and freight charges and reasonable and customary insurance where such
are separately stated as part of the sales price and are included in the gross
amount invoiced; and (iv) allowances and credits to customers on account of
rejection or return of products. Sales between or among IMX or MEDICIS, as the
case may be, and its Affiliates or sublicensees shall be excluded from the
computation of Net Sales, but Net Sales shall include the subsequent sales to
third parties by such Affiliates or sublicensees. For purposes of determining
Net Sales, a sale shall be deemed to have occurred when the products have been
shipped.
1.23 Major Agreements. "Major Agreements" shall mean this Agreement,
the LLC Agreement, the Stock Purchase Agreement, the Consulting Agreement, the
Facility Agreement, the New Product Agreement and the Service Agreement.
1.24 MEDICIS Contribution. "MEDICIS Contribution" means that amount
set forth in Section 2.1.
1.24 New Intellectual Property. "New Intellectual Property" means
any Intellectual Property conceived, created, developed, made or acquired, in
whole or in part, by IMX, either itself or jointly with others, after the
Closing Date which: (a) utilizes personnel, equipment, supplies, or facilities
provided or paid for by MEDICIS or LLC for its development after the Closing
Date; (b) utilizes or incorporates the Contributed Assets, including without
limitation the Contributed Intellectual Property for its development, (c)
utilizes or incorporates any Intellectual Property of MEDICIS or LLC; (d)
consists of Improvements, or (e) directly or indirectly, relates to, or results
from, any work performed or to be performed for, or on behalf of, MEDICIS or
LLC.
1.25 New Product. "New Product" means any product made or acquired,
in whole or in part, by IMX, either itself or jointly with others, to be used or
usable in the cosmetic
5
<PAGE>
or healthcare industry, provided however, that the basis for such product is not
New Intellectual Property or any Improvements.
1.26 Ordinary Course. "Ordinary Course" means, with respect to the
Business, only the ordinary course of commercial operations customarily engaged
in by such Business consistent with past practices, and specifically does not
include (a) activity (i) involving the purchase or sale of such business or of
any product line or business unit, (ii) involving modification or adoption of
any Employee Plan, as defined in Section 9.21 or (iii) which requires approval
by the board of directors or shareholders of a corporation engaged in such
business, or (b) the incurrence of any liability for any tort or any breach or
violation of or default under any Contract or Law.
1.27 Receivables. "Receivables" means all accounts receivable
(including all consignment or point of sale arrangements) of IMX in connection
with the Business that have been outstanding for less than 120 days at Closing.
1.28 Retained Assets. "Retained Assets" means those assets of IMX
set forth on Schedule 1.26.
1.29 Significant Employees. "Significant Employees" means Bill
Forster, Gary Spielfogel, Marc Falkin and Adele Falk.
1.30 Taxes. "Taxes" means all taxes, charges, fees, levies or other
like assessments imposed or assessed by any government, including without
limitation income, profits, windfall profit, employment (including Social
Security, state pension plans, and unemployment insurance), withholding,
payroll, franchise, gross receipts, sales, use, transfer, stamp, occupation,
real or personal property, ad valorem, value added, premium, and excise taxes;
Pension Benefit Guaranty Corporation premiums and any other like government
charges; and shall include all penalties, fines, assessments, additions to tax,
and interest resulting from, attributable to, or incurred in connection with
such Taxes or any contest or despite thereof. Any one of the foregoing Taxes may
be referred to sometimes as a "Tax."
1.31 Other Defined Terms. The following terms have the meanings
defined for such terms in the Sections set forth below:
Term Section
---- -------
Agents 12.1(a)
Competitive Business 13.1(a)
Consulting Agreement 6.1
Costs 18.6
Facility Agreement 6.2
Employee Plans 9.21(a)
ERISA 9.21(b)
Hearing 19.4
Helpline 1.4
6
<PAGE>
HSR Act 9.34
Indemnified Losses 18.2
Indemnified Parties 18.2
IRCA 9.24
LLC Agreement 2.0
LLC Business 13.1(a)
Losing Party 19.5
Market 13.1(a)
New Product Agreement 3.2
Other Intellectual Property 12.1(d)
Returns 9.8(a)
Service Agreement 7.0
Stock Purchase Agreement 3.1
Successful Party 19.5
2. FORMATION AND CAPITALIZATION OF THE JOINT VENTURE. IMX and MEDICIS
hereby agree to form the JV by contributing at the Closing certain cash and
assets to the LLC which shall be operated under the name of Medicis Consumer
Products Corporation, L.L.C. The rights and obligations of IMX and MEDICIS with
respect to the LLC shall be determined by this Agreement and the LLC Agreement
substantially similar to that agreement set forth as Exhibit A attached hereto
("LLC Agreement"). In the event of a conflict between this Agreement and the LLC
Agreement, the provisions of this Agreement shall control.
2.1 MEDICIS Contribution.
(a) On the Closing Date, upon the execution of this Agreement
and of the LLC Agreement, MEDICIS shall contribute to the LLC cash in the sum of
$4,000,000. As consideration for the contribution, MEDICIS shall receive 51% of
the interest in the LLC.
2.2 IMX Contribution. On the Closing Date, upon the execution of
this Agreement and of the LLC Agreement, IMX shall contribute to the LLC the
Contributed Assets. Consideration for the Contributed Assets shall be as
follows:
(a) As consideration for the Contributed Assets, except for
the Inventory and the Receivables, IMX shall receive 49% of the interest in the
LLC;
(b) As consideration for the Receivables, LLC agrees to pay to
IMX on the Closing Date: (i) $2,400,000 if the outstanding amount of Receivables
on the Closing Date is equal to or more than $2,700,000, or (ii) 90% of the
actual outstanding amount of the Receivables if such amount is less than
$2,700,000. To determine the payment required under this Section 2.2(b), IMX
will prepare and deliver to LLC at Closing a schedule setting forth the
Receivables and the value thereof determined in accordance with GAAP.
(c) As consideration for the Inventory, LLC agrees to pay to
IMX, within 10 days after receipt of the Inventory by LLC and inspection by
LLC's agents, the actual cost by lot number of the Inventory as reflected in
IMX's books and records.
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2.3 Liabilities of the Business. The LLC will assume solely those
Liabilities of IMX incurred in the Ordinary Course and related to the Business
which are set forth on Schedule 2.3. OTHER THAN THOSE LIABILITIES EXPRESSLY SET
FORTH ON SCHEDULE 2.3, LLC SHALL NOT ASSUME ANY LIABILITIES OF IMX, THE
BUSINESS, IMX'S SHAREHOLDERS OR ANY PREDECESSOR THEREOF OR ANY OTHER PERSON,
WHETHER OR NOT RELATED TO THE CONTRIBUTED ASSETS, INCLUDING ANY LIABILITIES FOR
ANY PREVIOUS OR SUBSEQUENT OPERATIONS OF IMX OCCURRING PRIOR TO, ON OR
SUBSEQUENT TO THE CLOSING. NO OTHER STATEMENT IN OR PROVISION OF THIS AGREEMENT
AND NO OTHER STATEMENT, WRITTEN OR ORAL, ACTION, OR FAILURE TO ACT INCLUDES OR
CONSTITUTES ANY SUCH ASSUMPTION OR AGREEMENT, AND ANY STATEMENT TO THE CONTRARY
BY ANY PERSON IS UNAUTHORIZED AND HEREBY DISCLAIMED.
3. ADDITIONAL AGREEMENTS.
3.1. In addition to its contribution to the LLC and as a condition
to IMX's participation in the JV, MEDICIS also hereby agrees to purchase or to
cause an Affiliate to purchase from IMX and IMX hereby agrees to sell to MEDICIS
or its Affiliate at the Closing, 400,000 shares of IMX's common stock at $2.50
per share, for a total purchase price of $1,000,000. The purchase and sale of
IMX's stock by MEDICIS or its Affiliate shall be on the terms and conditions
contained in a Stock Purchase Agreement substantially similar to that agreement
set forth at Exhibit B attached hereto ("Stock Purchase Agreement").
3.2. IMX shall grant to MEDICIS a right to purchase or license all
New Products developed by IMX subject to the terms and conditions of a New
Product Agreement substantially similar to that agreement set forth at Exhibit C
attached hereto ("New Product Agreement").
4. BUSINESS PURPOSE AND RIGHTS. The LLC has been formed specifically for
the purpose of the research, development, production and distribution of
pharmaceutical products. However, notwithstanding anything to the contrary
contained herein, the LLC shall have the authority which such authority shall be
included in its organizational documents to engage in any lawful activities for
which an LLC may be organized under applicable Laws.
5. MANAGEMENT AND CONTROL. The LLC shall be operated, managed and
controlled in accordance with the provisions in the LLC Agreement.
6. IMX SUPPORT OBLIGATIONS.
6.1. Consulting Services. During the term of this Agreement and the
New Product Agreement, unless earlier terminated pursuant thereto, IMX agrees
that it shall provide to LLC certain consulting services related to its
specialized knowledge of the Contributed Assets and Contributed Intellectual
Property in accordance with the terms and conditions of a Consulting,
Confidentiality and Noncompete Agreement substantially similar to that agreement
set forth in Exhibit D attached hereto ("Consulting Agreement"). LLC shall pay
to IMX a fee equal to 6% of the LLC Net Sales for the consulting services on the
terms included in more detail
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in the Consulting Agreement.
6.2. IMX shall also sublease to LLC pursuant to the terms and
conditions of a Facility Agreement substantially similar to that agreement set
forth as Exhibit E attached hereto ("Facility Agreement") the office space,
furniture, computer hardware, all utilities, including, telephone and fax
services and warehouse facilities and equipment leased, owned and occupied by
IMX as of the Closing Date.
7. MEDICIS SUPPORT OBLIGATIONS. MEDICIS shall be responsible for day to
day operation of the LLC. MEDICIS hereby agrees that it shall provide to LLC
those additional support services as more fully set forth in a Service Agreement
substantially similar to that agreement attached hereto as Exhibit F ("Service
Agreement"). The support services may include the following: general and
administrative support, financial reporting, provision of manufacturing
facilities, provision of warehousing facilities, product distribution, sales
support, customer service and product research and development support.
8. CLOSING. The Closing shall take place at 10:00 a.m. on the Closing Date
at the offices of Bryan Cave LLP, 2800 North Central Avenue, 21st Floor,
Phoenix, Arizona.
8.1 Deliveries of IMX at Closing. At the Closing, subject to the
conditions to IMX's obligations in Section 17, IMX shall execute and deliver or
cause to be delivered the documents identified in Section 17.
8.2 Deliveries of MEDICIS at Closing. At Closing, subject to the
conditions to MEDICIS' obligations contained in Section 16, MEDICIS and LLC, as
applicable, shall (a) execute and deliver or cause to be delivered the documents
identified in Section 16 and (b) transfer by wire transfer, to an account
designated by IMX on the Closing Date, the amounts set forth in Sections 2.1 and
2.2(b).
9. REPRESENTATIONS AND WARRANTIES OF IMX. IMX hereby makes the following
representations and warranties for the express benefit of MEDICIS and LLC, each
of which is true and correct on the date hereof and, except for changes
expressly permitted by this Agreement, shall be true and correct on the Closing
Date and each of which shall survive the Closing Date and the transactions
contemplated hereby.
9.1 Corporate Existence and Power of IMX.
(a) IMX is a corporation duly organized, validly existing and in
good standing under the Laws of Utah.
(b) IMX has the corporate power and authority to own and use the
Contributed Assets and to transact the Business, holds all franchises, licenses
and permits necessary and required therefor, is duly licensed or qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such license or qualification is required. IMX has the corporate
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power to enter into this Agreement and the other Major Agreements, to perform
its obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby.
9.2 Approval and Enforceability of Agreement.
(a) The execution and delivery of this Agreement and the other
Major Agreements and the consummation of the transactions contemplated hereby
and thereby have been duly authorized, approved and ratified by all necessary
action on the part of IMX and such authorization has not been altered, amended,
rescinded, repealed or revoked.
(b) Upon the due execution and delivery hereof, this Agreement
and the other Major Agreements will be the legal, valid and binding obligation
of IMX, enforceable against IMX according to its terms.
9.3 Financial Statements.
(a) Attached as Schedule 9.3 hereto are draft financial
statements which shall conform in all material respects to the Financial
Statements to be delivered before Closing. The Financial Statements are
certified by B.D.O. Seidman, certified public accountants, and their opinion is
appended thereto.
(b) The Financial Statements were derived from the books and
records of IMX and (i) are true, complete, and correct, (ii) present fairly, in
all material respects, the financial position, results of operations, and cash
flows of IMX at the dates and for the periods indicated, (iii) have been
prepared in accordance with GAAP applied on a basis consistent with previous
periods, and (iv) do not include any untrue statement of a material fact
required to be stated or reflected therein or omit to state or reflect any
material fact necessary to make any statements therein not misleading.
9.4 Events Subsequent to December 31, 1997. Since December 31, 1997,
except as set forth on Schedule 9.4, there has been no:
(a) change in the Business other than changes in the Ordinary
Course, none of which have been materially adverse;
(b) loss or threatened loss of a customer account;
(c) damage, destruction or loss, whether covered by insurance
or not, materially affecting the Business or the Contributed Assets;
(d) declaration, setting aside, or payment of any dividend or
any distribution (in cash or in kind) with respect to any securities of IMX;
(e) increase in or commitment to increase compensation,
benefits, or other remuneration to or for the benefit of any shareholder,
member, partner, director, officer, employee or agent of IMX, or, in connection
with the Business, any other person, or any benefits
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granted under any benefit plan with or for the benefit of any such shareholder,
member, partner, director, officer, employee, agent or person;
(f) transaction entered into or carried out by IMX other than
in the ordinary course of commercial operations in connection with the Business;
(g) borrowing or incurrence of any indebtedness (including
letters of credit and foreign exchange contracts), contingent or other, by or on
behalf of IMX, or any endorsement, assumption, or guarantee of payment or
performance of any Indebtedness or Liability of any other Person or entity by
IMX;
(h) change made by IMX in its Tax or financial accounting or
any Tax election;
(i) grant of any Lien with respect to the Business;
(j) transfer of any Contributed Assets other than arm's-length
sales, leases, or dispositions in the Ordinary Course in connection with the
Business;
(k) modification or termination of any Contract or any
material term thereof;
(l) lease or acquisition of any capital assets included in the
Business with a value greater than $1,000 per item;
(m) in connection with the Business, loan or advance to any
person except for advances not material in amount made in the Ordinary Course of
in connection with the Business to employees; or
(n) commitment or agreement by IMX to do any of the foregoing
items (d) through (n).
9.5 Inventories. All inventories relating to the Contributed Assets
held by IMX at any location are merchantable in the Ordinary Course of the
Business without markdown or discount and, except to the extent of any reserve
therefor on the Balance Sheet, are not physically damaged, previously used,
obsolete, discontinued or "excess". "Excess" inventory shall mean the amount of
inventory in excess of a 6 month supply based on actual sales of products over
the preceding 12 months, or for products introduced within the last 12 month
period, based on the forecasted sales amount for such products during the 6
months following the Closing. The inventories of IMX have been valued in
accordance with GAAP.
9.6 Receivables. Set forth on Schedule 9.6 hereto are all the
Receivables of IMX and an aging schedule related thereto, each as of May 29,
1998. The Receivables are, and any Receivables arising between such date and the
Closing Date shall be, valid, genuine and subsisting, and all such accounts and
notes receivable arose or will have arisen in the Ordinary Course in connection
with the Contributed Assets. Receivables are not, and will not be on the
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Closing Date, subject to any defense, set-off, counterclaims or Lien. Except to
the extent of any reserve therefor on the Financial Statements or paid in full
prior to Closing, all Receivables are and will be current and fully collectible.
LLC shall use commercially reasonable efforts to collect the Receivables. Any
Receivables which have not been collected by LLC within 60 days from the Closing
Date will be assigned to IMX upon execution by LLC of an assignment agreement in
a form reasonably acceptable to IMX and IMX will pay LLC the amount set forth on
the Financial Statements for such accounts or notes receivable, net of any
applicable reserve. The parties agree that any Receivables consisting solely of
consignment and point of sale arrangements collected by LLC shall be included in
LLC Net Sales for the first year of the term of this Agreement.
9.7 Undisclosed Liabilities. IMX does not have, in connection with
the Contributed Assets, any Liabilities whatsoever, known or unknown, asserted
or unasserted, liquidated or unliquidated, accrued, absolute, contingent, or
otherwise, and there is no basis for any claim against IMX in connection with
the Contributed Assets for any such Liability except (a) to the extent set forth
on the Balance Sheet, (b) to the extent set forth on Schedule 9.7, or (c)
Liabilities incurred in the Ordinary Course in connection with the Contributed
Assets since the Balance Sheet Date, none of which will, or could, have an
adverse effect upon the Contributed Assets on the condition of the Contributed
Assets.
9.8 Taxes.
(a) All Tax and informational returns and reports required to
be filed by or on behalf of IMX, including estimated tax and informational
returns, ("Returns") on or prior to the Closing Date with respect to Taxes have
been or will be timely filed and no Returns have been amended. All Returns are
true, correct and complete.
(b) All amounts for Taxes (whether or not reflected in the
Returns as filed) payable by IMX with respect to all periods prior to the
Closing have been paid or will be paid when due and there are no grounds for the
assertion or assessment of any Taxes against IMX, the Contributed Assets or in
connection with the Business with respect to such periods.
(c) Neither the Contributed Assets nor the Business is and
will not be encumbered by any Liens arising out of any unpaid Taxes and there
are no grounds for the assertion or assessment of any Liens against the
Contributed Assets or the Business in respect of any Taxes (other than Liens for
Taxes if payment thereof is not yet required, and which are set forth on
Schedule 9.8 hereto).
(d) The transactions contemplated by this Agreement will not
give rise to (i) the creation of any Liens against the Contributed Assets or the
Business in respect of any Taxes or (ii) the assertion of any additional Taxes
against the Contributed Assets or the Business.
(e) There is no action or proceeding or unresolved claim for
assessment or collection, pending or to the best of IMX's knowledge threatened,
by, or present or expected dispute with, any Government authority for assessment
or collection from IMX of any Taxes of any nature affecting the Contributed
Assets or the Business.
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(f) There is no extension or waiver of the period for
assertion of any Taxes against IMX affecting the Contributed Assets or the
Business.
(g) None of the Contributed Assets are subject to a tax
indemnification agreement.
(h) At all times prior to the Closing, IMX has complied with
all Laws relating to the withholding of Taxes and the payment thereof, and has
timely and properly withheld from employee wages and paid over to the proper
government entity all amounts required to by withheld and be paid over under
applicable Laws.
9.9 Real Property and Personal Property -- Owned. IMX owns no real
property. Except as set forth on Schedule 9.9 hereto, IMX has good and
marketable title to all personal property included in the Contributed Assets,
including in each case all personal property reflected on the Balance Sheet or
acquired after the date thereof (except any personal property subsequently sold
in the Ordinary Course of the Business), free and clear of all Liens, and there
exists no restriction on the use or transfer of such property.
9.10 Real and Personal Property -- Leases. IMX is not the lessor of
any real or personal property in connection with the Business. Set forth on
Schedule 9.10(a) hereto is a description of each lease under which IMX is the
lessee of any real property in connection with the Business, and on Schedule
9.10(b) hereto is a description of each lease under which IMX is the lessee of
any personal property in connection with the Business. IMX has delivered to
MEDICIS and LLC a true, correct and complete copy of each lease identified on
Schedules 9.10(a) and 9.10(b). The premises or property described in said leases
are presently occupied or used by IMX as lessee under the terms of such leases.
Except as set forth on Schedules 9.10(a) and 9.10(b), all rentals due under such
leases have been paid and there exists no default under the terms of any such
leases and no event has occurred which, upon passage of time or the giving of
notice, or both, would result in any event of default or prevent IMX from
exercising and obtaining the benefits of any rights or options contained
therein. IMX has all right, title and interest of the lessee under the terms of
said leases, free of all Liens and all such leases are valid and in full force
and effect. Except as set forth on Schedules 9.10(a) and 9.10(b), no consent is
necessary for the assignment to LLC of such leases or any sublease to LLC under
such leases of any of IMX's rights under the leases of real property which IMX
is lessee. Upon the Closing and except as set forth in Schedule 4.10, LLC will
have all right, title and interest of the lessee under the terms of the leases,
free of all Liens. There is no default or basis for acceleration or termination
under, nor has any event occurred nor does any condition exist which, with the
passage of time or the giving of notice, or both, would constitute a default or
basis for acceleration under any underlying lease, agreement, mortgage or deed
of trust which default or basis for acceleration would materially adversely
affect any lease described on Schedules 9.10(a) or 9.10(b) or the property or
use of the property covered by such lease. Subject to any consent required of a
lessor as set forth on Schedules 9.10(a) and 9.10(b), there will be no default
or basis for acceleration under any such underlying lease, agreement, mortgage
or deed of trust as a result of the transactions provided for in this Agreement.
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9.11 Intellectual Property.
(a) Schedule 9.11 contains a true, complete and accurate list
of all the Contributed Intellectual Property which identifies, where
appropriate, by country, for each item of the Contributed Intellectual Property:
filing date, issue date, classification of invention or goods covered, licensor,
license date and licensed subject matter. Schedule 9.11 contains a complete and
accurate list of all licenses and other rights granted by IMX to any third party
with respect to any item of the Contributed Intellectual Property. True,
complete and correct copies of the forms of such customer licenses are included
as part of Schedule 9.11.
(b) IMX hereby represents and warrants the following: (i) the
Contributed Intellectual Property is valid and enforceable and encompasses all
proprietary rights necessary or desirable for the conduct of the Business as
presently conducted or proposed to be conducted (in each case free and clear of
all Liens); (ii) IMX has taken all actions necessary to maintain and protect the
Contributed Intellectual Property; (iii) to the knowledge of IMX, the owners of
the Contributed Intellectual Property licensed to IMX have taken all actions
necessary to maintain and protect the Contributed Intellectual Property subject
to such licenses; (iv) there has been no claim made against IMX asserting the
invalidity, misuse or unenforceability of any of the Contributed Intellectual
Property or challenging such IMX's right to use or ownership of any of the
Contributed Intellectual Property, and there are no grounds for any such claim
or challenge; (v) IMX is not aware of any infringement or misappropriation of
any of the Contributed Intellectual Property or of any facts raising a
likelihood of infringement or misappropriation; (vi) to the best of IMX's
knowledge the conduct of the Business has not infringed or misappropriated, and
does not infringe or misappropriate, any intellectual property or proprietary
right of any other entity; (vii) no loss of any of the Contributed Intellectual
Property is threatened, pending or reasonably foreseeable; and (viii) the
consummation of the transactions contemplated by this Agreement will not alter,
impair or extinguish any of the Contributed Intellectual Property.
9.12 Necessary Property and Transfer of Contributed Assets. Except
as set forth on Schedule 9.12, the Contributed Assets constitute all of IMX's
property and property rights now used, useful or necessary for the conduct of
the Business in the manner and to the extent presently conducted or planned by
IMX. No such assets or property are in the possession of others and the IMX
holds no property on consignment. Except as set forth on Schedule 9.12 hereto,
no consent is necessary to, and there exists no restriction on, the transfer of
any of the Contributed Assets to LLC. There exists no condition, restriction or
reservation affecting the title to or utility of the Contributed Assets which
would prevent LLC from occupying or utilizing the Contributed Assets, or any
part thereof, to the same full extent that IMX might continue to do so if the
sale and transfer contemplated hereby did not take place. Upon the Closing, good
and marketable title to the Contributed Assets shall be vested in LLC free and
clear of all Liens.
9.13 Licenses and Permits. Set forth on Schedule 9.13 hereto is a
description of each license or permit required for the conduct of the Business
together with the name of the Government agency or entity issuing such license
or permit. Such licenses and permits are valid and in full force and effect.
Except as noted on Schedule 9.13, such licenses and permits are
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freely transferable by IMX, and upon Closing, LLC will have all right, title and
interest of the holder thereof.
9.14 Use and Condition of Property. All of the Contributed Assets
are in good operating condition and repair as required for their use in the
Business as presently conducted or planned, and to IMX's knowledge conform to
all applicable Laws, and no notice of any violation of any Law relating to any
of the Contributed Assets has been received by IMX except such as have been
fully complied with. There is no proposed, pending or threatened condemnation
proceeding or similar action affecting the Contributed Assets or with respect to
any streets or public amenities appurtenant thereto or in the vicinity thereof
which would materially adversely affect the Business or the use of the
Contributed Assets.
9.15 Contracts.
(a) Set forth on Schedule 9.15 is a list of each Contract
which (i) is material to the Business or the Contributed Assets, (ii) involves
(A) a guaranty, indemnity, or power of attorney, (B) a sharing of payments or
joint venture, (C) a sales agency, representation, distributorship, or franchise
arrangement, (D) restrictions on competition, (E) collective bargaining, works
council, or union representation, or (F) an obligation in excess of $50,000,
(iii) is not terminable upon 30 days' notice without liability, (iv) has
resulted or will result in a loss to the Contributed Assets, or (v) is not in
the ordinary course of the Business. True and complete copies of all written
Contracts have been delivered to MEDICIS.
(b) Each Contract is a valid and binding obligation of the
parties thereto, enforceable in accordance with its terms, and in full force and
effect.
(c) No party to a Contract is in default under or in breach or
violation of any Contract, and no event has occurred that, through the passage
of time or the giving of notice, or both, would constitute, and neither the
execution of this Agreement nor the Closing do or will constitute or result in,
such a default, breach or violation, cause the acceleration of any obligation of
any party thereto or the creation of a lien or encumbrance upon any Contributed
Asset, or require any consent thereunder.
(d) No obligations under Contracts will result in a loss to
LLC or would result in a loss to IMX, assuming it had continued in the Business.
(e) Each Contract will be duly assigned to LLC on the Closing
Date and upon such assignment, LLC will acquire all right, title and interest of
IMX in and to such Contract and will be substituted for IMX under the terms of
such Contract. Except as set forth on Schedule 9.10(b), no consent is required
for such assignment.
9.16 No Breach of Law or Governing Documents. IMX has complied with
and is not in default under or in breach or violation of any applicable Laws of
any Government body, or the provisions of any franchise or license, or in
default under or in breach or violation of any provision of its articles or
certificate of incorporation or association or its bylaws. Neither the execution
of this Agreement nor the Closing does or will constitute or result in any such
default,
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breach or violation. In particular, the Closing and the completion of the
transactions contemplated hereby (including the transfer of the Contributed
Assets to LLC) will not cause IMX to be unable to meet any of its Liabilities,
pay its creditors or otherwise render IMX bankrupt or insolvent under applicable
Laws or cause any third parties to file a petition in bankruptcy and such
transfer of the Contributed Assets will not be deemed to be a preferential or
fraudulent transfer under any Laws relating to bankruptcy, insolvency or fraud
in any jurisdictions which might assert jurisdiction over IMX, MEDICIS or LLC.
9.17 Litigation and Arbitration. Except as set forth on Schedule
9.17 hereto, there is no suit, claim, action or proceeding now pending or, to
the best knowledge of IMX, threatened before any court, grand jury,
administrative or regulatory body, Government agency, arbitration or mediation
panel or similar body, nor are there any grounds therefor, to which IMX is a
party or which may result in any judgment, order, decree, liability, award or
other determination which will, or could, have any adverse effect upon any
Contributed Asset or upon the condition of the Business. No such judgment,
order, decree or award has been entered against IMX nor has any such liability
been incurred which has, or could have, such effect. There is no claim, action
or proceeding now pending or threatened before any court, grand jury,
administrative or regulatory body, Government agency, arbitration or mediation
panel or similar body which will, or could, prevent or hamper the consummation
of the transactions contemplated by this Agreement, and the IMX has not been or
been threatened to be subject to, and there are no grounds for, any suit, claim,
litigation, proceeding (administrative, judicial, or in arbitration, mediation
or alternative dispute resolution), Government or grand jury investigation, or
other action or order, writ, injunction, or decree of any court or other
Government relating to personal injury, death, or property or economic damage
arising from products of the IMX.
9.18 Officers, Directors, Employees and Consultants. Set forth on
Schedule 9.18 hereto is a complete list of all IMX's directors, officers (with
office held), employees in connection with the Business and all consultants in
connection with the Business; together, in each case, with the current rate of
compensation payable to each.
9.19 Payments, Compensation and Perquisites of Agents and Employees.
IMX has properly and accurately reflected on its books and records all
compensation paid to and perquisites provided to or on behalf of its
consultants, agents and employees. Such compensation and perquisites have been
properly and accurately disclosed in the financial statements, proxy statements
and other public or private reports, records or filings of IMX to the extent
required by Law.
9.20 Labor Matters.
(a) There is no collective bargaining, works council, union
representation or similar agreement or arrangement to which IMX is or has been a
party or by which it is or has been bound.
(b) IMX is not and has not engaged in any unfair labor
practice;
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(c) There is no labor strike, dispute, slowdown, or stoppage
pending or, threatened against IMX;
(d) No right of representation exists respecting IMX's
employees;
(e) No collective bargaining agreement is currently being
negotiated and no organizing effort is currently being made with respect to
IMX's employees; and
(f) No current or former employee of IMX has any claim against
IMX on account of or for (i) overtime pay, other than overtime pay for the
current payroll period, (ii) wages or salary (excluding current bonus, accruals
and amounts accruing under pension and profit-sharing plans) for any period
other than the current payroll period, (iii) vacation, time off or pay in lieu
of vacation or time off, other than that earned in respect of the current fiscal
year, or (iv) any violation of any Law relating to minimum wages or maximum
hours of work.
9.21 Employee Benefit Matters.
(a) Except as set forth on Schedule 9.21, IMX does not have
outstanding and is not a party to or subject to liability under: (i) any
agreement, arrangement, plan, or policy, whether or not considered legally
binding, that involves (A) any pension, retirement, profit sharing, deferred
compensation, bonus, stock option, stock purchase, health, welfare, or incentive
plan; or (B) welfare or "fringe" benefits, including without limitation
vacation, severance, disability, medical, hospitalization, dental, life and
other insurance, tuition, company car, club dues, sick leave, maternity,
paternity or family leave, or other benefits; or (ii) any employment,
consulting, engagement, or retainer agreement or arrangement ((i) and (ii)
together the "Employee Plans" and each item thereunder an "Employee Plan").
True, correct, and complete copies of all documents creating or evidencing any
Employee Plan listed on Schedule 9.21 have been delivered to MEDICIS and LLC.
There are no negotiations, demands or proposals which are pending or threatened
or which have been made since January 1, 1996 which concern matters now covered,
or that would be covered, by the foregoing types of agreement, arrangement,
plan, or policy other than negotiations and proposals related to changing health
care coverage for employees which became effective November 1, 1996.
(b) Each Employee Plan has been administered in compliance in
all material respects with its terms, and, except as set forth on Schedule 2.23,
in compliance in all material respects with, and IMX does not have any direct or
indirect material liability under, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") or other Law applicable to any Employee Plan. Each
Employee Plan that is intended to qualify under Section 401(a) or Section
509(c)(9) of the Code has received a favorable determination letter from the
Internal Revenue Service (a copy of which has been provided to MEDICIS and LLC)
and related trusts have been determined to be exempt from taxation. Nothing has
occurred that would cause and no Action is pending or threatened which could
result in the loss of such exemption or qualification.
(c) (i) IMX has not made any contributions to any
multi-employer plan (as defined in ERISA) or to any pension plan subject to the
minimum funding standards of
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ERISA or Title IV of ERISA, (ii) IMX has never been a member of a controlled
group which contributed to any such plans and (iii) IMX has never been under
common control with an employer which contributed to any such plans.
(d) IMX has not terminated or taken action to terminate any
employee benefit plans since January 1, 1993.
(e) All of the Employee Plans, to the extent applicable, are
in compliance in all material respects with the continuation of health benefit
provisions contained in the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and with Section 1862(b)(4)(A)(i) of the Social Security Act,
and IMX does not have any material liability for any excise tax imposed by Code
Section 5000.
9.22 Discrimination, Workers Compensation and Occupational Safety
and Health. No Person or party (including, but not limited to, Government
agencies of any kind) has any claim, notice of claim, charge, lawsuit or to
IMX's knowledge any basis for any thereof, against IMX in connection with the
Business arising out of any Law relating to discrimination in employment or
employment practices or occupational safety and health standards, and no such
claim, notice of claim, charge or lawsuit is pending or, to the best knowledge
of IMX, threatened against IMX. Since April 30, 1993, IMX has not received any
notice in connection with the Business from any Person alleging a violation of
any such Law or occupational safety or health standards. IMX has no outstanding
Contracts or obligations to indemnify any person for violation of the Laws and
standards set forth in this Section.
9.23 Alien Employment Eligibility. With respect to each Person
employed by IMX in the Business on or after May 1, 1987, and who actually
commenced such employment on or after November 6, 1986, (a) IMX hired such
Person in compliance with the Immigration Reform and Control Act of 1986 and the
rules and regulations thereunder ("IRCA") and (b) IMX and each Affiliate have
complied with all recordkeeping and other regulatory requirements under IRCA.
9.24 Insurance Policies. Set forth on Schedule 9.24 hereto is a list
of all insurance policies and bonds in force covering or relating to the
Contributed Assets or the Business, including without limitation all properties,
operations or personnel of IMX used in connection with the Business. Policies
thereon described evidence insurance in such amounts and against such risks and
losses as are generally maintained with respect to comparable businesses and
properties.
9.25 Guarantees. IMX is not a guarantor, indemnity, surety or
accommodation party or otherwise liable for any indebtedness of any other
Person, firm or corporation except as endorser of checks received and deposited
in the Ordinary Course.
9.26 Product Warranties. Set forth on Schedule 9.26 hereto are the
standard forms of product warranties and guarantees used in the Business, and
copies of all other material product warranties and guarantees, and a summary of
all oral product warranties used by IMX if different from the foregoing. Except
as specifically described on Schedules 9.26 or 9.27, since
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April 30, 1992 no product warranty or similar claims have been made against IMX
in connection with the Business except routine claims as to which, in the
aggregate, losses and expenses in respect of repair or replacement of
merchandise do not and will not exceed $5,000. The aggregate loss and expense
attributable to all product, warranty and similar claims now pending or
hereafter asserted with respect to products manufactured on or prior to the
Effective Date will not exceed $5,000. No Person or party (including, but not
limited to, Government agencies of any kind) has any claim, or basis for any
action or proceeding, against IMX under any Law relating to unfair competition,
false advertising or other similar claims arising out of product warranties,
guarantees, specifications, manuals or brochures used in the Business.
9.27 Product Liability Claims. Except as described on Schedule 9.27,
IMX has not received notice or information as to any claim or allegation of
injury, death, or property or economic damages, any claim for punitive or
exemplary damages, any claim for contribution or indemnification, or any claim
for injunctive relief in connection with any product manufactured, sold,
distributed or otherwise put in commerce by or in connection with any service
provided by IMX in connection with the Business, except for routine claims
described and quantified pursuant to Section 9.26. The aggregate loss and
expense attributable to any and all such claims and allegations with respect to
products manufactured, sold or distributed or services provided prior to the
Closing Date which are asserted after the date of this Agreement will not exceed
$5,000, exclusive of any recovery or coverage under any insurance policy.
9.28 Product Safety Authorities. Except as set forth on Schedule
9.28 hereto, to the knowledge of IMX, no Person has been required to file any
notification or other report with or provide information to any Government
agency or product safety standards group concerning actual or potential defects
or hazards with respect to any product manufactured, sold, distributed or
otherwise put in commerce in connection with the Business, and there exist no
grounds for the recall of any such product.
9.29 Environmental Matters. Except as set forth on Schedule 9.29,
all assets and property currently or previously owned, leased, operated, or used
by the IMX, all current or previous conditions on and uses of all of the
property and assets currently or previously owned leased, operated or used by
IMX. All current or previous ownership or operation of the IMX or such property
and assets (including without limitation transportation and disposal of
Hazardous Materials by or for the IMX) comply and have at all times complied
with, and do not cause, have not caused, and will not cause liability to be
incurred by the IMX under any Environmental Law. Except as set forth on Schedule
9.29, the IMX is not in violation of and has not violated any Environmental Law.
9.30 Broker's Fees. Except as described on Schedule 9.30, IMX has
not retained any broker, finder or agent or agreed to pay any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this Agreement.
9.31 Foreign Operations and Export Control. IMX has made no sales
outside of the United States, directly or indirectly, and does not maintain any
sales depots or other manufacturing, distribution or sales entities outside of
the United States.
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9.32 Truthfulness. No representation or warranty of IMX herein and
no statement, information or certificate furnished or to be furnished by or on
behalf of IMX or its counsel, accountants or other agents 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 in order to make the statements contained herein or
therein not misleading. There is no fact or development, actual or prospective,
other than general economic conditions, which materially adversely affects or in
the future might reasonably be expected adversely to affect the Business, the
Contributed Assets in any material respect which has not been set forth or
described in this Agreement or in the Schedules hereto.
9.33 Books and Records. The books of account, stock record books and
minute books and other corporate records of IMX are in all material respects
complete and correct, have been maintained in accordance with good business
practices and the matters contained therein are accurately reflected on the
Financial Statements. The minute books and stock books of IMX have been made
available to MEDICIS and LLC and are correct and complete to the date hereof.
9.34 Hart-Scott-Rodino Act. For purposes of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act"), IMX is its own ultimate parent
entity and does not meet the size-of-person test set forth in Section 7A(a) of
the HSR Act or the rules relating thereto. The annual net sales of IMX (as
stated on its last regularly prepared annual statement of income and expense)
and the total assets of IMX (as stated on its last regularly prepared balance
sheet) are each less than $10 million.
10. OPTION TO PURCHASE. MEDICIS shall have the option to acquire IMX's
interest in the LLC in three annual equal installments on each of June 30, 1999,
2000, 2001 pursuant to the terms and conditions contained in the LLC Agreement.
11. COVENANTS OF IMX.
11.1. Payment of Debts. IMX hereby covenants and agrees that until
the Closing Date and for 90 days thereafter, IMX shall timely pay all of its
debts and other obligations involving more than $25,000 as they become due;
provided however that if IMX wishes to delay payment of any debts or obligations
over $25,000 for any reason whatsoever, IMX shall first inform LLC and MEDICIS
of such wish and of the underlying reason for such wish and shall obtain written
consent from LLC or MEDICIS, such consent not to be unreasonably withheld,
before IMX delays any such payment.
11.2. Release of Liens. Upon the Closing or immediately thereafter,
IMX shall use such portion of the consideration received pursuant to Sections
2.2(b) and 2.2(c) of this Agreement or pursuant to the Stock Purchase Agreement
as is necessary to cause the release of any Liens on IMX property or assets
arising from or related to financing arranged by IMX.
11.3 Closing Covenants. IMX covenants and agrees with LLC and
MEDICIS that, from and after the date of this Agreement and until the Closing
Date, IMX will conduct the Business subject to the following provisions and
limitations.
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(a) Operation of the Business. Without the prior written
consent of LLC and MEDICIS, IMX in connection with the Business and Contributed
Assets, will not:
(i) enter into any Contract or commitment or engage in
any transaction which is not in the Ordinary Course of the Business or which is
inconsistent with past practices;
(ii) sell or dispose of or encumber any material amount
of the Contributed Assets;
(iii) make, or enter into any Contract for, any material
capital expenditure or enter into any material lease of capital equipment or
real estate;
(iv) enter into any Contract, whether for the purchase
or sale of inventory, supplies, other products or services or otherwise, and
whether in the Ordinary Course of the Business or otherwise, involving more than
$5,000 or enter into any series of such Contracts with one party or affiliated
group of parties involving more than $5,000 in the aggregate;
(v) create, assume, incur or guarantee any indebtedness
other than (i) in the Ordinary Course of the Business and with a maturity date
of less than one year or (ii) that incurred pursuant to existing Contracts
disclosed in the schedules delivered pursuant hereto;
(vi) make or institute any unusual or novel method of
transacting business or change any accounting procedures or practices or its
financial structure;
(vii) make any amendments to or changes in its articles
or certificate of incorporation or association or bylaws;
(viii) perform any act, or attempt to do any act, or
permit any act or omission to act, which will cause a breach of any material
contract, commitment or obligation to which IMX is a party; or
(ix) take any action or incur any liability or
obligation which, if taken or incurred prior to the date of this Agreement,
would be required to be disclosed on any Schedule hereto.
(b) Preservation of Business. IMX shall carry on the Business
diligently and substantially in the same manner as heretofore conducted and
shall keep its business organizations intact, including its present employees
and present relationships with suppliers and customers and others having
business relations with IMX. IMX will at all times maintain in inventory
quantities of raw materials, component parts, work in process, finished goods
and other supplies and materials sufficient to allow the LLC to continue to
operate the Business, after the Closing Date, free from any shortage of such
items.
11.4. Taxes.
(a) IMX shall pay all applicable sales, use or other similar
transfer
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Taxes that are, or become, due or payable as a result of the transfer or
delivery of the Contributed Assets hereunder, whether levied on MEDICIS, LLC or
IMX. IMX shall prepare, subject to LLC's reasonable approval, and file any
Returns required in respect of such Taxes.
(b) All real estate, personal property, ad valorem and any
other local or state Taxes relating to the Contributed Assets or the Business
which shall be accrued but unpaid as of the Closing Date, shall be prorated to
the Closing Date and shall be paid by IMX to any Government levying such Taxes,
if such Taxes are levied directly against IMX, or to LLC if such Taxes are
levied against LLC or MEDICIS.
12. INVENTIONS. IMX acknowledges and agrees that the Contributed
Intellectual Property shall be the sole and exclusive property of LLC and,
unless otherwise agreed by the parties in writing or in this Section 12, the New
Intellectual Property shall be the sole and exclusive property of LLC and IMX
shall have no rights thereto other than the limited right to use the same for
the purposes reasonably related to its obligations under this Agreement.
12.1 New Intellectual Property. IMX and LLC agree to make prompt and
full disclosure to MEDICIS of all New Intellectual Property and advise MEDICIS,
regularly, of all work being done by IMX or LLC on any New Intellectual
Property.
(a) To the extent IMX or any of its directors, officers,
employees, consultants, agents, successors or assigns ("Agents") would be deemed
by law to be owners of any rights to the New Intellectual Property (other than
pursuant to agreement between the parties evidenced in writing), IMX hereby
assigns to LLC and hereby agrees to cause its Agents to assign to LLC all such
rights to the New Intellectual Property, effective upon its creation.
(b) IMX shall cooperate with LLC or MEDICIS, as LLC's agent or
assignee, provide all reasonable assistance and information, and execute any and
all applications, assignments or other instruments which LLC or MEDICIS may deem
necessary in order to enable LLC, at LLC's expense:
(i) to apply for, prosecute and obtain any patents,
trademarks, copyrights or other legal protection in the United States or foreign
countries for the New Intellectual Property; or
(ii) in order to assign or convey to or vest in LLC or
MEDICIS, as the case may be, the sole and exclusive right, title and interest in
and to the New Intellectual Property.
(c) LLC hereby agrees that upon MEDICIS's request and for
reasonable consideration to be determined at the time of such request, LLC shall
assign to MEDICIS all LLC's right, title and interest to the New Intellectual
Property.
(d) If IMX intends to incorporate into any New Intellectual
Property any Intellectual Property which IMX claims is proprietary to any person
other than LLC or MEDICIS (the "Other Intellectual Property"), IMX shall first
notify LLC and MEDICIS of such
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intention before its incorporation into any New Intellectual Property. IMX shall
incorporate the Other Intellectual Property into such property only upon the
written consent of LLC and MEDICIS. If such Other Intellectual Property is so
incorporated, IMX hereby:
i) Grants to LLC or MEDICIS, as the case may be, a
perpetual, irrevocable, world-wide, royalty-free right to use (and sublicense
others to use) the Other Intellectual Property so incorporated effective upon
delivery which shall be exclusive to LLC or MEDICIS, as the case may be, with
respect to IMX Intellectual Property and non-exclusive if such Intellectual
Property belongs to a third party; and
ii) Represents and warrants that the use of the Other
Intellectual Property by LLC or MEDICIS (and its Affiliates and sublicensees)
will not infringe upon or violate any patent, copyright, trade secret or other
proprietary right of any third party.
13. NONCOMPETE. IMX acknowledges and agrees that (i) the MEDICIS
Contribution and the LLC Consideration as well as the consideration and benefits
to be provided to LLC under this Agreement and the Major Agreements have been
bargained and negotiated in exchange for, and in consideration of, IMX's
agreement to abide by the covenants contained in this Section 13 and other
noncompetition agreements to be executed in connection with this Agreement; (ii)
the continued involvement by IMX in a business in competition with LLC or
MEDICIS would diminish the value of the IMX Contribution to a level where
MEDICIS would not receive the benefit of its bargain to participate in the joint
venture; and (iii) as an inducement to MEDICIS to participate in the joint
venture, IMX has agreed not to compete with LLC and MEDICIS and to refrain from
making disclosures to the extent set forth below.
13.1 Restrictive Covenants. IMX covenants and agrees that for a
period that is the lesser of (i) three years from the date of termination of the
LLC, whether by dissolution, liquidation or otherwise, or (ii) three years from
the date after which IMX holds less than 10% of the total interest outstanding
in the LLC (the "Restricted Period"), IMX will not, without the express written
approval of MEDICIS:
(a) directly or indirectly, in one or a series of
transactions, own, manage, operate, control, invest or acquire an interest
in, or otherwise engage or participate in, whether as a proprietor,
partner, stockholder, lender, director, officer, employee, joint venturer,
investor, lessor, supplier, customer, agent, representative or other
participant, in any business which competes ("Competitive Business"),
directly or indirectly, with any business conducted, or engaged in, or
proposed to be conducted or engaged in, by LLC or MEDICIS as of the
Closing Date or at any time during IMX's term of investment with LLC (the
"LLC Business") located in any county in the United States of America and
each similar jurisdiction in any other country in which the LLC Business
is conducted or engaged in by LLC or MEDICIS, or is proposed to be
conducted or engaged in by LLC or MEDICIS, as of the Closing Date or at
any time during IMX's term of investment with LLC (the "Market") without
regard to (A) whether the Competitive Business has its office,
manufacturing or other business facilities within or without the Market,
(B) whether any of the activities of IMX referred to above occur or are
performed within or without the Market,
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or (C) whether IMX resides, or reports to an office, within or without the
Market; provided, however, that (x) IMX may, anywhere in the Market,
directly or indirectly, in one or a series of transactions, own, invest or
acquire an interest in up to five percent of the capital stock of a
corporation whose capital stock is traded publicly, or that (y) IMX may
accept employment or engagement as an independent consultant with LLC,
MEDICIS or any successor company to LLC or MEDICIS.
(b) directly or indirectly, in one or a series of
transactions, (A) recruit, solicit or otherwise induce or influence any
proprietor, partner, stockholder, lender, director, officer, employee,
sales agent, joint venturer, investor, lessor, supplier, customer, agent,
representative or any other person which has a business relationship with
LLC or MEDICIS to discontinue, reduce or modify such employment, agency or
business relationship with LLC or MEDICIS, or (B) employ or seek to employ
or cause any Competitive Business to employ or seek to employ any person
or agent who is then (or was at any time within six months prior to the
date IMX or the Competitive Business employs or seeks to employ such
person) employed or retained by LLC or MEDICIS. Notwithstanding the
foregoing, nothing herein shall prevent IMX from providing a letter of
recommendation to an employee with respect to a future employment
opportunity.
13.2 MEDICIS/Meyer-Zall Relationship. MEDICIS covenants and agrees
that it shall not attempt to expand its relationship with Meyer-Zall
Laboratories to matters that are not related to or arise out of the IMX
Contribution or any New Products purchased by MEDICIS under the New Product
Agreement without the prior written approval of IMX.
13.3 Severability. LLC, MEDICIS and IMX believe the covenants
against competition contained in this Section 13 are reasonable and fair in all
respects, and are necessary to protect the interests of LLC and MEDICIS.
However, in case any one or more of the provisions or parts of a provision
contained in this Section 13 shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Section 13 or this Agreement or any other jurisdiction, but
this Section 13 shall be reformed and construed in any such jurisdiction as if
such invalid or illegal or unenforceable provision or part of a provision had
never been contained herein and such provision or part shall be reformed so that
it would be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction. Without limiting the foregoing, the parties intend that the
covenants and agreements contained in Section 13.1 shall be deemed to be a
series of separate covenants and agreements, one for each county or other
jurisdiction of the Market. If, in any judicial proceeding, a court shall refuse
to enforce all the separate covenants and agreements deemed to be included in
Section 13.1, it is the intention of the parties hereto that the covenants and
agreements which, if eliminated, would permit the remaining separate covenants
and agreements to be enforced in such proceeding shall, for the purpose of such
proceeding, be deemed eliminated from Section 13.1.
14. TERM AND TERMINATION.
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14.1 Term. Unless earlier terminated as provided herein, this
Agreement shall continue in force until the earlier of (i) the dissolution or
liquidation of LLC; (ii) the date on which IMX is no longer the owner of 10% or
more of any interest in LLC.
14.2 Default. In the event that any party hereto shall materially
breach any of the provisions contained in this Agreement or in any of the Major
Agreements, which breach has not been cured within thirty (30) days after
written notice to the defaulting party by the non-defaulting party, the
non-defaulting party may terminate this Agreement without further notice to the
defaulting party.
14.3 Termination. Upon the effective date of the termination of this
Agreement:
(a) If the termination is due to the default of either party
under Section 14.2 above, the LLC shall immediately cease doing business, except
as is necessary to wind up its affairs in an orderly manner and the assets of
LLC shall be distributed as set forth in the LLC Agreement.
(b) The obligations of the parties hereto contained in
Sections 3, 6, 7, 9-15, 17-20, inclusive shall survive the termination of this
Agreement.
(c) If the termination is due to a default of IMX under
Section 14.2 above, MEDICIS shall have the right to immediate possession of all
Contributed Intellectual Property and all New Intellectual Property as well as
copies of all such Intellectual Property in the possession of or under the
control of IMX and IMX shall promptly deliver the same to MEDICIS.
(d) If the termination is due to a default by MEDICIS under
Section 14.2, LLC shall have the right to maintain possession of all Contributed
Intellectual Property and all New Intellectual Property as well as copies of all
such Intellectual Property in the possession of or under the control of IMX and
IMX shall promptly deliver the same to LLC.
(e) Any amounts owing which are due to the breaching party by
the other party may be withheld and applied to offset any damages occasioned by
such breach.
(f) No termination of this Agreement or termination of the JV
or LLC shall constitute a waiver by any party hereto of any other rights or
remedies which it may have against the other, nor shall it constitute a
termination of any license arrangement between the parties hereto relating to a
New Product.
15. CONFIDENTIALITY. Subject to any limitations on confidentiality
obligations imposed by applicable Laws of any Government, each of MEDICIS and
IMX shall use all confidential information of the other party or LLC solely for
the purposes of carrying out their obligations and exercising their rights
hereunder, provided however, that subject to the New Products Agreement, MEDICIS
shall be permitted to use and/or disclose the confidential
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information of the LLC after IMX no longer holds an interest in the LLC or prior
to such time, if such use and/or disclosure will not or does not materially
affect the LLC's Net Sales.
15.1 Each party shall treat all confidential information as
confidential and proprietary and shall take reasonable steps to hold such
information in confidence, to protect against its unauthorized disclosure and to
restrict its use to those purposes consistent with the rights of the parties
hereto including without limitation having such party's employees and
consultants execute written agreements agreeing to abide by the confidential
obligations of such party.
15.2 Neither party shall be obligated to protect or hold in
confidence any confidential information which is:
(a) legally known to and reduced to writing by the receiving
party prior to the disclosure by the other party except this exception shall not
apply to IMX in relation to the confidential information contained in the
Contributed Assets;
(b) known or becomes known, to third parties knowledgeable in
the industry without the fault or negligence of the receiving party; or
(c) subsequently rightly received from a third party without
similar restriction and without a breach of this Agreement; or
(d) independently developed by the receiving party without
recourse to the confidential information or breach of this Agreement; or
(e) approved for release by written authorization of the
providing party; or
(f) disclosed pursuant to a governmental requirement or
disclosure is permitted by operation of law.
16. CONDITIONS TO MEDICIS's OBLIGATIONS. The obligations of MEDICIS to
consummate the transactions provided for in this Agreement shall be subject to
the satisfaction of each of the following conditions on or before the Closing
Date, subject to the right of MEDICIS to waive any one or more of such
conditions:
16.1 Representations and Warranties of IMX. The representations and
warranties of IMX contained in this Agreement, including the Schedules hereto,
and in the certificates and papers to be delivered to MEDICIS and LLC pursuant
hereto and in connection herewith shall be true and correct in all material
respects on the date hereof and on the Closing Date (except for changes
specifically permitted hereunder) as though such representations and warranties
were made on the Closing Date.
16.2 Approval by IMX's Shareholders. The shareholders of IMX shall
have, in a general meeting duly noticed and conducted, approved and adopted this
Agreement and the
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other Major Agreements and the transactions contemplated hereby and thereby in
accordance with all applicable requirements of Law and the articles or
certificate of incorporation or association and bylaws of IMX. Evidence of the
taking of such action, in a form satisfactory to MEDICIS and its counsel, shall
be delivered to MEDICIS prior to or at the Closing.
16.3 Performance of this Agreement. IMX shall have duly performed or
complied in all material respects with all of the obligations to be performed or
complied with by it under the terms of this Agreement and the other Major
Agreements on or prior to the Closing Date.
16.4 No Material Adverse Change. There shall have been no material
adverse change, actual or threatened, in connection with the Business (including
relationships with customers or vendors for any reason), whether or not covered
by insurance, as a result of any cause whatsoever.
16.5 Certificate of IMX. MEDICIS shall have received a certificate
signed by the President and Treasurer of IMX dated as of the Closing Date and
subject to no qualification certifying that the conditions set forth in Sections
16.1, 16.3, 16.4, 16.5, 16.12, 16.13, 16.14, 16.15 and 16.17 hereof have been
fully satisfied. Such certificate shall be deemed a representation and warranty
of IMX under this Agreement.
16.6 Documents. LLC shall receive from IMX on the Closing Date:
(a) a fully executed Assignment and Assumption Agreement in
the form of Exhibit G attached hereto and other appropriate documents conveying
to LLC good and marketable title to the Contributed Assets, other than the
Contributed Intellectual Property; and
(b) a fully executed Assignment of the trademark, "Exorex" and
any other trademarks or tradenames used in the Business in the form of Exhibit H
attached hereto and such other appropriate documents conveying to LLC good and
marketable title to the trademark; and
(c) a fully executed Computer Software License in the form to
be agreed between the parties and copies of the object code and source code, in
machine and human readable form, as appropriate, and all supporting instructions
and documentation relating to the use of the software; and
(d) a fully executed Exclusive Distribution Agreement
Assignment in the form of Exhibit I attached hereto and a related side letter.
16.7 Facility Agreement. IMX shall have executed and delivered the
Facility Agreement.
16.8 Consulting Agreement. IMX shall have executed and delivered the
Consulting Agreement and each Significant Employee shall have executed and
delivered the Nondisclosure Agreement.
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16.9 New Product Agreement. IMX shall have executed and delivered
the New Product Agreement.
16.10 No Lawsuits. No suit, action or other proceeding or
investigation shall be threatened or pending before or by any court or
Government concerning this Agreement or the consummation of the transactions
contemplated hereby, or in connection with any claim against IMX not disclosed
herein or on the Schedules hereto. No Government shall have threatened or
directed any request for information concerning this Agreement, the transaction
contemplated hereby or the consequences or implications of such transaction to
LLC, MEDICIS or IMX, or any officer, director, employee or agent of each of
them.
16.11 No Restrictions. There shall exist no conditions, restrictions
or reservations materially affecting the title to or utility of the Contributed
Assets which would prevent LLC from occupying and utilizing the Contributed
Assets, or any part thereof, to the same full extent that IMX might continue to
do so if the sale and transfer contemplated hereby did not take place including
without limitation no conditions of IMX such that the transactions contemplated
hereby would be considered preferential or fraudulent transfers under applicable
Laws.
16.12 Consents. All consents and approvals necessary to insure that
LLC will continue to have the same full rights in respect to the Contributed
Assets as IMX had immediately prior to the consummation of the transaction
contemplated hereunder shall have been obtained.
16.13 Releases. At the Closing or within three days thereafter, IMX
shall deliver to LLC and MEDICIS the written release of all Liens relating to
the Contributed Assets, executed by the holder of or parties to each such Lien.
The releases shall be satisfactory in substance and form to MEDICIS and its
counsel.
16.14 Termination of Employees. IMX shall have effectively
terminated all of the employees included in the Contributed Assets in compliance
with all applicable Laws, including the WARN Act, and shall have paid to all
such terminated employees all amounts then due and owing such employees plus all
accrued but not taken vacation and other pay.
16.15 Bulk Sales. IMX at its expense shall have taken all action
required, including preparation and, in cooperation with MEDICIS, mailing of a
notice to creditors, to effect compliance with any applicable bulk sales Law.
16.16 Due Diligence. MEDICIS shall be satisfied in all respects with
the contents of the Schedules hereto which may be amended until the Closing Date
and the results of its due diligence review in connection with the Business,
including without limitation the Financial Statements, the validity of the
Contributed Intellectual Property, customer, vendor, and other third person
relationships and environmental, tort, securities, corporate, product liability,
employee benefits, taxation and insurance matters.
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16.17 Further Assurances. MEDICIS shall have received such further
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
17. CONDITIONS TO IMX'S OBLIGATIONS. The obligations of IMX to consummate
the transactions provided for in this Agreement shall be subject to the
satisfaction of each of the following conditions on or before the Closing Date,
subject to the right of IMX to waive any one or more of such conditions:
17.1 Performance of the Major Agreements. MEDICIS shall have duly
performed or complied in all material respects with all of the obligations to be
performed or complied with by it under the terms of this Agreement and the other
Major Agreements on or prior to the Closing Date.
17.2 Approval by IMX's Shareholders. The shareholders of IMX shall
have, in a general meeting duly noticed and conducted, approved and adopted this
Agreement and the other Major Agreements and the transactions contemplated
hereby and thereby.
17.3 Payment of MEDICIS Contribution and LLC Consideration and
Assumption of Liabilities. IMX shall receive from MEDICIS and LLC, as
applicable, on the Closing Date, the MEDICIS Contribution and the LLC
Consideration, and the Assumption and Assignment Agreement duly executed by LLC.
17.4 Facility Agreement. LLC shall have executed and delivered the
Facility Agreement.
17.5. Consulting Agreement. LLC shall have executed and delivered
the Consulting Agreement.
17.6 Service Agreement. MEDICIS shall have executed and delivered
the Service Agreement.
17.7 Stock Purchase Agreement. MEDICIS shall have executed and
delivered the Stock Purchase Agreement.
17.8 Further Assurances. IMX shall have received such further
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
18. INDEMNIFICATION
18.1 Survival of Representations and Warranties. All representations
and warranties of the parties made in this Agreement and the other Major
Agreements or in any exhibit, statement, Schedule, certificate, instrument or
document delivered pursuant hereto and
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thereto shall survive the Closing and shall remain in effect for a period of two
years after the Closing Date and shall thereupon terminate and be of no further
force and effect; provided, however, that the foregoing shall not apply to
representations and warranties under Sections 9.8, 9.11, 9.21, 9.22, 9.27, 9.28
and 9.29; and provided, further, that this shall not prohibit any claim for
Indemnified Losses pursuant to Section 18.2(a) after such applicable survival
period with respect to Indemnified Losses as to which the indemnifying party has
received notice in accordance with this Section 18 prior to the expiration of
such survival period. The expiration of any representation or warranty made in
this Agreement or in any exhibit, statement, Schedule, certificate, instrument
or document delivered pursuant hereto shall not impair or restrict the rights
that any party could assert with respect to any and all remedies at law or in
equity in the absence of such representation or warranty. All representations
and warranties hereunder shall be deemed to be material and, except as otherwise
specifically provided herein, relied upon by the parties with or to whom the
same were made, notwithstanding any investigation or inspection made by or on
behalf of such party or parties.
18.2 Indemnification of MEDICIS and LLC. IMX hereby agrees to
indemnify and hold MEDICIS and its subsidiaries and Affiliates and the LLC
(together with their shareholders, directors, officers, employees, successors,
assigns and agents of each of them) (collectively, the Indemnified Parties")
harmless from, against and in respect of, and waives any claim for contribution
or indemnity with respect to, any and all claims, losses, damages, liabilities,
expenses or costs ("Losses"), plus reasonable attorneys' fees and expenses
and/or enforcement of this Agreement, plus interest from the date incurred
through the date of payment at the prime lending rate of Citibank, N.A. from
time to time prevailing (in all, "Indemnified Losses") incurred or to be
incurred by any of them (a) to the extent resulting from or arising out of, or
alleged to result from or arise out of, any breach or violation of the
representations, warranties, covenants or agreements of the IMX contained in
this Agreement and the other Major Agreements, or in any exhibit, statement,
Schedule, certificate, instrument or document delivered pursuant hereto and
thereto, including provisions of this Section 18, and (b) to the extent
resulting from or arising out of, or alleged to result from or arise out of, any
liability or obligation not expressly assumed by LLC hereunder, (c) the conduct
or operation of the Business of IMX; (d) the failure of IMX to perform any term,
condition, or obligation required by this Agreement or any of the Major
Agreements to be performed by IMX; or (e) any act or omission of gross
negligence, willful misconduct or bad faith by IMX in connection with its
performance of its obligations under this Agreement or any Major Agreement.
Notwithstanding the foregoing, the IMX shall not have any liability to the
Indemnified Parties for any Liabilities resulting primarily and directly from
the Indemnified Parties' negligence, willful misconduct.
18.3 Limitations. The Indemnified Parties shall not be entitled to
recover Indemnified Losses under this Section 18 until such Indemnified Losses
exceed a threshold amount of $25,000 in the aggregate, but once the Indemnified
Losses exceed such threshold amount, the Indemnified Parties shall be able to
recover the entire amount of the Indemnified Losses from IMX including the first
$25,000 of such Indemnified Losses.
18.4 Set-off Rights. MEDICIS and LLC shall be entitled to set off
any amounts owing by IMX to the Indemnified Parties, or any of them, pursuant to
this Section 18 or
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otherwise, against any amounts owed to IMX by MEDICIS or LLC. If it is
determined by a court of competent jurisdiction, after all appeals have been
exhausted by MEDICIS or LLC, or after the expiration of all applicable appeal
periods, that MEDICIS or LLC was not, in any particular circumstance, entitled
to invoke the set-off rights contained herein, MEDICIS or LLC shall pay, on
demand, the reasonable attorney's fees and expenses incurred by the IMX, or any
of them, in connection with such determination.
18.5 Participation in Litigation. In the event any suit or other
proceeding is initiated against an Indemnified Party with respect to which
MEDICIS alleges IMX is or may be obligated to indemnify an Indemnified Party
hereunder, IMX shall be entitled to participate in such suit or proceeding, at
its expense and by counsel of its choosing, provided that (a) such counsel is
reasonably satisfactory to MEDICIS, and (b) MEDICIS shall retain primary control
over such suit or proceeding. Such counsel shall be afforded access to all
information pertinent to the suit or proceeding in question. MEDICIS shall not
settle or otherwise compromise any such suit or proceeding without the prior
consent of IMX, which consent shall not be unreasonably withheld, if the effect
of such settlement or compromise would be to impose liability on IMX hereunder.
18.6 Claims Procedure. In the event from time to time MEDICIS
believes that it or any other Indemnified Party has or will suffer any Losses
for which IMX is obligated to indemnify it hereunder, it shall promptly notify
IMX in writing of the matter, specifying therein the reason why MEDICIS believes
that IMX is or will be obligated to indemnify, the amount, if liquidated, to be
indemnified, and the basis on which MEDICIS has calculated such amount; if not
yet liquidated, the notice shall so state; provided, however, that the right of
a person to be indemnified hereunder shall not be adversely affected by a
failure to give such notice unless, and then only to the extent that, an
Indemnifying Party is prejudiced thereby. IMX shall pay any amount to be
indemnified hereunder not more than five days after receipt of notice from
MEDICIS of the liquidated amount to be indemnified.
18.7 Tax Indemnification. In addition to any other indemnification
granted herein and notwithstanding the survivability or limits, if any, of any
representation contained herein or the absence of any representation herein, IMX
agrees to indemnify, defend and hold harmless MEDICIS and LLC, their Affiliates
and their respective officers, directors, employees and agents from and against
all loss, liability, including IMX's liability for its own Taxes or its
liability, if any (for example, by reason of transferee liability or application
of Treas. Reg. Section 1.1502-6) for Taxes of others, damage or reasonable
expense (including but not limited to reasonable attorneys' fees and expenses)
(collectively, "Costs") payable with respect to Taxes claimed or assessed
against MEDICIS or the Contributed Assets (i) for any taxable period ending on
or before the Closing Date or (ii) for any taxable period resulting from a
breach of any of the representations or warranties contained in Section 9.8
hereof. IMX also agrees to indemnify, defend and hold harmless MEDICIS and LLC
from and against any and all costs sustained in a tax period of LLC ending after
the Closing Date arising out of the settlement or other resolution of a proposed
tax adjustment which relates to a tax period ending on or before the Closing
Date.
19. ARBITRATION.
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19.1 The parties shall promptly submit to arbitration any dispute
which may arise in connection with this Agreement (or the transactions or
relationships contemplated thereby) that is not promptly resolved by them,
except that MEDICIS or LLC may seek injunctive relief for breaches of Sections
12, 13 or 15 of this Agreement if either party makes a good faith determination
that such breach by the other party will result in irreparable harm and that
injunctive relief is the only adequate remedy. Neither any provision of, nor the
exercise of any right under this Article shall limit the right of any party
before, during and after the pendency of the Arbitration to exercise any
self-help remedies such as, for example, set-off. The institution, use or
maintenance of any such remedies shall not constitute a waiver of the right of
any party to submit the controversy or claim to Arbitration.
19.2 The American Arbitration Association shall have jurisdiction
over any arbitration, which shall be conducted in Maricopa County, Arizona, in
accordance with the Commercial Arbitration Rules of such Association, except as
modified by agreement of the parties.
19.3 In the event a dispute is to be submitted to arbitration
pursuant to this Section 19, the parties agree that the dispute shall be
resolved by a private arbitration conducted by one arbitrator. Within ten (10)
days after the submission of such dispute to arbitration, the parties shall
agree upon one arbitrator, selected from a panel of five individuals, none of
whom is an officer, director or employee of a party or an affiliate of such
party, or a person who has a direct or indirect personal or financial interest
in the outcome of the arbitration, designated by the American Arbitration
Association from its permanent panel of commercial arbitrators. The parties
shall select the arbitrator by alternately striking names of the individuals so
designated until only one name remains. A coin toss will determine which party
is to strike the first name.
19.4 The arbitrator shall set a hearing date for an arbitration (the
"Hearing") within 90 days from the date the arbitrator is selected, unless
otherwise agreed by the parties. At least 15 days before the Hearing, each party
shall submit to the arbitrator a list of all witnesses and exhibits which it
intends to present at the Hearing. No later than ten days before the Hearing,
each party shall provide to the arbitrator a short (not to exceed five
single-spaced pages or such other page limit as the arbitrator permits)
statement of its position with regard to the dispute. Notwithstanding the
Commercial Arbitration Rules, each party shall have the right to conduct up to a
total of two depositions and may serve upon any other party one or more requests
for the production of documents. No other discovery may be conducted absent
agreement of the parties or an order of the arbitrator. At the Hearing, each
party shall, unless it waives the opportunity, make an oral opening statement
and an oral closing statement. The arbitrator shall not be strictly bound by
rules of procedure or rules of evidence, but shall use the Federal Rules of
Evidence as a guideline in conducting the Hearing. When testimony is complete
and each party has introduced its exhibits pursuant to the provisions of this
Agreement, and each party has made a closing statement pursuant to the
provisions of this Agreement or waived the opportunity to do so, the arbitrator
shall declare the Hearing closed; provided that the parties may submit
post-hearing briefs pursuant to an agreed upon schedule or a schedule formulated
by the arbitrator. The Hearing shall be held at a location agreed upon by the
parties and convenient for the arbitrator, or if the parties cannot agree upon a
location, at a location designated by the
32
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arbitrator. The Hearing shall be conducted in private. Attendance at the hearing
shall be limited to the following: (i) the arbitrator; (ii) representatives of
each party; (iii) each party's attorneys and attorneys' assistants or advisors,
if any, including expert witnesses, if any; (iv) a court reporter if requested
by either party; and (v) any witnesses. The arbitrator may sequester witnesses
upon the motion of a party. Within 30 days of the close of the Hearing or
submission of the post-hearing briefs, the arbitrator shall issue a written
opinion and award (the "Award") based on evidence, arguments and post-hearing
briefs, if any. The Award shall be a decision of the arbitrator, shall resolve
the parties' dispute and shall be final and binding on the parties. Except as
otherwise provided in this Agreement, there shall be no ex parte communication
regarding the subject matter of the Hearing between a party or its attorneys and
the arbitrator from the time the arbitrator is appointed until after the parties
receive the Award. The parties may agree to submit the dispute to the arbitrator
without a Hearing, in which event the arbitrator will render and deliver to the
parties a written opinion and Award within 30 days of being notified that the
parties waive the Hearing. Notwithstanding any other provision of this
Agreement, the arbitrator shall have no power to delete from, add to or modify
the terms of this Agreement, and may not award any remedy which effectively
conflicts directly or indirectly with any provision of this Agreement.
19.5 In any arbitration, all of the reasonable costs and expenses of
the Successful Party (including reasonable attorneys' fees and expenses), all
fees and expenses of experts retained by the Successful Party and all costs of
the arbitrator shall be borne the Losing Party in such arbitration. The "Losing
Party" and the "Successful Party" shall be determined by the arbitrator based on
the relative success or failure of each party to such arbitration.
20. MISCELLANEOUS
20.1 Choice of Forum and Governing Law. The parties hereby agree
that: (i) subject to Section 19, any claims or litigation involving any
noncompliance with or breach of the Agreement, or regarding the interpretation,
validity and/or enforceability of the Agreement, shall be filed and conducted
exclusively in the state or federal courts in Maricopa County, Arizona, (ii) the
parties consent to such jurisdiction, agree that venue will be proper in such
courts and waive any objections based upon forum non conveniens; and (iii) the
Agreement shall be deemed to be made in and in all respects shall be
interpreted, construed and governed by and in accordance with the laws of the
State of Delaware, without regard for any conflict of law principles. The choice
of forum set forth in this Section 20 shall not be deemed to preclude the
enforcement of any action under this Agreement in any other jurisdiction
20.2 Severability. In the event any portion of this Agreement shall
be held illegal, void or ineffective, the remaining portions hereof shall,
remain in full force and effect. If any of the terms or provisions of this
Agreement are in conflict with any applicable statute or rule of law, then such
terms or provisions shall be deemed inoperative to the extent that they may
conflict therewith and shall be deemed to be modified to conform with such
statute or rule of law. In the event that the terms and conditions of this
Agreement are materially altered, the parties will renegotiate the terms and
conditions of this Agreement to resolve any inequities in an attempt to carry
out to the extent legally permissible the severed or altered portion.
33
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20.3 Assignment; Binding Agreement.
(a) This Agreement and all or any part of LLC's rights and
obligations hereunder may be assigned by LLC at any time to any Affiliate of
LLC. LLC shall cause such Affiliate(s) to perform any of LLC's obligations
hereunder which are assigned to such Affiliate(s).
(b) Neither this Agreement nor any of IMX's rights or
obligations hereunder may be assigned by IMX without LLC's prior written
consent.
(c) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and to their respective successors and
permitted assigns. This Agreement is not intended, nor shall be construed, to
give any person other than the parties hereto and their respective successors,
assigns and legal representatives, any legal or equitable right, remedy or claim
hereunder.
20.4 Non-Disclosure of Information. Without the prior written
consent of MEDICIS, IMX will not disclose or reveal to any third Person any
confidential, non-public or commercially valuable information (a) concerning
MEDICIS or LLC to which IMX was exposed in connection with this Agreement or the
other Major Agreements, (b) in connection with the Business.
20.5 Remedies. Nothing contained herein is intended to or shall be
construed to limit the remedies which either party may have against the other in
the event of a breach of or default under this Agreement, it being intended that
any remedies shall be cumulative and not exclusive.
20.6 Non-Waiver of Rights. The failure to enforce at any time any of
the provisions of this Agreement or to require at any time performance by the
other party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement, or
any part hereof, or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.
20.7 Entire Agreement and Modification. This Agreement, including
the Schedules and Exhibits attached hereto, and the other Major Agreements and
the documents delivered pursuant hereto, constitutes the entire agreement
between the parties. No changes of, modifications of, or additions to this
Agreement shall be valid unless the same shall be in writing and signed by all
parties hereto.
20.8 Counterparts. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
20.9 Cooperation. Each party agrees to cooperate and to take such
further action and to execute and deliver such additional instruments and
documents as the other party
34
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may, from time to time, reasonable request in order to effectuate and accomplish
the purpose of this Agreement.
20.10 Headings; Interpretation. The section headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of the Agreement. Both parties have participated
substantially in the negotiation and drafting of this Agreement and each party
hereby disclaims any defense or assertion in any litigation or arbitration that
any ambiguity herein should be construed against the draftsman.
20.11 Payment of Fees and Expenses. Each party hereto shall pay all
fees and expenses of such party's respective counsel, accountants and other
experts and all other expenses incurred by such party incident to the
negotiation, preparation and execution of this Agreement and the consummation of
the transaction contemplated hereby, including any finder's or brokerage fees.
20.12 Notices. All written notices or other written communications
required under this Agreement shall be deemed properly given when provided to
the parties entitled thereto by personal delivery (including delivery by
commercial services such as messengers and airfreight forwarders) or by mail
sent registered or certified mail, postage prepaid at the following addresses
(or to such other address of a party designated in writing by such party to the
others):
If to LLC: Medicis Consumer Products Company, L.L.C.
c/o Medicis Pharmaceutical Corporation
4343 East Camelback, Suite 250
Phoenix, Arizona 85018-2700
Attention: Jonah Shacknai
If to MEDICIS: Medicis Partners Incorporated
c/o Medicis Pharmaceutical Corporation
4343 East Camelback, Suite 250
Phoenix, Arizona 85018-2700
Attention: Jonah Shacknai
with a copy to: Bryan Cave LLP
2800 North Central Avenue
21st Floor
Phoenix, Arizona 85004-1098
Attention: Frank M. Placenti, Esq.
If to IMX: IMX Pharmaceutical Corporation
2295 Corporate Boulevard
Boca Raton, Florida 33431
Attn: William Forster
35
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with a copy to: Nason, Yeager, Gerson, White & Lioce, P.A.
1645 Palm Beach Lakes Boulevard
Suite 1200
West Palm Beach, Florida 33401
Attn: Gary N. Gerson
All written notices shall be deemed delivered and properly received upon the
earlier of two (2) days after mailing the confirmation notice or upon actual
receipt of the notice provided by personal delivery or electronic means.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on
the day and year first above written.
MEDICIS CONSUMER PRODUCTS COMPANY, L.L.C.
By: /s/ Jonah Shacknai
-------------------------------------------
Medicis Partners Incorporated, General Manager
By: Jonah Shacknai, Chairman and Chief
Executive Officer
MEDICIS PARTNERS INCORPORATED
By: /s/ Jonah Shacknai
-------------------------------------------
Jonah Shacknai, Chairman and Chief
Executive Officer
IMX PHARMACEUTICALS, INC.
By:____________________________________________
William Forster, President
36
<PAGE>
EXHIBIT A
LLC AGREEMENT
[See Exhibit 10.4.1]
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT C
NEW PRODUCT AGREEMENT
[See Exhibit 10.4.2]
<PAGE>
EXHIBIT D
CONSULTING AGREEMENT
<PAGE>
EXHIBIT E
FACILITY AGREEMENT
[See 10.4.3]
<PAGE>
EXHIBIT F
SERVICE AGREEMENT
<PAGE>
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
EXHIBIT H
TRADEMARK ASSIGNMENT
<PAGE>
EXHIBIT I
ASSIGNMENT OF EXCLUSIVE DISTRIBUTION AGREEMENT
<PAGE>
ADDENDUM DATED JUNE 18, 1998 TO JOINT VENTURE AGREEMENT BY AND
BETWEEN MEDICIS PARTNERS INCORPORATED, MEDICIS CONSUMER
PRODUCTS COMPANY, L.L.C., AND IMX PHARMACEUTICALS, INC. DATED
JUNE 12, 1998
As an amendment to certain provisions of the Joint Venture Agreement, the
parties agree as follows:
1. Paragraph 1.28 shall be amended so that it shall read as follows:
"Receivables." Receivables shall mean all accounts receivable of IMX
in connection with the Business that have been outstanding for less than 120
days at the Closing, and also all consignment or point of sale arrangements that
are outstanding.
2. There shall be added a final sentence to Paragraph 1.25 New
Intellectual Property as follows: Notwithstanding the foregoing, New
Intellectual Property shall not include any Intellectual Property relating to
any New Product.
IMX PHARMACEUTICALS, INC.
By: /s/ William A. Forster
----------------------------------------
William A. Forster, President
MEDICIS PARTNERS INCORPORATED
By: /s/ Mark A. Prygocki, Sr.
----------------------------------------
Mark A. Prygocki, Sr.
Chief Financial Officer
MEDICIS CONSUMER PRODUCTS
COMPANY, L.L.C.
By: /s/ Mark A. Prygocki, Sr.
----------------------------------------
Mark A. Prygocki, Sr.
Chief Executive Officer
<PAGE>
10.4.1
================================================================================
LIMITED LIABILITY COMPANY AGREEMENT
OF
MEDICIS CONSUMER PRODUCTS COMPANY, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
Dated as of June 18, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND INTERPRETATION......................................1
1.1 CERTAIN DEFINITIONS...................................................1
1.2 OTHER DEFINED TERMS...................................................5
1.3 INTERPRETATION........................................................6
ARTICLE II. INTRODUCTORY MATTERS...............................................7
2.1 FORMATION OF LLC......................................................7
2.2 NAME..................................................................7
2.3 PRINCIPAL OFFICE......................................................7
2.4 REGISTERED OFFICE AND REGISTERED AGENT................................7
2.5 PERPETUAL EXISTENCE...................................................7
2.6 BUSINESS AND PURPOSE OF THE LLC.......................................7
2.7 TITLE TO ALL PROPERTIES...............................................7
ARTICLE III. MEMBERS...........................................................8
3.1 MEMBERS; NO PERSONAL LIABILITY........................................8
3.2 TRANSACTIONS WITH THE LLC.............................................8
3.3 COMPENSATION OF MEMBERS...............................................8
3.4 NO REGULAR MEETINGS...................................................8
3.5 ACTIONS WITHOUT A MEETING.............................................8
3.6 REQUIRED VOTE.........................................................9
3.7 QUORUM AND EFFECT OF VOTE.............................................9
ARTICLE IV. CAPITAL CONTRIBUTIONS..............................................9
4.1 INITIAL CAPITAL CONTRIBUTIONS.........................................9
4.2 IMX CONTRIBUTED ASSETS................................................9
4.3 ADDITIONAL CONTRIBUTIONS..............................................9
4.4 RIGHTS WITH RESPECT TO CAPITAL.......................................10
4.5 GENERAL RULES FOR ADJUSTMENT OF CAPITAL ACCOUNTS.....................10
4.6 SPECIAL RULES WITH RESPECT TO CAPITAL ACCOUNTS.......................11
4.7 TRANSFEREE'S CAPITAL ACCOUNT.........................................11
ARTICLE V. ALLOCATION OF PROFITS AND LOSSES...................................11
5.1 ALLOCATION OF NET PROFITS AND NET LOSSES.............................11
5.2 RESIDUAL ALLOCATIONS.................................................12
5.3 QUALIFIED INCOME OFFSET..............................................12
5.4 MINIMUM GAIN CHARGEBACK..............................................12
5.5 MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK......................13
5.6 MEMBER NONRECOURSE DEDUCTIONS........................................13
5.7 SPECIAL ALLOCATIONS..................................................13
5.8 FEES TO MEMBERS OR AFFILIATES........................................13
5.9 SECTION 704(c) ALLOCATION............................................14
1
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ARTICLE VI. DISTRIBUTIONS.....................................................14
6.1 AVAILABLE CASH FLOW..................................................14
6.2 LIQUIDATING DISTRIBUTIONS............................................14
6.3 AUTHORITY TO WITHHOLD................................................15
ARTICLE VII. MANAGEMENT.......................................................15
7.1 MANAGERS.............................................................15
7.2 LIMITATIONS ON RIGHTS AND POWERS.....................................18
7.3 COMPENSATION OF MANAGERS.............................................19
7.4 EXPENSE REIMBURSEMENT................................................19
7.5 OTHER BUSINESS VENTURES..............................................19
ARTICLE VIII. RESTRICTIONS ON TRANSFER OF LLC INTERESTS; ADMISSION OF
NEW MEMBERS...................................................................19
8.1 TRANSFER OR ASSIGNMENT OF MEMBER'S INTEREST..........................19
8.2 VOID TRANSFERS.......................................................20
8.3 SUBSTITUTION OF MEMBERS..............................................20
8.4 ADMISSION OF NEW MEMBERS.............................................20
8.5 SUBSEQUENT TRANSFERS SUBJECT TO TERMS OF AGREEMENT...................20
8.6 RIGHTS OF LEGAL REPRESENTATIVES......................................20
8.7 PURCHASE TERMS VARIED BY AGREEMENT...................................21
ARTICLE IX. OPTION TO PURCHASE IMX'S INTEREST.................................21
9.1 MEDICIS OPTION TO PURCHASE...........................................21
9.2 RIGHT TO REQUIRE PURCHASE............................................22
ARTICLE X. TERMINATION AND DISSOLUTION........................................23
10.1 DISSOLUTION.........................................................23
10.2 DISASSOCIATION EVENT................................................23
10.3 CONDUCT OF BUSINESS.................................................23
10.4 FILING OF CERTIFICATE OF CANCELLATION...............................23
10.5 DISTRIBUTION OF NET PROCEEDS........................................24
ARTICLE XI. BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS.........................24
11.1 MAINTENANCE OF BOOKS AND RECORDS; REPORTS TO MEMBERS................24
11.2 INSPECTION AND AUDIT RIGHTS.........................................25
11.3 FISCAL YEAR.........................................................25
11.4 TAX MATTERS.........................................................25
11.5 INCOME TAX ELECTIONS................................................26
11.6 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS........................26
ARTICLE XII. INDEMNIFICATION OF MEMBERS, MANAGERS AND AFFILIATES.............26
2
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12.1 INDEMNIFICATION OF THE MEMBERS AND THEIR PRINCIPALS.................26
12.2 EXPENSES............................................................26
12.3 INDEMNIFICATION RIGHTS NON-EXCLUSIVE................................27
12.4 ERRORS AND OMISSIONS INSURANCE......................................27
12.5 ASSETS OF THE LLC...................................................27
ARTICLE XIII. ISSUANCE OF LLC CERTIFICATES....................................27
13.1 ISSUANCE OF LLC CERTIFICATES........................................27
13.2 TRANSFER OF LLC INTERESTS...........................................28
13.3 LOST, STOLEN OR DESTROYED CERTIFICATES..............................28
ARTICLE XIV. AMENDMENTS.......................................................28
14.1 AMENDMENT, ETC. OF OPERATING AGREEMENT..............................28
14.2 AMENDMENT OF CERTIFICATE OF FORMATION...............................29
ARTICLE XV. MISCELLANEOUS PROVISIONS..........................................29
15.1 CHOICE OF FORUM AND GOVERNING LAW...................................29
15.2 SEVERABILITY........................................................29
15.3 ASSIGNMENT; BINDING AGREEMENT.......................................29
15.4 ENTIRE AGREEMENT AND MODIFICATION...................................30
15.5 NON-DISCLOSURE OF INFORMATION.......................................30
15.6 REMEDIES............................................................30
15.7 NON-WAIVER OF RIGHTS................................................30
15.8 ENTIRE AGREEMENT AND MODIFICATION...................................30
15.9 COUNTERPARTS........................................................31
15.10 COOPERATION........................................................31
15.11 HEADINGS; INTERPRETATION...........................................31
15.12 PAYMENT OF FEES AND EXPENSES.......................................31
15.13 NOTICES............................................................31
15.14 SURVIVAL OF RIGHTS.................................................32
15.15 REPRESENTATIONS AND ACKNOWLEDGMENTS................................32
15.16 PARTITION..........................................................32
15.17 WAIVER.............................................................32
15.18 ATTORNEYS' FEES....................................................32
15.19 CONFIDENTIALITY AND PRESS RELEASES.................................33
ARTICLE XVI. MISCELLANEOUS...................................................33
16.1 ASSIGNMENT; BINDING AGREEMENT.......................................33
EXHIBIT A......................................................................1
INITIAL MEMBER NAMES AND ADDRESSES; INITIAL CAPITAL
CONTRIBUTIONS AND PERCENTAGE INTERESTS....................................1
EXHIBIT B......................................................................2
(FACE OF CERTIFICATE).....................................................2
3
<PAGE>
MEDICIS CONSUMER PRODUCTS CORPORATION, LLC
LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement (this "Agreement") is made and
entered into and effective as of June 5, 1999 by and between Medicis Partners
Incorporated, a Delaware corporation ("Medicis"), and IMX Pharmaceuticals, Inc.,
a Utah corporation ("IMX").
R E C I T A L S
WHEREAS, the Members have caused Medicis Consumer Products Corporation,
L.L.C. (the "LLC") to be formed pursuant to the provisions of the Delaware
Limited Liability Company Act as set forth in Title 6, Chapter 18 (commencing
with Section 18-101) of the Delaware Code (the "Statute"); and
WHEREAS, the Members do hereby adopt this Agreement as the limited
liability company agreement of the LLC.
NOW, THEREFORE, in consideration of the covenants and the promises made
herein, the parties hereto hereby agree as follows.
ARTICLE I.
DEFINITIONS AND INTERPRETATION
1.1 CERTAIN DEFINITIONS. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1, which shall be equally
applicable to both the singular and plural forms.
1.1.1 "Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant fiscal year of the LLC, after giving effect to the following
adjustments:
(i) increase such Capital Account by any amounts which such
Member is obligated to contribute to the LLC (pursuant to the terms of this
Agreement or otherwise) or is deemed to be obligated to contribute to the LLC
pursuant to Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) reduce such Capital Account by the amount of the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
1.1.2 "Affiliate" means, when used with reference to a specified
Person, (i) the Principal of the Person, (ii) any Person directly or indirectly
controlling, controlled by or under common control with such Person, (iii) any
Person owning or controlling 10% or more of the outstanding voting interests of
such Person and (iv) any relative or spouse of such Person.
1.1.3 "Agreement" means this Limited Liability Company Agreement, as
originally executed and as amended from time to time.
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1.1.4 "Available Cash Flow" means, with respect to any fiscal year
of the LLC or other period, the sum of all cash receipts of the LLC from any and
all sources, less all cash disbursements (including loan repayments, capital
improvements and replacements) and a reasonable allowance for Reserves,
contingencies and anticipated obligations, as determined by the Manager.
1.1.5 "Capital Contribution" means any money, property or services
rendered, or a promissory note or other binding obligation to contribute money,
property or services, that a Member contributes to the LLC as capital in such
Member's capacity as a Member and pursuant to an agreement among the Members,
including an agreement as to the value of such contribution.
1.1.6 "Certificate of Formation" means the certificate of formation
filed with the Delaware Secretary of State for the purpose of forming the LLC.
1.1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.1.8 "Depreciation" means, for each fiscal year of the LLC or other
period, an amount equal to the depreciation, amortization or other cost recovery
reduction allowable with respect to an asset for such fiscal year or other
period.
1.1.9 "Disassociation Event" means the death, retirement,
resignation, expulsion, bankruptcy or dissolution of a Member, or any other
event that terminates the continued membership in the LLC of a Member.
1.1.10 "Economic Interest" means a Person's right to share in the
Net Profits, Net Losses or similar items of, and to receive distributions from,
the LLC, but does not include any other rights of a Member including the right
to vote or to participate in the management of the LLC or, except as provided by
the Statute, any right to information concerning the business and affairs of the
LLC.
1.1.11 "General Manager" means the Person responsible for the
overall management and control of the business of the LLC pursuant to Section
7.1 hereof.
1.1.12 "LLC Interest" or "Interest" means an ownership interest in
the LLC, which includes the Economic Interest, the right to vote or participate
in the management of the LLC and the right to information concerning the
business and affairs of the LLC, as provided in this Agreement and under the
Statute. The Interests of the Members, and any portion thereof, constitute the
personal property of the holders.
1.1.13 "LLC Minimum Gain" means the amount determined by computing
with respect to each nonrecourse liability of the LLC, the amount of gain (of
whatever character), if any, that would be realized by the LLC if it disposed
(in a taxable transaction) of the Property subject to such liability in full
satisfaction thereof, and by then aggregating the amounts so computed as set
forth in Regulations Section 1.704-2(d).
1.1.14 "Major Agreements" means this Agreement, the joint venture
agreement
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by and among the parties and the LLC dated as of June 12, 1998 ("Joint Venture
Agreement") and the agreements attached thereto as exhibits which are an
integral part of the transaction contemplated therein including the consulting
agreement, the new product agreement, the facility agreement, the service
agreement and the stock purchase agreement.
1.1.15 "Majority in Interest of the Members" means, with respect to
any date of determination, more than 50% of the interests of the Members in the
current profits and capital of the LLC.
1.1.16 "Manager" means each Person designated or elected to manage
the LLC pursuant to Section 7.1 of this Agreement.
1.1.17 "Member Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
1.1.18 "Member Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Member Nonrecourse Debt, equal to the LLC Minimum Gain that
would result if such Member Nonrecourse Debt were treated as a nonrecourse
liability of the LLC, determined in accordance with Regulations Sections
1.704-2(i)(2) and (3).
1.1.19 "Member Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2). The amount of Member Nonrecourse Deductions
with respect to a Member Nonrecourse Debt for a fiscal year of the LLC equals
the excess (if any) of the net increase (if any) in the amount of Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt
during that fiscal year over the aggregate amount of any distributions during
that fiscal year to the Member that bears (or is deemed to bear) the economic
loss for such Member Nonrecourse Debt to the extent such distributions are from
the proceeds of such Member Nonrecourse Debt and are allocable to an increase in
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(2).
1.1.20 "Member" means a Person who is a signatory to this Agreement,
as the same may be amended from time to time, and who has not resigned,
withdrawn or been expelled as a Member or, if other than an individual, been
dissolved.
1.1.21 "Net Profits" and "Net Losses" mean, for each fiscal year of
the LLC or other period, an amount equal to the LLC's taxable income or loss for
such fiscal year or period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the LLC that is exempt from Federal income
tax and not otherwise taken into account in computing Net Profits or Net Losses
shall be added to such taxable income or loss;
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(ii) Any expenditures of the LLC described in Code Section
705(b)(2)(B) or treated as Code Section 705(b)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in
computing Net Profits or Net Losses shall be subtracted from such taxable income
or loss;
(iii) Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for Federal income tax purposes
shall be computed by reference to the fair market value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its fair market value;
(iv) In lieu of depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or other
period, computed in accordance with the Section 1.1.8 hereof, and
(v) Notwithstanding any other provision of this subsection,
any items of income, gain, loss or deduction which are specifically allocated
shall not be taken into account in computing Net Profits or Net Losses.
1.1.22 "Percentage Interest" means the percentage interest of a
Member as set forth on Exhibit A hereto, as the same may be amended from time to
time or supplemented by a register of LLC Interests or any other books and
records maintained by the LLC or its transfer agent or register for the purpose
of recording the interests of the LLC's Interest holders.
1.1.23 "Principal" means the individual who is in ultimate control
of a Member.
1.1.24 "Property" means all assets of the LLC, both tangible and
intangible, or any portion thereof.
1.1.25 "Regulations" means the Federal income tax regulations
promulgated by the Treasury Department under the Code, as such regulations may
be amended from time to time.
1.1.26 "Reserves" means funds set aside from Capital Contributions
or gross cash revenues as reserves. Such Reserves shall be maintained in amounts
reasonably deemed sufficient by the Managers for working capital and the payment
of taxes, insurance, debt service, repairs, replacements, renewals or other
costs or expenses incident to the business of the LLC.
1.2 OTHER DEFINED TERMS. The following terms have the meanings defined for
such terms in the Sections set forth below:
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Term Section
Capital Account 4.4.3
Change in Control 9.2
IMX Preamble
IMX Contributed Assets 4.1
Indemnitee 12.1
Joint Venture Agreement 1.1.14
LLC Recitals
LLC Certificate 13.1
Medicis Preamble
Net Sales 9.1.2
Purchase Consideration 9.1
Statute Recitals
Transfer 8.1
Vote 3.6
Year 1999 9.1.1
Year 2000 9.1.1
Year 2001 9.1.1
1.2.1 Other capitalized terms used herein without definition shall
have the meaning ascribed to them in the Joint Venture Agreement.
1.3 INTERPRETATION. As used in this Agreement, the word "including" means
without limitation, the word "or" is not exclusive and the words "herein,"
"hereof," "hereto" and hereunder refer to this Agreement as a whole. Unless the
context otherwise requires, references herein: (i) to Articles, Sections and
Exhibits mean the Articles and Sections of and the Exhibits attached to this
Agreement, (ii) to an agreement, instrument or other document means such
agreement, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof and by this
Agreement and (iii) to a statute means such statute as amended from time to time
and includes any successor legislation thereto. The Exhibits referred to herein
shall be construed with and as an integral part of this Agreement to the same
extent as if they were set forth verbatim herein. Titles to Articles and
headings of Sections are inserted for convenience of reference only and shall
not be deemed a part of or to affect meaning or interpretation of this
Agreement. The language herein shall be in all cases construed simply according
to its fair meaning and not strictly for or against any of the Members. In the
event that the terms of this Agreement and the Joint Venture Agreement conflict
for any reason, the terms of the Joint Venture Agreement shall control.
ARTICLE II.
INTRODUCTORY MATTERS
2.1 FORMATION OF LLC. Concurrently herewith, the Members shall organize,
create and form the LLC pursuant to the provisions of the Statute by filing the
Certificate of Formation with the Delaware Secretary of State. The rights and
liabilities of the Members shall be
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determined pursuant to the Statute and this Agreement. To the extent that the
rights or obligations of any Member are different by reason of any provision of
this Agreement than they would be in the absence of such provision, this
Agreement shall, to the extent permitted by the Statute, control.
2.2 NAME. The name of the LLC shall be "Medicis Consumer Products Company,
L.L.C." The business of the LLC may be conducted under such name or, upon
compliance with applicable laws, any other name that the General Manager deems
appropriate or advisable. The General Manager shall file any fictitious name
certificates and similar filings, and any amendments thereto, that the General
Manager deems appropriate or advisable.
2.3 PRINCIPAL OFFICE. The LLC shall maintain its principal place of
business at 2295 Corporate Blvd., Boca Raton, Florida 33431, or at any other
location mutually agreed upon by the Members.
2.4 REGISTERED OFFICE AND REGISTERED AGENT. The location of the registered
office and the name of the registered agent of the LLC in the State of Delaware
shall be as set forth in the Certificate of Formation.
2.5 PERPETUAL EXISTENCE. The LLC shall have perpetual existence until
dissolved in accordance with the Statute or pursuant to Article XI of this
Agreement.
2.6 BUSINESS AND PURPOSE OF THE LLC. The purpose of the LLC is to engage
in any lawful activities for which a LLC may be organized under the Statute,
including the development and marketing of pharmaceutical products as set forth
in the Joint Venture Agreement and Major Agreements, provided that the LLC shall
not conduct any banking, insurance or trust company business.
2.7 TITLE TO ALL PROPERTIES. Real and personal property owned or purchased
by the LLC shall be held and owned, and conveyance made, in the name of the LLC.
Instruments and documents providing for the acquisition, mortgage or disposition
of Property of the LLC shall be valid and binding upon the LLC, except as
otherwise provided by this Agreement, if executed by the General Manager.
ARTICLE III.
MEMBERS
3.1 MEMBERS; NO PERSONAL LIABILITY. The name, present mailing address and
Percentage Interest of each Member is set forth on Exhibit A hereto. No Member
shall have any personal liability for any obligation of the LLC, except as
expressly provided by law.
3.2 TRANSACTIONS WITH THE LLC. Subject to any limitations set forth in
this Agreement and with the prior approval of the General Manager after full
disclosure of the Member's involvement, a Member may transact business with the
LLC. Subject to applicable law, a Member so transacting business with the LLC
shall have the same rights and obligations with respect thereto as a person who
is not a Member.
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3.3 COMPENSATION OF MEMBERS. Except as expressly permitted by this
Agreement or any other duly authorized and approved written agreement, the LLC
shall pay no compensation to any Member or any Principal of any Member for their
services to the LLC.
3.4 NO REGULAR MEETINGS. Notwithstanding anything to the contrary herein,
no annual or regular meetings of the Members are required to be held. The
Members may meet at such times as they may mutually determine, whether at the
offices of the LLC or at such other place, and in such manner, including
telephone conference, as may mutually be agreed upon.
3.5 ACTIONS WITHOUT A MEETING. Except as may be limited by the Statute,
any action which may be taken at any annual or special meeting of Members may be
taken without a meeting and without prior notice if a consent in writing,
setting forth the action so taken, shall be signed by Members holding in the
aggregate the number of votes equal to or greater than the number of votes
required to approve such action at a meeting of the Members.
3.6 REQUIRED VOTE. Unless otherwise expressly set forth in this Agreement
or required by the terms of the Statute, Code or applicable Regulations
thereunder, the affirmative vote of at least 50% of the Members (a "Vote"),
wherein each Member casts a number of votes equal to the Member's Percentage
Interest in the LLC, shall constitute the approval of the Members.
3.7 QUORUM AND EFFECT OF VOTE. A Majority in Interest of the Members shall
constitute a quorum at all meetings of the Members for the transaction of
business, and a Vote of the Members shall be required to approve any action,
unless a greater vote is required or a lesser vote is provided for by this
Agreement or by the Statute. Each Member shall have a number of votes equal to
the Percentage Interest held by such Member, provided that if, pursuant to the
Statute or the terms of this Agreement, a Member is not entitled to vote on a
specific matter, then such Member's number of votes and Percentage Interest
shall not be considered for purposes of determining whether a quorum is present,
or whether approval by Vote of the Members has been obtained in respect of such
specific matter.
ARTICLE IV.
CAPITAL CONTRIBUTIONS
4.1 INITIAL CAPITAL CONTRIBUTIONS. Upon execution of this Agreement,
Medicis shall contribute to the LLC cash in the amount of $4 million, and IMX
shall contribute to the LLC certain assets and properties (as more particularly
described in Section 4.2 hereof, the "IMX Contributed Assets"), which assets and
properties shall be valued in the amount set forth beside such Member's name
under the heading "Member's Capital Contribution" on Exhibit A hereto.
4.2 IMX CONTRIBUTED ASSETS. The IMX Contributed Assets shall be comprised
of all of IMX's right, title and interest in, to or under (i) the EXOREX Product
Line (including the shampoo and cream products) and all improvements thereto,
and (ii) the Helpline and the product fulfillment center as more fully set forth
in Section 1.7 of the Joint Venture Agreement.
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4.3 ADDITIONAL CONTRIBUTIONS. Except as may be otherwise expressly set
forth herein, no Member shall be required to make any additional Capital
Contributions or loan or caused to be loaned to the LLC any money or other
assets.
4.4 RIGHTS WITH RESPECT TO CAPITAL.
4.4.1 LLC Capital. Except as otherwise provided in this Agreement,
no Member shall have the right to withdraw or receive any return of its Capital
Contribution, and no Capital Contribution may be returned in the form of
property other than cash.
4.4.2 No Interest on Capital Contributions. Except as expressly
provided in this Agreement, no Capital Contribution of any Member shall bear any
interest or otherwise entitle the contributing Member to any compensation for
the use of contributed capital.
4.4.3 Establishment of Capital Accounts. A separate capital account
(each, a "Capital Account") shall be maintained for each Member. For book
purposes, each Member's Capital Account will be separated into a contribution
account and an income (loss) account and will be maintained according to
generally accepted accounting principles consistently applied. Sections 4.5 and
4.6 below describe the appropriate accounting treatment for tax purposes of the
Capital Accounts.
4.5 GENERAL RULES FOR ADJUSTMENT OF CAPITAL ACCOUNTS.
4.5.1 Increases. The Capital Account of a Member shall be increased
by:
(i) Such Member's cash contributions;
(ii) The agreed fair market value of property contributed by
such Member (net of liabilities secured by such
contributed property that the LLC is deemed to assume or
take subject to under Code Section 752); and
(iii) All items of LLC income and gain (including income and
gain exempt from tax) allocated to such Member pursuant
to Article IV or other provisions of this Agreement.
4.5.2 Decreases. The Capital Account of a Member shall be decreased
by:
(i) The amount of cash distributed to such Member;
(ii) The agreed fair market value of all actual and deemed
distributions of property made to such Member pursuant
to this Agreement (net of liabilities secured by such
distributed property that the Member is deemed to assume
or take subject to under Code Section 752); and
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(iii) All items of LLC deduction and loss allocated to such
Member pursuant to Article IV or other provisions of
this Agreement.
4.6 SPECIAL RULES WITH RESPECT TO CAPITAL ACCOUNTS.
4.6.1 Time of Adjustment for Capital Contributions. For purposes of
computing the balance in a Member's Capital Account, no credit shall be given
for any Capital Contribution which such Member is to make until such
contribution is actually made.
4.6.2 Intent to Comply with Treasury Regulations. The provisions of
Section 4.5 and this Section 4.6 and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent therewith. To the extent such provisions are inconsistent with such
Regulations Section or are incomplete with respect thereto, the Capital Accounts
shall be maintained in such manner as is required to comply with such
Regulations Section.
4.7 TRANSFEREE'S CAPITAL ACCOUNT. In the event a Member or the holder of
an Economic Interest transfers an Interest in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred Interest.
ARTICLE V.
ALLOCATION OF PROFITS AND LOSSES
5.1 ALLOCATION OF NET PROFITS AND NET LOSSES. Except as otherwise provided
in this Article V, Net Profits and Net Losses in each fiscal year of the LLC
shall be allocated among the Members as follows:
5.1.1 Net Profits. After giving effect to any special or other
overriding allocations set forth in this Article V, Net Profits shall be
allocated among the Members as follows:
(i) first, in proportion to and up to the amounts of Net
Losses allocated for previous fiscal years of the LLC
pursuant to Section 5.1.2(ii) and not previously
affected by allocations pursuant to this Section
5.1.1(i);
(ii) second, in proportion to and up to the amounts of Net
Losses allocated for previous fiscal years of the LLC
pursuant to Section 5.1.2(i) and not previously affected
by allocations pursuant to this Section 5.1.1(ii); and
(iii) thereafter, to the Members in accordance with their
respective Percentage Interests.
5.1.2 Allocation of Net Losses. After giving effect to any special
or other
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overriding allocations set forth in this Article V, Net Losses shall be
allocated among the Members as follows:
(i) first, in proportion and to the extent of the Members'
positive adjusted Capital Accounts; and
(ii) thereafter, to the Members in accordance with their
respective Percentage Interests.
5.2 RESIDUAL ALLOCATIONS. Except as otherwise provided in this Agreement,
all items of LLC income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Members in the same
proportions as they share Net Profits or Net Losses, as the case may be, for the
applicable fiscal year of the LLC.
5.3 QUALIFIED INCOME OFFSET. If any Member unexpectedly receives any
adjustments, allocation or distributions described in clauses (4), (5) or (6) of
Regulations Section 1.704-1(b)(2)(ii)(d), items of LLC income shall be specially
allocated to such Member in an amount and manner sufficient to eliminate the
Adjusted Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible. This Section 5.3 is intended to constitute
a "qualified income offset" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(d)(3).
5.4 MINIMUM GAIN CHARGEBACK. If there is a net decrease in LLC Minimum
Gain during a fiscal year, each Member will be allocated, before any other
allocation under this Article V, items of income and gain for such fiscal year
(and, if necessary, subsequent years) in proportion to and to the extent of an
amount equal to such Member's share of the net decrease in LLC Minimum Gain
determined in accordance with Regulations Section 1.704-2(g)(2). This Section
5.4 is intended to comply with, and shall be interpreted consistently with, the
"minimum gain chargeback" provisions of Regulations Section 1.704-2(f).
5.5 MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. Notwithstanding any
other provision of this Article V, but except Section 5.4, if there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member
Nonrecourse Debt during any fiscal year of the LLC, each Member who has a share
of the Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of LLC income and gain for
such year (and, if necessary, subsequent years) in an amount equal such Member's
share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4). This Section 5.5 is intended
to comply with a minimum gain chargeback requirement of that Section of the
Regulations and shall be interpreted consistently therewith.
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5.6 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions for
any fiscal year of the LLC or other period shall be specially allocated to the
Member who bears (or is deemed to bear) the economic risk of loss with respect
to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(2).
5.7 SPECIAL ALLOCATIONS. Any special allocations of items of Net Profits
pursuant to Sections 5.4, 5.5 and 5.6 shall be taken into account in computing
subsequent allocations of Net Profits pursuant to Section 5.1, so that the net
amount of any items so allocated and the gain, loss and any other item allocated
to each Member pursuant to Section 5.1 shall, to the extent possible, be equal
to the net amount that would have been allocated to each such Member pursuant to
the provisions of this Article V if such special allocations had not occurred.
5.8 FEES TO MEMBERS OR AFFILIATES. Notwithstanding the provisions of
Section 5.1, in the event that any fees, interest or other amounts paid to any
Member or any Affiliate thereof pursuant to this Agreement or any other
agreement between the LLC and any Member or Affiliate thereof providing for the
payment of such amount, and deducted by the LLC in reliance on Section 707(a)
and/or 707(c) of the Code, are disallowed as deductions to the LLC on its
federal income tax return and are treated as LLC distributions, then:
(i) the Net Profits or Net Losses, as the case may be, for the
fiscal year of the LLC in which such fees, interest, or other amounts were paid
shall be increased or decreased, as the case may be, by the amount of such fees,
interest or other amounts that are treated as LLC distributions; and
(ii) there shall be allocated to the Member to which (or to
whose Affiliate) such fees, interest or other amounts were paid, prior to the
allocations pursuant to Section 5.1, an amount of gross income for such fiscal
year equal to the amount of such fees, interest or other amounts that are
treated as LLC distributions.
5.9 SECTION 704(c) ALLOCATION. Any item of income, gain, loss and
deduction with respect to any property (other than cash) that has been
contributed by a Member to the capital of the LLC and which is required or
permitted to be allocated to such Member for income tax purposes under Section
704(c) of the Code so as to take into account the variation between the tax
basis of such property and its fair market value at the time of its contribution
shall be allocated to such Member solely for income tax purposes in the manner
so required or permitted.
ARTICLE VI.
DISTRIBUTIONS
6.1 AVAILABLE CASH FLOW. The Managers shall on a quarterly basis
distribute Available Cash Flow of the LLC to the Members in proportion to their
Percentage Interests as of the time of such distribution. For purposes of
allocations of Net Profits pursuant to Section 5.1.1, Available Cash Flow
attributable to a specific fiscal year of the LLC shall be deemed distributed as
of the end of such fiscal year.
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6.2 LIQUIDATING DISTRIBUTIONS. If the LLC is liquidated, the assets of the
LLC shall be distributed to the Members in accordance with the balances in their
respective Capital Accounts, after giving effect to all Capital Contributions,
distributions and allocations for all periods. Distributions to the Members
pursuant to this Section 6.2 shall be made in accordance with Section
1.704-1(b)(2)(ii)(b)(2) of the Regulations.
6.3 AUTHORITY TO WITHHOLD. The Members hereby irrevocably authorize the
General Manager to withhold from amounts otherwise distributable or allocable
(whether or not distributable) to any Member, any and all amounts as may be
required, from time to time, to be withheld with respect to such Member under
the provisions of Sections 1441, 1442, 1445 or 1446 of the Code and any
applicable Regulations or any other applicable provision of federal, state or
local income or other tax law. To the extent that any amount is required to be
so withheld with respect to a Member, such amount shall be treated as a
distribution of Available Cash Flow to such Member. If the amount so deemed to
be distributed exceeds the amount, if any, which the Member would then otherwise
be entitled to receive as a distribution of Available Cash Flow (excluding loan
payments) under the Agreement, then such Member shall be obligated to make a
Capital Contribution of cash in the amount of such excess on or before the date
on which the LLC is required to withhold the tax, unless the LLC agrees to an
extension of the date for payment. IMX shall be responsible for all other taxes
relating to or arising from its Interest in the LLC or in the formation of the
LLC and IMX agrees to indemnify LLC for any liabilities arising from IMX's
Interest in the LLC or in connection with the formation of the LLC.
ARTICLE VII.
MANAGEMENT
7.1 MANAGERS. The LLC shall be managed initially by Medicis and IMX.
Medicis shall be the General Manager unless and until removed or replaced as
General Manager in accordance with this Agreement. The overall management and
control of the business and affairs of the LLC shall be vested solely in the
General Manager, provided that to the extent practicable, the General Manager
shall consult with the other Managers with respect to the business and
operations of the LLC. Subject to reasonable consultation with and input from
the other Managers, the General Manager shall be responsible for establishing
the policies and operating procedures with respect to the business and affairs
of the LLC and, except as otherwise set forth herein, for making all decisions
of the LLC in all matters. Except as otherwise set forth herein or as otherwise
unanimously agreed by the Managers in writing, the General Manager and no other
Manager shall be authorized to execute agreements, documents and instruments on
behalf of the LLC. Notwithstanding the foregoing, the General Manager may
authorize by written instrument any other Manager to execute any agreement,
document or instrument, or any class of agreements, documents or instruments
and, subject to this Agreement and the Statute, to bind the LLC thereby.
7.1.1 Duties and Authority of the General Manager. Except as
otherwise expressly provided in this Agreement, all decisions relating to any
matter set forth herein or otherwise affecting or arising out of the conduct of
the business of the LLC shall be made by the General Manager who shall have the
exclusive right and full authority to manage, conduct and operate the business
of the LLC. Specifically, but not by way of limitation, the General Manager
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shall be authorized in the name and on behalf of the LLC:
(i) to borrow money, to issue evidences of indebtedness and to
guarantee the debts of others for whatever purposes it may specify and, as
security therefor, to mortgage, pledge or otherwise encumber the assets of the
LLC;
(ii) to cause to be paid on or before the due date thereof all
amounts due and payable by the LLC to any person or entity;
(iii) to employ or engage such agents, employees, managers,
accountants, attorneys, consultants and other persons necessary or appropriate
to carry out the business and affairs of the LLC, including itself, whether or
not any such persons so employed are affiliated or related to any Member, and to
pay such fees, expenses, salaries, wages and other compensation to such persons
as it shall in its sole discretion determine and to terminate such employment or
engagement, including, without limitation, to enter into the Service Agreements
and to terminate the same in accordance with the provisions thereof;
(iii) to pay, extend, renew, modify, adjust, subject to arbitration,
prosecute, defend or compromise, upon such terms as it may determine and upon
such evidence as it may deem sufficient, any obligation, suit, liability, cause
of action or claim, including taxes, either in favor of or against the LLC;
(iv) to pay any and all fees and to make any and all expenditures
which it, in its sole discretion, deems necessary or appropriate in connection
with the organization of the LLC, the management of the affairs of the LLC and
the carrying out of its obligations and responsibilities under this Agreement;
(v) to comply in all respects with the obligations imposed by any
mortgages encumbering the LLC's assets from time to time and by any other
agreements pertaining to the LLC's assets;
(vi) to cause all income which may become due with respect to the
LLC's assets to be collected;
(vii) to invest excess funds of the LLC in such investments as the
General Manager deems advisable and prudent;
(viii) to establish reserves for taxes, insurance, replacements and
other items as the General Manager may determine;
(ix) to establish banking accounts for and in the name of the LLC,
with such bank or banks or as the General Manager may elect;
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(x) to exercise all powers and authority granted by the Statute to
Managers, except as otherwise provided in this Agreement; and
(xi) subject to Section 7.2 hereof, to sell all or any portion of
the LLC's assets at such time or times and upon such terms as the General
Manager shall, in its sole discretion, determine without regard to the effect of
such sale upon the individual income tax obligations of any Member; provided,
however, that there shall be no installment sale election without the prior
written consent of all Members.
7.1.2 Election. The number of Managers shall be fixed at two until
such time as the Members shall otherwise unanimously agree. Medicis shall be
entitled to designate one Manager, who shall be the General Manager, and IMX,
for so long as the Percentage Interest of IMX equals or exceeds 10%, shall be
entitled to designate one Manager. In any election of Managers, the Members
hereby covenant and agree to vote their Interests in accordance with the
proceeding sentence. Each Manager shall hold office until such Manager's
successor has been designated pursuant to this Section 7.1 and has qualified,
unless such Manager earlier resigns or is removed or otherwise disqualified to
serve.
7.1.3 Subordinate Officers. The General Manager may appoint a
secretary, a chief financial officer and such other officers as the business of
the LLC may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in this Agreement, or as the
General Manager may determine.
7.1.4 Removal and Resignation. Any Manager or other officer of the
LLC may be removed, with or without cause, by a Vote of the Members provided,
that Medicis shall at all times have the right to designate one Manager, who
shall be the General Manager and that at all times as the Percentage Interest of
IMX equals or exceeds 10%, IMX shall have the right to designate one Manager.
Any Manager or other officer of the LLC may resign at any time without prejudice
to any rights of the LLC under any contract to which the Manager or other
officer of the LLC is a party, by giving written notice to the Members or to the
General Manager, as applicable. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein, and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
7.1.5 Vacancies. Subject to the provisions of Section 7.1.2 hereof
regarding the designation of Managers, a vacancy among the Managers or in any
office because of death, resignation, removal, disqualification or any other
cause shall be filled by a Vote of the Members through the appointment of a
successor Manager or officer who shall hold office for the unexpired term.
7.1.6 Meetings. Meetings of the Managers shall be held at the
principal office of the LLC, unless some other place is designated in the notice
of the meeting. Any Manager may participate in a meeting through use of a
conference telephone or similar communication equipment so long as all Managers
participating in such a meeting can hear one another. Accurate minutes of any
meeting of the Managers shall be maintained by the officer designated by the
Managers for that purpose. No regular meetings of the Managers shall be
required, except that the Managers may
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designate any such periodic meetings as they may mutually determine. Special
meetings of the Managers for any purpose may be called at any time by any
Manager. At least 48 hours notice of the time and place of a special meeting of
the Managers shall be delivered personally to the Managers or personally
communicated to them by an officer of the LLC by telephone, telegraph or
facsimile. If the notice is sent to a Manager by letter, it shall be addressed
to such Manager at his, her or its last known business address as it is shown in
the records of the LLC. In case such notice is mailed, it shall be deposited in
the United States mail, first-class postage, prepaid, in the place in which the
principal office of the LLC is located at least four days prior to the time of
the holding of the meeting. Such mailing, telegraphing, telephoning or delivery
as above provided shall be considered due, legal and personal notice to such
Manager.
7.1.7 Meetings Without Notice. Notice of a meeting need not be given
to any Manager who signs a waiver of notice, a consent to holding the meeting or
an approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such Manager. All such waivers, consents and approvals
shall be filed with the LLC's records or made a part of the minutes of the
meeting.
7.1.8 Written Consent in Lieu of Meetings. Any action required or
permitted to be taken by the Managers may be taken without a meeting and will
have the same force and effect as if taken by a vote of the Managers at a
meeting properly called and noticed, if authorized by a writing signed
individually or collectively by all, but not less than all, of the Managers.
Such consent shall be filed with the records of the LLC.
7.1.9 Quorum. A majority of the total number of incumbent Managers
shall constitute a quorum for the transaction of business at any meeting of the
Managers, and except as otherwise provided in this Agreement or by the Statute,
the action of a majority of the Managers present at any meeting at which there
is a quorum, when duly assembled, is valid. A meeting at which a quorum is
initially present may continue to transact business, notwithstanding the
withdrawal of Managers, if any action taken is approved by the General Manager
or a majority of the required quorum for such meeting.
7.2 LIMITATIONS ON RIGHTS AND POWERS. So long as the Percentage Interest
of IMX equals or exceeds 10%, neither the General Manager, any other Manager nor
any officer of the LLC shall have the authority, except by the unanimous
agreement of the Managers which is evidenced in writing, to:
(i) enter into or amend any Service Agreement other than on an arm's
length basis (and other than any Service Agreement entered into concurrently
with the execution of this Agreement);
(ii) commence the liquidation or termination of the LLC;
(iii) sell all or substantially all of the assets of the LLC in one
or more related transactions, except as otherwise expressly contemplated herein;
or
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(iv) do any act in contravention of this Agreement.
7.3 COMPENSATION OF MANAGERS. Except for the Major Agreements, the LLC
shall pay to the Managers such salary and other benefits as shall be approved
from time to time by the Vote of all the Members. The LLC shall reimburse the
Managers for any expense paid by a Manager that properly is to be borne by the
LLC.
7.4 EXPENSE REIMBURSEMENT. The LLC shall reimburse the Members for any
expense paid by them that properly is to be borne by the LLC, as approved from
time to time by the Managers. Expenses incurred in connection with service
agreements for outside consultants in amounts in excess of $50,000 shall require
the consent of all the Managers.
7.5 OTHER BUSINESS VENTURES. Unless otherwise agreed to, no Manager shall
be required to devote all of such Manager's time or business efforts to the
affairs of the LLC, but shall devote so much of such Manager's time and
attention to the LLC as is reasonably necessary and advisable to manage the
affairs of the LLC to the best advantage of the LLC.
ARTICLE VIII.
RESTRICTIONS ON TRANSFER OF LLC INTERESTS;
ADMISSION OF NEW MEMBERS
8.1 TRANSFER OR ASSIGNMENT OF MEMBER'S INTEREST. No transfer, sale,
hypothecation, pledge, encumbrance, assignment or other disposition (any of the
foregoing, a "Transfer") of a Member's Interest, or any part thereof, in the LLC
(other than to Medicis or its Affiliate) will be valid without the consent of a
Majority in Interest of the Members, so long as IMX has 10% or more Percentage
Interest in the LLC, and provided however, that if MEDICIS desires to Transfer
its Interest, MEDICIS shall first discuss with IMX the terms of any such
Transfer. Nothing in this Section 8.1 shall be construed as requiring IMX's
consent to any Transfer, unless IMX holds a Majority in Interest of the Members.
Any Transfer of an Interest which does not satisfy the requirements of this
Section 8.1 shall be voidable at the election of the General Manager in its sole
discretion.
8.2 VOID TRANSFERS. If the General Manager determines in its sole
discretion that any Transfer would cause the termination of the LLC under the
Code, then the Transfer shall be null and void.
8.3 SUBSTITUTION OF MEMBERS. A transferee of an Interest shall become a
substitute Member, provided that (i) the Transfer was valid under Section 8.1
hereof and not voided by the Managers pursuant to Section 8.2 hereof, (ii) the
transferee has become a party to this Agreement and (iii) the transferee pays
any reasonable expenses in connection with his, her or its admission as a
Member. A transferee who becomes a substituted Member has, to the extent
transferred, all of the rights, powers and duties of a Member under this
Agreement and the Statute.
8.4 ADMISSION OF NEW MEMBERS. A new Member may be admitted into the LLC
only upon the consent of the Members holding, in the aggregate, at least 90% of
the
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Percentage Interests then outstanding. The amount of Capital Contribution, if
any, which must be made by a new Member shall be determined by the Vote of all
existing Members. A new Member shall not be deemed admitted into the LLC until
the Capital Contribution required of such Person shall have been made and such
Person has become a party to this Agreement and made any and all investment
representations deemed necessary or advisable by the Managers in their sole
discretion.
8.5 SUBSEQUENT TRANSFERS SUBJECT TO TERMS OF AGREEMENT. After the
consummation of any Transfer of any part of an LLC Interest, the Interest or
portion thereof so transferred shall continue to be subject to the terms and
provisions of this Agreement and any further Transfers shall be required to
comply with all the terms and provisions hereof.
8.6 RIGHTS OF LEGAL REPRESENTATIVES. If a Member who is an individual dies
or is adjudged by a court of competent jurisdiction to be incompetent to manage
the Member's person or property, the Member's executor, administrator, guardian,
conservator or other legal representative may exercise all of the Member's
rights for the purpose of settling the Member's estate or administering the
Member's property, including any power the Member has under the Certificate of
Formation or this Agreement to give an assignee the right to become a Member. If
a Member is a corporation, trust or other entity and is dissolved or terminated,
the powers of that Member may be exercised by its legal representative or
successor.
8.7 PURCHASE TERMS VARIED BY AGREEMENT. Provided that the restrictions set
forth in this Agreement have been satisfied, nothing contained herein is
intended to prohibit Members from agreeing upon other terms and conditions for
the purchase by the LLC or any other Member of the Interest (or any portion
thereof) of any Member desiring to retire, withdraw or resign.
ARTICLE IX.
OPTION TO PURCHASE IMX'S INTEREST
9.1 MEDICIS OPTION TO PURCHASE. Within 30 days after June 30 of each of
1999, 2000 and 2001, Medicis shall have the option to acquire one third of IMX's
Percentage Interest in the LLC existing as of the date hereof upon the payment
of the Purchase Consideration. The payment of the Purchase Consideration shall
be made in immediately available funds no later than 60 days after the exercise
of an option. The "Purchase Consideration" for each option shall mean the
product of the Sales Multiple and one-sixth of the Net Sales during the most
recently completed fiscal year of the LLC.
9.1.1 Determination of Sales Multiples. For the year ended June 30,
1999 ("Year 1999"), if the Net Sales are equal to or below $6 million, the Sales
Multiple shall be two, and if the Net Sales are equal to or above $10 million,
the Sales Multiple shall be three. The Sales Multiple shall be prorated for Net
Sales between $6 million and $10 million. For the fiscal year ended June 30,
2000 ("Year 2000") and 2001 ("Year 2001"), the Sales Multiple shall be as
follows:
(i) if Net Sales decline over the prior fiscal year of the
LLC, the Sales Multiple is one; and
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(ii) if Net Sales increase over the prior fiscal year of the
LLC by:
(A) less than 10%, the Sales Multiple is 1.5;
(B) 10%, the Sales Multiple is two;
(C) 30%, the Sales Multiple is three; and
(D) greater than or equal to 50%, the Sales Multiple
is four.
The Sales Multiple shall be prorated for any Net Sales increases between 10% and
50% in Years 2000 and 2001.
9.1.2. Definition of "Net Sales." "Net Sales" shall mean the gross
amount invoiced by the LLC on all sales of LLC's products less deductions for:
(i) sales taxes, value-added taxes and excise taxes, tariffs, import or export
duties, and duties paid or allowed by a selling party and any other governmental
charges imposed upon the importation, use or sale of such products which are
included in the gross amount invoiced; (ii) allowed customary trade and quantity
discounts and allocated sales discounts; (iii) allocated transportation, bulk
packaging, handling and freight charges and reasonable and customary insurance
where such are separately stated as part of the sales price and are included in
the gross amount invoiced; and (iv) allowances and credits to customers on
account of rejection or return of products. Sales between or among LLC and its
Affiliates or sublicensees shall be excluded from the computation of Net Sales,
but Net Sales shall include the subsequent sales to third parties by such
Affiliates or sublicensees. For purposes of determining Net Sales, a sale shall
be deemed to have occurred when the products have been shipped.
9.1.3 Exercise of Option in Subsequent Years. Within 30 days after
Year 2000 and 2001, Medicis may also purchase the Percentage Interest of IMX
that Medicis elected not to purchase in any prior period, provided that in
calculating the Purchase Consideration, the Net Sales amount used will be for
Year 2000 or Year 2001, as applicable, and the Sales Multiple will be determined
based on sales growth between Year 1999 and Year 2000 or Year 2000 and Year
2001, as applicable.
9.1.4 Exercise of Option in Subsequent Years. To the extent that
Medicis does not exercise any option pursuant to this Section 9.1 prior to
September 30, 2001, Medicis shall have the right to purchase at any time the
remainder of IMX's Percentage Interest not previously purchased by Medicis upon
the payment of the Purchase Consideration calculated for Year 2001.
9.2 RIGHT TO REQUIRE PURCHASE. In the event there is a Change in Control
of Medicis, if the Percentage Interest of IMX equals or exceeds 10%, IMX may
elect to require Medicis (or its successor) to purchase the remainder of IMX's
Percentage Interest not previously purchased by Medicis within 180 days of
providing written notice to Medicis, upon the payment of the Purchase
Consideration (calculated as set forth in Section 9.1 by using Net Sales for the
most recently completed fiscal year of the LLC before the date of purchase and a
Sales Multiple based upon sales growth between the year prior to such year and
such year multiplied by the amount (expressed as a percentage) of the Medicis
option pursuant to Section 9.1 remaining unexercised as of the date of such
Change of Control). A "Change in Control" shall mean the purchase or other
acquisition by any person or entity of beneficial ownership (within the meaning
of Rule 13d-3
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promulgated under the Securities Exchange Act of 1934, as amended) of a majority
in interest of either the then outstanding shares of common stock of the Company
or the combined voting power of the Company's then-outstanding voting securities
entitled to vote generally in the election of directors.
ARTICLE X.
TERMINATION AND DISSOLUTION
10.1 DISSOLUTION. The LLC shall be dissolved upon the occurrence of any of
the following events:
(i) a Vote of the Members to dissolve the LLC;
(ii) the entry of a decree of judicial dissolution by a court of
competent jurisdiction providing for the dissolution of the LLC; or
(iii) the sale of all or substantially all of the assets of the LLC
and the distribution to the Members of the proceeds thereof.
10.2 DISASSOCIATION EVENT. Upon the occurrence of a Disassociation Event,
the business of the LLC shall be automatically continued.
10.3 CONDUCT OF BUSINESS. Upon the occurrence of any event specified in
Section 10.1, the LLC shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets and satisfying the claims
of its creditors. The General Manager or other Managers who have not wrongfully
dissolved the LLC or, if none, the Members, shall be responsible for overseeing
the winding up and liquidation of the LLC, shall take full account of the assets
and liabilities of the LLC, shall cause its assets to be either sold or
distributed, and shall cause the proceeds therefrom, to the extent sufficient
therefor, to be applied and distributed as provided in this Section 11.3. The
Persons winding up the affairs of the LLC shall give written notice of the
commencement of winding up by mail to all known creditors and claimants whose
addresses appear on the records of the LLC. The Manager or Managers winding up
the affairs of the LLC shall be entitled to reasonable compensation for such
services. On winding up the LLC, the assets of the LLC shall be distributed
first to creditors of the LLC, including Members who are creditors, in
satisfaction of the liabilities of the LLC, and then to the Members in
accordance with Article VI.
10.4 FILING OF CERTIFICATE OF CANCELLATION. Upon completion of the winding
up of the affairs of the LLC, the Managers shall promptly file, or cause to be
filed, a certificate of cancellation of the Certificate of Formation with the
Delaware Secretary of State. If there are no Managers, the Certificate of
Cancellation shall be filed by the remaining Members. If there are no Members,
the Certificate of Cancellation shall be filed by the legal or personal
representative of the Person who was the last Member.
10.5 DISTRIBUTION OF NET PROCEEDS. The Members shall continue to divide
Net Profits and Net Losses and Available Cash Flow during the winding-up period
in the same
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manner and the same priorities as provided for in Articles V and VI hereof. The
proceeds from the liquidation of Property shall be applied in the following
order:
(i) to creditors other than Members in the order of priority
provided by law;
(ii) to creditors who are Members in order of priority, except
amounts owed to Members on account of their Capital Contributions.
(iii) to Members in respect of their share of the Net Profits and
other compensation by way of income on their Capital Contributions;
(iv) to Members for return of their Capital Contributions; and
(v) to Members in accordance with the respective positive Capital
Account balances after giving effect to all Capital Contributions,
distributions, revaluations and allocations required under this Agreement.
Where the distribution pursuant to this Section 11.5 consists both of cash (or
cash equivalents) and non-cash assets, the cash (or cash equivalents) shall
first be distributed, in a descending order, to fully satisfy each category
starting with the most preferred category set forth above. In the case of
non-cash assets, the distribution values are to be based on the fair market
value thereof as determined in good faith by the liquidator, and the shortest
maturity portion of such non-cash assets (e.g., notes or other indebtedness)
shall, to the extent such non-cash assets are readily divisible, be distributed,
in a descending order, to fully satisfy each category above, starting with the
most preferred category.
ARTICLE XI.
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
11.1 MAINTENANCE OF BOOKS AND RECORDS; REPORTS TO MEMBERS. The General
Manager shall cause to be maintained proper and complete books and records in
which shall be entered all transactions and other matters relevant to the
business and affairs of the LLC. Such books and records shall be prepared and
maintained in accordance with generally accepted accounting principles. The
determination of the General Manager as to adjustments to the financial reports,
books, records and returns of the LLC, in the absence of fraud or gross
negligence, shall be final and binding upon the LLC and all of the Members. In
addition, the General Manager shall cause the LLC to deliver reports to the
Members in accordance with prudent business practices and the Statute.
11.2 INSPECTION AND AUDIT RIGHTS. Each Member has the right upon
reasonable request, for purposes reasonably related to the interest of that
Person, to inspect and copy at his, her or its expense during normal business
hours any of the following LLC books and records:
(i) true and full information regarding the status of the business
and financial condition of the LLC;
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(ii) promptly after becoming available, a copy of the LLC's federal,
state and local income tax returns for each year;
(iii) a current list of the name and last known business, residence
or mailing address of each Member and Manager;
(iv) a copy of this Agreement and the Certificate of Formation and
all amendments thereto, together with executed copies of any written powers of
attorney pursuant to which this Agreement, the Certificate of Formation or any
amendments thereto have been executed;
(v) true and full information regarding the amount of cash and a
description and statement of the agreed value of any other property or services
contributed by each Member and which each Member has agreed to contribute in the
future, and the date on which each such Person became a Member; and
(vi) such other information regarding the affairs of the LLC as is
just and reasonable.
Notwithstanding the foregoing, the General Manager may keep confidential
from the Members, for such period of time as they deem reasonable, any
information which the General Manager reasonably believe to be trade secrets or
which the General Manager in good faith believe the disclosure of which to be
detrimental to the LLC or prohibited by law or by an agreement with a third
party.
11.3 FISCAL YEAR. The fiscal year of the LLC shall end on June 30 of each
year.
11.4 TAX MATTERS. One of the Managers who is also a Member, or in the
event no Manager is a Member, a Member or an officer of a corporate Member,
shall be designated as "Tax Matters Partner" (as defined in Code section 6231),
to represent the LLC (at the LLC's expense) in connection with all examinations
of the LLC's affairs by tax authorities, including resulting judicial and
administrative proceedings, and to expend LLC funds for professional services
and costs associated therewith. In its capacity as Tax Matters Partner, the
designated Person shall oversee the LLC tax affairs in the overall best
interests of the LLC. Unless and until the Members designate another Person to
be the Tax Matters Partner, the General Manager shall be the initial Tax Matters
Partner.
11.5 INCOME TAX ELECTIONS. The Tax Matters Partner designated pursuant to
Section 12.5 shall have the authority on behalf of the LLC to make all elections
permitted under the Code and all other tax-related statutes and regulations,
including elections of methods of depreciation and elections under Section 754
of the Code. The decision to make or not to make an election shall be at the Tax
Matters Partner's sole and absolute discretion.
11.6 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members hereby
acknowledge that they are aware of the income tax consequences of the
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allocations made by this Agreement and hereby agree to be bound by the
provisions of this Agreement in reporting their shares of the LLC income and
loss for income tax purposes.
ARTICLE XII.
INDEMNIFICATION OF MEMBERS,
MANAGERS AND AFFILIATES
12.1 INDEMNIFICATION OF THE MEMBERS AND THEIR PRINCIPALS. The LLC shall
indemnify and hold harmless the Members, the Managers, their Affiliates and
their respective officers, directors, employees, agents and Principals
(individually, an "Indemnitee") from and against any and all losses, claims,
demands, costs, damages, liabilities, joint and several, expenses of any nature
(including reasonable attorneys' fees and disbursements), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, whether civil, criminal, administrative or investigative,
in which the Indemnitee was involved or may be involved, or threatened to be
involved, as a party or otherwise, arising out of or incidental to the business
of the LLC, regardless of whether the Indemnitee continues to be a Member, an
Affiliate, or an officer, director, employee, agent or Principal of the Member
at the time any such liability or expense is paid or incurred, to the fullest
extent permitted by the Statute and all other applicable laws.
12.2 EXPENSES. Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to Section 13.1 shall, from time to
time, be advanced by the LLC prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the LLC of an undertaking by
or on behalf of the Indemnitee to repay such amount if it shall be determined
that such Person is not entitled to be indemnified as authorized in Section
13.1.
12.3 INDEMNIFICATION RIGHTS NON-EXCLUSIVE. The indemnification provided by
Section 13.1 shall be in addition to any other rights to which those indemnified
may be entitled under any agreement or vote of the Members, as a matter of law
or equity or otherwise, both as to action in the Indemnitee's capacity as a
Member, as an Affiliate or as an officer, director, employee, agent or Principal
of a Member and as to any action in another capacity, and shall continue as to
an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns, representatives and administrators of
the Indemnitee.
12.4 ERRORS AND OMISSIONS INSURANCE. The LLC may purchase and maintain
insurance, at the LLC's expense, on behalf of the Members and such other Persons
as the Members shall determine, against any liability that may be asserted
against, or any expense that may be incurred by, such Person in connection with
the activities of the LLC and/or the Members' acts or omissions as the Members
of the LLC regardless of whether the LLC would have the power to indemnify such
Person against such liability under the provisions of this Agreement or under
applicable law.
12.5 ASSETS OF THE LLC. Any indemnification under Section 13.1 shall be
satisfied solely out of the assets of the LLC. No Member shall be subject to
personal liability or
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required to fund or to cause to be funded any obligation by reason of these
indemnification provisions.
ARTICLE XIII.
ISSUANCE OF LLC CERTIFICATES
13.1 ISSUANCE OF LLC CERTIFICATES. Upon or at any time after the execution
of this Agreement and the payment of the Capital Contributions by the Members,
the General Manager may elect to cause the LLC to issue one or more LLC
Certificates in the form of Exhibit B hereto (each, an "LLC Certificate") in the
name of each Member certifying that the Person named therein is the record
holder of the LLC Interests set forth therein. For purposes of this Agreement,
the term "record holder" shall mean the person whose name appears on Exhibit A
as the Member owning the LLC Interest at issue.
13.2 TRANSFER OF LLC INTERESTS. An LLC Interest which is transferred in
accordance with the terms of this Agreement shall be transferable on the books
of the LLC by the record holder thereof in person or by such record holder's
duly authorized attorney, but, except as provided in Section 14.3 hereof with
respect to lost, stolen or destroyed certificates, in the event an LLC
Certificate has been issued, no transfer of an LLC Interest shall be entered
until the previously issued LLC Certificate representing such LLC Interest shall
have been surrendered to the LLC and canceled and a replacement LLC Certificate
issued to the assignee of such LLC Interest in accordance with such procedures
as the General Manager may establish. In the event of a Transfer of less than
all of a Member's LLC Interests and if LLC Certificates have been issued, the
General Manager shall issue to the transferring Member a new LLC Certificate
representing the LLC Interests not being transferred. Except as otherwise
required by law, the LLC shall be entitled to treat the record holder of an LLC
Certificate on its books as the owner thereof for all purposes regardless of any
notice or knowledge to the contrary.
13.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The LLC shall issue a new LLC
Certificate in place of any LLC Certificate previously issued if the record
holder of the LLC Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to
the Managers, that a previously issued LLC Certificate has been lost, destroyed
or stolen;
(ii) requests the issuance of a new LLC Certificate before the LLC
has notice that the LLC Certificate has been acquired by a purchaser for value
in good faith and without notice of an adverse claim;
(iii) indemnifies the LLC against any claim that may be made on
account of the alleged loss, destruction or theft of the LLC Certificate; and
(iii) satisfies any other reasonable requirements imposed by the
Managers.
If a Member fails to notify the LLC within a reasonable time after it has notice
of the loss, destruction or theft of an LLC Certificate, and a transfer of the
LLC Interest represented by the
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LLC Certificate is registered before receiving such notification, the LLC shall
have no liability with respect to any claim against the LLC for such transfer or
for a new LLC Certificate.
ARTICLE XIV.
AMENDMENTS
14.1 AMENDMENT, ETC. OF OPERATING AGREEMENT. This Agreement may be
adopted, altered, amended or repealed and a new operating agreement may be
adopted by a Vote of the Members. Any amendments to this Agreement which
materially alter the rights under this Agreement of a Member holding a minority
of the outstanding Percentage Interests shall require consent of such minority
Member.
14.2 AMENDMENT OF CERTIFICATE OF FORMATION. Notwithstanding any provision
to the contrary in the Certificate of Formation or this Agreement, in no event
shall the Certificate of Formation be amended without the affirmative vote of at
least a Majority in Interest of the Members.
ARTICLE XV.
MISCELLANEOUS PROVISIONS
15.1 CHOICE OF FORUM AND GOVERNING LAW. In light of LLC's substantial
contacts with the State of Delaware, and the parties' interests in ensuring that
disputes regarding the interpretation, validity and enforceability of this
Agreement are resolved on a uniform basis, the parties agree that: (i) any
litigation involving any noncompliance with or breach of the Agreement, or
regarding the interpretation, validity and/or enforceability of the Agreement,
shall be filed and conducted exclusively in the state or federal courts in
Maricopa County, Arizona; (ii) the parties hereby consent to the jurisdiction of
such courts, agree that venue will be proper in such courts and waive any
objections based upon forum non conveniens; and (iii) the Agreement shall be
deemed to be made in and in all respects shall be interpreted, construed and
governed by and in accordance with the laws of the State of Delaware, without
regard for any conflict of law principles. The choice of forum set forth in this
Section 15.1 shall not be deemed to preclude the enforcement of any action under
this Agreement in any other jurisdiction.
15.2 SEVERABILITY. In the event any portion of this Agreement shall be
held illegal, void or ineffective, the remaining portions hereof shall, remain
in full force and effect. If any of the terms or provisions of this Agreement
are in conflict with any applicable statute or rule of law, then such terms or
provisions shall be deemed inoperative to the extent that they may conflict
therewith and shall be deemed to be modified to conform with such statute or
rule of law. In the event that the terms and conditions of this Agreement are
materially altered, the parties will renegotiate the terms and conditions of
this Agreement to resolve any inequities in an attempt to carry out to the
extent legally permissible the severed or altered portion.
15.3 ASSIGNMENT; BINDING AGREEMENT.
(a) This Agreement and all or any part of LLC's rights and
obligations
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hereunder may be assigned by LLC at any time to any Affiliate of LLC. LLC shall
cause such Affiliate(s) to perform any of LLC's obligations hereunder which are
assigned to such Affiliate(s).
(b) Neither this Agreement nor any of IMX's rights or obligations
hereunder may be assigned by IMX without LLC's prior written consent.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and to their respective successors and permitted
assigns. This Agreement is not intended, nor shall be construed, to give any
person except (1) the parties hereto and their respective successors, assigns
and legal representatives, (2) Affiliates and Principals of the Members and (3)
any other Person as may be entitled to benefits of Article XIII hereof.
15.4 ENTIRE AGREEMENT AND MODIFICATION. This Agreement, including the
Schedules and Exhibits attached hereto, the documents delivered pursuant hereto
and the other Major Agreements, constitute the entire agreement between the
parties. No changes of, modifications of, or additions to this Agreement shall
be valid unless the same shall be in writing and signed by all parties hereto.
15.5 NON-DISCLOSURE OF INFORMATION. Without the prior written consent of
MEDICIS, IMX will not disclose or reveal to any third Person any confidential,
non-public or commercially valuable information (a) concerning MEDICIS or LLC to
which IMX was exposed in connection with this Agreement or the other Major
Agreements, (b) in connection with the Business.
15.6 REMEDIES. Nothing contained herein is intended to or shall be
construed to limit the remedies which either party may have against the other in
the event of a breach of or default under this Agreement, it being intended that
any remedies shall be cumulative and not exclusive.
15.7 NON-WAIVER OF RIGHTS. The failure to enforce at any time any of the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement, or
any part hereof, or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.
15.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement, including the
Schedules and Exhibits attached hereto, and the other Major Agreements and the
documents delivered pursuant hereto, constitutes the entire agreement between
the parties. No changes of, modifications of, or additions to this Agreement
shall be valid unless the same shall be in writing and signed by all parties
hereto.
15.9 COUNTERPARTS. This Agreement may be executed in one or more identical
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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<PAGE>
15.10 COOPERATION. Each party agrees to cooperate and to take such further
action and to execute and deliver such additional instruments and documents as
the other party may, from time to time, reasonable request in order to
effectuate and accomplish the purpose of this Agreement, including Sections 4.2
and 8.5 hereof.
15.11 HEADINGS; INTERPRETATION. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of the Agreement. Both parties have participated
substantially in the negotiation and drafting of this Agreement and each party
hereby disclaims any defense or assertion in any litigation or arbitration that
any ambiguity herein should be construed against the draftsman.
15.12 PAYMENT OF FEES AND EXPENSES. Each party hereto shall pay all fees
and expenses of such party's respective counsel, accountants and other experts
and all other expenses incurred by such party incident to the negotiation,
preparation and execution of this Agreement and the consummation of the
transaction contemplated hereby, including any finder's or brokerage fees;
provided, however, that the expenses related to the formation of the LLC shall
be paid by LLC.
15.13 NOTICES. All written notices or other written communications
required under this Agreement shall be deemed properly given when provided to
the parties entitled thereto by personal delivery (including delivery by
commercial services such as messengers and airfreight forwarders) or by mail
sent registered or certified mail, postage prepaid at the addresses set forth on
Exhibit A (or to such other address of a party designated in writing by such
party to the others). All written notices shall be deemed delivered and properly
received upon the earlier of two (2) days after mailing the confirmation notice
or upon actual receipt of the notice provided by personal delivery or electronic
means.
15.14 SURVIVAL OF RIGHTS. This Agreement shall be binding upon, and, as to
permitted or accepted successors, transferees and assigns, inure to the benefit
of the Members and the LLC and their respective heirs, legatees, legal
representatives, successors, transferees and assigns, in all cases whether by
the laws of descent and distribution, merger, reverse merger, consolidation,
sale of assets, other sale, operation of law or otherwise.
15.15 REPRESENTATIONS AND ACKNOWLEDGMENTS. (a) Each Member does hereby
represent and warrant by the signing of a counterpart of this Agreement that the
Interest acquired by him was acquired for his/her own account, for investment
only, and not for the benefit of any other person, and not for resale to any
other person or future distribution, and that he/she has relied solely on the
advice of his/her personal tax, investment or other advisor(s) in making
his/her decision. The Managers have not made and hereby make no warranties or
representations other than those set forth in this Agreement.
(b) Each member acknowledges and agrees that the firm of Bryan Cave
LLP has represented Medicis. Each Member acknowledges and agrees that they have
been advised to seek their own separate counsel with respect to the LLC, this
Agreement and all matters pertaining thereto.
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15.16 PARTITION. The Members agree that the Property that the LLC may own
or have an interest in is not suitable for partition. Each of the Members hereby
irrevocably waives any and all rights that it may have to maintain any action
for partition of any Property the LLC may at any time have an interest in.
15.17 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
15.18 ATTORNEYS' FEES. In the event of any litigation, arbitration or
other dispute arising as a result of or by reason of this Agreement, the
prevailing party in any such litigation, arbitration or other dispute shall be
entitled to, in addition to any other damages assessed, its reasonable
attorneys' fees, and all other costs and expenses incurred in connection with
settling or resolving such dispute. The attorneys' fees which the prevailing
party is entitled to recover shall include fees for prosecuting or defending any
appeal and shall be awarded for any supplemental proceedings until the final
judgment is satisfied in full. In addition to the foregoing award of attorneys'
fees to the prevailing party, the prevailing party in any lawsuit or arbitration
procedure on this Agreement shall be entitled to its reasonable attorneys' fees
incurred in any post judgment proceedings to collect or enforce the judgment.
This attorneys' fees provision is separate and several and shall survive the
merger of this Agreement into any judgment.
15.19 CONFIDENTIALITY AND PRESS RELEASES. The Members and their respective
Affiliates and Principals hereby agree that it is in all of their best interests
to keep this Agreement and the business of the LLC and all information
concerning such business confidential. Such parties each agree that they will
not take any action nor conduct themselves in any fashion, including giving
press releases or granting interviews, that would disclose to third parties
unrelated to the LLC or the business of the LLC any aspect of the LLC or the
business of the LLC without the unanimous prior written approval of all Members.
To the extent such prior approval is given, it may be conditioned upon approval
of the text of any press release or the scope of any intended interview.
ARTICLE XVI.
MISCELLANEOUS
16.1 ASSIGNMENT; BINDING AGREEMENT.
(a) This Agreement and all or any part of MEDICIS's rights and
obligations hereunder may be assigned by MEDICIS at any time to any Affiliate of
MEDICIS. MEDICIS shall cause such Affiliate(s) to perform any of MEDICIS's
obligations hereunder which are assigned to such Affiliate(s).
(b) Neither this Agreement nor any of IMX's rights or obligations
hereunder may be assigned by IMX without MEDICIS's prior written consent.
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<PAGE>
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and to their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this
Agreement as of the date first written above.
MEDICIS PARTNERS INCORPORATED
By: /s/ Mark A. Prygocki
-----------------------------------
Mark A. Prygocki, Sr.
Chief Financial Officer
IMX PHARMACEUTICALS, INC.
By: /s/ Bill Forster, President
-----------------------------------
Bill Forster, President
28
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EXHIBIT A
INITIAL MEMBER NAMES AND ADDRESSES; INITIAL
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
================================================================================
MEMBER'S NAME MEMBER'S ADDRESS MEMBER'S MEMBER'S
CAPITAL PERCENTAGE
CONTRIBUTION INTEREST
================================================================================
Medicis Partners 4343 East Camelback $4,000,000 51%
Incorporated Suite 250
Phoenix, AZ 85018-2700
- - --------------------------------------------------------------------------------
IMX Pharmaceuticals, Inc. 2295 Corporate Blvd. $4,000,000* 49%
Boca Raton, FL 33431
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
TOTALS: $8,000,000 100%
================================================================================
* Represents the agreed upon fair market value of property contributed by IMX to
the capital of the LLC.
-1-
<PAGE>
EXHIBIT B
(FACE OF CERTIFICATE)
THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE. SUCH LLC INTERESTS MAY NOT BE SOLD OR TRANSFERRED UNLESS
SUBSEQUENTLY REGISTERED OR QUALIFIED OR UNLESS AN EXEMPTION FROM REGISTRATION OR
QUALIFICATION IS AVAILABLE. THE AGREEMENT (AS DEFINED BELOW) PROVIDES FOR
FURTHER RESTRICTIONS ON TRANSFER OF THE LLC INTERESTS REPRESENTED HEREBY.
CERTIFICATE FOR LLC INTEREST
IN
MEDICIS CONSUMER PRODUCTS COMPANY, L.L.C.
Certificate No. __________ __________ Percentage Interest
The undersigned, as a General Manager of Medicis Consumer Products
Company, L.L.C., a Delaware limited liability company (the "LLC"), hereby
certifies that ___________________________ is the holder of an LLC Interest
representing a _______ percent (__%) Percentage Interest, as those terms are
defined in the Limited Liability Company Agreement of Medicis Consumer Products
Corporation dated as of June 5, 1998, as amended and restated from time to time
(the "Agreement") (copies of which are on file at the principal office of the
LLC).
This Certificate is not negotiable or transferable except by operation of
law, or as otherwise provided in the Agreement, and any such transfer will be
valid only upon delivery of this Certificate, together with a duly executed
assignment in the form set forth on the reverse hereof (or otherwise acceptable
to the Managers and sufficient to convey an interest in an LLC pursuant to the
Delaware Limited Liability Company Act, as it may be amended and in effect from
time to time, or any successor statute thereto) to the Managers of the LLC.
Dated: __________ MEDICIS CONSUMER PRODUCTS
COMPANY, L.L.C.
By:
-----------------------------------
Its: Manager
-2-
<PAGE>
(REVERSE OF CERTIFICATE)
ASSIGNMENT OF LLC INTEREST
IN
MEDICIS CONSUMER PRODUCTS COMPANY, L.L.C.
FOR VALUE RECEIVED, the undersigned ("Assignor") hereby assigns, conveys,
sells and transfers unto
________________________________________________________________________________
("Assignee")
________________________________________ ___________________________________
(Please insert Social Security (Please print or typewrite name and
or other identifying number of Assignee) address of Assignee)
all rights and interest of Assignor in ______ percent of the LLC Interest
evidenced hereby and directs that all future distributions and allocations with
respect to such specified assigned LLC Interest be paid or allocated by the LLC
to such Assignee. The Assignor hereby irrevocably constitutes and appoints each
Manager as Assignor's attorney-in-fact with full power of substitution in the
premises to transfer the same on the books of the LLC.
Dated: ____________________ ______________________________________
Signature of Assignor
Note: The signature to any assignment must correspond with the name as
written upon the face of this Certificate, in every particular, without
alteration or enlargement or any change whatever. If the assignment is
executed by an attorney, executor, administrator, trustee or guardian,
the person executing the assignment must give such person's full title
in such capacity, and proper evidence of authority to act in such
capacity, if not on file with the LLC or its transfer agent, must be
forwarded with this Certificate.
The undersigned, a General Manager of the LLC, hereby consents to
this Assignment pursuant to Section 9.1 of the Agreement.
Dated: ____________________ MEDICIS CONSUMER PRODUCTS
COMPANY, L.L.C.
By:
--------------------------------------
Its: General Manager
THE LLC INTERESTS EVIDENCED HEREBY ARE SUBJECT TO ALL TERMS AND CONDITIONS
OF THE AGREEMENT AND UNLESS AND UNTIL ADMITTED TO THE LLC AS A MEMBER, NO
ASSIGNEE SHALL BE ENTITLED TO ANY OF THE RIGHTS, POWERS OR PRIVILEGES OF THE
ASSIGNOR, EXCEPT THAT ASSIGNEE SHALL BE ENTITLED TO THE DISTRIBUTIONS PAID AND
ALLOCATIONS MADE WITH RESPECT TO SUCH INTERESTS AS DIRECTED BY THE ASSIGNOR
ABOVE.
-3-
<PAGE>
10.4.2
NEW PRODUCTS AGREEMENT
This NEW PRODUCTS AGREEMENT, dated as of 18th June, 1998, is by and
between Medicis Pharmaceutical Corporation, a Delaware corporation, and its
Affiliates (collectively "MEDICIS") and IMX Pharmaceuticals, Inc., a Utah
corporation ("IMX"). Capitalized terms used herein without definition shall have
the meaning set forth in the Joint Venture Agreement (as defined below).
WHEREAS, pursuant to a Joint Venture Agreement dated June 12, 1998 by and
among MEDICIS, IMX and Medicis Consumer Products Company, L.L.C. ("LLC") ("Joint
Venture Agreement") and all of the Exhibits, Schedules and Agreements attached
thereto, including the Facility Agreement, Service Agreement, Consulting
Agreement, Stock Purchase Agreement and this Agreement ("Major Agreements"),
MEDICIS, IMX and LLC have agree to form a joint venture for the development,
manufacture and distribution of pharmaceutical products; and
WHEREAS, one of the conditions of the Joint Venture Agreement is that IMX
shall give MEDICIS an option to purchase any new products developed by IMX;
NOW THEREFORE, in consideration of the agreements and mutual covenants
contained herein and in the Joint Venture Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall
have the meaning ascribed to them in the Joint Venture Agreement. As used in
this Agreement, the following terms shall have the meaning specified below:
1.1 "Additional New Product Consideration" with respect to any year
shall mean the product of the Sales Multiple and one-sixth of Net Sales of the
applicable New Product during the most recently completed 12 months of sales of
such new product.
1.2 "Acquisition Date" shall mean with respect to any New Product,
the date in which MEDICIS acquired all right, title and interest in such New
Product.
1.3 "Confidential New Product Information" shall mean any and all
information pertaining to a particular New Product which is identified by IMX in
writing or marked as confidential and is not generally known in the
pharmaceutical or skin care industry, including without limitation the New
Product Technology, Technical Information, Technical Processes, financial and
statistical data, sales and client information, techniques, strategies,
know-how, show-how and business plans. Confidential Information shall not
include information which:
(a) was already in the public domain at the time of disclosure
by IMX to MEDICIS or came into the public domain after such disclosure (unless
through an act or failure to act in breach of this Agreement),
<PAGE>
(b) was already known by MEDICIS prior to its disclosure to
MEDICIS unless such knowledge is due to disclosure by IMX in relation to a New
Product not purchased by MEDICIS;
(c) was lawfully obtained by MEDICIS from a third party under
circumstances lawfully permitting its disclosure and use, or
(d) is independently developed by MEDICIS without reference to
or reliance upon Confidential New Product Information.
1.4 "New Product Net Sales" shall mean with respect to any New
Product, the gross amount invoiced by IMX or MEDICIS, as the case may be, on all
sales of such products less deductions for: (i) sales taxes, value-added taxes
and excise taxes, tariffs, import or export duties, and duties paid or allowed
by a selling party and any other governmental charges imposed upon the
importation, use or sale of such products which are included in the gross amount
invoiced; (ii) allowed customary trade and quantity discounts and allocated
sales discounts; (iii) allocated transportation, bulk packaging, handling and
freight charges and reasonable and customary insurance where such are separately
stated as part of the sales price and are included in the gross amount invoiced;
and (iv) allowances and credits to customers on account of rejection or return
of products. Sales between or among IMX or MEDICIS, as the case may be, and its
Affiliates or sublicensees shall be excluded from the computation of Net Sales,
but Net Sales shall include the subsequent sales to third parties by such
affiliates or sublicensees. For purposes of determining Net Sales, a sale shall
be deemed to have occurred when the products have been shipped.
1.5 "New Products" mean any commercially marketable products made or
acquired, in whole or in part, by IMX, either itself or jointly with others to
be used or usable in the skin care, cosmetic or healthcare industry, provided
however, that the basis for such product is not New Intellectual Property or any
Improvements.
1.6 "New Product Profits" shall mean with respect to any year, sales
of New Products less costs of goods less direct costs less an allocation of
expenses as determined by MEDICIS in good faith.
1.7 "New Product Report" shall mean a written report by IMX
informing MEDICIS of development work being conducted, directly or indirectly,
by IMX on New Products.
1.8 "New Product Technology" means any and all Technical Information
and Technical Processes, discoveries, inventions (whether or not patented or
patentable), trade secrets, software (whether in source code or object code),
which are on the effective date of this Agreement owned by or licensed to IMX
and which are necessary or useful, in the manufacture, use or marketing of the
New Products.
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<PAGE>
1.9 "New Product Title" shall mean all right, title and interest to
the New Product Technology, Technical Information, Technical Processes,
Trademarks comprising a New Product and any samples, equipment, supply lines,
inventory, Government approvals, manufacturing agreements and any other item
developed by IMX which is useful for or relating to a particular New Product.
1.10 "Technical Information" shall mean technical data,
professional, scientific and engineering information, patents, copyright
material, know-how, show-how, manufacturing techniques, specifications of
equipment and materials, documentation relating to availability of FDA approvals
for the New Product, marketing information, advertising materials and brochures
and other information or knowledge relating to the manufacture and marketing of
New Products and the Technical Processes relating to New Products, including
without limitation design drawings for any New Product and all other proprietary
information relating to a New Product.
1.11 "Technical Processes" means the processes and methods of
working for the manufacture of any New Products.
1.12 "Territory" shall mean (a) with respect to any New Product
created under the First Refusal Agreement, dated as of October 13, 1995, between
IMX and Meyer-Zall Industries, Inc., as amended from time to time ("Meyer-Zall
License"), the United States of America and Puerto Rico, and (b) with respect to
any New Product not created under the Meyer-Zall License, all of North America,
together with the states, commonwealths, provinces and territories thereof.
1.13 "Trademarks" means any name or mark and such trademarks or
other commercial designations which are used to describe any New Products,
whether or not registered, and including trademarks, trademark registrations and
pending applications for registrations using such names or commercial
designations, registered or filed in the Territory, and all goodwill associated
therewith.
2. PURCHASE OPTION.
2.1 New Product Report. Within 10 days of the beginning of each
fiscal quarter during the term of this Agreement, IMX shall send to MEDICIS a
New Product Report. The New Product Report shall include information regarding:
(a) the use of the New Product; (b) an explanation of the science or other
technology underlying the New Product; (c) the ownership of the technology
underlying the New Product, (d) whether any New Intellectual Property or
Contributed Intellectual Property is included in the New Product; (e) the
anticipated cost of developing the New Product; (f) anticipated date of
completion of development; (g) strategic marketing concepts for the New Product
and (h) the terms of any third party contracts relating to the New Products.
2.2 Within 60 days of receiving the New Product Report, MEDICIS
shall inform IMX if MEDICIS is interested in acquiring the New Product Title in
the Territory. If
3
<PAGE>
MEDICIS has indicated interest in a New Product, MEDICIS may assist IMX, to the
extent MEDICIS believes appropriate in the development of such New Product. All
costs incurred by MEDICIS in the development of any New Product shall be
promptly reimbursed by IMX upon the request of MEDICIS.
2.3 Option to Purchase. Upon successful completion of the
development of such New Product, IMX shall promptly provide MEDICIS with a
Notice of Option to Purchase a New Product, together with adequate production
quality samples of the New Product and with information regarding test results,
packaging, logo design and trade dress, marketing concepts, sales strategy,
projected first year high and low sales thresholds and total development costs
and other information as MEDICIS may reasonably request. Within 60 days of
receipt by MEDICIS of such notice, MEDICIS shall provide IMX with written notice
of its election to acquire or not acquire the New Product Title in the
Territory. If MEDICIS elects to exercise its option to purchase the New Product
Title, MEDICIS shall pay to IMX for the rights in the New Product Title the
following: (i) the out-of-pocket development costs incurred by IMX for the New
Product (subject to the limitations set forth in Section 5); and (ii) for each
of the three years after the date in which MEDICIS acquired the New Product
Title, the Additional New Product Consideration and one-sixth of the New Product
Profits from such New Product. At the time MEDICIS makes an election to purchase
a New Product, MEDICIS shall inform IMX of its intended method of payment and
the timing of any payments contemplated under Section 2.3(ii).
2.4 Final Option to Purchase. If MEDICIS does not elect to purchase
the New Product Title prior to commercial sales of the New Product, twelve
months after first commercial sales of the New Product, IMX shall provide
MEDICIS with a Notice of a Final Option to Purchase a New Product, containing a
full, accurate and complete information regarding the New Product, including
information regarding total sales of New Product (including order and reorders)
and other information as may reasonably be requested by MEDICIS. Within 60 days
of receipt by MEDICIS of such notice, MEDICIS shall provide IMX with written
notice of its election to acquire or not acquire New Product Title in the
Territory. In the event that MEDICIS elects to exercise the option to purchase
such New Product, MEDICIS shall pay to IMX (i) the out-of-pocket development
costs incurred by IMX for the New Product (subject to the limitations set forth
in Section 5), (ii) a sum equal to one times New Product Net Sales of the New
Product in the first year of commercial sales of the New Product by IMX and
(iii) for each of the three years after the date in which MEDICIS acquires the
New Product Title, the Additional New Product Consideration and one sixth of the
New Product Profits from the New Product. At the time MEDICIS elects to exercise
the option to purchase, MEDICIS shall inform IMX of its intended method of
payment and the timing of any payments contemplated under Section 2.4(ii) and
2.4(iii).
3. TRANSFER OF NEW PRODUCT TITLE, OWNERSHIP
3.1 On completion of the purchase and sale of a New Product by IMX
to MEDICIS, IMX shall execute any and all documents, assignments, applications
or other instruments which MEDICIS may deem necessary in order to (i) assign or
convey to or vest in MEDICIS the sole and exclusive right, title and interest in
and to the New Product Title; (ii)
4
<PAGE>
apply for, prosecute and obtain any patents, trademarks, copyrights or other
legal protection in the Territory for the New Product Technology or New Product
Trademarks; (iii) represent and warrant that the use of any New Product
Technology by MEDICIS (and its Affiliates and sublicensees) will not infringe
upon or violate any patent, copyright, trade secret or other proprietary right
of any third party.
3.2 Other Technology. If IMX intends to incorporate into any New
Product any Technical Information, Technical Processes, discoveries, inventions,
trade secrets or software which IMX claims is proprietary to any person other
than IMX (the "Other Technology"), IMX shall first notify MEDICIS of such
intention before its incorporation into any New Product. IMX shall incorporate
the Other Technology into such property only upon the written consent of
MEDICIS. If such Other Technology is so incorporated, IMX hereby:
(a) Grants to MEDICIS, as the case may be, a perpetual,
irrevocable, royalty-free right to use (and sublicense others to use) the
incorporated Other Technology in the Territory effective upon delivery which
shall be non-exclusive to MEDICIS; and
(b) Represents and warrants that the use of the Other
Technology by MEDICIS (and its Affiliates and sublicensees) will not infringe
upon or violate any patent, copyright, trade secret or other proprietary right
of any third party.
4. DETERMINATION OF SALES MULTIPLES. Upon the exercise of the option by
MEDICIS pursuant to Section 2.3 or 2.4, both MEDICIS and IMX shall in good faith
agree on the low and high sales thresholds for the New Product. In the first
year of commercial sales of the New Product by MEDICIS ("Year 1"), if the New
Product Net Sales are below the low sales threshold as determined pursuant to
Section 2.4, the Sales Multiple shall be two and, if New Product Net Sales are
above the high sales threshold, the Sales Multiple shall be three. The Sales
Multiple in Year 1 shall be prorated for any amounts between the low and high
sales threshold. In the second year of sales of the New Product by MEDICIS
("Year 2") and the third year of sales of the New Product by MEDICIS ("Year 3"),
the Sales Multiple shall be as follows:
4.1 if New Product Net Sales decline over the prior fiscal year of
the LLC, the Sales Multiple is one; and
4.2 if New Product Net Sales increase over the prior fiscal year of
the LLC by:
(a) less than 10%, the Sales Multiple is 1.5;
(b) 10%, the Sales Multiple is two;
(c) 30%, the Sales Multiple is three; and
(d) greater than or equal to 50%, the Sales Multiple is
four.
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<PAGE>
The Sales Multiple shall be prorated for New Product Net Sales increases in Year
2 and 3 between 10% and 50%.
5. LAPSE OF PURCHASE OPTION. In the event that MEDICIS does not exercise
its purchase options pursuant to Sections 2.3 and 2.4 above with respect to any
New Product, the rights of MEDICIS for such New Product shall lapse and IMX
shall own all right, title and interest to such New Product.
6. RESTRICTIONS ON IMX PRODUCT DEVELOPMENT ACTIVITIES. With respect to any
New Products, IMX shall not enter into any material development, licensing,
supply, sale, marketing, research or other similar agreements or arrangements
with any third party without providing MEDICIS the opportunity to review and
discuss the desirability of such arrangements or agreements. In the event that
any such arrangement or agreement was entered into by IMX without the prior
written consent of MEDICIS and MEDICIS elects to purchase the New Product so
developed by IMX, MEDICIS shall have the option (i) to not assume any
obligations under such arrangements or agreements or (ii) disregard the costs
incurred under the arrangement or agreement in the calculation of developments
costs pursuant to clause (i) of Sections 2.3 and 2.4 hereof. Notwithstanding the
foregoing, IMX shall have the right to in connection with any supply, sale,
marketing, research or other similar agreements or arrangements with any third
party to enter into contracts for less than $50,000 individually or $100,000 in
the aggregate relating to any New Product, provided the terms of such contracts
and the obligations of IMX (or its successors and assigns) do not extend over
one year. With respect to development, licensing agreements or other similar
agreements or arrangements, IMX shall have the right to enter into agreements
that bind IMX or any successor or assign to pay no more than 2% of New Product
Net Sales of any such New Product for any obligation extending beyond three
years, provided that upon the expiration of the term of such agreement, IMX (and
its successors and assigns) shall have all right, title and interest, exclusive
of all others, in the New Products and the intellectual property underlying any
New Products.
7. CONFIDENTIAL NEW PRODUCT INFORMATION.
7.1 Medicis Confidentiality Obligation. As long as MEDICIS has not
acquired the New Product Title to any particular New Product, MEDICIS agrees to
keep any Confidential New Product Information relating to such New Product
secret and confidential, and not to use or disclose to any third-parties, except
as directly required for MEDICIS to evaluate such New Product.
7.2 IMX Confidentiality Obligation. IMX acknowledges and agrees that
after the sale to MEDICIS of any New Product Title, IMX shall have no claim on
or interest in the Confidential New Product Information relating to such New
Product and that it shall turn over to MEDICIS all documents, notes, memoranda,
writings, drawings or other material embodying or containing any Confidential
New Product Information and that it shall keep any Confidential New Product
Information relating to such sold New Product secret and confidential and that
it shall not use or disclose such Confidential New Product Information to any
third parties.
6
<PAGE>
8. TERM AND TERMINATION. Unless earlier terminated in accordance with this
Section 8, this Agreement shall continue in effect until the later of (a) five
years from the date of this Agreement, or (b) the date which is the three year
anniversary of the last date in which IMX receives payment for any New Product
in accordance with the terms of this Agreement or upon IMX's election, upon a
Change in Control of MEDICIS.
8.1 Termination for Cause. In addition to any damages or other
remedies available under applicable law or in equity, either party may terminate
this Agreement without prejudice to any rights of action accrued to either party
at the date of termination if the other party materially breaches any of the
terms of this Agreement and fails to remedy such breach (if capable of being
remedied) within 30 calendar days after written notice by the non-breaching
party to the breaching party specifying the nature of the breach.
(a) In the event of a termination for cause by MEDICIS under
this Section 8.1, MEDICIS shall be entitled to keep any New Product Title it has
purchased under this Agreement, but shall be under no further obligation to
submit payments to IMX for such New Product Title.
(b) In the event of a termination by IMX under this Section
8.1 related to MEDICIS's failure to pay the consideration for a particular New
Product or a breach of Section 9.2, MEDICIS shall transfer to IMX, through
execution of such documentation as is reasonably required by IMX, MEDICIS's
interest in such New Product Title; provided however, that IMX repay to MEDICIS
any out-of-pocket development costs and any Additional New Product Consideration
previously paid by MEDICIS for such New Product Title and, in the event a New
Product is purchased under Section 2.4, any amounts paid under 2.4(ii). IMX
shall make such payment to MEDICIS on mutually agreeable terms over a period not
to exceed two years.
8.2 Effect of Termination. The obligations of the parties hereto
contained in Sections 7 and 9-12 inclusive.
9. POST-TERMINATION RESTRICTIONS.
9.1 MEDICIS is hereby agreeing to purchase New Product from IMX
based upon IMX's assurances and promises contained herein that IMX will not
reduce the value of the New Product purchased by MEDICIS by using the
Confidential New Product Information IMX has sold to MEDICIS or by making or
helping a competitor to make a product competitive with the New Product.
Accordingly, IMX agrees that during the time MEDICIS is paying IMX for the
purchase of a particular New Product and for a period of three years,
thereafter, IMX will not, directly or indirectly (whether as owner, partner,
consultant, employee or otherwise):
(a) engage in, assist or have an interest in, or enter the
employment of or act as an agent, advisor or consultant for, any person or
entity which is engaged in, or will be engaged in, the development, manufacture,
supplying, distribution or sale of a product, process, apparatus, service or
development which is competitive with such New Product purchased by
7
<PAGE>
MEDICIS ("Competitive Work"), and which serves any market in which such New
Product is sold by MEDICIS during the term of this restriction.
(b) solicit, call on, or in any manner cause or attempt to
cause, or provide any Competitive Work to, any customer or active prospective
customer of MEDICIS which IMX helped MEDICIS solicit, gave MEDICIS the name of
or which was a customer for the New Product at the time IMX sold the New Product
to MEDICIS.
9.2 MEDICIS agrees that during the three-year period in which
MEDICIS is paying the consideration for a particular New Product, MEDICIS will
not engage in, assist or have an interest in the manufacture, supply or sale in
the Territory of any products which are based on the same active ingredient as
contained in the New Product Technology for such New Product, other than those
products which are in development, as evidenced by written documentation, or
being manufactured, distributed, marketed or sold by MEDICIS or its Affiliates
on the date of acquisition of such New Product title.
10. ACKNOWLEDGMENT REGARDING RESTRICTIONS. IMX and MEDICIS recognize and
agree that the restraints contained in Section 9 are reasonable and enforceable
in view of MEDICIS's legitimate interests in protecting its investment in a New
Product or IMX's in protecting the consideration payable to it for any New
Product Title and in protecting the Confidential New Product Information.
11. RIGHT TO INJUNCTIVE RELIEF, TOLLING. In the event of a breach or
threatened breach of any of IMX's obligations under the terms and provisions of
Sections 7.2 and 9.1 hereof or MEDICIS's obligations under the terms and
provisions of Section 7.1 and 9.2 hereof, MEDICIS or IMX as the case may be
shall be entitled, in addition to any other legal or equitable remedies it may
have in connection therewith (including any right to damages that it may
suffer), to temporary, preliminary and permanent injunctive relief restraining
such breach or threatened breach. IMX hereby expressly acknowledges that the
harm which might result to MEDICIS's investment in a New Product as a result of
any noncompliance by IMX with any of the provisions of Sections 7.2 and 9 would
be largely irreparable. MEDICIS hereby expressly acknowledges that the harm
which might result to the value of an unsold New Product to IMX as a result of
any noncompliance by MEDICIS with any of the provisions of Section 7.1 would be
largely irreparable. IMX specifically agrees that if there is a question as to
the enforceability of any of the provisions of Section 9 hereof, IMX will not
engage in any conduct inconsistent with or contrary to such Sections until after
the question has been resolved by a final judgment of a court of competent
jurisdiction. IMX and MEDICIS agree that the running of the period set forth in
Section 9 hereof shall be tolled during any period of time in which IMX or
MEDICIS violates that section.
12. MISCELLANEOUS.
12.1 Arbitration. The parties shall promptly submit to Arbitration
any dispute which may arise in connection with this Agreement (or the
transaction or relationships
8
<PAGE>
contemplated thereon) that is not promptly resolved by them pursuant to Section
19 of the Joint Venture Agreement.
12.2 Choice of Forum and Governing Law. The parties agree that: (i)
any litigation involving any noncompliance with or breach of the Agreement, or
regarding the interpretation, validity and/or enforceability of the Agreement,
shall be filed and conducted exclusively in the state or federal courts in
Maricopa County, Arizona and the parties hereby agree to submit to the
jurisdiction of such courts; and (ii) the Agreement shall be deemed to be made
in and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of Delaware, without regard for any
conflict of law principles.
12.3 Severability. If any provision of this Agreement is adjudicated
to be invalid or unenforceable under applicable law in any jurisdiction, the
validity or enforceability of the remaining provisions thereof shall be
unaffected as to such jurisdiction and such adjudication shall not affect the
validity or enforceability of such provisions in any other jurisdiction. To the
extent that any provision of this Agreement is adjudicated to be invalid or
unenforceable because it is overbroad, that provision shall not be void but
rather shall be limited only to the extent required by applicable law and
enforced as so limited. The parties expressly acknowledge and agree that this
Section is reasonable in view of the parties' respective interests. In the event
that the terms and conditions of this Agreement are materially altered by any
limitations to its provisions, the parties will renegotiate the terms and
conditions of this Agreement to resolve any inequities in an attempt to carry
out to the extent legally permissible the severed or altered portion.
12.4 Assignment; Binding Agreement.
(a) This Agreement and all or any part of MEDICIS's rights and
obligations hereunder may be assigned by MEDICIS at any time to any Affiliate of
MEDICIS. MEDICIS shall cause such Affiliate(s) to perform any of MEDICIS's
obligations hereunder which are assigned to such Affiliate(s).
(b) Neither this Agreement nor any of IMX's rights or
obligations hereunder may be assigned by IMX without MEDICIS's prior written
consent.
(c) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and to their respective successors and
permitted assigns. This Agreement is not intended, nor shall be construed, to
give any person other than the parties hereto and their respective successors,
assigns and legal representatives, any legal or equitable right, remedy or claim
hereunder.
12.5 Entire Agreement and Modification. This Agreement, including
the Schedules and Exhibits attached hereto and the documents delivered pursuant
hereto, constitutes the entire agreement between the parties. No changes of,
modifications of, or additions to this Agreement shall be valid unless the same
shall be in writing and signed by all parties hereto.
9
<PAGE>
12.6 Remedies. Nothing contained herein is intended to or shall be
construed to limit the remedies which either party may have against the other in
the event of a breach of or default under this Agreement, it being intended that
any remedies shall be cumulative and not exclusive.
12.7 Non-Waiver of Rights. The failure to enforce at any time any of
the provisions of this Agreement or to require at any time performance by the
other party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement, or
any part hereof, or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.
12.8 Counterparts. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
12.9 Cooperation. Each party agrees to cooperate and to take such
further action and to execute and deliver such additional instruments and
documents as the other party may, from time to time, reasonable request in order
to effectuate and accomplish the purpose of this Agreement.
12.10 Headings; Interpretation. The section headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of the Agreement. Both parties have participated
substantially in the negotiation and drafting of this Agreement and each party
hereby disclaims any defense or assertion in any litigation or arbitration that
any ambiguity herein should be construed against the draftsman.
12.11 Payment of Fees and Expenses. Each party hereto shall pay all
fees and expenses of such party's respective counsel, accountants and other
experts and all other expenses incurred by such party incident to the
negotiation, preparation and execution of this Agreement and the consummation of
the transaction contemplated hereby, including any finder's or brokerage fees.
12.12 Notices. All written notices or other written communications
required under this Agreement shall be deemed properly given when provided to
the parties entitled thereto by personal delivery (including delivery by
commercial services such as messengers and airfreight forwarders) or by mail
sent registered or certified mail, postage prepaid at the following addresses
(or to such other address of a party designated in writing by such party to the
others):
If to MEDICIS: MEDICIS Pharmaceutical Corporation
4343 East Camelback, Suite 250
Phoenix, Arizona 85018-2700
Attention: Jonah Shacknai
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<PAGE>
with a copy to: Bryan Cave LLP
2800 North Central Avenue
21st Floor
Phoenix, Arizona 85004-1098
Attention: Frank M. Placenti, Esq.
If to IMX: IMX Pharmaceutical Corporation
2295 Corporate Boulevard
Boca Raton, Florida 33431
Attn: William Forster
with a copy to: Nason, Yeager, Gerson, White & Lioce, P.A.
1645 Palm Beach Lakes Boulevard
Suite 1200
West Palm Beach, Florida 33401
Attn: Gary N. Gerson
All written notices shall be deemed delivered and properly received upon the
earlier of two (2) days after mailing the confirmation notice or upon actual
receipt of the notice provided by personal delivery or electronic means.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their authorized officers on the date hereof.
MEDICIS PHARMACEUTICAL CORPORATION
/s/ Mark A. Prygocki
--------------------------------------------
Mark A. Prygocki, Sr.
Chief Financial Officer
IMX PHARMACEUTICALS, INC.
/s/ William Forster, President
--------------------------------------------
William Forster, President
11
<PAGE>
10.4.3
FACILITY AGREEMENT
This Facility Agreement is made and entered into as of the 18th day of
June, 1998, by and between MEDICIS CONSUMER PRODUCTS COMPANY, L.L.C., a Delaware
limited company (the "LLC"), and IMX PHARMACEUTICALS, INC., a Utah corporation
("IMX"). Capitalized terms used herein without definitions shall have the
meaning set forth in the Joint Venture Agreement (as defined below).
WHEREAS, pursuant to a Joint Venture Agreement dated June 12, 1998 and its
exhibits, schedules, attachments and all other related agreements contemplated
therein (collectively, "Joint Venture Agreement") by and between IMX and MEDICIS
PARTNERS INCORPORATED, a Delaware corporation ("MEDICIS"), IMX and MEDICIS have
agreed to form a joint venture to develop and market pharmaceutical products and
have formed LLC as the joint venture entity;
WHEREAS, IMX currently leases approximately 4,100 square feet of office
space at 2295 Corporate Boulevard, Boca Raton, Florida 33431 under a lease which
currently terminates on March 31, 2001 (the "Office Lease") and also leases
approximately 1,500 square feet of warehouse space located at 2960 N.W. 2nd
Avenue, Bay J, Boca Raton, Florida 33431 which terminates on April 30, 1999 (the
"Warehouse Lease") (the Warehouse Lease and/or the Office Lease, shall be
collectively the "Leases").
WHEREAS, pursuant to the terms of the LLC Agreement, IMX has agreed to
permit the LLC to occupy and use the office and warehouse facilities and to
sublease to the LLC the Office Lease and Warehouse Lease subject to and upon the
terms as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, it is agreed as follows:
1. Sublease.
(a) IMX hereby subleases to LLC all of the space utilized under the
Leases except the space currently used as offices of the Significant Employees
or for the support of the Significant Employees (the space used by LLC is the
"Occupied Space"), which shall continue to be leased and used by IMX.
(b) Also included in this Sublease are: (i) all of the common areas
which will be used jointly by LLC and IMX; (ii) the use of the telephone system
and telephones and computer hardware; and (iii) copy machines, fax machines,
furniture and other facilities and services necessary to conduct the business of
LLC as contemplated under the Joint Venture Agreement and other Major
Agreements. IMX hereby represents and warrants it has obtained all necessary
approval for the sublease granted hereunder.
<PAGE>
2. Rent. The rent payable to IMX shall initially be in the amount of Five
Thousand Seventy-Three Dollars and Thirteen Cents ($5,073.13) per annum payable
in equal monthly installments on the first day of each calendar month during the
Term.
3. Term. This Sublease shall commence on the date of execution by the
parties and unless earlier terminated pursuant to this Section 3, shall remain
in effect until termination of the Office Lease ("Initial Term"). The term of
this Sublease shall be extended on any renewal of the Leases (as set forth in
Section 4(b)) or, if applicable, on the agreement for any New Leases (as set
forth in Section 4(a) or 4(c)) ("Extended Term"). However, in the event that the
LLC fails to pay any rent within 30 days after the due date and does not cure
such failure within 30 days after receipt of written notice of IMX of such
failure, IMX shall have the right to terminate this Sublease immediately upon
written notice of termination to the LLC. LLC shall be entitled to immediately
terminate by written notice this Sublease upon any failure by IMX to pay rent to
the Landlord when due which is not cured within 30 days after the date of notice
by either LLC or the Landlord of such failure to pay rent. In the event of
termination due to a breach, by either party, of the Joint Venture Agreement,
the non-breaching party shall also be entitled to terminate this Sublease. Upon
any termination of this Sublease by LLC under this Section 3, all obligation to
pay rent shall cease as of the date of such termination.
4. Renewal of Leases; New Leases.
(a) Additional Space. If during the Initial Term, IMX seeks office
or warehouse space in addition to the Leases to rent for its own purposes, IMX
shall inform LLC in writing. LLC shall be entitled in its discretion to sublease
from IMX a percentage of the additional space being leased by IMX upon the same
terms and conditions as are contained herein, except the rent to be paid by LLC
to IMX under the sublease shall be a percentage of the total rent to be paid by
IMX to the landlord which is proportionately equal to the percentage used by LLC
of the total additional space rented by IMX. The term of such sublease shall be
as the parties agree in writing.
(b) Lease Renewal. During the Initial Term IMX shall not terminate
either the Office Lease or Warehouse Lease, prior to the natural expiration of
the Leases by their terms, without the prior written consent of LLC. IMX may
renew the Office Lease and/or Warehouse Lease upon their expiration, provided
however, that LLC shall be entitled, but not required, to continue to sublease
the same Occupied Space under this Sublease for such period as LLC in its sole
discretion shall determine. In the event the rent charged IMX by the Landlord(s)
increases under the Lease renewal then the rent to be paid by the LLC shall
increase proportionately on a pro rata basis to equal the percentage of space
being used by LLC. If IMX determines that it shall not renew either the Office
Lease and/or Warehouse Lease, IMX shall so notify LLC in writing prior to the
expiration of the term of such Lease. LLC shall then have the option to rent the
Occupied Space directly from the landlord.
(c) New Leases. If IMX and LLC allow the Leases to terminate and IMX
leases new office and/or warehouse facilities ("New Leases"), the LLC shall be
entitled, but not required, to sublease space in such new facilities on the same
terms and conditions as are
2
<PAGE>
contained in this Sublease provided however that the rent payable by LLC for
such sublease shall be a percentage of the total rent to be paid by IMX to the
landlord which is proportionately equal to the percentage used by LLC of total
new space rented by IMX. The term of such sublease shall be as the parties agree
in writing.
5. Arbitration. The parties shall promptly submit to arbitration pursuant
to Section 19 of the Joint Venture Agreement any dispute which may arise in
connection with this Sublease (or the transactions or relationships contemplated
thereon) that is not promptly resolved by them.
6. Choice of Forum and Governing Law. The parties agree that: (i) subject
to Section 5, any claims or litigation involving any noncompliance with or
breach of this Sublease, or regarding the interpretation, validity and/or
enforceability of this Sublease, shall be filed and conducted exclusively in the
state or federal courts in Maricopa County, Arizona; (ii) the parties consent to
such jurisdiction, agree that venue will be proper in such courts and waive any
objections based upon forum non conveniens; and (iii) this Sublease shall be
deemed to be made in and in all respects shall be interpreted, construed and
governed by and in accordance with the laws of the State of Delaware, without
regard for any conflict of law principles. The choice of forum set forth in this
Section 6 shall not be deemed to preclude the enforcement of any action under
this Sublease in any other jurisdiction.
7. Severability. In the event any portion of this Sublease shall be held
illegal, void or ineffective, the remaining portions hereof shall, remain in
full force and effect. If any of the terms or provisions of this Sublease are in
conflict with any applicable statute or rule of law, then such terms or
provisions shall be deemed inoperative to the extent that they may conflict
therewith and shall be deemed to be modified to conform with such statute or
rule of law. In the event that the terms and conditions of this Sublease are
materially altered, the parties will renegotiate the terms and conditions of
this Sublease to resolve any inequities in an attempt to carry out to the extent
legally permissible the severed or altered portion.
8. Assignment; Binding Agreement.
(a) This Sublease and all or any part of LLC's rights and
obligations hereunder may be assigned by LLC at any time to any Affiliate of
LLC. LLC shall cause such Affiliate(s) to perform any of LLC's obligations
hereunder which are assigned to such Affiliate(s).
(b) Neither this Sublease nor any of IMX's rights or obligations
hereunder may be assigned by IMX without LLC's prior written consent.
(c) This Sublease shall be binding upon and shall inure to the
benefit of the parties hereto and to their respective successors and permitted
assigns. This Sublease is not intended, nor shall be construed, to give any
person other than the parties hereto and their respective successors, assigns
and legal representatives, any legal or equitable right, remedy or claim
hereunder.
3
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9. Remedies. Nothing contained herein is intended to or shall be construed
to limit the remedies which either party may have against the other in the event
of a breach of or default under this Sublease, it being intended that any
remedies shall be cumulative and not exclusive.
10. Non-Waiver of Rights. The failure to enforce at any time any of the
provisions of this Sublease or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Sublease, or
any part hereof, or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Sublease.
11. Entire Agreement and Modification. This Sublease, the Joint Venture
Agreement and the other Major Agreements and the documents delivered pursuant
thereto, constitutes the entire agreement between the parties. No changes of,
modifications of, or additions to this Sublease shall be valid unless the same
shall be in writing and signed by all parties hereto.
12. Counterparts. This Sublease may be executed in one or more identical
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
13. Cooperation. Each party agrees to cooperate and to take such further
action and to execute and deliver such additional instruments and documents as
the other party may, from time to time, reasonable request in order to
effectuate and accomplish the purpose of this Sublease.
14. Headings; Interpretation. The section headings contained in this
Sublease are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Sublease. Both parties have participated
substantially in the negotiation and drafting of this Sublease and each party
hereby disclaims any defense or assertion in any litigation or arbitration that
any ambiguity herein should be construed against the draftsman.
15. Payment of Fees and Expenses. Each party hereto shall pay all fees and
expenses of such party's respective counsel, accountants and other experts and
all other expenses incurred by such party incident to the negotiation,
preparation and execution of this Sublease and the consummation of the
transaction contemplated hereby, including any finder's or brokerage fees.
16. Notices. All written notices or other written communications required
under this Sublease shall be deemed properly given when provided to the parties
entitled thereto by personal delivery (including delivery by commercial services
such as messengers and airfreight forwarders) or by mail sent registered or
certified mail, postage prepaid at the following addresses (or to such other
address of a party designated in writing by such party to the others):
If to LLC: Medicis Consumer Products Company, L.L.C.
c/o Medicis Partners Incorporated
4343 East Camelback, Suite 250
Phoenix, Arizona 85018-2700
Attention: Jonah Shacknai
4
<PAGE>
with a copy to: Bryan Cave LLP
2800 North Central Avenue
21st Floor
Phoenix, Arizona 85004-1098
Attention: Frank M. Placenti, Esq.
If to IMX: IMX Pharmaceutical Corporation
2295 Corporate Boulevard
Boca Raton, Florida 33431
Attn: William Forster
with a copy to: Nason, Yeager, Gerson, White & Lioce, P.A.
1645 Palm Beach Lakes Boulevard
Suite 1200
West Palm Beach, Florida 33401
Attn: Gary N. Gerson
All written notices shall be deemed delivered and properly received upon the
earlier of two (2) days after mailing the confirmation notice or upon actual
receipt of the notice provided by personal delivery or electronic means.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed the day and year first above written.
MEDICIS CONSUMER PRODUCTS
COMPANY, L.L.C.
By: /s/ Mark Prygocki
----------------------------------------------
Medicis Partners Incorporated, General Manager
By: Mark A. Prygocki, Sr.
Chief Financial Officer
IMX PHARMACEUTICALS, INC.
By: /s/ William Forster, President
----------------------------------------------
William Forster, President
5
<PAGE>
================================================================================
Exhibit 10.5
ASSET PURCHASE AGREEMENT
by and among
THE EXOREX COMPANY, LLC
BIOGLAN PHARMA PLC
MEDICIS PHARMACEUTICAL CORPORATION
and
IMX PHARMACEUTICALS, INC.
-------------------------------
Dated as of June 29, 1999
-------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
- - --------------------------------------------------------------------------------
Page
ARTICLE I DEFINITIONS..........................................................1
ARTICLE II SALE AND PURCHASE; PURCHASE PRICE...................................3
Section 2.1 Sale and Purchase of Assets...................................3
Section 2.2 Purchase Price................................................4
Section 2.3 Form of Payment...............................................4
Section 2.4 Assumption of Obligations.....................................4
ARTICLE III CLOSING............................................................4
Section 3.1 Closing.......................................................4
Section 3.2 Closing Deliveries of the LLC.................................4
Section 3.3 Closing Deliveries of Bioglan.................................5
ARTICLE IV CONDITIONS TO CLOSING...............................................5
Section 4.1 Conditions to Bioglan's Obligations...........................5
Section 4.2 Conditions to the LLC's Obligations...........................6
ARTICLE V OTHER MATTERS........................................................6
Section 5.1 Use of Know-How...............................................6
Section 5.2 New Product Development.......................................7
Section 5.3 Risks Associated With the Products............................7
Section 5.4 Agreement to Distribute.......................................7
Section 5.5 Notification of Customers.....................................7
Section 5.6 Customer Orders...............................................7
Section 5.7 Accounts Receivable...........................................7
Section 5.8 Product Registration..........................................8
Section 5.9 Recall and Return of Products.................................9
Section 5.10 Dissolution of the LLC........................................9
Section 5.11 Payment of Royalties..........................................9
ARTICLE VI REPRESENTATIONS AND WARRANTIES......................................9
Section 6.1 Representations and Warranties of the LLC.....................9
Section 6.2 Representations and Warranties of Bioglan....................12
ARTICLE VII CONDUCT PRIOR TO CLOSING..........................................13
Section 7.1 Cooperation..................................................13
Section 7.2 Conduct of Business by LLC...................................13
Section 7.3 Review.......................................................13
Section 7.4 Contribution Margin..........................................13
ARTICLE VIII INDEMNIFICATION..................................................14
Section 8.1 Indemnification by Medicis and IMX...........................14
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Section 8.2 Indemnification by Bioglan...................................15
Section 8.4 Discontinuance of Operations.................................16
Section 8.5 Returns of Products..........................................16
ARTICLE IX GENERAL PROVISIONS.................................................16
Section 9.1 Survival of Representations and Warranties...................16
Section 9.2 Notices......................................................16
Section 9.3 Confidential Information.....................................17
Section 9.4 Amendment....................................................18
Section 9.5 Binding Effect...............................................18
Section 9.6 Press Releases...............................................18
Section 9.7 Expenses; Taxes..............................................18
Section 9.8 Headings.....................................................19
Section 9.9 Entire Agreement.............................................19
Section 9.10 Waiver.......................................................19
Section 9.11 Severability.................................................19
Section 9.12 Termination..................................................19
Section 9.13 Governing Law................................................19
Section 9.14 Counterparts.................................................20
Section 9.15 Shareholder Approval.........................................20
ARTICLE X ARBITRATION.........................................................20
Section 10.1 Submission to Arbitration....................................20
Section 10.2 Arbitrator and Rules of Arbitration..........................20
Section 10.3 Selection of Arbitrators.....................................20
Section 10.4 Procedure....................................................20
Section 10.5 Arbitration Costs............................................21
ii
<PAGE>
SCHEDULES AND EXHIBITS
- - --------------------------------------------------------------------------------
Schedules
Schedule 1..............................................................Products
Schedule 2............................................................Trademarks
Exhibits
Exhibit A...................................................Form of Bill of Sale
Exhibit B..................................Form of Transition Services Agreement
Exhibit C.............................................Form of License Assignment
Exhibit D...........................................Form of Trademark Assignment
iii
<PAGE>
Exhibit 10.5
PURCHASE AGREEMENT
PURCHASE AGREEMENT (the "Agreement") dated as of this 29th day of June 1999, by
and among THE EXOREX COMPANY, LLC, a Delaware limited liability company (the
"LLC"), BIOGLAN PHARMA PLC, a company incorporated under the laws of England and
Wales under company registration number 1779870 ("Bioglan"), MEDICIS
PHARMACEUTICAL CORPORATION ("Medicis") and IMX PHARMACEUTICALS, INC. ("IMX").
W I T N E S S E T H:
WHEREAS, Medicis and Bioglan have entered into an Asset Purchase Agreement
(the "Asset Purchase Agreement") dated as of June 29, 1999 whereby Medicis has
agreed to sell to Bioglan and Bioglan has agreed to purchase from Medicis all of
Medicis' right, title and interest in, to and under the Purchased Assets (as
defined therein);
WHEREAS, in connection with the transactions contemplated by the Asset
Purchase Agreement the parties thereto have conditioned execution of the Asset
Purchase Agreement on the execution of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
In this Agreement the following terms shall have the following meanings:
"Affiliate" means any person, firm, corporation or other business entity,
directly or indirectly controlling, controlled by or under direct or indirect
common control with another person. A person shall be deemed to control another
person if such person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such entity, whether
through ownership of voting securities, by contract or otherwise.
"Business" means the development, manufacture, marketing and sale of the
Exorex Product Line and the related telephone product information and ordering
services provided to customers and distributors and product fulfillment center.
"Contribution Margin" means the amount equal to Net Sales less (i) all
reasonable charges from June 1, 1999 to the Closing for overhead directly
associated with the Products and the direct and indirect cost of goods (absent
the cost of Inventory paid at the Closing Date by Bioglan), and (ii) returns
from the period from June 1, 1999 to the Closing.
"Disclosure Letter" means the disclosure letter as of the date hereof from
the LLC to Bioglan relating to the representations and warranties set out in
Section 6.1.
"Exorex Product Line" means all skin care products developed by the LLC
for the treatment of and relief from psoriasis or other dermatological
conditions including, without
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limitation, shampoos and cream products and marketed under the trademark or
tradename "Exorex," including without limitation the Products listed on Schedule
1.
"Know-How" means the information known to the LLC relating solely and
uniquely to the formulae, manufacturing processes, customer lists, marketing and
advertising rights and promotional materials, technology and testing data for
the Products.
"Products" means the pharmaceutical products which are set forth on
Schedule 1.
"Net Sales" means the gross amount invoiced by the LLC and its Affiliates
to third parties on all sales of Products and any improvements (as defined in
the License Agreement), less deductions for: (i) sales taxes, value-added taxes
and excise taxes, tariffs, import or export duties, and duties paid or allowed
by a selling party and any other governmental charges imposed upon the import,
use or sale of such Products (except income taxes of the LLC, its Affiliates and
sublicensees) which are included in the gross amount invoiced; (ii) allowed
customary trade and quantity discounts (such discounts not to exceed 10% of the
sales price) and sales discounts (as defined in accordance with GAAP, such
discounts not to exceed 5% of the sales price); (iii) transportation, bulk
packaging, handling and freight charges (such charges not to exceed 3% of the
sales price) and reasonable and customary insurance where such are separately
stated as part of the sales price and are included in the gross amount invoiced;
and (iv) allowances and credits to its Affiliates or sublicensees which shall be
excluded from the computation of Net Sales, but Net Sales shall include
subsequent sales to third parties by such Affiliates or sublicensees. For
purposes of determining Net Sales, a sale shall be deemed to have occurred when
the Products have been shipped by the LLC, its Affiliates or a sublicensee.
"Trademarks" means the trademarks listed in Schedule 2 hereto together
with the goodwill symbolized by such trademarks.
"Warranties" means the warranties and representations of the LLC set out
in Section 6.1.
The following terms have the meanings defined for such terms in the
Sections set forth below:
Term Section
- - ---- -------
Agreement.............................................................Recitals
Asset Purchase Agreement..............................................Recitals
Assumed Liabilities........................................................2.4
Award.....................................................................10.4
Basket..................................................................8.3(e)
Bill of Sale ..........................................................3.2 (a)
Bioglan...............................................................Recitals
Closing....................................................................3.1
Closing Date...............................................................3.1
Excluded Assets............................................................2.1
GAAP....................................................................6.1(g)
Hearing...................................................................10.4
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IMX...................................................................Recitals
Indemnified Party.......................................................8.3(a)
Indemnifying Party......................................................8.3(a)
Inventory..................................................................2.2
Joint Notice...............................................................5.5
License Agreement..........................................................2.1
LLC...................................................................Recitals
Losing Party..............................................................10.5
Losses.....................................................................8.1
Material Adverse Effect.................................................6.1(d)
Medical Affairs Liaison.................................................5.8(d)
Medicis...............................................................Recitals
New Authorizations......................................................5.8(a)
Purchase Price.............................................................2.2
Purchased Assets...........................................................2.1
Required Consents.......................................................4.1(c)
Successful Party..........................................................10.5
ARTICLE II
SALE AND PURCHASE; PURCHASE PRICE
Section 2.1 Sale and Purchase of Assets. Subject to the terms and
conditions set forth herein, and in reliance upon the representations and
warranties contained herein, the LLC will sell, assign, convey, transfer and
deliver to Bioglan or to the nominated Affiliate of Bioglan, and Bioglan will
purchase and acquire from the LLC the following assets of the LLC, including,
without limitation, (i) the Exorex Product Line in the United States, (ii) all
rights related to the Exorex Product Line in the United States, (iii) the Exorex
trademark, (iv) an assignment of the license by and between Pegasus Dermasearch
(Pty) Limited and Interderm Limited dated June 23, 1995 as subsequently amended
on September 18, 1995, September 1, 1996, January 15, 1998, and March [ ],
1998 (the "License Agreement") to the extent it relates to the Exorex Product,
(v) the helpline, including all employees of the Business and all obligations
relating to such employees, (vi) the Facility Agreement between the LLC and IMX
dated June 18, 1998, (vii) the Inventory (as defined herein), (viii) an amount
equal to the Contribution Margin to be paid pursuant to the Transition Services
Agreement, (ix) the Software License Agreement from IMX to LLC, dated as of June
18, 1998, and (x) all other ordinary course obligations, including obligations
and contracts related to distribution, sales and marketing obligations related
to the Business (the "Purchased Assets") except: (i) the New Product Agreement
between Medicis and IMX dated June 18, 1998; (ii) the non-Disclosure and
Invention Agreements entered into by (a) Adele Folk, dated as of June 18, 1998,
(b) Gary Spielfogel, dated as of June 18, 1998, (c) Marc Falkin, dated as of
June 18, 1998 and (d) Bill Forster, dated as of June 18, 1998; (iii) the
Consulting, Confidentiality and Non-Compete Agreement between the LLC and IMX
dated June 18, 1998 ; (iv) the Exclusive Distribution Assignment Agreement
between IMX and the LLC, dated June 18, 1998; and (v) the Assignment
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and Assumption Agreement between IMX and the LLC, dated June 18, 1998 (the
"Excluded Assets").
Section 2.2 Purchase Price. In consideration for the sale,
assignment, conveyance, transfer and delivery of the Purchased Assets, Bioglan
will pay the LLC consideration as set forth in Section 2.2(a) of the Asset
Purchase Agreement and LLC's cost (less the sum of US $200,000) for all
inventory (the "Inventory") of the Products as of June 1, 1999 with a remaining
shelf life of no less than twelve (12) months as of June 1, 1999 (the "Purchase
Price") and in the manner herein and therein provided and the LLC hereby gives
its consent to the payment of the Purchase Price being satisfied in such manner.
The parties hereby agree that any Inventory with a shelf life of less than
twelve (12) months shall be transferred by the LLC to IMX. Medicis agrees to
accept payment of the balance of the sum due in respect of that portion of the
Inventory related to raw material and bulk inventory (after allowing for the sum
paid therefor on the Closing in accordance with Section 3.3(f)) on September 30,
1999.
Section 2.3 Form of Payment. Except as otherwise provided herein,
all payments made hereunder shall be made in United States Dollars by wire
transfer in immediately available funds to an account designated in writing by
Medicis to Bioglan.
Section 2.4 Assumption of Obligations. Subject to the terms and
conditions set forth herein, and in reliance upon the representations and
warranties contained herein, at the Closing, in consideration for the sale,
assignment, conveyance, transfer and delivery of the Purchased Assets to
Bioglan, the LLC will assign, convey and transfer to Bioglan, and Bioglan will
unconditionally assume and undertake to pay, perform and discharge, in a timely
manner and in accordance with the terms thereof, all liabilities related to or
arising out of the Purchased Assets as are incurred and become due at any time
following June 1, 1999 (collectively, the "Assumed Liabilities"). Without
limiting the generality of the foregoing, Bioglan hereby agrees to assume,
undertake and perform all obligations of the LLC under the Assumed Liabilities
to the extent such obligations arise or are to be performed after June 1, 1999.
ARTICLE III
CLOSING
Section 3.1 Closing. The consummation of the transactions
contemplated herein (the "Closing") shall take place within five (5) business
days of satisfaction of the conditions set forth in Article IV, or at such other
date and time as mutually agreed to by the parties (the "Closing Date").
Section 3.2 Closing Deliveries of the LLC. At the Closing, and
subject always to Section 9.15, the LLC shall execute (where appropriate) and
deliver to Bioglan:
(a) a Bill of Sale substantially in the form of Exhibit A attached
hereto, executed by the LLC;
(b) a Transition Services Agreement substantially in the form of
Exhibit B attached hereto, executed by the LLC, Medicis and IMX;
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(c) a Secretary's Certificate of the LLC setting forth copies of the
resolutions or other instruments authorizing this Agreement and the transactions
contemplated herein;
(d) an Officer's Certificate of the LLC as required under Section
4.1(b) hereof;
(e) a copy of all consents, approvals and authorizations as required
under Section 4.1(c) hereof;
(f) a License Assignment for the License Agreement substantially in
the form of Exhibit C attached hereto;
(g) a Trademark Assignment substantially in the form of Exhibit D
attached hereto;
(h) the Inventory, together with a receipt of payment for the sum
paid on account therefor pursuant to Section 3.3(f);
(i) a certified true copy of the License Agreement and all
amendments thereto; and
(j) such other documents as Bioglan shall reasonably request.
Section 3.3 Closing Deliveries of Bioglan. At the Closing, and
subject always to Section 9.15, Bioglan shall deliver to the LLC:
(a) a Transition Services Agreement substantially in the form of
Exhibit B attached hereto, executed by Bioglan;
(b) a Secretary's Certificate of Bioglan setting forth copies of the
resolutions or other instruments authorizing this Agreement and the transactions
contemplated herein;
(c) an Officer's Certificate of Bioglan as required under Section
4.2(a) hereof;
(d) a counterpart License Assignment for the License Agreement
substantially in the form of Exhibit C attached hereto;
(e) a counterpart Trademark Assignment substantially in the form of
Exhibit D attached hereto;
(f) an amount equal to the LLC's cost for the finished goods
included in the Inventory; and
(g) such other documents as the LLC shall reasonably request.
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ARTICLE IV
CONDITIONS TO CLOSING
Section 4.1 Conditions to Bioglan's Obligations. Bioglan's
obligation to consummate the transactions contemplated herein at the Closing are
subject to the fulfillment at or prior to the Closing of each of the following
conditions, the fulfillment of any of which may be waived, in whole or in part
or subject to conditions, by Bioglan:
(a) The completion by the LLC, Medicis and IMX of all acts necessary
to authorize their execution, delivery and performance of this Agreement and the
other agreements provided for herein, and the consummation of the transactions
contemplated herein and therein.
(b) All the representations and warranties (including the
disclosures made in the Disclosure Letter) of the LLC contained in this
Agreement being true and correct in all material respects as of the date of
execution of this Agreement and at the Closing Date and all of the agreements of
the LLC which are provided in this Agreement to be performed at or prior to the
Closing having been duly performed, and the LLC having complied with this
Agreement in all other material respects and the LLC having delivered to Bioglan
a certificate, dated as of the Closing Date, and signed by an executive officer
of the LLC, to the effect set forth in this Section 4.1(b).
(c) The LLC, Medicis and IMX having obtained all consents,
approvals, releases, discharges and authorizations necessary to be obtained on
the part of the LLC, Medicis and IMX to consummate the transactions contemplated
hereby, including without limitation, all necessary consents of shareholders,
mortgagees, lienholders, encumbrancers, assignees and licensors (pursuant to the
License Agreement) (the "Required Consents").
(d) The simultaneous consummation of the transactions contemplated
pursuant to the Asset Purchase Agreement.
Section 4.2 Conditions to the LLC's Obligations. The obligations of
the LLC to consummate the transactions contemplated at the Closing are subject
to the fulfillment at or prior to the Closing of each of the following
conditions, the fulfillment of any of which may be waived, in whole or in part
or subject to conditions, by the LLC:
(a) All the representations and warranties of Bioglan contained in
this Agreement being true and correct in all material respects as of the date of
execution of this Agreement and at the Closing Date and all of the agreements of
Bioglan which are provided in this Agreement to be performed at or prior to the
Closing Date having been duly performed, and Bioglan having complied with this
Agreement in all other material respects, and Bioglan having delivered to the
LLC a certificate, dated as of the Closing Date and signed by an executive
officer of Bioglan, to the effect set forth in this Section 4.2(a).
(b) The simultaneous consummation of the transactions contemplated
pursuant to the Asset Purchase Agreement.
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ARTICLE V
OTHER MATTERS
Section 5.1 Use of Know-How. Except as otherwise provided for in
this Agreement, after the Closing, the LLC shall not use the Know-How.
Furthermore, after the Closing the LLC shall not disclose the Know-How to any
third party, unless such disclosure is required by law or regulation.
Section 5.2 New Product Development. Notwithstanding anything in
this Agreement to the contrary, the transfer and assignment to Bioglan by the
LLC of the Purchased Assets shall not prevent the LLC, IMX or Medicis from
continuing to manufacture and sell other products included or expected to be
included in their current line or to use other trademarks owned by the LLC, IMX
or Medicis or restrict the rights of the LLC, IMX or Medicis to develop and sell
new products using the same active ingredients contained in the Products, but
using different formulations, or different presentations, and under different
product trademarks.
Section 5.3 Risks Associated With the Products. After the Closing
Date, subject to the terms of the Transition Services Agreement, Bioglan shall
bear the entire responsibility for and risk in the manufacture, distribution,
marketing and sale of the Products, including, subject to Section 8.5, those
associated with returns of Product sold by the LLC prior to June 1, 1999, and
compliance with all regulations and laws pertaining to the Products. The LLC
shall, for one year following the Closing Date, use its reasonable best efforts
to assist Bioglan in these matters, but they shall remain the sole
responsibility of Bioglan.
Section 5.4 Agreement to Distribute. In order to ensure continued
supply of the Products to customers following consummation of this Agreement,
the LLC hereby agrees to act as distributor of the Products for the earlier of
(i) a period of four (4) months from the consummation of this Agreement, or (ii)
until Bioglan gives written notice to the LLC that Bioglan has developed its own
distribution network. This period shall be extended, at the written request of
Bioglan, for a further two (2) months if, after using its reasonable best
efforts, Bioglan has been unable to develop its own distribution system at the
end of the four month period. Upon expiration of the period for which the LLC
shall distribute Products on behalf of Bioglan as set forth above, the LLC shall
return to Bioglan any inventory of the Products in the LLC possession as of the
date thereof.
Section 5.5 Notification of Customers. The LLC and Bioglan agree to
cooperate in the notification to customers of the transactions contemplated by
this Agreement. Neither the LLC nor Bioglan shall notify any customers of such
transactions without the written consent of the other. Such notification (the
"Joint Notice") shall be in such form as is reasonably satisfactory to Bioglan
and the LLC and shall also inform such customers of Bioglan's address.
Section 5.6 Customer Orders. The LLC agrees for a period of four (4)
months after the Closing Date to use its reasonable best efforts to forward to
Bioglan all customer orders or inquiries for the Products received after the
Closing as soon as practicable after receipt by the LLC. The LLC agrees that,
for a period of six (6) months from the Closing Date, it will inform
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any customers ordering the Products or requesting information about the
Products, that Bioglan is now supplying the Products and provide such customers
with Bioglan's address.
Section 5.7 Accounts Receivable.
(a) In the event that the LLC receives any payment relating to any
accounts receivable that accrued on or after the date on which the Transition
Services Agreement is terminated or expires, such payment will be the property
of, and will be immediately forwarded and remitted to Bioglan. The LLC will
promptly endorse and deliver to Bioglan any cash, checks or other documents
received by the LLC on account of any such accounts receivable and will advise
Bioglan of any counterclaims or set-offs that may arise subsequent to the
Closing Date with respect to such accounts receivable.
(b) In the event that Bioglan or any of Bioglan's Affiliates receive
any payment relating to any accounts receivable that accrued prior to the date
on which the Transition Services Agreement is terminated or expires, such
payment will be the property of, and will be immediately forwarded and remitted
to the LLC. Bioglan or any such Affiliates will promptly endorse and deliver to
the LLC any cash, checks or other documents received by Bioglan or any such
Affiliate on account of any such accounts receivable and will advise the LLC of
any counterclaims or set-offs that may arise subsequent to the Closing Date with
respect to such accounts receivable.
Section 5.8 Product Registration.
(a) After the Closing, Bioglan will initially market the Products
under the Authorizations, such Authorizations having been varied to permit the
same. Such distribution relationship shall continue until Bioglan obtains
regulatory authorization from the FDA to market the Products under its own
authorizations (the "New Authorizations").
(b) To permit Bioglan to distribute and sell the Products, Bioglan
shall, promptly following signature hereof at its own expense, file all
necessary instruments with the FDA to obtain a waiver to vary the LLC's
Authorizations to allow Bioglan to sell the Products.
(c) Bioglan shall, at its sole expense, file a product license
application with the FDA for each of the Products. The LLC shall, at its
expense, file all necessary instruments with the FDA to authorize Bioglan to
cross-refer to the data contained in the Authorizations in order for Bioglan to
obtain the New Authorizations.
(d) Within thirty (30) days after the Closing Date, the parties
shall each appoint a primary liaison (the "Medical Affairs Liaison") to
communicate with each other with regard to the actions and information required
pursuant to this Section 5.8 and shall notify the other of the name, address and
telephone number of the person so appointed.
(e) During the period that Bioglan is selling the Products under the
Authorizations, each party shall advise the other as set forth in (i) and (ii)
below of any adverse drug experience associated with the Products. In addition,
Bioglan shall report all adverse drug
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experience information it obtains, including that obtained from the LLC, to the
FDA as set forth in Section 5.8(f) below:
(i) Any adverse drug experience information obtained by a
party shall be reported to Bioglan's Medical Affairs Liaison, by
telephone or in writing (only by facsimile) within three (3)
business days after the first party's initial receipt of the
information; provided, however, that any report of a serious
unlabelled side effect or any report of a death shall be reported to
Bioglan's Medical Affairs Liaison within twenty-four (24) hours of
receipt of the information; and
(ii) The reports of adverse drug experience shall contain the
following information: (i) the date the report was received; (ii)
the name of the reporter; (iii) the address and telephone number of
the reporter; (iv) the patient details; (v) the suspected drug; (vi)
other concomitant therapy; (vii) a description of the adverse drug
experience; and (viii) any additional relevant information; provided
such information is obtainable through the use of reasonable efforts
and is not subject to any duty of non-disclosure or confidence.
(f) Bioglan shall report all adverse drug experience information
associated with the Products, including those received from the LLC under this
Section 5.8 to the FDA, in accordance with the laws and regulations of the
United States.
(g) After the Closing, Bioglan shall bear the entire responsibility
for the manufacture, distribution, advertising and sale of the Products and for
all actions required by the FDA and other governmental laws and regulations
relating to the manufacture, distribution, and use of the Products after June 1,
1999.
(h) Upon the grant to Bioglan of the New Authorizations, the LLC
agrees at its own expense to take all reasonably necessary steps to cancel,
transfer or assign forthwith at Bioglan's option its Authorizations in the
United States.
Section 5.9 Recall and Return of Products. During the period that
Bioglan is selling Products pursuant to the Authorizations, Bioglan shall, at
its cost, be responsible for all activities to be performed relating to any
recall or return of such Products and the LLC shall during such period promptly
notify Bioglan of all decisions and notifications of the FDA relating to the
Products.
Section 5.10 Dissolution of the LLC. Medicis shall dissolve the LLC
within eight (8) months of the Closing Date and shall not use the name Exorex in
connection with any of its Affiliates or any Products sold by Medicis or its
Affiliates. Medicis shall not infringe or seek to infringe on the Exorex
Trademark pursuant to applicable United States law.
Section 5.11 Payment of Royalties. The LLC agrees that it will pay
all royalties which accrued under the License Agreement prior to June 1, 1999 in
accordance with the terms of the License Agreement, failing which, Medicis will
pay the royalties on behalf of the LLC.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.1 Representations and Warranties of the LLC. Except as set
forth in the Disclosure Letter or Section 6.1(g) and Section 6.1(k), the LLC
hereby warrants to Bioglan as of the date hereof as follows:
(a) Ownership of LLC Interests. Prior to Closing, Medicis will own
100% of the LLC interests. Prior to Closing, no person will hold any membership
interest or any right to receive any income, profits, distributions or assets of
the LLC, other than Medicis. None of the LLC Interests were issued in violation
of any preemptive or similar rights.
(b) Organization. The LLC (i) is a corporation duly organized and
validly existing and in good standing under the laws of Delaware and (ii) has
all necessary corporate power and authority to own its properties and to conduct
its business, as currently conducted.
(c) Authorization. The execution and delivery of this Agreement and
the other agreements contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, are within the corporate power of
the LLC, Medicis and IMX and have been or will be, on or prior to the Closing
Date, duly authorized by all necessary corporate proceedings, if required, and
such agreements have been or will be, on or prior to the Closing, duly executed
and delivered by the LLC, Medicis and IMX.
(d) Execution and Delivery. Neither the execution of this Agreement
and the other agreements contemplated hereby nor the consummation of the
transactions contemplated herein and therein: (i) requires the LLC, Medicis or
IMX to obtain any approval, consent or withholding of objections on the part of
any regulatory or governmental body, (ii) will result in any violation or breach
of any term or provision of the LLC's Certificate of Formation or the
organizational documentation of Medicis or IMX; (iii) will constitute a default
under any material indenture, mortgage, deed of trust, license agreement or
other contract or agreement to which the LLC, Medicis or IMX is a party or to
which the LLC interests may be subject; or (iv) will violate any provision of
any judicial, governmental or administrative order, writ, injunction, award,
judgment or decree applicable to the LLC, Medicis or IMX which could result in a
material adverse effect in the condition, business or operations ("Material
Adverse Effect") of the LLC.
(e) Binding Obligation. As of the Closing, this Agreement and the
other agreements contemplated hereby will have been duly and validly authorized,
executed and delivered by the LLC, Medicis and IMX and, when duly executed and
delivered by Bioglan, will constitute valid and binding obligations of the LLC,
, Medicis and IMX enforceable against each of the LLC, Medicis and IMX in
accordance with their terms, except as such enforcement may be limited by
bankruptcy or other laws of general application affecting creditor rights or
general principles of equity or principles of public policy relating to
indemnification.
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(f) Broker. Except for Corporate Development Specialists, Inc.,
neither the LLC nor any officer, director or agent of the LLC has employed any
broker, finder, or agent with respect to this Agreement or the transactions
contemplated hereby.
(g) Gross Sales. Medicis represents and warrants that the amount of
gross sales, less returns, for the calendar year ended December 31 1998, and for
the calendar quarter ended March 31, 1999 as accounted for by the LLC in
accordance with United States generally accepted account principles ("GAAP"),
which has been provided by the LLC to Bioglan prior to the date of this
Agreement as contained in the Disclosure Letter, was correct in all material
respects. The LLC has also provided Bioglan in the Disclosure Letter with
information regarding shipments and returns for the period from April 1, 1999 to
May 31, 1999, which information Medicis represents and warrants was correct in
all material respects.
(h) Trademarks. The Trademarks are currently being used commercially
by the LLC and have been properly filed or registered with the U.S. Patent and
Trademark Office and are valid and in full force and effect as of the date of
execution of this Agreement.
Except as may be restricted or prohibited by any applicable law,
rule, regulation or decision, the LLC has the exclusive right to use, transfer
and assign, free and clear of any liens or encumbrances, the registrations for
the Trademarks.
To the LLC's knowledge, the manufacture, use or sale of the Products
by the LLC or the use of the Trademarks in the United States of America for the
sale of the Products does not infringe the rights of any third party including
inter alia intellectual property rights.
Except for any restriction or prohibition set forth in any
applicable law, rule, regulation, decision or other governmental action, the LLC
is not aware of any restriction or prohibition which would prevent or restrict
the disclosure of the Know-How to Bioglan hereunder.
(i) Adverse Drug Experiences. The LLC has informed Bioglan of all
material adverse drug experiences related to the Products of which it has
knowledge.
(j) License Agreement. The License Agreement is in full force and
effect, and a full and complete copy thereof including all amendments thereof
(if any), as duly executed by all parties, is attached to the Disclosure Letter.
There have been and are no other amendments, changes or waivers by either party
of any of the terms thereof, written or otherwise.
The LLC has the full legal right, power and authority to
convey the License Agreement.
The LLC has not assigned, sublicensed or granted, nor is there
otherwise outstanding, any material lien or encumbrance of any kind in, the
License Agreement.
The LLC is in compliance with all material terms of the
License Agreement. To the knowledge of the LLC, there are no counterclaims,
defenses or offsets
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against any obligation of the LLC or any of its Affiliates to perform under the
License Agreement.
(k) Inventory. Medicis represents and warrants that the LLC has good
and valid title to the Inventory, free and clear of any material lien or
encumbrance, and has not sold or contracted to sell any of the Inventory other
than in the ordinary course of business.
Medicis represents and warrants that all Inventory to be sold
hereunder is in good and marketable condition and has a remaining shelf life as
of June 1, 1999 of not less than twelve (12) months and does not include any
patently damaged, obsolete, or outdated material. All Products sold by the LLC
after June 1, 1999 to the Closing Date or in Inventory as of the Closing Date
were manufactured in accordance with Good Manufacturing Practices, are
adequately packaged and labeled and in conformity with all applicable
authorizations.
(l) Litigation. There is no litigation, arbitration, proceeding,
governmental investigation, action or claims of any kind, pending or, to the
knowledge of the LLC, threatened, or facts which could reasonably be expected to
give rise thereto, by or against the LLC which would affect Bioglan as the
purchaser hereunder or relative to the License Agreements or the Products,
including, without limitation, regarding breach of express or implied warranty
or representation or failure to warn or relating to personal injury, property
damage or other liability arising from or caused by the Products.
(m) Contractual Obligations. There are no material obligations or
agreements between the LLC and either or both of Medicis and IMX except for
those obligations and agreements which are included in the Purchased Assets and
the Excluded Assets.
(n) Employees. The Disclosure Letter contains details of all
employees and consultants of the Business and their current salaries. There are
no written employment contracts with respect to the employees and consultants of
the Business.
(o) DISCLAIMER. OTHER THAN THOSE ARISING AS A RESULT OF A BREACH OF
THE REPRESENTATIONS AND WARRANTIES HERETO AND THE BILL OF SALE, BIOGLAN HEREBY
WAIVES ANY AND ALL OTHER REPRESENTATIONS, WARRANTIES, DUTIES, AND GUARANTEES OF
ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, CONCERNING THE
PURCHASED ASSETS OR THE VALUE, CONDITION, EFFECTIVENESS OR COMPLIANCE WITH
SPECIFICATION OF THE PRODUCTS, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, THE ABSENCE
OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR THE QUALITY OF THE
MATERIALS OR WORKMANSHIP, AND BIOGLAN HEREBY WAIVES ANY AND ALL RIGHTS AND
REMEDIES IT MAY HAVE AGAINST MEDICIS RELATING TO ANY OF THE FOREGOING AND
ARISING BY LAW OR OTHERWISE OR WITH RESPECT TO LOSS OF USE, REVENUE OR PROFIT,
THE EXISTENCE OF ANY LATENT, INHERENT OR ANY OTHER DEFECT (WHETHER OR NOT
DISCOVERABLE), OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES.
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Section 6.2 Representations and Warranties of Bioglan. Bioglan
hereby represents and warrants to the LLC as of the date hereof as follows:
(a) Organization. Bioglan (i) is a public limited company duly
organized, validly existing under the Laws of England and Wales and (ii) has all
necessary power and authority to own its properties and to conduct business as
presently conducted.
(b) Authority. The execution and delivery of this Agreement and the
other agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby, are within the corporate power of Bioglan and
any relevant Affiliate of Bioglan, have been or will be, on or prior to the
Closing Date, duly authorized by all necessary corporate proceedings except for
shareholder approval, the obtaining of which shall be governed by and subject to
Section 7.5 of the Asset Purchase Agreement and such agreements have been or
will be, on or prior to the Closing, duly executed and delivered by Bioglan and
any relevant Affiliate of Bioglan.
(c) Execution and Delivery. Subject to the approval of the
shareholders of Bioglan at the shareholders' meeting as contemplated in Section
7.5 of the Asset Purchase Agreement, neither the execution of this Agreement and
the other agreements contemplated hereby nor the consummation of the
transactions contemplated hereby and thereby: (i) requires Bioglan to obtain the
approval, consent or withholding of objection on the part of any governmental
body; (ii) will result in any violation or breach of any term or provisions of
Bioglan's memorandum and articles of association; (iii) will constitute a
default under any indenture, mortgage, deed of trust, license, agreement, or
other contract or agreement to which Bioglan or any Affiliate of Bioglan that is
a party to any of the agreements contemplated hereby; or (iv) will violate any
provision of any judicial, governmental or administrative order, writ,
injunction, award, judgment or decree applicable to Bioglan or any Affiliate of
Bioglan that is a party to any of the agreements contemplated hereby which could
reasonably be expected to result in a Material Adverse Effect on Bioglan.
(d) Binding Obligation. Subject to the approval of the shareholders
of Bioglan at the shareholders' meeting as contemplated in Section 7.5 of the
Asset Purchase Agreement, as of the Closing, this Agreement and the other
agreements contemplated hereby will have been duly and validly authorized,
executed and delivered by Bioglan, and when duly executed and delivered by the
LLC, will constitute valid and binding obligations of Bioglan, enforceable
against Bioglan in accordance with their terms, except as such enforcement may
be limited by bankruptcy or other laws of general application affecting creditor
rights or general principles of equity or principles of public policy relating
to indemnification.
(e) Broker. Neither Bioglan nor any officer, director or agent of
Bioglan, has employed any broker or finder with respect to this Agreement or the
transactions contemplated hereby.
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ARTICLE VII
CONDUCT PRIOR TO CLOSING
Section 7.1 Cooperation. The parties agree to cooperate mutually and
make all reasonable efforts toward consummating the transactions contemplated
hereby and fulfilling the purposes of this Agreement prior to and following
Closing, including providing and executing such additional documentation and
communications as may be appropriate for such purposes.
Section 7.2 Conduct of Business by LLC. Upon execution of this
Agreement, the LLC shall not without the prior written consent of Bioglan take
any action out of the ordinary course of business in relation to the Products
prior to Closing nor will it do, procure or allow anything which may cause,
constitute or result in a breach of the Warranties. After the execution of this
Agreement through the Closing Date, the LLC shall provide Bioglan, its agents,
representatives and professional advisors reasonable access to all information
and facilities relating to the Purchased Assets, as reasonably requested by
Bioglan during normal business hours.
Section 7.3 Review. The LLC shall permit Bioglan's auditors to
inspect the LLC's records relating to sales of the Products to enable the said
auditors to adequately validate the financial receipts relating to the sales of
the Products (as required under the Listing Rules of the London Stock Exchange)
since January 1, 1998; provided, however, that the LLC shall have no liability
whatsoever in connection with the review described herein, unless the review
shall indicate the existence of a material breach of the Warranties.
Section 7.4 Contribution Margin. Medicis covenants that if the
Contribution Margin is less than zero (0), then Medicis shall pay to Bioglan an
amount equal to the deficit in the Contribution Margin. However, any payment
required to be made by Medicis to Bioglan under this Section 7.4 shall be
reduced by the total value of all returns received after June 1, 1999 by the LLC
from CVS, Jack Eckerd and Walgreens.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification by Medicis and IMX. Medicis and IMX,
jointly and severally, agree to indemnify, defend and hold harmless Bioglan (and
its directors, officers, employees, Affiliates, successors and assigns) from and
against all losses, personal injuries, liabilities, damages (other than
incidental or consequential), deficiencies, costs or expenses including, without
limitation, interest, penalties and reasonable attorneys' fees and disbursements
("Losses") of Bioglan and its Affiliates based upon, arising out of or otherwise
in respect of:
(a) any material inaccuracy in or material breach of, any
representation, warranty, covenant or agreement (other than with respect to the
covenant set forth in Section 7.3, for which the LLC shall have no liability,
unless the review shall indicate the existence of a material breach of the
Warranties) of the LLC contained in this Agreement.
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(b) any harm to any third party caused by any defect in the Products
manufactured, mandated, distributed, or sold by the LLC or any relevant
Affiliate, prior to June 1, 1999, or by any negligent or wrongful act of the LLC
or any relevant Affiliate prior to the Closing in connection with the
manufacture, distribution, advertising, or sale of the Products, or any failure
to comply with any regulation or statute in connection with the Products.
(c) failure of the LLC prior to the Closing Date to use its
reasonable best efforts to conduct its efforts under this Agreement at all times
in accordance with all applicable laws and regulations which may materially
affect the Products including without limitation the U.S. Foreign Corrupt
Practices Act.
Section 8.2 Indemnification by Bioglan. Bioglan agrees to indemnify,
defend and hold harmless the LLC (and its directors, officers, employees,
Affiliates, successors and assigns) from and against all Losses of the LLC based
upon, arising out of or otherwise in respect of:
(a) any material inaccuracy in or material breach of any
representation, warranty, covenant or agreement of Bioglan, any of its
Affiliates or sublicensees contained in this Agreement.
(b) any harm to any third party caused by any defect in the Products
manufactured, mandated, distributed or sold by Bioglan or any relevant Affiliate
after June 1, 1999 or by any negligent or wrongful act of Bioglan in connection
with the manufacture, distribution, advertising, or sale of the Products after
the Closing Date, or any failure after the Closing Date to comply with any
regulation or statute.
(c) failure of Bioglan to use its reasonable best efforts to conduct
its efforts under this Agreement at all times in strict accordance with all
applicable laws and regulations which may materially affect the Products
including without limitation the US Foreign Corrupt Practices Act.
Section 8.3 Procedure for Indemnification.
(a) If any legal proceeding shall be instituted, or any claim or
demand made, against an indemnifying party in respect of which an indemnifying
party may be liable hereunder, or if either party hereto for any reason shall
believe that it has a claim against the other party pursuant to the respective
Section 8.1 or 8.2 hereof, then the indemnified party or the party believing it
has a claim against the other party, as the case may be (in either case, the
"Indemnified Party"), shall give prompt written notice hereunder to the
indemnifying party or the party against whom the party giving notice believes it
has a claim, as the case may be (in either case, the "Indemnifying Party"). Such
notice shall specify in reasonable detail the date such underlying claim or
belief first was asserted or arose, the nature of the Loss(es) for which payment
is claimed, the Section or Sections of this Agreement upon which such claim is
based, and the amount payable in respect thereto, and shall provide a copy of
all pleadings relating to the underlying claim.
15
<PAGE>
(b) If an Indemnifying Party shall receive notice pursuant to this
Section 8.3, the Indemnifying Party may, at its sole option, elect to defend
against the Loss, which is the subject of such notice. If the Indemnifying Party
elects to defend, then the Indemnified Party shall have the right to participate
in such defense, and the trial counsel for the Indemnified Party shall be chosen
by the Indemnifying Party and such trial counsel shall be reasonably
satisfactory to the Indemnified Party, the costs of which shall be borne by the
Indemnified Party. If the Indemnifying Party does not elect to defend, then the
Indemnified Party may do so by its own counsel, such counsel shall be reasonably
satisfactory to the Indemnifying Party, the costs of which shall be borne by the
Indemnifying Party, and the Indemnifying Party agrees to cooperate with the
Indemnified Party in such defense.
(c) If the amount of any actual Loss indemnified against hereunder
shall at any time subsequent to the payment of any indemnity payable hereunder,
be reduced by any recovery, settlement or other payment, then the amount of such
reduction, less any expense incurred by the party receiving such recovery,
settlement or other payment in connection therewith, shall be repaid promptly to
the Indemnifying Party.
(d) The aggregate indemnification obligations of Bioglan on the one
hand and Medicis and IMX on the other hand under Section 8.1 or 8.2 hereof, as
the case may be, will not exceed United States Three Million Dollars (US
$3,000,000).
(e) Neither party shall be obligated to indemnify the other for any
Losses hereunder, unless and until the aggregate amount of all Losses exceeds
United States Fifty Thousand Dollars (US $50,000) (the "Basket"), and shall be
liable only for amounts in excess of the Basket; provided that the Basket shall
not apply to Section 8.4 or Section 8.5.
(f) IMX shall have no obligation to indemnify Bioglan with respect
to Section 6.1(g) or Section 6.1(k).
Section 8.4 Discontinuance of Operations. In addition to the other
indemnification obligations set forth in this Article VIII, Medicis shall
indemnify Bioglan for any out of pocket expense incurred by Bioglan in excess of
United States Four Hundred Thousand Dollars (US $400,000) with respect to the
discontinuance of the operations relating to the Purchased Assets if such
operations are discontinued within two (2) months of the Closing Date and are
not incurred due to actions taken by Bioglan other than those costs directly
related to discontinuing such operations; provided, however, that the LLC shall
not be responsible for more than two (2) weeks of severance pay for any employee
of the LLC in connection with such discontinuance.
Section 8.5 Returns of Products. In addition to the other
indemnification obligations set forth in this Article VIII, Medicis shall,
indemnify Bioglan for any return of Products returned within two (2) years of
June 1, 1999 by CVS, Walgreens and Jack Eckerd; provided that such
indemnification obligation shall not exceed United States Six Hundred Thousand
Dollars (US $600,000).
16
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Survival of Representations and Warranties. All
representations or warranties set forth herein shall survive the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby for a period of two (2) years after the Closing Date. Thereafter, no
claim for breach of any representation or warranty shall be made. If this
Agreement is terminated pursuant to Section 9.12 hereof, none of the parties
hereto shall be under any liability whatsoever with respect to any such
representation or warranty. The covenants and agreements shall survive
indefinitely, unless otherwise specified herein.
Section 9.2 Notices. All communications under this Agreement shall
be in writing and shall either be faxed, sent by courier or mailed by first
class mail, postage prepaid, to the fax number and/or address specified below.
If faxed, such communication shall be deemed to be given when sent; provided,
however, that any fax shall be confirmed by sending a hard copy by express
courier or first class mail (by methods specified herein) within one (1)
business day of the sending of such fax. If sent by express courier or mailed by
first class mail as specified herein, such communication shall be deemed to be
given either two (2) business days after sending (for communications sent by
courier) or ten (10) business days after mailing (for communications sent by
mail). All communications hereunder shall be sent:
TO BIOGLAN: at its address shown below or such other address as it may
give to Medicis on behalf of the LLC by notice hereunder:
5 Hunting Gate and to:
Hitchin, Hertfordshire SG4 0TJ Roiter Zucker Solicitors
England Regent House
Attn: Terry I. Sadler 5-7 Broadhurst Gardens
Swiss Cottage
London NW6 3RZ England
Attn: Warren Roiter
TO MEDICIS, at the address shown below or such other address as it may
give to Bioglan by notice hereunder:
c/o Medicis Pharmaceutical Corporation and to:
4343 East Camelback Road, Akin, Gump, Strauss, Hauer &
Suite 250 Feld, L.L.P.
Phoenix, Arizona 85018-2100 USA 590 Madison Avenue
Attn: Jonah Shacknai New York, New York 10022
Attn: Stephen E. Older, Esq.
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TO IMX, at the address shown below or such other address as it may give to
Bioglan by notice hereunder:
IMX Pharmaceuticals, Inc. and to:
2295 Corporate Boulevard Nason, Yeager, Gerson, White,
Boca Raton, Florida 33431 Lioce, P.A.
Attn: William Forster 1645 Palm Beach Lakes Boulevard
Suite 1200
West Palm Beach, Florida 33401
Attn: Gary N. Gerson
Section 9.3 Confidential Information. The parties hereto shall each
hold (and shall cause their respective Affiliates to hold) in confidence all
documents and information received by them in connection with the transactions
contemplated by this Agreement and, in the event that for any reason the
transactions contemplated by this Agreement shall not be consummated, the
parties hereto shall refrain (and shall cause their respective Affiliates to
refrain) from disclosing or otherwise using such documents and information
except in connection with any legal proceeding that may be contemplated or
instigated by any party against the other in relation to any matter arising out
of or under this Agreement, or as required by law or regulation. This Section
9.3 shall not apply to information generally available to the public through no
fault of the disclosing party. Nothing in this Section 9.3 shall prevent any
party hereto from disclosing such information as may be required by applicable
law or any governmental or regulatory body or by the rules or regulations of any
national securities exchange upon which the securities of either party are
listed. If any party hereto is requested to disclose confidential information
pursuant to the preceding sentence, (i) such party will notify the other parties
immediately of the existence, terms and circumstances surrounding such a request
so that the other parties may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Agreement, and (ii)
if, in the absence of a protective order, such disclosure is required in the
opinion of the disclosing party's counsel, such party may make such disclosure
without liability hereunder, provided that only that portion of the confidential
information which is legally required is disclosed, the other parties receive
notice of the information to be disclosed as far in advance of its disclosure as
practicable and will use its reasonable best efforts to ensure that confidential
treatment will be accorded to all such disclosed information. Bioglan shall not
disclose confidential information to any third party in connection with the
marketing and selling of Bioglan's securities to such third party without the
prior written consent of Medicis (which consent shall not be unreasonably
withheld), provided that such consent shall be deemed granted if Medicis has not
responded to a request by Bioglan for such consent within twenty-four (24) hours
after Medicis receives actual notice of such request with sufficient information
regarding the terms and conditions of such proposed disclosure to allow Medicis
to evaluate the proposed disclosure.
Section 9.4 Amendment. This Agreement may be amended, modified or
supplemented only by written agreement of the parties hereto.
Section 9.5 Binding Effect. The rights and obligations of the
parties hereto under this Agreement and the agreements contemplated hereby shall
be binding upon and inure
18
<PAGE>
to the benefit of the parties hereto and their respective successors and
permitted assigns, but may not be assigned by either party without the prior
written consent of the other parties hereto. Nothing set forth herein shall
prevent such party from assigning its rights or obligations hereunder to an
Affiliate of said party provided that no such assignment shall relieve said
party of its obligations hereunder.
Section 9.6 Press Releases. Bioglan, and Medicis for itself and on
behalf of the LLC and IMX, agree to approve jointly the text of an initial press
release announcing the consummation of the transactions contemplated hereby and
not to use the name of any of the other parties in any press information,
marketing or advertising materials or other release to the public without the
prior written approval of the other, which approval shall not be unreasonably
withheld. The foregoing shall not be deemed to prevent such party from making
any public announcement or issuing any circular which may be required by
legislation or any governmental or regulatory body or by the rules and
regulations of any national securities exchange upon which the securities of
such party are traded; provided that the disclosing party has notified the
non-disclosing party of such public announcement and the non-disclosing party
has been given an opportunity to comment on such announcement. The disclosing
party shall make such changes as are reasonably requested.
Section 9.7 Expenses; Taxes. The parties hereto shall each be
responsible for their respective costs incurred in connection with this
Agreement and the transactions contemplated hereby. Except as otherwise provided
herein, Bioglan shall pay all recording fees and all taxes due by Bioglan in
connection with the transfer of the Purchased Assets to Bioglan hereunder.
Section 9.8 Headings. All headings in this Agreement are for
convenience only and shall not affect the interpretation or meaning of any
provision hereof.
Section 9.9 Entire Agreement. This Agreement, the promissory note to
be entered into pursuant to the Closing of the Asset Purchase Agreement and the
Disclosure Letter, together with the other agreements provided for herein, and
the Schedules and Exhibits attached hereto, constitutes the entire agreement of
the parties, merges all prior negotiations, agreements and understandings, and
states in full all representations and warranties or warranties other than those
herein stated. To the extent there are any inconsistencies between the
provisions of this Agreement and the Disclosure Letter, the Schedules and
Exhibits and any of the other agreements provided for herein, this Agreement
shall govern.
Section 9.10 Waiver. No delay on the part of any party in exercising
any right, power, or privilege hereunder shall operate as a waiver thereof; nor
shall any waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or privilege,
preclude any further exercise thereof or the exercise of any other such right,
power or privilege. The rights and remedies of any party based on, arising out
of or otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement contained in this Agreement shall in no way be
limited by the fact that the act, omission, occurrence or other state of facts
upon which any claim of any such inaccuracy or
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breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement contained in this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy or breach.
Section 9.11 Severability. If any provision of this Agreement is
found or declared to be invalid or unenforceable by any court or other competent
authority having jurisdiction, such finding or declaration shall not invalidate
any other provision hereof, and this Agreement shall thereafter continue in full
force and effect except that such invalid or unenforceable provision, and (if
necessary) other provisions thereof, shall be reformed by a court of competent
jurisdiction so as to effect, insofar as is practicable, the intention of the
parties as set forth in this Agreement, provided that if such court is unable or
unwilling to affect such reformation, the invalid or unenforceable provision
shall be deemed deleted to the same extent as if it had never existed.
Section 9.12 Termination. This Agreement may be terminated or
extended as set forth in Section 9.12 of the Asset Purchase Agreement; provided,
however, that the provisions of Sections 9.3, 9.7 and 9.13 and Article X shall
survive the termination of this Agreement; and provided further that such
termination shall not relieve any party hereto of any liability for any breach
of this Agreement.
Section 9.13 Governing Law. This Agreement shall be governed by the
substantive laws of the State of Arizona, United States of America (without
regard to principles of conflict of laws) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
Bioglan consents and submits to the personal jurisdiction of the state and
federal courts in Arizona.
Section 9.14 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.
Section 9.15 Shareholder Approval. Subject to Section 9.12,
notwithstanding the Closing having taken place, if Bioglan shall for any reason
whatsoever fail to procure shareholder approval as provided in Section 7.5 of
the Asset Purchase Agreement, the Closing shall be deemed for all purposes never
to have taken place and all documents delivered at the Closing shall be
cancelled and deemed to be null and void and all the Purchased Assets and
Assumed Liabilities shall be re-transferred to the LLC in the condition that
they are in at such time and subject thereto, except for the Security Agreement
and the Trademark Security Agreement (as defined in the Asset Purchase
Agreement), no party hereto shall be under any further liability or obligation
to any other whether pursuant to this Agreement or otherwise howsoever;
provided, further, that the Security Agreement and the Trademark Security
Agreement shall remain in full force and effect.
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ARTICLE X
ARBITRATION
Section 10.1 Submission to Arbitration. The parties shall promptly
submit to arbitration any dispute which may arise in connection with this
Agreement that is not promptly resolved by them, except that each party may seek
injunctive relief for breaches of this Agreement if either party makes a good
faith determination that a breach of the terms of this Agreement by the other
party will result in irreparable harm and that injunctive relief is the only
adequate remedy.
Section 10.2 Arbitrator and Rules of Arbitration. The American
Arbitration Association shall have jurisdiction over the arbitration, which
shall be conducted in accordance with the Commercial Arbitration Rules of such
Association, except as modified by agreement of the parties.
Section 10.3 Selection of Arbitrators. In the event a dispute is to
be submitted to arbitration pursuant to this Article X, the parties agree that
the dispute shall be resolved by a private arbitration conducted by one
arbitrator. Within ten (10) days after the submission of such dispute to
arbitration, the parties shall agree upon one arbitrator, selected from a panel
of five individuals, none of whom is an officer, director or employee of a party
or an Affiliate of such party, or a person who has a direct or indirect personal
or financial interest in the outcome of the arbitration, designated by the
American Arbitration Association from its permanent panel of commercial
arbitrators. The parties shall select the arbitrator by alternately striking
names of the individuals so designated until only one name remains. A coin toss
will determine which party is to strike the first name.
Section 10.4 Procedure. The arbitrator shall set a hearing date for
an arbitration (the "Hearing") within ninety (90) days from the date the
arbitrator is selected, unless otherwise agreed by the parties. At least fifteen
(15) days before the Hearing, each party shall submit to the arbitrator a list
of all witnesses and exhibits which it intends to present at the Hearing. No
later than five (5) days before the Hearing, each party shall provide to the
arbitrator a short (not to exceed five (5) single-spaced pages or such other
page limit as the arbitrator permits) statement of its position with regard to
the dispute. Notwithstanding the Commercial Arbitration Rules, each party shall
have the right to conduct up to a total of two (2) depositions. At the Hearing,
each party shall, unless it waives the opportunity, make an oral opening
statement and an oral closing statement. The arbitrator shall not be strictly
bound by rules of procedure or rules of evidence, but shall use the Federal
Rules of Evidence as a guideline in conducting the Hearing. When testimony is
complete and each party has introduced its exhibits pursuant to the provisions
of this Agreement, and each party has made a closing statement pursuant to the
provisions of this Agreement or waived the opportunity to do so, the arbitrator
shall declare the Hearing closed; provided that the parties may submit
post-hearing briefs pursuant to an agreed upon schedule or a schedule formulated
by the arbitrator. The Hearing shall be conducted in private. Attendance at the
Hearing shall be limited to the following: (i) the arbitrator; (ii)
representatives of each party; (iii) each party's attorneys and such attorneys'
assistants or advisors, if any, including expert witnesses if any; (iv) a court
reporter if requested by either party; and (v) any witnesses. The
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arbitrator may sequester witnesses upon the motion of a party. Within thirty
(30) days of the close of the Hearing or submission of the post-hearing briefs,
the arbitrator shall issue a written opinion and an award (the "Award") based on
evidence, arguments and post-hearing briefs, if any. The Award shall be a
decision of the arbitrator, shall resolve the parties' dispute and shall be
final and binding on the parties. Except as otherwise provided in this
Agreement, there shall be no ex parte communication regarding the subject matter
of the Hearing, in which event the arbitrator will render and deliver to the
parties a written opinion and Award within thirty (30) days of being notified
that the parties waive the Hearing. Notwithstanding any other provision of this
Agreement, the arbitrator shall have no power to delete from, add to or modify
the terms of this Agreement, and may not award any remedy which effectively
conflicts directly or indirectly with any provision of this Agreement.
Section 10.5 Arbitration Costs. In any arbitration, all of the
reasonable costs and expenses of the successful party ("Successful Party")
(including reasonable attorneys' fees and expenses), all fees and expenses of
experts retained by the Successful Party and all costs of the arbitrator shall
be borne by the losing party ("Losing Party") in such arbitration. The Losing
Party and the Successful Party shall be determined by the arbitrator based on
the relative success or failure of each party to such arbitration.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
THE EXOREX COMPANY, LLC
By:
----------------------------------------
Name:
Title:
BIOGLAN PHARMA PLC
By:
----------------------------------------
Terry I. Sadler
Chairman and Chief Executive Officer
MEDICIS PHARMACEUTICAL CORPORATION
By:
----------------------------------------
Mark A. Prygocki, Sr.
Chief Financial Officer
IMX PHARMACEUTICALS, INC.
By:
----------------------------------------
Name:
Title:
23
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SCHEDULE 1
Products
Exorex Aqueous Cleanser
Exorex Body Combo Pack
Exorex Display-Large
Exorex Display-Small
Exorex Excema Formula 4 oz. Gentle
Exorex Excema Formula 4 oz. Regular
Exorex Excema Formula 8 oz. Regular
Exorex Leave on Scalp Conditioner
Exorex Penetrating Emulsion
Exorex Prepak
Exorex Scalp Combo
Exorex Shampoo
Exorex Stabilizing Cream 8 oz.
1
<PAGE>
SCHEDULE 2
Trademarks
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------
TRADEMARK COUNTRY REG. NO. REG. DATE CLASS & GOODS/
SERVICES
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXOREX US 2049968 4/1/97 Medicated lotions and topical
gels for use in the treatment
of psoriasis.
- - ----------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT A
FORM OF BILL OF SALE
'A
<PAGE>
EXHIBIT B
FORM OF TRANSITION SERVICES AGREEMENT
'B
<PAGE>
EXHIBIT C
FORM OF LICENSE ASSIGNMENT
'C
<PAGE>
EXHIBIT D
FORM OF TRADEMARK ASSIGNMENT
'D
<PAGE>
Exhibit 10.5.1
SALE AND TRANSFER AGREEMENT
THIS SALE AND TRANSFER AGREEMENT (this "Agreement"), dated as of June 30,
1999, entered into by and between MEDICIS PHARMACEUTICAL CORPORATION, a Delaware
corporation ("Medicis"), and IMX PHARMACEUTICALS, INC., a Utah corporation
("IMX"),
WITNESSETH:
WHEREAS, Medicis (or its Affiliate) and IMX entered into a joint venture
agreement for the creation of The Exorex Company, LLC (the "LLC") in June 1998;
WHEREAS, the LLC has entered into the Asset Purchase Agreement, dated June
29, 1999, by and among the LLC, Medicis, IMX and Bioglan Pharma, PLC ("Bioglan")
for the sale of substantially all of its assets to Bioglan (the "Asset Purchase
Agreement");
WHEREAS, the LLC has entered into the Transition Services Agreement, dated
June 30, 1999, between the LLC and Bioglan ("Transition Service Agreement");
WHEREAS, capitalized terms used herein without definition shall have the
meaning set forth in the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and covenants herein and
subject to the terms and conditions contained herein, the parties hereto agree
as follows:
1. Sale. Immediately prior to the consummation of the proposed Closing,
IMX shall sell all of its right, title and interest in the LLC to Medicis, and
at the Closing Medicis shall pay IMX $3.6 million.
2. Transfer. At the Closing, Medicis shall cause the inventory of the LLC
as of the Closing Date with a shelf life of less than twelve months as of the
Closing Date to be transferred to IMX.
3. Release. Subject to the obligations of the parties under the Asset
Purchase Agreement, the Transition Services Agreement and this Agreement, IMX
hereby releases, remises and forever discharges Medicis and the LLC from all
claims, rights, actions and causes of action, whether legal or equitable in
nature, accrued or unaccrued, asserted or unasserted, now existing or hereafter
arising, in connection with or relating to the LLC, including but not limited to
all products in the Exorex Product Line. Subject to the obligations of the
parties under the Asset Purchase Agreement, the Transition Services Agreement
and this Agreement, Medicis and the LLC hereby release, remise and forever
discharge IMX from all claims, rights, actions and causes of action, whether
legal or equitable in nature, accrued or unaccrued, asserted or unasserted, now
existing or hereafter arising, in connection with or relating to the LLC.
<PAGE>
4. Best Efforts. IMX shall use its best efforts to assist the LLC in the
performance of the LLC's obligations under the Transition Services Agreement,
including continuing the performance of ordinary course obligations;
5. Guarantee. IMX shall guarantee the obligations of the LLC under the
Transition Services Agreement to the extent that obligations are within the
reasonable control of IMX, and at the Closing IMX shall execute and deliver the
Transition Services Agreement as a guarantor of such obligations.
6. Transition Services Agreement. In connection with the Transition
Services Agreement, IMX and Medicis agree that any fees and expenses paid to the
LLC pursuant to Section 4.1 of the Transition Services Agreement shall be shared
equally.
7. Other Agreements. The parties hereto shall terminate the New Product
Agreement, dated June 18, 1998, between Medicis and IMX, at the Closing. The
parties hereto hereby agree to take such action as is necessary at the Closing
to terminate the obligations arising on and after the Closing under (A) the
Consulting, Confidentiality and Non-Compete Agreement between IMX and the LLC,
dated June 18, 1998 and (B) the Non-Disclosure and Invention Agreements entered
into by (i) Adele Folk, dated as of June 22, 1998, (ii) Gary Spielfogel, dated
as of June 22, 1998, (iii) Marc Falkin, dated as of June 22, 1998 and (iv) Bill
Forster dated as of June 22, 1998; provided, however, that all obligations
arising under the Consulting, Confidentiality and Non-Compete Agreement and such
Non-Disclosure and Invention Agreements, other than any obligations with respect
to non-competition which, except as set forth in the succeeding paragraph shall
be terminated, arising prior to the Closing shall not be terminated and shall
remain in full force and effect.
Medicis covenants and agrees that for a period of twenty-four (24) months,
it will comply with the covenant set forth in Section 13.2 of the Joint Venture
Agreement between Medicis, the LLC and IMX dated as of June 12, 1998 (the "Joint
Venture Agreement"). The obligations of IMX set forth in Section 13 of the Joint
Venture Agreement arising after the Closing shall terminate at the Closing. As
of the Closing, IMX shall have no further obligations under Section 13 of the
Joint Venture Agreement.
8. Indemnification Procedures. In the event that the LLC becomes obligated
to indemnify, or is requested to indemnify, Bioglan under the Asset Purchase
Agreement, Medicis shall have primary responsibility for defending against such
indemnification obligations; provided, however, that Medicis shall not settle
any dispute relating thereto without the prior consent of IMX, which consent
shall not be unreasonably withheld, conditioned or delayed. Medicis shall bear
all fees and expenses (including attorneys' fees and expenses) in connection
with the defense of any such dispute as such fees and expenses arise; provided,
however, that after the conclusion of any such dispute Medicis and IMX shall
mutually in good faith reallocate the burden of such fees and expenses fairly
and appropriately between Medicis and IMX. Medicis and IMX initially shall
equally bear all other liabilities and obligations in connection with or
resulting from any such dispute as and when the obligation to pay such
liabilities and
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obligations arises. Thereafter, Medicis and IMX shall mutually in good faith
reallocate the burden of such liabilities and obligations fairly and
appropriately between Medicis and IMX. In the event that Medicis and IMX do not
agree to the appropriate reallocation of such fees, expenses, liabilities and
obligations between themselves within forty-five (45) days after the conclusion
of any such dispute, with respect to fees and expenses, or after the initial
payment by Medicis and IMX, with respect to liabilities and obligations, such
reallocation shall be determined in accordance with the arbitration provisions
set forth in Section 16 hereof.
9. Amendment. This Agreement may be amended, modified or supplemented only
by written agreement of the parties hereto.
10. Binding Effect. The rights and obligations of the parties hereto under
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but may not be
assigned by either party without the prior written consent of the other party
hereto. Nothing set forth herein shall prevent either party from assigning its
rights or obligations hereunder to an Affiliate of the party provided that no
such assignment shall relieve such party of its obligations hereunder.
11. Headings. All headings in this Agreement are for convenience only and
shall not affect the interpretation or meaning of any provision hereof.
12. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof, merges all prior
negotiations, agreements and understandings, and states in full all
representations and warranties applicable to this Agreement.
13. Waiver. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege.
14. Severability. If any provision of this Agreement is found or declared
to be invalid or unenforceable by any court or other competent authority having
jurisdiction, such finding or declaration shall not invalidate any other
provision hereof, and this Agreement shall thereafter continue in full force and
effect except that such invalid or unenforceable provision, and (if necessary)
other provisions thereof, shall be reformed by a court of competent jurisdiction
so as to effect, insofar as is practicable, the intention of the parties as set
forth in this Agreement, provided that if such court is unable or unwilling to
effect such reformation, the invalid or unenforceable provision shall be deemed
deleted to the same extent as if it had never existed.
15. Governing Law. This Agreement shall be governed by the substantive
laws of the State of Arizona (without regard to principles of conflict of laws)
as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies. The parties hereto submit to the
personal jurisdiction of the state and federal courts in Arizona.
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16. 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.
17. Arbitration. The parties shall promptly submit to arbitration any
dispute which may arise in connection with this Agreement that is not promptly
resolved by them, except that each party may seek injunctive relief for breaches
of this Agreement if either party makes a good faith determination that a breach
of the terms of this Agreement by the other party will result in irreparable
harm and that injunctive relief is the only adequate remedy.
The American Arbitration Association shall have jurisdiction over the
arbitration, which shall be conducted in accordance with the Commercial
Arbitration Rules of such Association, except as modified by agreement of the
parties.
In the event a dispute is to be submitted to arbitration pursuant to this
Section 16, the parties agree that the dispute shall be resolved by a private
arbitration conducted by one arbitrator. Within ten (10) days after the
submission of such dispute to arbitration, the parties shall agree upon one
arbitrator, selected from a panel of five individuals, none of whom is an
officer, director or employee of a party or an Affiliate of such party, or a
person who has a direct or indirect personal or financial interest in the
outcome of the arbitration, designated by the American Arbitration Associated
from its permanent panel of commercial arbitrators. The parties shall select the
arbitrator by alternately striking names of the individuals so designated until
only one name remains. A coin toss will determine which party is to strike the
first name.
The arbitrator shall set a hearing date for an arbitration (the "Hearing")
within ninety (90) days from the date the arbitrator is selected, unless
otherwise agreed by the parties. At least fifteen (15) days before the Hearing,
each party shall submit to the arbitrator a list of all witnesses and exhibits
which it intends to present at the Hearing. No later than ten (10) days before
the Hearing, each party shall provide to the arbitrator a short (not to exceed
five single-spaced pages or such other page limit as the arbitrator permits)
statement of its position with regard to the dispute. Notwithstanding the
Commercial Arbitration Rules, each party shall have the right to conduct up to a
total of two depositions. At the Hearing, each party shall, unless it waives the
opportunity, make an oral opening statement and an oral closing statement. The
arbitrator shall not be strictly bound by rules of procedure or rules of
evidence, but shall use the Federal Rules of Evidence as a guideline in
conducting the Hearing. When testimony is complete and each party has introduced
its exhibits pursuant to the provisions of this Agreement, and each party has
made a closing statement pursuant to the provisions of this Agreement or waived
the opportunity to do so, the arbitrator shall declare the Hearing closed;
provided that the parties may submit post-hearing briefs pursuant to an agreed
upon schedule or a schedule formulated by the arbitrator. The Hearing shall be
conducted in private. Attendance at the Hearing shall be limited to the
following: (i) the arbitrator; (ii) representatives of each party; (iii) each
party's attorneys and such attorneys' assistants or advisors, if any, including
expert witnesses if any; (iv) a court reporter if requested by either party; and
(v) any witnesses. The arbitrator may sequester witnesses upon the motion of a
party. Within thirty (30) days of the close of the Hearing or submission of the
post-hearing briefs, the arbitrator shall issue a written
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opinion and an award (the "Award") based on evidence, arguments and post-hearing
briefs, if any. The Award shall be a decision of the arbitrator, shall resolve
the parties' dispute and shall be final and binding on the parties. Except as
otherwise provided in this Agreement, there shall be no ex parte communication
regarding the subject matter of the Hearing, in which event the arbitrator will
render and deliver to the parties a written opinion and Award within thirty (30)
days of being notified that the parties waive the Hearing. Notwithstanding any
other provision of this Agreement, the arbitrator shall have no power to delete
from, add to or modify the terms of this Agreement, and may not award any remedy
which effectively conflicts directly or indirectly with any provision of this
Agreement.
In any arbitration, all of the reasonable costs and expenses of the
Successful Party (including reasonable attorneys' fees and expenses), all fees
and expenses of experts retained by the Successful Party and all costs of the
arbitrator shall be borne by the Losing Party in such arbitration. The "Losing
Party" and the "Successful Party" shall be determined by the arbitrator based on
the relative success or failure of each party to such arbitration.
18. Further Assurances. IMX and Medicis each agree to use reasonable best
efforts to implement the provisions of this Agreement, the Asset Purchase
Agreement and the Transition Services Agreement. In connection therewith, IMX
will, without further consideration, from time to time, whether before or after
the Closing, execute and deliver such further documents and take such other
action as may be required or desirable to carry out the purposes and intent of
this Agreement, the Asset Purchase Agreement and the Transition Services
Agreement, including (i) promptly executing and delivering, or using reasonable
best efforts to cause to be executed and delivered, to Medicis consents and
other instruments in addition to those required by this Agreement, the Asset
Purchase Agreement and the Transition Services Agreement in form and substance
reasonably satisfactory to Medicis and its counsel, and taking all such other
actions as Medicis may reasonably deem necessary or desirable to implement any
provision of this Agreement, and (ii) permit Medicis reasonable access to such
files and personnel of IMX and the LLC.
[The next page is the signature page]
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IN WITNESS WHEREOF, the parties hereto have executed this Sale and
Transfer Agreement as of June 30, 1999.
MEDICIS PHARMACEUTICAL CORPORATION
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
IMX PHARMACEUTICALS, INC.
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
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Exhibit 10.5.2
================================================================================
TRANSITION SERVICES AGREEMENT
by and among
THE EXOREX COMPANY, LLC,
BIOGLAN PHARMA PLC
MEDICIS PHARMACEUTICAL CORPORATION
and
IMX PHARMACEUTICALS, INC.
-----------------------------
Dated as of June 30, 1999
-----------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................................1
ARTICLE II RESPONSIBILITIES OF PARTIES.........................................2
SECTION 2.1 PROVISION OF SERVICES...........................................2
SECTION 2.2 COOPERATION AND ASSISTANCE......................................2
SECTION 2.3 DISTRIBUTION AGENCY SERVICES....................................2
SECTION 2.4 MARKETING SUPPORT SERVICES......................................2
SECTION 2.5 REPORTS.........................................................3
SECTION 2.6 NDC NUMBERS.....................................................3
SECTION 2.7 PAYMENT OF NET SALES............................................3
SECTION 2.8 GOVERNMENT CONTRACTS............................................3
SECTION 2.9 ORDERS FOLLOWING TERMINATION OR EXPIRATION......................3
SECTION 2.10 GUARANTEE BY IMX................................................3
ARTICLE III PRODUCT RETURNS....................................................4
ARTICLE IV PAYMENTS............................................................4
SECTION 4.1 FEES............................................................4
SECTION 4.2 RECORDS; AUDIT..................................................4
SECTION 4.3 CONTRIBUTION MARGIN.............................................4
ARTICLE V STANDARD FOR SERVICES................................................5
ARTICLE VI TERM AND TERMINATION................................................6
SECTION 6.1 TERM............................................................6
SECTION 6.2 TERMINATION.....................................................6
SECTION 6.3 RIGHTS AND DUTIES OF PARTIES UPON TERMINATION...................6
ARTICLE VII CONFIDENTIALITY....................................................6
ARTICLE VIII INDEPENDENT CONTRACTOR............................................7
ARTICLE IX NOTICES.............................................................7
ARTICLE X SUCCESSORS AND ASSIGNS...............................................8
ARTICLE XI SURVIVAL OF TERMS...................................................8
ARTICLE XII ADDITIONAL TERMS...................................................9
SECTION 12.1 ENTIRE AGREEMENT................................................9
SECTION 12.2 AMENDMENTS; NO WAIVER...........................................9
SECTION 12.3 COUNTERPARTS....................................................9
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SECTION 12.4 SEVERABILITY....................................................9
SECTION 12.5 CAPTIONS........................................................9
SECTION 12.6 INJUNCTIVE RELIEF...............................................9
SECTION 12.7 EXPENSES........................................................9
SECTION 12.8 ATTORNEYS' FEES................................................10
SECTION 12.9 GOVERNING LAW; JURISDICTION....................................10
SCHEDULES AND EXHIBITS
- - --------------------------------------------------------------------------------
Schedules
Schedule 1................................................Form of Monthly Report
Exhibits
Exhibit A...............................................................Contacts
Exhibit B.......................................Current List Prices for Products
Exhibit C........................................THE LLC's Returned Goods Policy
Exhibit D.........................The LLC's Disposition of Returned Goods Policy
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<PAGE>
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT (the "Agreement") is entered into as of this 30th
day of June, 1999 by and among THE EXOREX COMPANY, LLC, a Delaware limited
liability company (the "LLC") and BIOGLAN PHARMA PLC, a company incorporated
under the laws of England and Wales under company registration number 1779870
("Bioglan") and MEDICIS PHARMACEUTICAL CORPORATION ("Medicis") and IMX
PHARMACEUTICALS, INC. ("IMX"). All capitalized terms used herein but not
otherwise defined shall have the meanings assigned to them in the Exorex Asset
Purchase Agreement (the "Exorex Asset Purchase Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to the Exorex Asset Purchase Agreement, dated as of June
29, 1999, by and among the LLC, Bioglan, Medicis and IMX, Bioglan has purchased
from the LLC the Purchased Assets; and
WHEREAS, Bioglan desires to retain the LLC, and the LLC is willing to be
retained by Bioglan, to provide certain sales, finance and distribution services
during the period of transition of the Products from the LLC to Bioglan.
NOW, THEREFORE, in consideration of the above and of the mutual covenants
contained herein and for other good and valuable consideration, receipt of which
is hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
In this Agreement the following terms shall have the following meanings:
"Fully Loaded Costs" means all direct expenses and, with respect to time
spent on a project by employees, an hourly rate which equals salary plus
benefits plus fifty percent (50%) allocated overhead.
"Net Sales" means the gross invoice amount of Products sold to third
parties in the Territory from and after the Closing Date, less: (a) promotional
and trade discounts; (b) sales and excise taxes, value added and other taxes and
insurance premiums and duties which are billed to customers as separate items on
invoices; (c) allowances for short-shipments and price adjustments; and (d)
those contract chargebacks, government rebates, and returns (e.g., of spoiled,
damaged or outdated Products) which are the responsibility of Bioglan under the
Agreement.
<PAGE>
"Sales" means the gross invoice amount of Products sold to third parties
in the Territory on behalf of Bioglan from and after the Closing Date.
"Services" means any and all services with respect to the Products
provided by the LLC to Bioglan pursuant to this Agreement.
"Territory" means the United States of America and its territories,
possessions, and commonwealth including the Commonwealth of Puerto Rico.
ARTICLE II
RESPONSIBILITIES OF PARTIES
Section 2.1 Provision of Services. Subject to the terms hereof, the
LLC shall (i) reasonably cooperate with Bioglan and assist in the orderly
transition of the Purchased Assets to Bioglan, and (ii) provide the Services
described herein that are requested by Bioglan.
Section 2.2 Cooperation and Assistance. The LLC and Bioglan shall
make available the individuals identified on Exhibit A, or their qualified
designees, for consultation with the other party's representatives via
telephone, correspondence or in person at the LLC's facilities for the purpose
of conveying and transferring information relating to the operation of the
Purchased Assets. Such consultation shall occur for reasonable periods of time,
upon reasonable notice during normal business hours. Either party may appoint
substitutes for the individuals listed on Exhibit A. Notwithstanding any other
provision of this Agreement, the individuals listed on Exhibit A (or their
substitutes) shall be available for minimal consultation for a period of six (6)
months following the Closing Date.
Section 2.3 Distribution Agency Services. With respect to the
Purchased Assets, the LLC, or subcontractors used by the LLC in the ordinary
course of conducting its business, shall provide all services (including
storing, delivering and distributing the Products and filling orders) requested
by Bioglan and customarily performed by a distribution agent in connection with
the sale of the Products in the Territory, including the following: (a)
accepting orders and invoicing purchasers on behalf of Bioglan; (b) processing
all Products returned by customers in accordance with Article 3 of this
Agreement; (c) order entry and billing services; (d) recording sales and
collecting amounts due; (e) making appropriate payments for chargebacks and
rebates subject to the Agreement; and (f) customer complaint and inquiry
services, including adverse drug reaction reporting. The LLC further covenants
and represents to Bioglan that it shall use reasonable efforts to comply with
all material laws, rules, regulations and requirements of any governmental body
which may be applicable to the distribution or sale of the Products under this
Agreement, provided, however, that it shall not be deemed a breach of this
Section 2.3 if the LLC can demonstrate that such non-compliance was caused by
following the written instructions of Bioglan. The LLC shall charge customers
and pay Bioglan for Products sold only on the basis of list prices for each unit
of the Product, except as may already be committed for the quarter ended June
30, 1999. The current list prices for Products are set forth on Exhibit B.
Bioglan may change the list prices from time to
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time by written notice to the LLC, which price changes shall be effective within
seven (7) days of receipt of such notice.
Section 2.4 Marketing Support Services. In order to inform customers
of the sale of the Purchased Assets to Bioglan, and otherwise transition the
Purchased Assets, the parties shall: (a) notify all contracted customers, trade
customers, and wholesalers of the transfer of the Purchased Assets to Bioglan by
a method and at a time mutually agreed to by the parties in the form
substantially as agreed by the parties, and (b) provide notice to wholesalers at
mutually agreed to times which allows adequate transition time for the
wholesalers. In providing marketing support services hereunder, the LLC shall
provide Bioglan with necessary pricing information concerning the Products, but
shall not be required to disclose copies of customer contracts. The parties
hereto acknowledge and agree that the LLC shall not be responsible for providing
Bioglan with any sales or promotional support.
Section 2.5 Reports. The LLC shall submit in writing to Bioglan (a)
within seven (7) business days after the end of each calendar month a report
setting forth total Net Sales by SKU for the period ending the last Sunday in
the preceding calendar month, (b) within seven (7) business days after the end
of each calendar month a report setting forth inventory on-hand by SKU as of the
last Sunday in the preceding calendar month, and (c) within fifteen (15) days
after the end of each calendar month a report as set forth on Schedule 1 and
such other information as Bioglan shall reasonably request that is agreed to by
the LLC.
Section 2.6 NDC Numbers. Immediately following the Closing, Bioglan
shall take any and all action necessary to change the National Drug Code ("NDC")
number for the Products, which change shall be implemented pursuant to the terms
of the Agreement.
Section 2.7 Payment of Net Sales. On the twentieth calendar day of
each calendar month, the LLC will wire transfer to Bioglan the amount equal to
total Net Sales for the prior month, less (i) a one-half percent (.50%) reserve
for uncollected Sales based on Net Sales; (ii) a two percent (2%) deduction from
Sales for cash discounts based on payment terms of two percent (2%) thirty net
thirty-one (31) days; (iii) the amount of the fee, if any, calculated for such
prior month under Section 4.1; and (iv) any and all direct costs related to the
Products, including assumed litigation costs, and any allocated costs which the
LLC may receive which are not allocated by Product, including but not limited to
freight, product liability, warehousing, broker fees, sales incentives,
insurance and administrative services, including payroll processing.
Section 2.8 Government Contracts. The parties shall mutually agree
on the timing and method of notifying applicable federal agency customers and
the Health Care Financing Administration ("HCFA") of the sale of the Products to
Bioglan, and shall take whatever action is necessary to simultaneously add the
Products to Bioglan's federal supply schedule and Medicaid rebate agreement, if
applicable, and delete the Products from the federal supply schedule and
Medicaid rebate agreement of the LLC as applicable.
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Section 2.9 Orders Following Termination or Expiration. For a period
of two (2) weeks following the termination or expiration of this Agreement, the
LLC shall forward to Bioglan as soon as practicable via facsimile any orders for
Products received by the LLC. For a period of six (6) weeks following the end of
the two (2) week period in the preceding sentence, the LLC shall forward to
Bioglan via facsimile at least every three (3) days any orders for Products
received by the LLC. At the end of such six (6) week period, the LLC shall
reject all orders for Products received by the LLC, but shall notify any such
orderer that future orders should be placed directly with Bioglan.
Section 2.10 Guarantee by IMX. In consideration of Medicis' purchase
of IMX's interest in the LLC, IMX hereby agrees to guarantee the due and timely
performance of all obligations of the LLC under this Agreement which are within
the reasonable control of IMX.
ARTICLE III
PRODUCT RETURNS
The LLC shall process and pay all claims received by it for returns
of Products in accordance with the provision of the return goods policy attached
hereto as Exhibit C. Bioglan shall not engage in any special pricing, rebate
allowance, promotional or marketing program or activities, special returns
policy or special restocking program that would impact the normal course or
level of expected returns with respect to Products sold prior to Closing.
Returned goods will be destroyed in accordance with the provisions of the
disposition of returned goods policy of the LLC, a copy of which is attached
hereto as Exhibit D.
ARTICLE IV
PAYMENTS
Section 4.1 Fees. In consideration of the LLC's Services under this
Agreement, Bioglan shall pay to the LLC a fee equal to six per cent (6%) of
Bioglan's Net Sales of Products for the period during which the LLC provides
Services to Bioglan, payable monthly. In addition, the LLC shall be reimbursed
its Fully Loaded Costs for any special services or expenses, provided that
Bioglan has given its prior written approval for such special services or
expenses, including without limitation the cost of destruction of returned goods
other than pursuant to on-going, normal business operations, the participation
of the LLC in any recall of Products, "scrap" charges incurred due to labeling
or packaging changes requested by Bioglan, and any components with the LLC's NDC
number ordered on or after the date six (6) months after termination of this
Agreement with the prior written approval of Bioglan, transportation costs
associated with the delivery of inventory and records upon termination of this
Agreement, and any other expenses incurred by the LLC specifically as a result
of this Agreement. Bioglan will reimburse the LLC with respect to the foregoing
costs, if any, within thirty (30) days of receipt of the LLC's statement.
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Section 4.2 Records; Audit. Medicis, on behalf of the LLC, shall
keep records relating to the calculation of Net Sales and the fees under Section
4.1 in accordance with generally accepted accounting principles in the United
States and provide copies of such records to Bioglan within ninety (90) days of
termination of this Agreement. During and at any time within six (6) months
following termination of this Agreement, Bioglan, at its expense, shall have the
right to conduct one examination or audit of said records of the LLC which
relate solely to the services provided hereunder and costs and expenses incurred
hereunder, for the sole purpose of verifying information provided by the LLC and
payments made to the LLC hereunder. The LLC and Medicis shall cooperate fully
with the auditor and provide all reasonable access to records and employees
necessary to promptly complete this audit. During and at any time within six (6)
months following termination of this Agreement, Bioglan, at its expense, shall
have the right to appoint an independent certified public accounting firm
reasonably acceptable to the LLC and Medicis who will be bound by
confidentiality terms reasonable to the LLC and Medicis, to conduct one audit of
customer invoices for the Products for the sole purpose of verifying the
information provided by the LLC and payments made to the LLC hereunder. Such
auditor shall not disclose any information to Bioglan relating to the LLC's
products or business other than information which pertains directly to the
purpose of the audit. If any such examination or audit discloses an underpayment
or overpayment hereunder, written notice of such fact, specifying the amount and
basis of the underpayment or overpayment shall promptly be furnished to the LLC.
Subject to the LLC's right to dispute the amount of any overpayment or
underpayment, the amount of any overpayment upon resolution of such dispute, if
any, shall be credited against future amounts owed to the LLC hereunder, or if
there will be no such future amounts, the LLC shall refund the overpayment to
Bioglan within thirty (30) days of such notice; and the amount of any
underpayment shall be paid to the LLC within thirty (30) days after such
disclosure. If the audit determines that the LLC has overcharged Bioglan by five
percent (5%) or more for the fee under Section 4.1 for the period audited, the
LLC shall promptly reimburse Bioglan for all reasonable expenses incurred in
conducting said audit.
Section 4.3 Contribution Margin. LLC shall pay to Bioglan the
Contribution Margin at the later of (i) twenty (20) business days after the
Closing Date or (ii) the date on which Medicis receives the US $39.1 million
payment from Bioglan as set forth in Article II of the Asset Purchase Agreement
dated June 29, 1999 between Medicis and Bioglan. Medicis shall have no
obligation to pay the Contribution Margin unless and until it receives in a
timely manner such $39.1 million payment from Bioglan.
ARTICLE V
STANDARD FOR SERVICES
The LLC shall meet the standards of the applicable profession in
performing Services hereunder; provided that except as otherwise set forth
herein, neither the LLC nor its employees shall have any liability to Bioglan in
connection with such performance absent bad faith, gross negligence or willful
misconduct. In performing its duties hereunder, the quality and quantity of
Services provided hereunder by the LLC to Bioglan (including without limitation
the substance, timeliness and diligence thereof) shall be substantially the same
as the
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quality and quantity of services rendered in relation to the LLC's other
products by the LLC personnel. Nothing contained in this Agreement shall require
the LLC to alter its operations, policies, procedures, method of doing business,
reporting mechanisms or formats or information technology systems in order to
provide Services hereunder or otherwise engage in any extraordinary activities,
except as set forth in this Agreement. If Bioglan suffers any loss or damage
caused by the LLC's bad faith, gross negligence or willful misconduct, the LLC
shall pay all direct out of pocket costs incurred as a result thereof. Under no
circumstances shall the LLC have any liability to Bioglan for consequential or
incidental damages.
ARTICLE VI
TERM AND TERMINATION
Section 6.1 Term. Subject to Section 6.2, this Agreement shall
commence as of the Closing Date and shall continue in effect for a period of
four (4) months. This period shall be extended, at the written request of
Bioglan, for an additional two (2) months if, after using its reasonable best
efforts, Bioglan has been unable to develop its own distribution system at the
end of the four month period.
Section 6.2 Termination. At any time after payment in full of the
$39.1 million payment from Bioglan as set forth in Article II of the Asset
Purchase Agreement dated June 29, 1999 between Bioglan and Medicis, Bioglan may
terminate this Agreement upon not less fifteen (15) days written notice that it
has developed its own distribution network, provided any transition issues that
will require cooperation after termination are mutually agreed to by the
parties.
Section 6.3 Rights and Duties of Parties Upon Termination. Upon
expiration or other termination of this Agreement in accordance with the terms
hereof, the parties shall cooperate in the orderly termination of the Services
hereunder, including without limitation the transfer of Products to Bioglan; and
the transfer of other information relating solely to the Products, including
customer information.
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ARTICLE VII
CONFIDENTIALITY
The LLC acknowledges that confidential and proprietary information
with respect to the Purchased Assets is valuable, special and unique. Neither
the LLC nor any of its Affiliates shall at any time after the Closing Date
disclose, directly or indirectly, to any third party, or use or purport to
authorize any third party to use any confidential or proprietary information
with respect to the Purchased Assets, whether or not for the LLC's or an
Affiliate's own benefit, without the prior written consent of Bioglan, including
without limitation, information as to the financial condition, results of
operations, customers, suppliers, products, inventions, sources, leads or
methods of obtaining new supplies, marketing strategies or any other information
relating to the Products which could reasonably be regarded as confidential, but
not including information which (i) does not relate directly and exclusively to
the Purchased Assets, provided that the LLC and its Affiliates shall not
disclose such information to the direct detriment of the Purchased Assets; or
(ii) is or shall become generally available to the public other than as a result
of an unauthorized disclosure by the LLC or an Affiliate or third party to whom
the LLC or an Affiliate has provided such information; or (iii) as may be
necessary for the LLC or any of its Affiliates to perform its obligations under
this Agreement or the Exorex Asset Purchase Agreement or the transactions or
agreements contemplated therein; or (iv) that is required by law to be disclosed
by the LLC or any of its Affiliates.
ARTICLE VIII
INDEPENDENT CONTRACTOR
Each party shall act solely as an independent contractor and nothing
in this Agreement shall be construed to give either the power or authority to
enter into or incur, any commitments, expenses or liabilities whatsoever on
behalf of the other party. Nothing herein shall be construed to create the
relationship of a partnership, principal and agent, or joint venture between
Bioglan and the LLC, other than as expressly set forth herein and the LLC shall
not represent itself to be an agent of Bioglan or incur any obligations for or
on behalf of Bioglan other than is expressly contemplated by this Agreement.
ARTICLE IX
NOTICES
Any notice required or permitted to be given hereunder shall be
deemed sufficient if sent by facsimile letter or overnight courier, or delivered
by hand to Bioglan or the LLC at the respective addresses and facsimile numbers
set forth below or at such other address and facsimile number as either party
hereto may designate. If sent by facsimile letter, notice shall be deemed given
when the transmission is completed if the sender has a confirmed
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transmission report. If a confirmed transmission report does not exist, then the
notice will be deemed given when the notice is actually received by the person
to whom it is sent. If delivered by overnight courier, notice shall be deemed
given when it has been signed for. If delivered by hand, notice shall be deemed
given when received.
All correspondence to the LLC shall be addressed as follows:
c/o Medicis Pharmaceutical Corporation
4383 East Camelback Road
Phoenix, Arizona 85018
U.S.A.
Attention: Jonah Shacknai
With copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue, 20th Floor
New York, New York 10022
U.S.A.
Attention: Stephen E. Older, Esq.
8
<PAGE>
All correspondence to Bioglan shall be addressed as follows:
Bioglan Pharma Plc
5 Hunting Gate
Hitchin, Hertfordshire SG4 OTJ
England
Attention: Terry Sadler
With copies to:
Roiter Zucker Solicitors
Regent House
Swiss Cottage
5-7 Broadhurst Gardens
London NW6 3RZ England
Attention: Warren Roiter
All correspondence to IMX shall be addressed as follows:
IMX Pharmaceuticals, Inc.
2295 Corporate Boulevard
Boca Raton, Florida 33431
Attention: William Forster
With copies to:
Nason, Yeager, Gerson, White & Lioce, P.A.
1645 Palm Beach Lakes Boulevard
Suite 1200
West Palm Beach, Florida 33401
Attention: Gary N. Gerson
ARTICLE X
SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns; provided that this
Agreement may not be assigned by any party without the written consent of the
other party.
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ARTICLE XI
SURVIVAL OF TERMS
The provisions of Sections 2.2, 2.5, 2.6, 2.7 (to the extent
payments due remain outstanding thereunder), 2.9, 6.3 and 12.1 and Articles 4,
5, 7, and 8 shall survive the termination or expiration of this Agreement.
ARTICLE XII
ADDITIONAL TERMS
Section 12.1 Entire Agreement. This Agreement and the exhibits
hereto embody the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede and replace all previous negotiations,
understandings, representations, writings, and contract provisions and rights
relating to the subject matter hereof. If there is any conflict between this
Agreement and the terms and conditions contained on any purchase order or
invoice, the terms and conditions of this Agreement shall prevail.
Section 12.2 Amendments; No Waiver. No provision of this Agreement
may be amended, revoked or waived except by a writing signed and delivered by an
authorized officer of each party. No failure or delay on the part of either
party in exercising any right hereunder will operate as a waiver of, or impair,
any such right. No single or partial exercise of any such right will preclude
any other or further exercise thereof or the exercise of any other right. No
waiver of any such right will be deemed a waiver of any other right hereunder.
Section 12.3 Counterparts. This Agreement may be executed in one or
more counterparts all of which shall together constitute one and the same
instrument and shall become effective when a counterpart has been signed by
Bioglan and delivered to the LLC and a counterpart has been signed by the LLC
and delivered to Bioglan.
Section 12.4 Severability. The parties agree that (a) the provisions
of this Agreement shall be severable and (b) in the event that any of the
provisions hereof are held by a court of competent jurisdiction to be invalid,
void or otherwise unenforceable, (i) such invalid, void or otherwise
unenforceable provisions shall be automatically replaced by other provisions
that are as similar as possible in terms to such invalid, void or otherwise
unenforceable provisions but are valid and enforceable and (ii) the remaining
provisions shall remain enforceable to the fullest extent permitted by law,
provided that the rights and interests of the parties hereto shall not be
materially affected.
Section 12.5 Captions. Captions herein are inserted for convenience
of reference only and shall be ignored in the construction or interpretation of
this Agreement. Unless the context requires otherwise, all references herein to
Articles and Sections are to the articles and sections of this Agreement.
Section 12.6 Injunctive Relief. It is possible that remedies at law
may be inadequate and, therefore, the parties hereto shall be entitled to seek
equitable relief including,
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without limitation, injunctive relief, specific performance or other equitable
remedies in addition to all other remedies provided hereunder or available to
the parties hereto at law or in equity.
Section 12.7 Expenses. Except as otherwise expressly provided in
this Agreement, all legal, accounting and other costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
Section 12.8 Attorneys' Fees. If there is any litigation or
arbitration with respect to this Agreement, the prevailing party shall be
entitled to receive from the non-prevailing party and the non-prevailing party
shall pay upon demand all reasonable fees and expenses of counsel for the
prevailing party.
Section 12.9 Governing Law; Jurisdiction. This Agreement shall be
governed by the substantive laws of the State of Arizona, United States of
America (without regard to principles of conflicts of laws) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies. Bioglan consents and submits to the personal
jurisdiction of the state and federal courts in Arizona.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE EXOREX COMPANY, LLC
By:
-------------------------------------------
Name:
Title:
BIOGLAN PHARMA PLC
By:
-------------------------------------------
Terry I. Sadler
Chairman and Chief Executive Officer
MEDICIS PHARMACEUTICAL CORPORATION
By:
-------------------------------------------
Mark A. Prygocki, Sr.
Chief Financial Officer
IMX PHARMACEUTICALS, INC.
By:
-------------------------------------------
Name:
Title:
12
<PAGE>
SCHEDULE 1
FORM OF MONTHLY REPORT
<PAGE>
EXHIBIT A
THE LLC CONTACTS
William Forster
Marc L. Panoff
BIOGLAN CONTACTS
Terry I. Sadler
Bob Moccia
<PAGE>
EXHIBIT B
CURRENT LIST PRICES FOR PRODUCTS
[To be negotiated by the parties prior to the termination of this agreement.]
<PAGE>
EXHIBIT C
THE LLC'S RETURNED GOODS POLICY
<PAGE>
EXHIBIT D
THE LLC'S DISPOSITION OF RETURNED GOODS POLICY
The LLC does not have a formal policy regarding disposition of returned
products.
<PAGE>
10.6
LEASE
AGREEMENT OF LEASE made this 29th day of August, 1996, between provided said
occurrence is not the direct result of a negligent act by Landlord, ASPEN REALTY
AND MANAGEMENT CO., a Florida Corporation, of 2295 Corporate Boulevard, Suite
134, Boca Raton, FL 33431 (hereinafter referred to as "Landlord"), and IMX
CORPORATION, a Florida Corporation, of 2295 Corporate Blvd., Suite 131, Boca
Raton, FL 33431 (hereinafter referred to as "Tenant").
1. DEMISED PREMISES. Landlord does hereby demise unto Tenant, and Tenant does
hereby take from, Landlord, certain premises together with the buildings and
improvements located thereon, in the County of Palm Beach, City of Boca Raton,
Florida, known as and by the street address 2295 Corporate Boulevard, Suite
131-133, in Executive Court No. 1, Boca Raton, Florida having approximately 1380
square feet based on outside wall dimensions. Tenant acknowledges that the grant
of the Demised Premises is subject to zoning, building, local, state and federal
regulations affecting the Demised Premises now or hereafter in effect and
subject to approval by the Board of Condominiums for One Executive Court.
The unit is leased as a partially furnished unit containing the following
furnishings: alarm system, window treatments, carpet, built in desks and
credenzas. No furnishings or other items are furnished or leased with the unit
other than those listed above. Lessee agrees to return the above items to lessor
on the expiration of the tenancy in as good condition as when received,
reasonable wear and tear excepted. Lessee by the execution of this agreement
accepts the above items as being in good, serviceable condition. Lessee will be
responsible for all breakage or other damage to the above items. Parking is
available on a non-exclusive basis as per rules and regulations of the
Condominiums for One Executive Court.
2. LENGTH OF TERM. The term Of this lease shall be for a period of five (5)
years beginning no later than April 1, 1996, and terminating on March 31, 2001,
unless sooner terminated as hereinafter provided, plus, if the term commences on
other than the first day of a calendar month, the number of days from the
commencement to the end of the calendar month in which the commencement occurs.
3. COMMENCEMENT OF TERM. Upon lease execution, Tenant may enter the premises.
4. RENT. Tenant shall pay to Landlord, at the address noted above or at such
place as Landlord shall designate in writing from time to time, a gross rental
plus applicable Florida Sales
<PAGE>
tax payable in monthly installments due on the first (1st) day of each month
during the term as follows:
A. Year 1 (April 1, 1996 - March 31, 1997) $ 1,667.50 per month plus
Florida sales tax for an annual rental rate of $20,010.00 plus Florida sales
tax. The gross rental for any fractional month shall be apportioned. Tenant
shall be given one month free rent in year 1.
B. Year 2 (April 1, 1997 - March 31, 1998) $1,753.75 per month plus
Florida sales tax for an annual rental rate of $21,045.00 plus Florida sales
tax. The gross rental for any fractional month shall be apportioned.
C. Year 3 (April 1, 1998 - March 31, 1999) $1,840.00 per month plus
Florida sales tax for an annual rental rate of $22,080.00 plus Florida sales
tax. The gross rental for any fractional month shall be apportioned.
D. Year 4 (April 1, 1999 - March 31 ,2000) $1,926.25 per month plus
Florida sales tax for an annual rental rate of $23,115.00 plus Florida sales
tax. The gross rental for any fractional month shall be apportioned.
E. Year 5 (April 1, 2000 - March 31, 2001) $2,012.50 per month plus
Florida sales tax for an annual rental rate of $24,150.00 plus Florida sales
tax. The gross rental for any fractional month shall be apportioned. The last
months' rent shall be waived by Landlord provided Tenant is in good standing
under the lease terms.
It is the purpose and intent of the parties hereto that the rent herein provided
shall, except as expressly provided to the contrary herein, be gross to
Landlord. Tenant shall not be responsible for such charges as common area
maintenance, Landlord's insurance or taxes; yet Tenant shall be responsible for
its own operating costs such as electricity, light bulbs, telephones,
janitorial, licenses of every type, personal property taxes, alarm monitoring,
signage in accordance with the condominium standards (and removed at lease
termination), the expenses associated with the removal of trash and garbage, and
its own costs associated with maintenance, cleaning and operations including
costs listed in Article 8 below.
If Tenant shall fail to pay when due any installment of Rent, Tenant shall pay
Landlord, on demand, an additional sum of ten percent (10%) thereafter
representing late charges (or, if such rate be illegal, at the maximum rate then
permitted by law) of the amount of such delinquent payment that such payment is
overdue.
All Rent shall be paid to Landlord without notice, demand, counterclaim, set
off, deduction or defense, and nothing shall
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suspend, defer, diminish, abate or reduce any rent, except as otherwise
specifically provided in this Lease.
5. CONDITION OF THE PREMISES. Tenant shall take possession of the Demised
Premises "as is" in broom clean condition and Landlord shall have no obligation
to alter, improve, decorate or otherwise prepare the Demised Premises for
Tenant's occupancy other than to repaint the premises and install carpet paid
for by tenant. Tenant shall not do any construction work or alterations, nor
shall Tenant install any equipment other than unattached, movable trade
fixtures, without first obtaining Landlord's written approval and consent, not
to be unreasonably withheld.
6. USE OF PREMISES. Tenant shall use the Demised Premises solely for the purpose
of conducting its business under the name of and be known as "IMX CORPORATION",
"THE FORSTER COMPANIES", and any other company/entity of which Bill Forster is
an active principal and majority owner in same. Subject to the restrictions set
forth below, Tenant shall use and occupy the Demised Premises as consulting
offices and for no other purpose. Tenant may only alter said use with the
express written consent of Landlord, not to be unreasonably withheld.
Tenant shall keep the premises well-lighted during the hours of operations; keep
the premises and exterior and interior portions of windows, doors and all glass
or plate glass fixtures in a neat, clean, sanitary and safe condition; not place
any weight upon the floors which shall exceed seventy-five (75) pounds per
square foot of floor space covered; notify Landlord of any name change of the
business operated in the Demised Premises; not conduct any auction, distress,
fire or bankruptcy sale (whether real or fictitious) or any fictitious "going
out of business" sale; not permit the sale or display of any pornographic
material; not place any signs or banners on the exterior of the Premises,
including the windows without Landlord's prior written approval; and not use or
permit the use of any portion of the Demised Premises for any activity in
violation of current zoning standards of operation or in violation of the Board
of Condominium practices and covenants for One Executive Court. Landlord has no
knowledge of any violations for the premises concerning building or occupancy
codes.
Tenant represents that it has examined and is fully familiar with the physical
condition of the Demised Premises, the improvements thereon, the sidewalks and
structures adjoining the same, subsurface conditions, and the present tenancies,
and uses thereof. Lessee accepts the same, without recourse to Landlord, in the
condition and state in which they now are, except for the work to be done by
Landlord pursuant to the Lease, and agrees that the Demised Premises complies in
all respects with all requirements of this Lease. Landlord makes no
representation or warranty, express or implied in fact or by law, as to the
nature or condition of the Demised Premises, or its fitness or
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<PAGE>
availability for any particular use, or the income from or expenses of operation
of the Demised Premises. Landlord shall not be liable for any latent or patent
defect therein.
Tenant shall, (A) at its own cost and expense comply with the all governmental
laws, ordinances, licensing requirements, orders and regulations affecting the
Demised Premises now or hereafter in force; (B) comply with and execute all
rules, regulations and requirements of the Condominium Board of One Executive
Court or its successors.
Tenant shall not directly or indirectly create or permit to be created or to
remain, and shall discharge, any mortgage, lien, security interest, encumbrance
or charge on, pledge of or conditional sale or other retention agreement with
respect to the Demised Premises or any part thereof, Tenant's interest therein,
or any Fixed Rent or other Rent payable under this Lease.
7. ASSIGNMENT & SUBLETTING. Tenant shall not be allowed to assign, sublet,
mortgage or encumber this Lease, in whole or in part, under any circumstances
without the express written consent of Landlord, unless WILLIAM FORSTER is
principal and majority owner of said new entity.
8. REPAIRS. All nonstructural repairs are the responsibility of the tenant.
Landlord shall be required to make any repairs or improvements of any kind upon
the Demised Premises for necessary exterior structural repairs not caused by
negligence of Tenant, it's employees, guests and/or invitees, all other items
are the responsibility of the tenant. Tenant shall maintain and care for the
H.V.A.C. by obtaining a routine service and maintenance contract with a licensed
Florida H.V.A.C. company approved by landlord that at a minimum changes the
filters and checks the Freon on a regular basis. Should Tenant comply with the
foregoing, Landlord shall be responsible for repair and/or replacement of said
H.V.A.C. unit during the term of the lease. Tenant acknowledges that he is
taking the premises "as is" and accepts the condition of the premises. Tenant
agrees to keep and maintain the Premises in good condition, reasonable wear and
tear excepted.
Tenant acknowledges and understands that there is a management company and
condominium association for the building common areas. In matters regarding the
common areas, building exterior and public bathroom maintenance, Tenant shall
first contact the management company or building superintendent for assistance.
Landlord will assist Tenant in advocating its position as long as such position
is not detrimental to the interests of Landlord, the Landlord having sole
discretion thereof.
9. UTILITY CHARGES. Tenant is responsible for its own utility and telephone
charges, deposits, alarm maintenance, hook-up fees, if any, and service. Tenant
agrees that it will not install any
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<PAGE>
equipment which will exceed or overload the capacity of the current service or
present a fire/safety risk.
10. INDEMNITY.
(A) Tenant does hereby indemnify Landlord and agree to hold it harmless
from suits, actions, damages, liability and expense in connection with loss of
life, bodily or personal injury or property damage arising from or out of any
occurrence in, upon, at or from the Demised Premises or the occupancy or use by
Tenant of said Premises or any part thereof, or occasioned wholly or in part by
any act or omission by Tenant, its agents, contractors, employees, servants,
invitee, licensees or concessionaires, provided said occurrence is not the
direct result of a negligent act by Landlord.
(B) Landlord shall not be responsible or liable for any latent defects in
the building or common area of Executive Court outside the demised premises and
tenant uses said common areas at its own risk, nor from any injury or damage
caused by or resulting from acts of God or the elements, nor for any injury or
damage caused by or resulting from negligence in the occupancy, construction,
operation, or of use of any portion of the Executive Court Condominium or
equipment therein by any person or by or from the at of or any negligence of any
occupant of the Executive Court Condominiums except for an act of the landlord.
(C) Tenant shall give prompt notice to Landlord in case of fire or
accident in the Demised Premises or in the building of which the Demised
Premises are a part or of any defect therein or in any fixture or equipment.
(D) In the event Landlord shall, without fault on its part, be made a
party to any litigation commenced by or against Tenant, then Tenant shall
protect and hold Landlord harmless and shall pay all costs, expenses and
reasonable attorneys' fees provided said occurrence is not the direct result of
a negligent act by Landlord.
11. DEFAULT. ALL RENTAL PAYMENTS ARE DUE ON OR BEFORE THE FIRST DATE OF EACH
MONTH. If Tenant fails to pay any rental or other payment due hereunder within
ten (10) days of written notice when said payment is due and owing, or upon its
failure to perform any other of the material terms of this lease to be observed
or performed by Tenant, or if the Demised Premises become vacant or deserted, or
if the Demised Premises are materially damaged by reason of negligence or
carelessness of Tenant, its agents, employees or invitee, or if Tenant shall
become bankrupt or insolvent, or file any debtor proceedings or take or have
taken against Tenant in any court, or should Tenant fail to maintain the
required H.V.A.C. or maintenance contracts, then, in any one or more of such
events, upon Landlord serving a written three (3) day notice of default for any
monetary defaults (fifteen (15) days notice for nonmonetary defaults) upon
Tenant specifying the
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<PAGE>
nature of said default and if, at the expiration of said three (3) day period,
or fifteen (15) day period as the case may be. Tenant shall have failed to
comply with or remedy such default, then Landlord may give Tenant notice of
cancellation of this lease and this lease and the term hereunder shall terminate
and come to an end immediately, and Tenant shall quit and surrender the Demised
Premises to Landlord as if the term hereunder ended by the expiration of the
time fixed herein, but Tenant shall remain liable for any and all monies due
during the term of the Lease together with interest thereon. Tenant agrees to
pay the cost of collection and/or attorneys and brokers fees of the amount
collected by suit or attorney after the same is past due and the payment of
costs involved to relet the premises to a new tenant.
If an Event of Default shall have occurred and be continuing, Landlord, whether
or not the Lease Term shall have been terminated pursuant to this Lease, may
enter upon and repossess the Demised Premises or any part thereof by force,
summary proceedings, ejectment or otherwise, and may remove Tenant and all other
persons and any and all property therefrom.
No expiration or termination of the Lease Term pursuant to this Lease, by
operation of law or otherwise (except as expressly provided herein), and no
repossession of the Demised Premises or any part thereof pursuant to this Lease
or otherwise, shall relieve Tenant of Tenant's obligations or liabilities
hereunder, all of which shall survive such expiration, termination or
repossession.
No failure by Landlord to insist upon the strict performance of and compliance
with any term, covenant or condition hereof or to exercise or enforce any right,
power or remedy consequent upon a breach thereof, and no submission by Tenant or
acceptance by Landlord of full or partial Rent during the continuance of any
such breach, shall constitute a waiver of any such breach or of any such term,
covenant or condition. No waiver of any breach of any term, covenant or
condition of this Lease shall affect or alter this Lease, which shall continue
in full force and effect, or the respective rights, powers or remedies of
Landlord or Tenant with respect to any other then existing or subsequent breach.
All of the rights, powers and remedies of Landlord provided for in this Lease or
now or hereafter existing at law or in equity, or by statute or otherwise, shall
be deemed to be separate, distinct, cumulative and concurrent. No one or more of
such rights, powers or remedies, nor any mention of reference to any one or more
of them in this Lease, shall be deemed to be in the exclusion of, or a waiver
of, any other rights, powers or remedies provided for in this Lease, or now or
hereafter existing at law or in equity, or by statute or otherwise. The exercise
or enforcement by Landlord of any one or more of such rights, powers or remedies
shall not preclude the simultaneous or later exercise
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or enforcement by Landlord of any or all of such other rights, powers or
remedies.
12. ACCESS TO PREMISES. Landlord shall have the right to place, maintain and
repair all utility equipment of any kind, in, upon or under the Demised Premises
as may be necessary for the servicing of the Demised Premises provided
reasonable notice is given to Tenant. In the event of default by Tenant or in
the event of emergency, Landlord shall have unencumbered access to the premises.
Landlord shall also have the right to enter the Demised Premises, at reasonable
time and with reasonable notice, to inspect or to exhibit the same to
prospective purchasers, mortgagees and tenants, and to make such repairs,
additions, alterations or improvements as Landlord may deem desirable. If Tenant
shall not be personally present to permit an entry into said Premises when for
any reason an entry therein shall be permissible, Landlord may enter the same by
the use of force without rendering Landlord liable therefor (except to repair
any damage to the entry point by reason of any forcible entry) and without in
any manner affecting Tenant's obligations under this lease. Landlord may place
upon the said Premises "To Let" or "For Sale" signs if Tenant is in arrears, in
default or during the last 120 days of the lease term. Other than the foregoing,
Landlord shall allow for Tenant to have quiet enjoyment of the premises.
13. END OF TERM. At the expiration of this lease, Tenant shall surrender the
Demised Premises, broom clean, in substantially equivalent condition, reasonable
wear and tear excepted, as said Premises were in upon delivery of possession
thereto under this lease and shall deliver all keys to Landlord.
14. HOLDING OVER. Any holding over after the expiration of the term or any
renewal term shall be construed to be a tenancy from month to month at a rent
equal to One Hundred Fifty (150%) percent of the Monthly Rent as at the end of
the term and shall otherwise be bound by the terms and conditions herein
specified so far as applicable.
15. NOTICES. Any notice, demand, request or other instrument which may be or is
required to be given under this lease shall be in writing and mailed by United
States Certified or Registered Mail/Return Receipt Requested, postage-prepaid,
and shall be addressed (a) if to Landlord, at the address as hereinabove given,
and (b) if to Tenant, at the address as hereinabove given OR to the address of
the demised premises. Either party may at any time designate such other address
or party to whom such written notice shall be sent.
16. BROKER. Landlord and Tenant each represent and warrant that NO Broker and/or
real estate agent instrumental in consummating this lease. Each party hereto
agrees to hold the other harmless and indemnify the other against any claims
relating to any broker concerning the Demised Premises.
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17. RULES AND REGULATIONS. Tenant agrees to adhere to all rules and regulations
of the Executive Court Condominium Association. Failure to abide thereto shall
be a material breach of this Lease and grounds for default.
18. CORPORATE TENANTS. In the event Tenant hereunder is a corporation, the
persons executing this lease on behalf of the Tenant hereby covenant and warrant
that Tenant is a duly constituted corporation, qualified to do business in the
State of Florida and licensed to do business in Palm Beach County and the city
of Boca Raton, Florida, and that such persons are duly authorized by the
governing body of such Tenant to execute and deliver this lease on behalf of
Tenant to Landlord or its agent. Tenant shall maintain said corporation in good
standing with the Florida Department of State at all times during said Lease.
19. SECURITY. Tenant has deposited with Landlord the sum of $1,667.50 as
security for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this lease; it is agreed that in the event Tenant
defaults in respect of any of the terms, provisions and conditions of this
lease, including. but not limited to, the payment of rent and additional rent,
Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent or any other sum as
to which Tenant is in default or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenant and conditions of this Lease, including but not limited to, any damages
or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this Lease, the security
shall be returned to Tenant after the date fixed as the end of the lease and
after delivery of entire possession of the demised premises to Landlord. Tenant
agrees that Landlord is under no obligation to place said monies in an interest
bearing account or separate account.
20. INSURANCE. Tenant shall maintain at its own cost and expense:
(A) COMPREHENSIVE GENERAL LIABILITY INSURANCE covering the Demised
Premises on an occurrence basis with minimum limits of liability in an amount
equal to One Million and 00/100 ($1,000,000) Dollars for bodily injury, personal
injury, death and to property. Such policy shall name Landlord as additional
insured and certificate holder and shall provide that the same may not be
canceled or terminated without at least thirty (30) days' written notice to
Landlord by the insurance company issuing such policy, and that no act or
omission to act of the Tenant shall invalidate such insurance as to Landlord;
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(B) FIRE INSURANCE in an amount adequate to cover the cost of replacement
of all improvements, fixtures and contents in the Demised Premises in the event
of fire, perils covered by extended coverage, vandalism, and malicious mischief.
(C) PLATE GLASS INSURANCE must be obtained by Tenant in an amount
necessary to cover the demised premises.
Prior to occupancy of the demised premises, and thereafter not less than thirty
(30) days prior to the expiration date of any policy delivered pursuant to this
Article, Tenant shall deliver to Landlord, adequate evidence of said policies or
renewal policies, as the case may be, required by this Lease, bearing notations
evidencing the payment of the premiums therefor. In lieu of any such policies,
Tenant may deliver certificates of the insurer, in form and substance
satisfactory to Landlord, as to the issuance and effectiveness of such policies
and the amounts of coverage afforded thereby, accompanied by copies of such
policies.
Tenant shall not conduct any business or venture that results in the increase of
Landlord's insurance costs.
Tenant's failure to carry the aforesaid insurance coverage, shall be a material
breach of this Lease and a grounds for default.
21. CASUALTY. If the Demised Premises or any part of the building within which
the Demised Premises are located (the "Building") shall be damaged by fire or
other casualty and such damage renders all or a substantial portion of the
Demised Premises or the Building untenantable and such damage cannot be repaired
within one hundred twenty (120) days from the date such damage occurred, then
either Landlord or Tenant shall have the right to terminate this Lease as of the
date of such damage upon giving notice to the other. Unless this Lease is
terminated as provided in the preceding sentence, Landlord shall proceed with
reasonable promptness to repair and restore the Demised Premises to the
condition the same was in at the commencement of the lease.
In the event any such fire or casualty should render the Demised Premises
substantially untenantable for more than two (2) consecutive business days and
if this Lease shall not have been terminated pursuant to the foregoing provision
by reason of such damage, the rent shall abate during the period beginning with
the date of such damage and ending with the date when Landlord completes its
repair and restoration work to the Demised Premises. Such abatement shall be in
an amount bearing the same ratio to the total amount of the Rent for such period
as the portion of the Demised Premises rendered untenantable as a result of such
damage bears to the entire Demised Premises. In the event of termination of this
Lease pursuant to this provision, the Rent shall be apportioned on a per diem
basis and be paid to the date of such fire or other casualty.
9
<PAGE>
22. ADDITIONAL PROVISIONS. This Lease shall bind the parties and their
successors, heirs, executors and successors as the case may be. This Lease may
be changed or modified only by an instrument in writing signed by the party
against which enforcement of such change or modification is sought. Tenant
acknowledges that it has not relied upon any statement, representation, prior or
contemporaneous written or oral promises, agreements, or warranties, except such
as are expressed herein. It is acknowledged that each of the parties hereto has
contributed substantially to the content of this lease. Accordingly, this lease
shall not be more strictly construed against either party hereto by reason of
the fact that one party may have drafted or prepared any or all of the terms and
provisions hereof.
23. PETS. No pets are allowed on the premises except for seeing eye dogs as
required.
24. SMOKING. The demised premises is hereby designated a non-smoking area. Any
damage to the demised premises caused by failure to observe this lease provision
by the tenant, its employees or guests will be deducted from security or added
to rental amounts or due and owing.
25. MAINTENANCE CONTRACT(S). Tenant shall be responsible for the preventive and
routine maintenance of the alarm, plumbing, electrical, heating ventilation and
air conditioning systems and water heater. Tenant agrees to enter into a
preventative maintenance agreement, which includes replacement if
non-repairable, with a reputable service firm approved by the landlord to
provide said maintenance during the term of the lease. A copy of said
maintenance agreement(s) shall be supplied to landlord within ten (10) days
after occupancy of the demised premises.
26. EXCULPATION. Neither landlord nor any general or limited partner, any direct
or indirect partner, incorporator, shareholder, mortgagee, trustee, officer or
director, disclosed or undisclosed, past, present or future partner of landlord
shall be personally liable for any liability or obligation of landlord to tenant
in connection with this lease. Tenant will look solely to the interest of
landlord in the premises to satisfy any claims tenant may have against landlord
with respect to such liabilities and obligations.
27. RADON GAS. Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding Radon and Radon testing may be obtained from your public health unit.
10
<PAGE>
28. HAZARDOUS MATERIALS. Tenant shall not generate, store, handle or use any
hazardous effluent, materials or substances in excess of lawful standards, or
prohibited by code, anywhere in the demised premises or condominium complex.
29. RIGHT OF FIRST REFUSAL. Provided tenant has not been in material default of
this lease and same has not been timely remedied as per this lease, if the
adjacent premises become available at a rental rate and terms which landlord has
determined in its sole discretion or be acceptable, landlord shall provide
tenant a written outline of the terms and conditions of such offer on the same
terms and conditions as would be offered to a prospective tenant. Landlord and
Tenant agree to negotiate in good faith. In order to exercise the right, tenant
must deliver written notice of such exercise to landlord not later than twenty
(20) business days after landlord's notice. The right shall be null and void
should tenant fail to exercise it within said twenty (20) business days and
landlord shall thereafter be free to deal with the prospective tenants in
connection with the demised premises as landlord sees fit.
IN WITNESS WHEREOF, the parties hereto have respectively signed and sealed this
lease the day and year first above written.
LANDLORD:
ASPEN REALTY AND MANAGEMENT CO.
By: /s/ LEE MAX ROTHMAN
- - ----------------------------------- ----------------------------------
LEE MAX ROTHMAN, President
- - -----------------------------------
TENANT:
IMX CORPORATION
By: /s/ BILL FORSTER
- - ----------------------------------- ----------------------------------
Authorized Signature
- - -----------------------------------
Title: President
-------------------------------
(CORPORATE SEAL)
11
<PAGE>
GUARANTY
For value received and in consideration for and as an inducement to
landlord making the within Lease with Tenant, the undersigned, on behalf of him
or herself, his or her legal representatives, heirs, successors and assigns,
jointly and severally, absolutely and unconditionally guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the rules and regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefore, all of which the undersigned
expressly waives and agrees that the validity of this agreement and the
obligations of the undersigned guarantor hereunder shall of be terminated,
affected or impaired by reason of the assertion by Landlord against Tenant of
any of the rights or remedies reserved to Landlord pursuant to the provisions of
the within Lease. The undersigned further agrees that this guaranty shall remain
and continue in full force and effect as to any renewal, modification or
extension of this Lease. As a further inducement to Landlord to make this Lease
and in consideration thereof, Landlord and the undersigned agree that, in any
action or proceeding brought by either Landlord or the undersigned against the
other on any matters whatsoever arising out of, or by virtue of the terms of
this lease or of this guaranty, Landlord and the undersigned shall, and do
hereby, absolutely and unconditionally waive trial by jury. In the event
Landlord incurs any expenses in the enforcement of this guaranty, whether legal
action be instituted or not, the undersigned agrees to be liable for same
(including, without limitation, reasonable attorneys' fees) and to pay same
promptly on demand by Landlord. The undersigned acknowledges receipt of a
complete copy of the Lease with all exhibits and other attachments, if any, and
this guaranty. Said guarantor shall only be responsible for a monetary amount
equal to six (6) months' rent at the highest level called for under the lease
together with any costs, interest, attorneys fees and court costs incurred by
Landlord or its agents to enforce said guaranty.
DATE: March 29/96
---------------------------------
WITNESSES:
/s/ [unintelligible] SIGNATURE: /s/ Bill Forster
- - ----------------------------------- -----------------------------
PRINT NAME: BILL FORSTER
- - ----------------------------------- ----------------------------
HOME ADDRESS:
--------------------------
---------------------------------------
<PAGE>
10.6.1
ADDENDUM TO LEASE
THIS LEASE ADDENDUM, made this 11th day of March, 1997, by and between
ASPEN REALTY & MANAGEMENT CO., with offices located at 2295 Corporate Blvd.,
Suite 134, Boca Raton, FL 33431, a Florida corporation, as Landlord, [successor
in interest to LEE MAX ROTHMAN], and IMX CORPORATION, a Utah Corporation,
located at 2295 Corporate Blvd., #131, Boca Raton, FL 33431, as Tenant
[successor in interest to the FORSTER COMPANY and SHALOM Y'ALL, INC.]
WITNESSETH:
WHEREAS, by Lease bearing the date of March 29, 1996, as modified by
Addendum dated June 29, 1996, Landlord let to Tenant the premises and
appurtenances known as Suite 131-133; of the office building known as Executive
Court I located at 2295 Corporate Blvd., Boca Raton, Palm Beach County, Florida.
Subsequently, by Addendum dated June 29, 1996 Landlord let to Tenant additional
office space to be known as Suite 138, in the same office building for a term
beginning on April 1, 1996 and ending March 31, 2001.
WHEREAS, in consideration of the mutual benefits to be derived, the
parties hereto again desire to modify said Lease as hereinafter set forth:
NOW, THEREFORE, it is mutually understood and agree as follows:
1. Tenant shall lease the additional premises known as Suite 130 for the term
beginning March 12, 1997 and ending on March 31, 2001.
2. Tenant shall not be entitled to make any alterations or additions to the
Demised Premises without the prior written consent of Landlord and approval of
the City of Boca Raton and County of Palm Beach. Florida. All work or
renovations shall meet the present standards of the Building, including
decorative and cosmetic standards, and Building Codes of the City of Boca Raton
and County of Palm Beach, Florida.
3. In addition to all other rental and monetary obligations contained in Article
4 of the Lease dated March 29, 1996, or the addenda thereto, Tenant shall be
responsible for additional rent as follows:
"4. RENT. Tenant shall pay to Landlord, at the address noted above or at such
place as Landlord shall designate in writing from time to time, a gross rental
plus applicable Florida Sales
<PAGE>
tax payable in monthly installments due on the first (1st) day of each month
during the term as follows:
A. March 12, 1997 - March 31, 1998: $890.00 per month plus Florida sales tax for
an annual rental rate of $10,680.00 plus Florida sales tax. The gross rental for
any fractional month shall be apportioned.
B. April 1, 1998 - March 31, 1999: $950.00 per month plus Florida sales tax for
an annual rental rate of $11,400.00 plus Florida sales tax. The gross rental for
any fractional month shall be apportioned.
C. April 1, 1999 - March 31, 2000: $1,015.00 per month plus Florida sales tax
for an annual rental rate of $12,180.00 plus Florida sales tax. The gross rental
for any fractional month shall be apportioned.
D. April 1, 2000- March 31, 2001: $1,100.00 per month plus Florida sales tax for
an annual rental rate of $13,200.00 plus Florida sales tax. The gross rental for
any fractional month shall be apportioned.
It is the purpose and intent of the parties hereto that the rent herein provided
shall, except as expressly provided to the contrary herein, be gross to
Landlord. Tenant shall not be responsible for such charges as common area
maintenance, Landlord's insurance or taxes; yet Tenant shall be responsible for
its own operating costs such as electricity, light bulbs, telephones,
janitorial, licenses of every type, personal property taxes, alarm monitoring,
signage in accordance with the condominium standards (and removed at lease
termination), the expenses associated with the removal of trash and garbage, and
its own costs associated with maintenance, cleaning and operations including
costs listed in the original Lease.
If Tenant shall fail to pay when due any installment of Rent, Tenant shall pay
Landlord, on demand, an additional sum of ten percent (10%) thereafter
representing late charges (or, if such rate be illegal, at the maximum rate then
permitted by law) of the amount of such delinquent payment that such payment is
overdue.
All Rent shall be paid to Landlord without notice, demand, counterclaim, set
off, deduction or defense, and nothing shall
2
<PAGE>
suspend, defer, diminish, abate or reduce any Rent, except as otherwise
specifically provided in this Lease."
4. Landlord and Tenant each represent and warrant that there was no broker
and/or real estate agent instrumental in consummating this lease. Tenant agrees
to hold Landlord harmless against any claims arising out of any conversations
Tenant had with any broker concerning the Demised Premises.
5. All other Terms and Conditions of the above referenced Lease shall remain in
full force and effect.
IN WITNESS WHEREOF. the parties hereto have executed this ADDENDUM TO
LEASE the day and year first above written.
Signed, sealed in the LANDLORD:
presence of: ASPEN REALTY & MANAGEMENT CO.
a Florida corporation
/s/ Jeanne Wilson
- - ------------------------------
Name Jeanne Wilson By: /s/ Lee Max Rothman
------------------------- ------------------------------------
Lee Max Rothman, Pres.
/s/ Katherine A. Brewer
- - ------------------------------
Name Katherine A. Brewer (CORPORATE SEAL)
-------------------------
TENANT:
IMX CORPORATION., a Utah corporation
/s/ Jeanne Wilson
- - ------------------------------
Name Jeanne Wilson By: /s/ Bill Forster
------------------------- ------------------------------------
Bill Forster
C.E.O.
/s/ Katherine A. Brewer
- - ------------------------------
Name Katherine A. Brewer
------------------------- (CORPORATE SEAL)
3
<PAGE>
10.6.2
ADDENDUM TO LEASE
THIS LEASE ADDENDUM. made this 28 day of August, 1997, by and between
ASPEN REALTY & MANAGEMENT CO., a Florida corporation, with offices located at
2295 Corporate Blvd., Suite 134, Boca Raton, FL 33431, as Landlord, [successor
in interest to LEE MAX ROTHMAN], and IMX CORPORATION, a Utah Corporation, with
offices located at 2295 Corporate Blvd., Suite 131, Boca Raton, FL 33431, as
Tenant [successor in interest to the FORSTER COMPANY and SHALOM Y'ALL. INC.]
WITNESSETH:
WHEREAS, by Lease bearing the date of March 29, 1996, Landlord let to
Tenant Approximately 1,380 rentable square feet located on the first floor known
as Suites 131-133 of the office building known as Executive Court I located at
2295 Corporate Blvd., Boca Raton, Palm Beach County, Florida, for a term
beginning on April 1, 1996 and ending March 31, 2001;
WHEREAS, by Addendum dated June 29, 1996 to the above-referenced Lease
Landlord let to Tenant approximately 780 rentable square feet located on the
first floor known as Suite 138 of the office building known as Executive Court I
located at 2295 Corporate Blvd., Boca Raton, Palm Beach County, Florida for a
term beginning on April 1, 1996 and ending March 31, 2001;
WHEREAS, by Addendum dated March 11, 1997 to the above-referenced Lease
Landlord let to Tenant approximately 675 rentable square feet located on the
first floor known as Suite 130 of the office building known as Executive Court I
located at 2295 Corporate Blvd., Boca Raton, Palm Beach County, Florida for a
term beginning on March 12, 1997 and ending March 31, 200.;
WHEREAS, in consideration of the mutual benefits to be derived, the
parties hereto again desire to modify said Lease, together with the addenda
thereto as hereinafter set forth:
NOW, THEREFORE, it is mutually understood and agree as follows:
1. PREMISES & TERM. Landlord shall let to Tenant additional office space to be
known as Suite 137 of the office building known as Executive Court I located at
2295 Corporate Blvd., Boca Raton, Palm Beach County, Florida, containing
approximately 650 rental square feet. The lease term shall begin on September 1,
1997 and shall terminate on March 31, 2001, both dates being inclusive. unless
terminated sooner as provided under the terms of the lease.
<PAGE>
2. SUITE IMPROVEMENTS. Landlord shall perform the following improvements:
A. Cut opening for hallway between Suites 137 and Suite 138.
B. Relocate electrical in hallway.
C. Repaint Suite 137 (touch up paint for Suite 138 as needed).
D. Shampoo carpet in Suite 137.
E. Remove shelving in Storage Area of Suite 138, patch area and
repaint.
F. H.V.A.C. and electrical system shall be in working order at
inception.
3. PREMISES "AS-IS". Other than the aforementioned items listed above in
Paragraph 2. Tenant shall take possession of the Demised Premises "as is" in
broom clean condition. Tenant acknowledges that he is taking the premises "as
is" and accepts the condition of the premises. Tenant agrees to keep and
maintain the Premises in good condition, reasonable wear and tear excepted.
Tenant is responsible for its own utility and telephone charges, deposits,
hook-up fees, if any, and service. Tenant agrees that it will not install any
equipment which will exceed or overload the capacity of the current service or
present a fire/safety risk. Tenant shall not be entitled to make any alterations
or additions to the Demised Premises without the prior written consent of the
Landlord and approval of the City of Boca Raton and County of Palm Beach.
Florida. All work or renovations shall meet the present standards of the
Building, including decorative and cosmetic standards, and Building Codes of the
City of Boca Raton and County of Palm Beach, Florida.
4. RENT. Article 4 of the Lease dated March 29, 1996, as amended shall be
furthermore amended to add the following rental amounts for Suite 137 to any
said amounts already due and owing from Tenant to Landlord for the rental of
Suites 130, 131-133 and 138:
A. September 1, 1997 - August 31, 1998: $1,000.00 per month plus Florida sales
tax for an annual rental rate of $12.000.00 plus Florida sales tax. Tenant shall
be given a one time credit of $1,000.00 for September, 1997.
B. September 1. 1998 - August 31, 1999: $1,050.00 per month plus Florida sales
tax for an annual rental rate of $12,600.00 plus Florida sales tax.
C. September 1, 1999 - August 31, 2000: $1,102.50 per month plus Florida sales
tax for an annual rental rate of $13,230.00 plus Florida sales tax.
2
<PAGE>
D. September 1, 2000 - March 31, 2001: $1,157.63 per month plus Florida sales
tax for an annual rental rate of $13,891.56 plus Florida sales tax.
Tenant shall pay to Landlord the above rental amounts which shall be due and
owing on the first (1st) day of each month at the address noted above or at such
place as Landlord shall designate in writing from time to time. All Rent shall
be paid to Landlord without notice, demand, counterclaim, set off, deduction or
defense.
It is the purpose and intent of the parties hereto that the rent herein provided
shall, except as expressly provided to the contrary herein, be gross to
Landlord. Tenant shall not be responsible for such charges as common area
maintenance, landlord's insurance or taxes; yet Tenant shall be responsible for
its own operating costs such as electricity, light bulbs, telephones,
janitorial, licenses of every type, personal property taxes, alarm monitoring,
signage in accordance with the condominium standards (and removed at lease
termination), the expenses associated with the removal of trash and garbage, and
its own costs associated with maintenance, cleaning and operations including
costs listed below.
If Tenant shall fail to pay when due any installment of Rent, Tenant shall pay
Landlord, on demand, an additional sum of ten per cent (10%) thereafter
representing late charges (or, if such rate be illegal, at the maximum rate then
permitted by law) of the amount of such delinquent payment that such payment is
overdue.
5. NO BROKER. Landlord and Tenant each represent and warrant that there was no
broker and/or real estate agent instrumental in consummating this lease. Tenant
agrees to hold Landlord harmless against any claims arising out of any
conversations Tenant had with any broker concerning the Demised Premises.
6. REPAIRS and maintain said unit during the term of the lease. Tenant
acknowledges that he is taking the premises "as is" and accepts the condition of
the premises. Tenant agrees to keep and maintain in good condition the Premises.
At a minimum Tenant is additionally to provide, maintain and pay for a pest
control contract on said premises with regular monthly maintenance and an
H.V.A.C. service contract. A copy is to be provided to Landlord.
Landlord shall be required to make any repairs or improvements of any kind upon
the Demised Premises for necessary exterior structural repairs not caused by
negligence of Tenant, it's employees, guests and/or invitees, all other items
are the responsibility of the tenant. Tenant shall maintain a service contract
on the H.V.A.C that at a minimum by changes the filters and checking on the
Freon on a periodic basis, no less than quarterly. Landlord shall be responsible
for repair of said
3
<PAGE>
H.V.A.C. unit during the term of the lease provided Tenant maintains sad service
contract.
Tenant acknowledges and understands that there is a management company and
condominium association for the building common areas. In matters regarding the
common areas, building exterior and bathroom maintenance, Tenant shall first
contact the management company or building superintendent for assistance.
Landlord will assist Tenant in advocating its position as long as such position
is not detrimental to the interests of Landlord, the Landlord having sole
discretion thereof.
7. UTILITY CHARGES. Tenant is responsible for its own utility charges, deposits,
hook-up fees, if any, and service. Tenant agrees that it will not install any
equipment which will exceed or overload the capacity of the current service or
present a fire/safety risk.
8. SECURITY. [This clause intentionally omitted].
9. INSURANCE. Tenant shall maintain at its own cost and expense (a)
COMPREHENSIVE GENERAL LIABILITY INSURANCE covering the Demised Premises on an
occurrence basis with minimum limits of liability in an amount equal to One
Million ($1,000,000.00) Dollars for bodily injury, personal injury, death and to
property. Such policy shall name Landlord and shall provide that the same may
not be canceled or terminated without at least thirty (30) days' written notice
to Landlord by the insurance company issuing such policy, and that no act or
omission to act of the Tenant shall invalidate such insurance as to Landlord;
(b) FIRE INSURANCE in an amount adequate to cover the cost of replacement of all
improvements, fixtures and contents in the Demised Premises in the event of
fire, perils covered by extended coverage, vandalism, and malicious mischief;
(c) PLATE GLASS INSURANCE must be obtained by Tenant in an amount necessary to
cover the demised premises or Tenant may elect to self insure providing it
notify Landlord in writing of its intent to do so and promptly make necessary
repairs to said plate glass. Tenant's failure to carry the aforesaid insurance
coverage, shall be a material breach and a grounds for default.
10. RADON NOTICE. As required by section 404.056 of Florida Statutes the
following warning is given: RADON GAS: Radon is a naturally occurring
radioactive gas, that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it over time.
Levels of radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon testing
may be obtained from your county public health unit.
4
<PAGE>
11. ALL OTHER TERMS AND CONDITIONS OF THE ABOVE REFERENCED LEASE AS AMENDED
SHALL REMAIN IN FULL FORCE AND EFFECT.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF. the parties hereto have executed this ADDENDUM TO
LEASE the day and year first above written.
Signed, sealed in the LANDLORD:
presence of: ASPEN REALTY & MANAGEMENT CO,
a Florida corporation
/s/ Jeanne M. Wilson By: /s/ Lee Max Rothman
- - ----------------------------- ------------------------------------
Name Jeanne M. Wilson LEE MAX ROTHMAN, President
-------------------------
/s/ (unintelligible)
- - -----------------------------
Name (CORPORATE SEAL)
-------------------------
TENANT:
IMX CORPORATION
a Utah corporation
/s/ Jeanne M. Wilson By: /s/ Bill Forster
- - ----------------------------- ------------------------------------
Name Jeanne M. Wilson BILL FORSTER, President
-------------------------
/s/ (unintelligible)
- - -----------------------------
Name (CORPORATE SEAL)
-------------------------
5
<PAGE>
10.7
LEASE AGREEMENT
THIS LEASE, dated this 18th day of December 1998, by and between LEWIS RENTAL
PROPERTIES, 3600 N.W. Boca Raton Boulevard, Boca Raton, Florida 33431
(hereinafter referred to as the "LANDLORD") and:
BUSINESS: IMX CORPORATION
MAILING 2295 Corporate Blvd. #131
ADDRESS: Boca Raton, FL 33431
PHONE #: 561-998-5660\FAX 998-5654 CONTACT: Bill Forster/Adele
(hereinafter referred to as the "TENANT"):
WITNESSETH:
That the LANDLORD hereby demises and leases unto the TENANT, and the TENANT
hereby hires and takes from the LANDLORD for the term and upon the rentals
hereinafter specified described as follows :
LOCATED AT 2920 NW Boca Raton Blvd., Bay #8-9
CITY OF BOCA RATON, FLORIDA 33431
APPROXIMATELY 3000 SQUARE FEET
The TENANT has examined said property prior to and as a condition precedent to
his acceptance and the execution hereof and is satisfied with the physical
condition thereof, and the TENANT'S taking possession thereof shall be
conclusive evidence of the TENANT'S receipt thereof in good order and repair,
except as otherwise specified herein. The term of this lease is as follows:
BEGINNING 1ST DAY OF JANUARY, 1999 **Pro-rate 15th**
ENDING 31ST DAY OF DECEMBER, 1999
The following advance deposit shall be held as security to ensure that the
TENANT will live up to the term of this LEASE AGREEMENT and return the said
property to the LANDLORD in good condition. Deposit will be held until such time
as said property is returned to the LANDLORD in as good condition as received by
TENANT, loss by fire or other casualty and ordinary wear and tear excepted. If
property is not returned in good condition or any outstanding charges remain,
repairs and charges will be deducted from deposit. LANDLORD reserves the right
to increase the deposit at anytime during the term of this lease if the TENANT
becomes consistently late in the payment of rent.
SECURITY DEPOSIT $200.00 DOLLARS
The TENANT shall pay to the LANDLORD at the office of the LANDLORD, 3600 NW Boca
Raton Blvd., Boca Raton, Florida 33431, as rent plus sales tax the following
amount for the said term. The TENANT does further agree to pay the first and
last month rent plus sales tax upon the execution of this lease agreement. The
<PAGE>
TENANT also agrees to pay the additional rent and automatic increases as
hereinafter provided. RENT $5.85 PER SQUARE FOOT PER YEAR.
MONTHLY RENT PAYMENTS $1462.25 LAST MONTH RENT $1462.25
ADDITIONAL MTHLY RENT 525.25 ADD'L LAST MONTHS RENT 525.25
(see section#4) (see section#4)
SALES TAX 119.25 SALES TAX 119.25
-------- --------
TOTAL MONTHLY RENT $2106.75 TOTAL LAST MONTHS RENT $2106.75
Receipt of these monies is acknowledged by LANDLORD'S execution of this lease.
The above letting is upon the following additional terms and conditions:
1. PEACEFUL POSSESSION. The LANDLORD covenants that the TENANT, on paying the
said rental and performing the covenants and conditions in this lease contained,
shall and may peaceably and quietly have, hold and enjoy the demised premises
for the term aforesaid.
2. PURPOSE. The TENANT covenants and agrees to use the demised premises as
OFFICE/MANUFACTURING/STORAGE and agrees not to use or permit to be used for any
other purpose without the prior written consent of the LANDLORD endorsed hereon.
3. PAYMENT OF RENT. TENANT covenants without any previous demand therefore to
pay the LANDLORD, or its agent, the basic or fixed rent herein reserved and all
other sums and additional payments to be made by TENANT hereunder, at the time
and in the manner in this LEASE provided, all of which rent, sums and payments
are to be paid in legal and lawful money of the United States of America, which
shall be legal tender in payments of all debts and dues at the time of payment,
without deduction, diminution abatement or rebate of whatsoever kind, nature and
description, except as in this LEASE otherwise provided. All rents are due in
full on the first day of each month. TENANT agrees to pay a late payment charge
of five percent (5%) per month of the amount of rent and a $5.00 per day charge
in default if rent is not paid by the fifth (5) day of each month. The TENANT'S
covenant to pay the LANDLORD all rent and other sums when due, without previous
demand, is not subject to or subordinate to any causes of action, offsets or any
claims whatsoever by TENANT of third parties against LANDLORD.
4. ADDITIONAL RENT. TENANT shall pay as additional rent the following:
a. 6.67% of all real property taxes and any similar tax imposed on said
property on as estimated basis, levied against the building and the land on
which it is situated including the parking areas. Said amount shall be paid
monthly in advance and shall be adjusted upon computation of the actual amount
due.
2
<PAGE>
b. 6.67% of all common area maintenance, electricity, water, sewer and
trash removal charges including all public and parking areas. Maintenance
includes landscaping and the monthly maintenance of such. Individual tenant
repairs and maintenance of their space is not included. Said amount shall be
paid monthly in advance and shall be adjusted upon computation of actual amount
due.
c. 6.67% of Multi-Peril insurance levied against the building and the land
upon which it is situated, including the parking areas. Said amount shall be
paid monthly in advance and shall be adjusted upon computation of the actual
amount due.
d. Sales tax on the rental payments set forth herein.
5. SERVICES AND UTILITIES. All utilities and services furnished to the demised
premises solely for the benefit of the TENANT shall be provided and paid for by
the TENANT. The LANDLORD shall not be liable for any interruption or delay in
any of those services for any reason.
6. DEFAULT. If TENANT shall not pay the rent or other sums herein reserved at
the time and in the manner stated, shall abandon the demised premises, or shall
fail to keep and preform any othercondition, stipulation or agreement herein
contained on the part of the TENANT to be kept and performed, or if TENANT shall
suffer to be filed against TENANT an involuntary petition in bankruptcy or shall
be adjudged a voluntary or involuntary bankrupt, or shall make an assignment for
the benefit of creditors, or should there be appointed a Receiver to take charge
of the premises either in the state courts or in the federal courts, then in any
of such events, LANDLORD may, at LANDLORD'S option, terminate and end this Lease
and re-enter upon the property, without liability therefore, whereupon the term
hereby granted and all right, title and interest under it shall end and TENANT
shall become a TENANT at sufferance; or else LANDLORD may, at LANDLORD'S option,
elect to declare the entire rent for the balance of the term, or any part
thereof, due and payable forthwith, and may proceed to collect the same by
distress or otherwise and thereupon said term shall terminate at the option of
the LANDLORD, or else the said LANDLORD may take possession of the premises and
relet the same for the account of TENANT. The exercise of any of the options
herein contained shall not be deemed the exclusive remedy of the LANDLORD, such
remedies to be cumulative and cumulative to any remedies provided by law or in
equity. The expression "entire rent for the balance of the term" as used herein
shall mean all of the rent prescribed to be paid by TENANT unto LANDLORD for the
full term of this Lease, less however any payments that shall have been made on
account of TENANT pursuant to the terms of this Lease. For the purpose of
reletting, the LANDLORD shall be authorized to make such repairs or alterations
in or to the leased premises as may be necessary to place the same in good order
and condition. The TENANT shall be liable to the LANDLORD for the cost of such
repairs or
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alteration, and all expenses of such reletting. The TENANT shall not be entitled
to any surplus accruing as a result of reletting. The LANDLORD is hereby granted
a lien, in addition to any statutory lien, on all personal property of the
TENANT in or upon the demised premises, to secure payment of the rent
performance of the covenants and conditions of this Lease. The LANDLORD shall
have the right, as agent of the TENANT, to take possession of any furniture,
fixtures or other personal property of the TENANT, found in or about the
premises, and sell the same at public or private sale to apply the proceeds
thereof to the payment of any monies becoming due under this Lease, the TENANT
hereby waiving the benefit of all laws exempting property from execution, levy
and sale on distress or judgment. The proceeds of any such sale shall be applied
first to the necessary and proper expense of removing, storing, and selling such
property, then to the payment of any rent due or to become due under this Lease,
with the balance, if any, to be paid to TENANT.
7. SUB-LETTING AND ASSIGNMENT. The TENANT shall not assign or sublet the demised
premises nor any portion thereof without the prior written consent of the
LANDLORD nor upon terms unacceptable to the LANDLORD.
8. CONDITION OF PREMISES, REPAIRS, ALTERATIONS AND IMPROVEMENTS, SANITATION,
INFLAMMABLE MATERIALS. The TENANT has examined the demised premises, and accepts
them in their present condition (except as otherwise expressly provided herein)
and without any representations on the part of the LANDLORD or its agents as to
the present of future condition of the said premises. The TENANT shall keep the
demised premises in good condition, and shall redecorate, paint and renovate the
said premises as may be necessary to keep this in repair and good appearance.
The TENANT shall quit and surrender their premises at the end of the demised
term in as good condition as the reasonable use thereof will permit. Such
decorations, redecoration, painting, or renovation shall be subject to the
approval of the LANDLORD. All erections, additions, and improvements, whether
temporary or permanent in character which may be made upon the premises either
by the LANDLORD or the TENANT except business signs, furniture, or movable trade
fixtures installed at the expense of the TENANT, shall be the property of the
LANDLORD and shall remain upon and be surrendered with the premises as part
thereof at the termination of this Lease, without compensation to the TENANT.
All such alterations, additions, or improvements are to be done in accordance
with the city of BOCA RATON Building Code. The TENANT further agrees to keep
said premises and all parts thereof in a clean and sanitary condition and free
of trash, inflammable material and other objectionable matter.
9. MECHANIC'S LIENS. The TENANT shall not create any lien or other encumbrance
upon any interest of the LANDLORD or any ground or underlying lessor in any
portion of the demised premises. If, because of any act or omission (or alleged
act or omission) of
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the TENANT, any mechanic's or other lien, charge or order for the payment of
money or other encumbrance shall be filed against the LANDLORD, and/or any
ground or underlying lessor, and/or any mortgagee, and/or any portion of the
demised premises (whether or not such lien, charge, order or encumbrance is
valid or enforceable as such), the TENANT shall, at its own cost and expense,
cause the same to be discharged of record or bonded within ten (10) days after
notice to the TENANT of the filing thereof; and the TENANT shall indemnify and
save harmless the LANDLORD, all ground and underlying lessor(s), and all
mortgagees against and from all costs, liabilities, suits, penalties, claims and
demands, including reasonable counsel fees and appellate counsel fees resulting
therefrom. In the event the TENANT fails to comply with the foregoing provisions
of this paragraph, the LANDLORD shall have the option of discharging or bonding
any such lien, charge, order or encumbrance by payment or otherwise, and the
TENANT agrees to reimburse the LANDLORD for all costs, expenses and other sums
of money in connection therewith (as Additional Rent) with interest at the rate
of eighteen percent (18%) per annum promptly upon demand. Pursuant to Florida
law representation of this clause shall be stated in the memorandum of lease.
10. LIABILITY OF LANDLORD. The LANDLORD shall not be responsible for the loss of
or damage to property, or injury to persons, occurring in and about the demised
premises, by reason of any existing or future condition, defect, matter in and
about said demised premises or the property of which the premises are a part, or
for the acts, omissions or negligence of other persons or tenants in and about
the said property. The TENANT hereby agrees to indemnify LANDLORD against and
hold harmless from any and all damages, liability, cost and expense, including
attorney fees and disbursements, arising out of any injury or damage to persons
or property at the premises or as a result, in all or in part, of any action or
failure to take action by TENANT, its servants, agents, employees, guests,
licensees and contractors. In case LANDLORD shall be made a party to any
litigation commences by or against TENANT, TENANT shall protect and hold
LANDLORD harmless and pay all costs and expenses and reasonable attorney's fees
at the trial and appellate levels.
11. RIGHT TO INSPECT AND EXHIBIT. The LANDLORD, or its agents, shall have the
right to enter the demised premises at reasonable hours in the day or night to
examine the same, or to run telephone or other wires, or to make such repairs,
additions, or alterations as it shall deem necessary for the safety,
preservation or restoration of the improvements, or for the safety or
convenience of the occupants or users thereof (there being no obligation,
however, on the part of the LANDLORD to make any such repairs, additions or
alterations), or to exhibit the same to prospective tenants or purchasers. For
three (3) months prior to the expiration of the demised term, the LANDLORD, or
its
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agents, may place the usual "To Let" signs thereon, and may exhibit a For Sale"
sign at any time.
12. DAMAGE BY FIRE, EXPLOSION, THE ELEMENTS OR OTHERWISE. In the event of the
destruction of the demised premises of the building containing the said premises
by fire, explosion, the elements, or otherwise during the term hereby created or
previous thereto, or such partial destruction thereof as to render the premises
wholly untenantable or unfit for occupancy, or should the demised premises be so
badly injured that the same cannot be repaired within ninety (90) days from the
happening of such injury, then and in such case the term hereby created shall,
at the option of the LANDLORD, cease and become null and void from the date of
such damage or destruction, and the TENANT shall immediately surrender said
premises and all the TENANT'S interest therein to the LANDLORD and shall pay
rent only to the time of such surrender, in which event the LANDLORD may
re-enter and repossess the premises thus discharged from this Lease and may
remove all parties therefrom. Should the demised premises be render untenantable
and unfit for occupancy, but yet be repairable within ninety (90) days from the
happening of said injury, the LANDLORD may enter and repair the same with
reasonable speed and the rent shall not accrue said injury or while repairs are
being made, but shall recommence immediately after said repairs shall be
completed. But if the premises shall be so slightly injured as not to rendered
untenantable and unfit for occupancy, then the LANDLORD agrees to repair the
same with reasonable promptness and in that case the rent accrued and accruing
shall not cease or determine. The TENANT shall immediately notify the LANDLORD
in case of fire or other damage to the premises.
13. OBSERVATION OF LAWS, ORDINANCES, RULES, AND REGULATIONS. The TENANT agrees
to observe and comply with all laws, ordinances, rules and regulations of the
Federal, State, County, and Municipal authorities applicable to the business to
be conducted by the TENANT in the demised premises. The TENANT agrees not to do
or permit anything to be done in said premises, or keep anything therein, which
will increase the rate of fire insurance premiums on the improvements or any
part thereof, or on property kept therein, or which will obstruct or interfere
with the rights of other tenants, or conflict with the regulations of the Fire
Department or with any insurance policy upon said improvements or any part
thereof. In the event of any increase in insurance premiums resulting from the
TENANT'S occupancy of the premises, or from any act or omission on the part of
the TENANT, the TENANT agrees to pay the said increase premiums on the
improvements or contents thereof as additional rent.
14. OTHER PROHIBITED CONDUCT. The TENANT shall not at any time without first
obtaining the written consent of the LANDLORD:
a. Change, whether by alteration, replacement, rebuilding, or otherwise,
the exterior color or architectural treatment of
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the leased property or of the building in which the same is located, or any part
thereof.
b. Use the plumbing facilities for any purposes other than that for which
they were constructed, or dispose of any garbage or other foreign substance
therein whether through the utilization of so-called disposal or similar units,
or otherwise.
c. Subject any fixtures, furnishings, or equipment in or on the leased
property which are affixed to the realty to any mortgages, liens, conditional
sales agreements, security interest, or encumbrances.
d. Perform any act or carry on any practice which may damage, mar, or
deface the leased property or the building in which such property is located.
e. Install, operate, or maintain in the leased property any electrical
equipment which will overload the electrical system therein, or any part
thereof, beyond its reasonable capacity for proper and safe operation as
determined by the LANDLORD.
f. Suffer, allow or permit any offensive or obnoxious vibration, noise,
odor, or other undesirable effect to emanate from the leased property, or any
machine or other installation therein, or otherwise suffer, allow or permit the
same to constitute a nuisance or otherwise unreasonably interfere with the
safety, comfort, or conveniences of the LANDLORD or any of the other occupants
of the building in which the leased property is located or their customers,
agents or invitees or any others lawfully in or upon such building.
g. Allow the accumulation of any debris or trash abnormal in character or
volume, in the sole discretion of the LANDLORD. Any and all trash placed at the
exterior of the leased property by the TENANT or persons employed by the TENANT,
shall be placed only in authorized dumpsters provided by the LANDLORD and
scheduled for regularly assigned pickup. If any trash or material are found
outside of the dumpsters or in trash enclosure, TENANT will be charged a
minimum. of $50.00 for the removal of such trash. All trash must be placed in
proper dumpsters only. The following items are not permitted in dumpsters:
1. Trash from outside of Buildings dumped by tenant, employees or
Sub-Contractors of TENANT
2. 55 Gallon drums
3. Lumber and Aluminum Studs over 4 ft. long
4. Cabinets
5. Cement or Any Product of
6. Drywall
7. Pallets and Skids
8. Refrigerators
9. Hot Water Heaters
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10. Plumbing Fixtures
11. Any type of Furniture
Upon notice by the LANDLORD to the TENANT that any of the aforesaid is
occurring, the TENANT shall, within five (5) days thereafter, remove or control
the same and, if any such condition is not so remedied, then the LANDLORD may,
at its discretion, either: (1) cure such condition and add any cost and expense
incurred by the LANDLORD therefore to the next installment of the rental due
under this Lease and the TENANT shall then pay such amount, as additional rent
hereunder; or (2) treat such failure on the part of the TENANT to remedy such
condition as a material default of this Lease on the part of the TENANT
hereunder.
15. SIGNS. Except as hereinafter provided, the TENANT shall not without the
LANDLORD'S prior written consent, place or erect any signs or advertising to be
used, including awnings, of any nature on any part of the leased property, or
the sidewalk adjoining the leased property, or on any part of the LANDLORD'S
property adjacent to the leased property. If such consent is granted, the TENANT
at its sole expense, shall carry such workmen's compensation and general
liability insurance as the LANDLORD may require. Upon termination of this Lease
by whatever reason, TENANT shall remove all signs and make any necessary repairs
to the demised premises necessitated by such removal.
16. OTHER ALTERATIONS, ADDITIONS AND IMPROVEMENTS. TENANT shall not create any
openings in the roof or exterior walls, nor make any alterations, additions or
improvements to the leased premises without the prior written consent of the
LANDLORD. Consent for nonstructural alterations, additions, or improvements
shall not be unreasonably withheld by LANDLORD. TENANT shall have the right at
all times to erect or install shelves, bins, machinery, and trade equipment,
provided that TENANT complies with all applicable laws, ordinances and
governmental regulations. TENANT shall have the right to remove at the
termination of this Lease all such nonstructural items so installed, provided
that TENANT is not in default; however, TENANT shall, prior to the termination
of this Lease, repair at its own expense, any damage caused by such removal.
17. SUBORDINATION. This Lease and all rights of TENANT hereunder are, and shall
be, subject to and subordinate to the liens of any mortgages, deeds of trust
(including blanket mortgages or deeds of trust covering the demised premises
and/or other property) or any other security interest which has been or which
hereafter may be placed upon the demised premises, or any advances made on such
liens or security interest, and to any ground lease or leases of all or a
substantial part of the property of which the demised premises are a part, and
to any renewals, modifications, consolidations, replacements and extensions
thereof.
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The provisions of the foregoing paragraph shall be self-operative, but TENANTS
covenants and agrees that it shall, on demand at any time or times, execute,
acknowledge and deliver to LANDLORD any and all instruments in order to
subordinate this Lease and TENANT'S rights hereunder as aforesaid.
If TENANT shall fail or neglect to execute, acknowledge and deliver any such
instrument, LANDLORD, in addition to any other remedies, may as agent or
attorney-in-fact of TENANT, execute, acknowledge and deliver same on behalf of
TENANT, and TENANT hereby irrevocably nominates, constitutes and appoints
LANDLORD as TENANT'S proper and legal attorney-in-fact for such purpose.
TENANT agrees that any time and from time to time, upon not less than twenty
(20) days prior notice by LANDLORD, to execute acknowledge and deliver to
LANDLORD a statement in writing certifying that this Lease unmodified and in
full force and effect (or if there have been modifications) and dates to which
the rent and other charges have been paid in advance, if any, and stating
whether or not LANDLORD is in default in performance of any covenant, agreement
or condition contained in this Lease, and if so, specifying each such default,
it being intended that any such statement delivered pursuant to this paragraph
may be relied upon by the LANDLORD and any party to whom such certificate may be
delivered by LANDLORD.
18. RULES AND REGULATIONS. The rules and regulations regarding the demised
premises affixed to this Lease, if any, as well as any other and further
reasonable rules and regulations which shall be made by the LANDLORD shall be
observed by the TENANT and by the TENANT'S employees, agents and customers. The
LANDLORD reserves the right to rescind any presently existing rules applicable
to the demised premises and to make such other further reasonable rules and
regulations as, in its judgment, may from time to time be desirable for the
safety, care and cleanliness of the premises, and for the preservation of good
order therein, which rules, when so made and notice thereof given to the TENANT,
shall have the same force and effect as if originally made a part of this Lease.
Such other and further rules shall not, however, be inconsistent with the proper
and rightful enjoyment by the TENANT of the demised premises.
19. NON-WAIVER OF BREACH OR FAILURE OF CONDITION. No waiver by the LANDLORD of
any breach of covenant or failure of condition by the TENANT shall constitute or
be constructed as a waiver of any other breach of covenant or failure of
condition, nor shall lapse of time after breach of covenant or failure of
condition by the TENANT before the LANDLORD shall exercise its rights operate to
defeat any right of the LANDLORD after the said breach or failure. The receipt
by the LANDLORD of rent with knowledge of a breach of the TERMS, covenants or
conditions of this Lease to be kept or performed by the TENANT shall not be
deemed a waiver of such breach, and the LANDLORD shall not be deemed to have
waived
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any provision of this Lease unless expressed in writing and signed by the
LANDLORD.
20. NOTICES. All notices and demands, legal or otherwise, incidental to this
Lease or the occupation of the demised premises, shall be in writing. If the
LANDLORD or its agent desires to give or serve upon the TENANT any notice or
demand, it shall be sufficient to send a copy thereof by registered mail,
addresses to the TENANT at the demised premises, or to leave a copy thereof with
a person of suitable age found on the premises, or to post a copy thereof upon
the door to said premises. Notices from the TENANT to the LANDLORD shall be sent
by registered mail or delivered to the LANDLORD at the place as the LANDLORD may
from time to time designate in writing.
21. MAINTENANCE BY TENANT. The TENANT will perform all day-to-day janitorial
services, maintain and/or replace all equipment, if necessary, and make all
necessary repairs to the air conditioning, heating and plumbing, and otherwise
maintain the entire interior of the premises occupied, and shall also maintain
all exterior doors including all repairs to overhead garage doors and also all
glass and window repairs.
22. DISPOSITION OF SECURITY DEPOSIT. It is agreed that in the event TENANT
defaults in respect of any of the terms, provisions and conditions of this Lease
including, but not limited to, the payment of rent and additional rent incurred
by LANDLORD, by reason of TENANT'S default in respect of any of the terms,
covenants and conditions of this Lease including, but not limited to, any
damages or deficiency accrued before or after summary proceedings or other
re-entry by LANDLORD; that LANDLORD shall apply the security deposit to satisfy
such damages or deficiency. In the event that TENANT shall fully and faithfully
comply with all the terms, provisions, covenants and conditions of this Lease,
the security shall be returned to the TENANT without interest, after the
expiration of the Lease and after delivery of entire possession of the demised
premises to LANDLORD.
23. KEYS AND LOCKS. TENANT shall furnish LANDLORD with a duplicate key or
combination to any additional or substituted lock or changed tumbler for the
demised premises. Any change in locks or tumblers shall be at TENANT'S expense.
24. BANKRUPTCY, INSOLVENCY, ASSIGNMENT FOR BENEFIT OF CREDITORS. It is further
agreed that if at any time during the term of this Lease the TENANT shall make
any assignment for the benefit of creditors, or be decreed insolvent or bankrupt
according to law, or if a receiver shall be appointed for the TENANT, then the
LANDLORD may, at its option, terminate this Lease, exercise of such option to be
evidence by notice to that effect served upon the assignee, receiver, trustee or
other person in charge of the liquidation of the property of the TENANT or the
TENANT'S estate, but such termination shall not release or discharge any payment
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of rent payable hereunder and then accrued, or any liability then accrued by
reason of any agreement or covenant herein contained on the part of the TENANT,
of the TENANT'S legal representative.
25. HOLDING OVER BY TENANT. If TENANT or anyone claiming under TENANT shall
remain in possession of the Demised Premises or any part thereof after
expiration of the term without an agreement in writing between LANDLORD and
TENANT with respect thereto, the person remaining in possession shall be deemed
a TENANT at sufferance, and, during such holding over, all rents payable under
this Lease shall be payable at a rate twice the rate in effect immediately prior
to the expiration of the term. In no event, however, shall such holding over be
deemed or constructed to constitute an extension or renewal of this Lease. Upon
the expiration and termination of this Lease, either by lapse of time or
otherwise, the TENANT shall surrender to the LANDLORD the Demised Premises in
"broom clean" condition, and in good repair, reasonable wear and tear excepted.
26. EMINENT DOMAIN, CONDEMNATION. If during the term of this Lease or any
extension or renewal thereof, all of the leased premises shall be taken for any
public or quasi-public use under any law, ordinance, or regulation or by right
of eminent domain, or should be sold to the condemning authority under threat of
condemnation this Lease shall terminate and the rent shall be abated during the
unexpired portion of this Lease, effective as of the date of the taking of said
premises by the condemning authority.
If less than all of the leased premises shall be taken for any public or
quasi-public use under any law, ordinance, or regulation, or by right of eminent
domain, or should be sold to the condemning authority under threat of
condemnation, LANDLORD may, at its sole expense, restore and reconstruct the
building and other improvements situated on the lease premises, provided the
restoration and reconstruction shall make the same reasonably tenantable and
suitable for the uses for which the premises are leased. The rent payable
hereunder during the unexpired portion of this Lease shall be adjustable
equitably. LANDLORD may at its option terminate this lease in lieu of restoring
or reconstructing the condemned premises, in which case the rent shall be abated
for the unexpired portion of this Lease, effective as of the date of the taking
of said premises by the condemning authority.
LANDLORD and TENANT shall each by entitled to receive and retain such separate
awards and portions of lump-sum awards as may be allocated to their respective
interests in a condemnation proceeding, if any. The termination of this Lease
shall not affect the rights of the respective parties to such awards.
27. DELIVERY OF LEASE. No rights are to be conferred upon the TENANT until this
Lease has been signed by the LANDLORD, and an executed copy of this Lease has
been delivered to the TENANT.
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28. LEASE PROVISIONS NOT EXCLUSIVE. The foregoing rights and remedies are not
intended to be exclusive but as additional to all rights and remedies the
LANDLORD would otherwise have by law or in equity.
29. LEASE BINDING ON HEIRS, SUCCESSORS, ETC. All of the terms, covenants and
conditions of this Lease shall inure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and assigns of the
parties hereto. However, in the event of the death of TENANT, if an individual,
or any guarantor of the TENANT, if such guarantor is an individual, the LANDLORD
may, at its option, terminate this Lease by notifying the executor of
administrator of the TENANT, if an individual guarantor has died, at the demised
premises.
30. CONTINUING OBLIGATIONS OF TENANT. This Lease and the obligation of TENANT to
pay rent hereunder and perform all of the other covenants and agreements
hereunder on the part of TENANT to be performed shall in no way be affected,
impaired or excused because LANDLORD is unable to supply or is delayed in
supplying any service expressly or implied to be supplied or is unable to make,
or is delayed in making any repairs, additions, alterations or decorations or is
unable to supply or is delayed in supplying and equipment or fixtures if
LANDLORD is prevented or delayed from so doing by reason of governmental
preemption in connection with a National Emergency declared by the President of
the United States or in connection with any rule, order or regulation of any
department or subdivision of any governmental agency or by reason by a war,
declared or undeclared, or civil insurrection.
31. RADON GAS. Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your country public
health unit.
32. HAZARDOUS SUBSTANCES. TENANT hereby agrees not to discharge or cause to be
discharged regulated (hazardous or toxic) substances onto the asphalt or other
pavement or grounds surrounding the premises or into storm sewers, sanitary
sewer lines, septic tank(s), sinks, or toilets serving the property. Regulated
substances (hazardous wastes) are those defined in the (U.S.) Code of Federal,
Title 40, Section 261 and commonly found in substances including, but not
limited to, the following:
Cutting fluids/oils
Degreasing solvents
Electroplating solutions
Inks, printing, and photocopying chemicals
Paints, primers, thinners, dyes, stains, wood preservatives, varnishing and
cleaning compounds
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Painting solvents
Pool chemicals
Refrigerants (e.g. "freon", etc.)
Cleaning solvents
Glues, adhesives, and resins
Fuels and additives
Plastic resins, plasticizers and catalysts
Processed dust and particulates (e.g., grindings, etc.)
Poisons
Photo development chemicals
Explosives
Antifreeze and coolants
Stripping compounds
PCB - containing liquids (e.g., older transformer oils)
Arsenic and arsenic compounds
Solders and fluxes
Pesticides and herbicides
Fire extinguishing chemicals containing chlorinated hydrocarbons (e.g, "Halon")
Roofing chemicals and sealers
Mercury and mercury compounds
Radioactive materials
Metal finishing solutions
Liquid storage battery contents, strong acids, and bases
Fertilizers
Caulking agents and sealants
Polishes
Medical, pharmaceutical, dental, veterinary and hospital solutions
Laboratory chemicals
Industrial sludges and still bottoms
Hydraulic fluid
Formaldehyde
Casting and foundry chemicals
Brake and transmission fluids
TENANT agrees to hold LANDLORD harmless for violations of any and all violations
of Federal, State, County, or municipal environmental regulations attributable
to TENANT'S operations whether or not these violations are intentional and/or
the result of actions of TENANT'S agents and/or assignees.
LANDLORD reserves the right to terminate this lease should there be sufficient
cause to believe that violations of Federal, State, and local environmental
regulations have occurred and may be attributable to TENANT and/or his/her
agents and/or assignees. TENANT agrees to vacate premises for such cause within
thirty (30) days of written notification by LANDLORD to do so. Compliance with
such notice shall not absolve TENANT of liabilities associated with violation of
environmental laws during his/her tenancy nor shall it affect LANDLORD'S rights
to recover damages and any and all costs associated with administrative and
legal proceedings, fines, civil or criminal
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penalties, settlements and environmental restorations (corrective actions) as
well as court costs and reasonable attorney's fees.
33. OUTSIDE STORAGE/OUTSIDE VEHICLES. TENANT shall not park any Construction
Trailers, Storage Trailers or Trailers of any type on the exterior property.
TENANT shall not place for storage inoperable vehicles or do mechanical work on
any vehicles in or around the parking areas. TENANT shall be responsible, and
held liable, for any damages caused to the parking areas, or driveways, of the
leased property by the TENANT or any persons employed by the TENANT. Any
inoperable or unlicensed or abandoned vehicle parked for more than 2 days will
be towed away from property at owners expense. All other such items left outside
for more than 24 hours will be picked up and taken to the dump for disposal. All
costs of such removal shall be charged back to the tenant.
34. NO ORAL MODIFICATIONS. This instrument may not be changed orally.
35. RECORDINGS. This Lease shall not be filed for public record.
36. CAPTIONS. All captions used in this Lease are inserted solely as a matter of
convenience and shall not be relied upon or used in construing the effect or
meaning of the text of this Lease.
37. ATTORNEY'S FEES AND EXPENSES. The LANDLORD and TENANT agree to pay to the
prevailing party all attorney's fees and other expenses incurred by the
prevailing party to enforce any provisions of this Lease or exercise any right
hereunder, at the trial and appellate levels.
38. GOVERNING LAW. This Lease shall be governed, performed, and enforced in
accordance with the laws of the State of Florida.
39. EXHIBITS. See attached, if checked _____
40. MODIFICATIONS. If there have been any changes made to the body of this
Lease, see attached, if checked. _____
41. ADDITIONAL CLAUSES. If there have been any additional clauses added to this
Lease, see attached, if checked. XXXXXX
------
42. LANDLORD WILL AIR CONDITION ENTIRE WAREHOUSE/OFFICE AND REMOVE CARPET FROM
ONE OFFICE AS INDICATED BY TENANT. TENANT WILL PROVIDE HOT WATER HEATER
AND SINK TO BE INSTALLED. LRP WILL BILL TENANT FOR PLUMBER AND ELECTRICIAN
AS NEEDED FOR INSTALLATION OF EACH. LANDLORD WILL ORDER DOUBLE DOOR AND
INSTALL. INSTALLATION OF FLOOR DRAIN PENDING (IF NEEDED)
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IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the day
and year first above written.
Witnesses: "LANDLORD"
LEWIS RENTAL PROPERTIES
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"TENANT"
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By /s/ Forster
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President IMX
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UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
FOR VALUE RECEIVED and in consideration for, and as an inducement to
LANDLORD making the within Lease with TENANT,
_________________________(hereinafter referred to as the "GUARANTOR
individually, and if more than one, jointly and severally"), guarantees to
LANDLORD the punctual payment by TENANT of the rent and other charges imposed by
the Lease, and the performance by TENANT of the rent and other charges imposed
by the Lease, an the performance by TENANT of all other terms and conditions of
the lease including, without limitation, the rules and regulations of the
LANDLORD.
GUARANTOR shall pay any amount due LANDLORD from the TENANT under the
Lease including, without limitation, rent, additional rent, and damages incurred
by LANDLORD from the breach of any of the terms and conditions of the Lease to a
maximum of a sum equal to one year's rent of the then pertaining rent under the
Lease or any renewal term.
WITNESSES:
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BY:
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STATE OF FLORIDA
COUNTY OF
BEFORE ME personally appeared _________________________, to me well known
and known to me to be the person described in and who executed the foregoing
instrument, and acknowledged to and before me that he/she executed said
instrument for the purpose therein expressed.
WITNESS my hand and official seal, this _____ day of 19___.
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Notary Public
My Commission Expires:
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Exhibit 10.8
EMPLOYMENT AGREEMENT
Agreement, dated as of July 1, 1998, by and between IMX PHARMACEUTICALS,
INC., a Utah corporation, having its principal place of business at 2295
Corporate Boulevard, Suite 131, Boca Raton, Florida 33431 (the "Corporation"),
and WILLIAM A. FORSTER, residing at 2295 Corporate Boulevard, Suite 131, Boca
Raton, Florida 33431 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ Executive as an executive
officer, and Executive is willing to accept such employment, all subject to the
terms and conditions set forth herein:
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement set forth herein, the parties hereto agree as follows:
1. Employment and Term. Subject to the terms and conditions hereof, the
Corporation hereby employs Executive, and Executive hereby accepts employment by
the Corporation, for a period of three years commencing the date first written
above (the "Term"). This Agreement shall supersede that Employment Agreement
between the Corporation and the Executive dated as of January 21, 1996 in its
entirety.
2. Duties. Executive shall serve the Corporation as its President, Chief
Executive Officer and Chairman of the Board of Directors. Executive shall
perform such duties as are incidental to the offices he holds and as may, from
time to time, be assigned to him by the Board of Directors of the Corporation.
Executive agrees that the performance of his duties hereunder shall be his
principal business. He may engage in other business activities, as long as such
activities do not compete with the Corporation.
3. Compensation.
(a) As base compensation for the services to be rendered by
Executive hereunder, the Corporation agrees to pay to Executive an annual base
salary in the amount of $225,000.00 (the "Base Salary"), which Base Salary shall
be retroactive to January 1, 1998, and which such salary shall be paid in equal,
bi-weekly installments for so long as Executive is employed by the Corporation.
(b) The Base Salary shall be adjusted annually on or near each
anniversary of this Agreement, to reflect an increase, if any in the cost of
living for the previously 12-month period as measured by the change in the
Consumer Price Index published by the U.S. Department of Labor.
(c) The Corporation may, in its discretion, award the Executive
annual bonuses in an amount up to 100% of his Base Salary. In determining
whether the Executive has
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earned a bonus, and if so, the amount of the bonus, the Corporation shall
consider the following factors: (i) Executive's ability and his performance;
(ii) whether the Corporation's equity interest in the limited liability company
formed with Medicis Partners, Incorporated ("Medicis") has been acquired
pursuant to Section 9.1 of the Limited Liability Company Agreement dated as of
June 18, 1998 at a Sales Multiple of two or greater; and (iii) whether the
Corporation has finalized two new income-producing projects per year. A project
shall be deemed to be "finalized" when it is sold to Medicis pursuant to the
terms of the Joint Venture Agreement with Medicis, or if the new product is
otherwise successfully brought to market by the Corporation.
4. Benefits. The Corporation shall provide Executive with the following
benefits:
(a) He shall be entitled to reimbursement for all normal and
reasonable travel, entertainment and other expenses necessarily incurred by him
in the performance of his obligations hereunder. The Corporation shall reimburse
Executive for such expenses upon presentation to the Corporation, within a
reasonable time after such expenses are incurred, of an itemized account of such
expenses, together with such vouchers or receipts for individual expense items
as the Corporation may from time to time require under its established policies
and procedures.
(b) He shall be entitled to participate in, or benefit from, in
accordance with the eligibility and other provisions thereof, such medical
insurance, pension, retirement, life insurance, bonus, profit-sharing, stock
option, stock purchase or other fringe benefit plans or policies as the
Corporation may make available to, or have in effect for, its executive
personnel from time to time.
(c) He shall be entitled to four weeks of vacation per year.
(d) He shall receive an allowance of $600 per month towards his
provision and maintenance of an automobile, plus $400 per month for related car
expenses.
(e) The Corporation shall obtain a "key-man" life insurance policy
on Executive's life in an amount of at least $1,000,000 (the "Policy"), which
Policy will name the Corporation as beneficiary. The Corporation shall pay the
cost of the Policy premiums.
(f) In addition, subject to Executive's insurability, the
Corporation agrees to obtain an additional life insurance policy covering the
Executive's life in an amount which will not exceed a premium amount of $25,000
for any year or the Term, and with the Executive having sole discretion in his
choice of beneficiaries. The Corporation will pay all premiums for additional
policy
5. Option to Renew. The Corporation shall have the option to renew this
Agreement for an additional term of two years upon the same terms and conditions
herein. If the Corporation elects not to renew the Agreement, the Executive
shall be entitled to receive at the end of the Term an amount equal to the Base
Salary for the third year of the Term, plus the annual cash value of all other
benefits provided to Executive hereunder in the third year. The
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payments provided for herein shall be payable in full at the time of expiration
of the Term of this Agreement.
6. Termination on Disability or Death.
(a) In the event that the Executive, due to physical or mental
disability or incapacity, is unable to substantially perform his duties
hereunder for a period of six successive months, the Corporation or the
Executive shall have the right to terminate this Agreement and Executive's
employment hereunder upon 30-days' prior written notice. In the event that the
Executive shall be able to and shall recommence rendering services and
performing all of his duties hereunder within such 30-day notice period, such
notice shall be vitiated. The Executive's employment shall terminate immediately
upon his death.
(b) Upon termination of the Executive's employment by reason of his
death or disability as aforesaid, the Executive, or in the case of the
Executive's death, the Executive's personal representatives, shall be entitled
to receive all base compensation earned or accrued to the date of such
termination and not theretofore paid, less any benefits paid to Executive by
reason of such disability.
(c) In the event of the termination of this Agreement for any reason
other than death, the Executive shall have the right to purchase, and the
Corporation shall assign to the Executive, any insurance policy maintained by
the Corporation on the life of the Executive then in effect, for a price equal
to the net cash surrender value thereof at the time of such termination.
7. Termination for Certain Causes. In the event of the (i) willful and
material misconduct of the Executive in the performance of his duties hereunder,
(ii) willful and material breach of any provision of Sections 9 or 10, or (iii)
conviction of the Executive for any felony under federal or state law, this
Agreement and the Executive's employment hereunder may be terminated by the
Corporation without prior notice.
8. Change of Control. In order to protect the Executive against the
possible consequences and uncertainties of a Change of Control of the
Corporation (as hereinafter defined)
(a) If, during the term of this Agreement, the Executive's
employment is terminated by the Corporation at any time subsequent to a Change
of Control other than for the causes set forth in Paragraph 7, then in such
event, the Corporation shall pay the Executive all amounts due to Executive
pursuant to this Agreement, for the entire term of this Agreement. The base
salary of the Executive in effect at the time of termination pursuant to this
Paragraph 8(a) shall remain in effect for the remaining term of this Agreement.
All benefits provided to Executive pursuant to this Agreement shall continue to
be provided to Executive for the entire term of this Agreement.
(b) For purposes of this Paragraph 8, in the event, following a
Change of Control, the Executive shall resign from his employment with the
Corporation within thirty (30) calendar days after he has obtained actual
knowledge of any significant and material change or proposed change in his
nature of duties, including, without limitation, removal from
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the position of Chief Executive Officer, in each instance without his prior
consent, such resignation shall be deemed to be a termination of employment by
the Corporation for purposes of Paragraph 8(a) of this Agreement.
(c) As used in this Paragraph 8, a "Change of Control" shall be
deemed to have occurred if (i) any "person" or "group of persons" (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), becomes the "beneficial owner" (as defined in Rule
13d-3 promulgated under the 1934 Act), directly or indirectly, of securities of
the Corporation representing more than fifty percent (50%) of the Corporation's
then outstanding securities having the right to vote on the election of
directors or (ii) if directors constituting a majority of the Board of Directors
are elected to the Board of Directors without the recommendation or approval of
the incumbent Board of Directors.
9. Confidentiality.
(a) Executive understands and hereby acknowledges that as a result
of his employment with the Corporation, he will necessarily become informed of,
and have access to, certain valuable and confidential information of the
Corporation and any of its subsidiaries, joint ventures and affiliates,
including, without limitation, inventions, trade secrets, technical information,
know-how, plans, specifications, identity of customers and suppliers, and that
such information, even though it may be developed or otherwise acquired by
Executive, is the exclusive property of the Corporation to be held by he
Executive in trust and solely for the Corporation's benefit. Accordingly, the
Executive hereby agrees that he shall not, at any time, either during or
subsequent to his employment hereunder, use, reveal, report, publish, transfer
or otherwise disclose to any person, corporation or other entity, any of the
Corporation's confidential information without the prior written consent of the
Corporation, except to responsible officers and employees of the Corporation and
other responsible persons who are in contractual or fiduciary relationship with
the Corporation or who have a need for such information for purposes in the
interest of the Corporation, and except for such information for purposes in the
interest of the Corporation, and except for such information which legally and
legitimately is or becomes of general public knowledge from authorized sources
other than Executive.
(b) Upon the termination of his employment with the Corporation for
any reason whatsoever, the Executive shall promptly deliver to the Corporation
all drawings, manuals, letters, notes, notebooks, reports and copies thereof,
and all other materials, including, without limitation, those of a secret and
confidential nature, relating to the Corporation's business which are in
Executive's possession or control.
10. Non-Competition. Executive agrees that, during the term of this
Agreement and for a period of two years after the termination for any cause of
his employment with the Corporation, he shall not, anywhere in the United States
of America or elsewhere in the world (or in such small area or for such lesser
period as may be determined by a court of competent jurisdiction to be a
reasonable limitation on the competitive activity of Executive), directly or
indirectly:
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(i) engage in a competitive line of business to the business carried
on by the Corporation, either for his own account or with or for anyone else;
(ii) solicit or attempt to solicit business of any customers of the
Corporation for products or services the same or similar to those offered, sold,
produced or under development by the Corporation;
(iii) otherwise divert or attempt to divert from the Corporation any
business whatsoever;
(iv) solicit or attempt to solicit for any business endeavor any
employee of the Corporation;
(v) interfere with any business relationship between the Corporation
and any other person; or
(vi) render any services as an officer, director, employee, partner,
consultant or otherwise to, or have any interest as a stockholder, partner,
lender or otherwise in, any person which is so engaged.
Notwithstanding anything to the contrary contained in this Section 10, the
provisions hereof shall not prevent the Executive from purchasing or owning up
to 5% of the voting securities of any corporation, the stock of which is
publicly traded.
11. Remedies. Because the Corporation does not have an adequate remedy at
law to protect its business from Executive's competition or to protect its
interests in its trade secrets, privileged, proprietary or confidential
information and similar commercial assets, the Corporation shall be entitled to
injunctive relief, in addition to such other remedies and relief that would, in
the event of a breach of the provisions of Sections 8 or 9, be available to the
Corporation. In the event of such a breach, in addition to any other remedies,
the Corporation shall be entitled to receive from the Executive payment of, or
reimbursement for, its reasonable attorneys' fees and disbursements incurred in
enforcing any such provision.
12. Entire Agreement. This Agreement sets forth the entire understanding
of the parties and merges and supersedes any prior or contemporaneous agreements
between the parties pertaining to the subject matter hereof. This Agreement may
not be changed or terminated orally, and no change, termination or attempted
waiver of any of the provisions hereof shall be binding unless in writing and
signed by the party against whom the same is sought to be enforced; provided,
however, that the Executive's compensation may be increased at any time by the
Corporation without in any way affecting any of the other terms and conditions
of this Agreement, which in all other respects shall remain in full force and
effect. Failure of a party to enforce one or more of the provisions of this
Agreement or to require at any time performance of any of the obligations hereof
shall not be construed to be a waiver of such provisions by such party nor to in
any way affect the validity of this Agreement of such party's right thereafter
to
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enforce any provision of this Agreement, nor to preclude such party from taking
any other action at any time which it would legally be entitled to take.
13. Successors and Assigns. Neither party shall have the right to assign
this personal Agreement, or any rights or obligations hereunder, without the
consent of the other party; provided, however, that upon the sale of all or
substantially all of the assets, business and goodwill of the Corporation to
another corporation, or upon the merger or consolidation of the Corporation with
another corporation, this Agreement shall inure to the benefit of, and be
binding upon, both Executive and the corporation purchasing such assets,
business and goodwill, or surviving such merger or consolidation, as the case
may be, in the same manner and to the same extent as though such other
corporation were the Corporation. Subject to the foregoing, this Agreement shall
inure to the benefit of, and bind, the parties hereto and their legal
representatives, heirs, successors and assigns.
14. Additional Acts. Executive and the Corporation each agrees that he or
it shall, as often as requested to do so, execute, acknowledge and deliver and
file, or cause to be executed, acknowledged and delivered and filed, any and all
further instruments, agreements or documents as may be necessary or expedient in
order to consummate the transactions provided for in this Agreement and do any
and all further acts and things as may be necessary or expedient in order to
carry out the purpose and intent of this Agreement.
15. Communications. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time when mailed in any United States post office
enclosed in a registered or certified postage prepaid envelope and addressed to
the addresses set forth at the beginning of this Agreement, or to such other
address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
16. Construction. The headings of the paragraphs of this Agreement have
been inserted for convenience of reference only and shall in no way restrict or
otherwise affect the construction of the terms or provisions hereof. References
in this Agreement to Sections are to the sections of this Agreement.
17. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
18. Severability. If any provision of this Agreement is held to be invalid
or unenforceable by a court or tribunal of competent jurisdiction, such
invalidity or unenforceability shall not affect the validity and enforceability
of the other provisions of this Agreement and the provision held to be invalid
or unenforceable shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
19. Governing Law. This Agreement is made and executed and shall be
governed by the laws of the State of Florida (excluding rules relating to
conflict of laws).
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first set forth above.
IMX PHARMACEUTICALS, INC.
By:
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DAVID NATAN, Chairman of the
Compensation Committee
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WILLIAM A. FORSTER, Executive
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Exhibit 10.9
EMPLOYMENT AGREEMENT
Agreement, dated as of July 1, 1998, by and between IMX PHARMACEUTICALS,
INC., a Utah corporation, having its principal place of business at 2295
Corporate Boulevard, Suite 131, Boca Raton, Florida 33431 (the "Corporation"),
and GARY SPIELFOGEL, residing at 3070 Hampton Place, Boca Raton, Florida 33434
("Executive").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ Executive as an executive
officer, and Executive is willing to accept such employment, all subject to the
terms and conditions set forth herein:
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement set forth herein, the parties hereto agree as follows:
1. Employment and Term. Subject to the terms and conditions hereof, the
Corporation hereby employs Executive, and Executive hereby accepts employment by
the Corporation, for a period of three years commencing the date first written
above (the "Term"). This Employment Agreement shall supersede the Employment
Agreement dated March 16, 1997 between the Corporation and Executive.
2. Duties. Executive shall serve the Corporation as its Executive
Vice-President. Executive shall perform such duties as are incidental to the
offices he holds and as may, from time to time, be assigned to him by the Board
of Directors of the Corporation.
3. Compensation.
(a) As base compensation for the services to be rendered by
Executive hereunder, the Corporation agrees to pay to the Executive the sum of
$125,000 ("Base Salary").
(b) The Base Salary shall be adjusted annually on or near each
anniversary of this Agreement to reflect an increase, if any (but not a
decrease). in the cost of living for the previous 12-month period as measured by
the change in the Consumer Price Index published by the United States Department
of Labor.
(c) The Corporation is a party to a Limited Liability Company
Agreement dated as of June 18, 1998 (the "LLC Agreement") with Medicis Partners
Incorporated ("Medicis"). Pursuant to Section 9.1 of the LLC Agreement, Medicis
has options on three successive years to acquire a portion of the Corporation's
Percentage Interest (as defined in the LLC Agreement). In the event Medicis
exercises its first option at a Sales Multiple (as defined in the LLC Agreement)
of two or greater, the Executive shall receive a bonus of 5% of the aggregate
option price received by the Company. In the event Medicis exercises its second
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and/or third option at a Sales Multiple of two or greater, the Executive shall
receive a bonus of 3 1/2% of the aggregate option price for each of these
options. Bonuses earned hereunder shall be paid to the Executive within 30 days
after the option price is received by the Corporation.
(d) The Corporation hereby grants to Executive options to purchase
50,000 shares of the Corporation's Common Stock under the Corporation's
Long-Term Incentive Plan adopted by the Board of Directors of the Corporation on
September 9, 1998 (the "Plan"). The options will be exercisable at a price of
$1.75 per share and shall vest in four equal installments over a period of two
years from the date hereof with the first installment vesting six months from
the date hereof and each subsequent installment vesting at subsequent six-month
intervals. The options shall also be subject to the standard terms and
conditions of a Stock Option Agreement in the form customarily used by the
Corporation in connection with its stock option grants.
4. Benefits. The Corporation shall provide Executive with the following
benefits:
(a) He shall be entitled to a $600 per month car allowance for the
Term of this Agreement, plus $400 per month for related car expenses, or the use
of Corporation car.
(b) He shall be entitled to reimbursement for all normal and
reasonable travel, entertainment and other expenses necessarily incurred by him
in the performance of his obligations hereunder. The Corporation shall reimburse
Executive for such expenses upon presentation to the Corporation, within a
reasonable time after such expenses are incurred, of an itemized account of such
expenses, together with such vouchers or receipts for individual expense items
as the Corporation may from time to time require under its established policies
and procedures.
(c) He shall be entitled to participate in, or benefit from, in
accordance with the eligibility and other provisions thereof, such medical
insurance pension, retirement, life insurance, bonus, profit-sharing, stock
option, stock purchase or other fringe benefit plans or policies as the
Corporation may make available to, or have in effect for, its executive
personnel from time to time.
(d) He shall be entitled to two weeks of vacation per year with pay,
or such additional vacation time as Company policy dictates.
5. Termination on Disability or Death.
(a) In the event that Executive, due to physical or mental
disability or incapacity, is unable to substantially perform his duties
hereunder for a period of four successive months, the Corporation or Executive
shall have the right to terminate this Agreement and Executive's employment
hereunder upon 30-days prior written notice. During such time of disability
and/or incapacity, Executive shall be fully compensated and shall be able to
collect on any and all benefits in accordance with the terms to this Agreement
and the Plan. In the event that Executive shall be able to and shall recommence
rendering services and performing all of his
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duties hereunder within such 30-day notice period, such notice shall be
vitiated. Executive's employment shall terminate immediately upon his death.
(b) Upon termination of Executive's employment by reason of his
death or disability as aforesaid, Executive, or in the case of Executive's
death, Executive's personal representatives, shall be entitled to receive all
base compensation earned or accrued to the date of such termination and not
theretofore paid, less any benefits paid to Executive by reason of such
disability.
6. Termination for Certain Causes. In the event of the (i) willful and
material misconduct of Executive in the performance of his duties hereunder,
(ii) willful and material breach of any provision of Sections 8 or 9, or (iii)
conviction of the Executive for any felony under federal or state law, this
Agreement and Executive's employment hereunder may be terminated by the
Corporation without prior notice. Executive's refusal to move out of the State
of Florida at Corporation's request shall not constitute grounds to terminate
under this paragraph.
7. Change of Control. In order to protect the Executive against the
possible consequences and uncertainties of a Change of Control of the
Corporation (as hereinafter defined):
(a) If, during the term of this Agreement, the Executive's
employment is terminated by the Corporation at any time subsequent to a Change
of Control other than for the causes set forth in Paragraph 6, then in such
event the Corporation shall pay the Executive all amounts due to Executive
pursuant to this Agreement, for the entire term of this Agreement. The base
salary of the Executive in effect at the time of termination pursuant to this
Paragraph 7(a) shall remain in effect for the remaining term of this Agreement.
All benefit provided to Executive pursuant to this Agreement shall continue to
be provided to Executive for the entire term of this Agreement.
(b) For purposes of this Paragraph 7, in the event, following a
change of Control, the Executive shall resign from his employment with the
Corporation within 30 calendar days after he has obtained actual knowledge of
any significant and material change or proposed change in his title or nature of
duties, in each instance without his prior consent, such resignation shall be
deemed to be a termination of employment by the Corporation for purposes of
Paragraph 7(a) of this Agreement.
(c) As used in this Paragraph 7, a "Change of Control" shall be
deemed to have occurred if (i) any "person" or "group of persons" (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), becomes the "beneficial owner" (as defined in Rule
13d-3 promulgated under the 1934 Act), directly or indirectly, or securities of
the Corporation representing more than 50% of the Corporation's then outstanding
securities having the right to vote on the election of directors, or (ii) if
directors constituting a majority of the Board of Directors are elected to the
Board of Directors without the recommendation or approval of the incumbent Board
of Directors.
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8. Confidentiality.
(a) Executive understands and hereby acknowledges that as a result
of his employment with the Corporation, he will necessarily become informed of,
and have access to, certain valuable and confidential information of the
Corporation and any of its subsidiaries, joint ventures and affiliates,
including, without limitation, inventions, trade secrets, technical information,
know-how, plans, specifications, identity of customers and suppliers, and that
such information, even though it may be developed or otherwise acquired by
Executive, is the exclusive property of the Corporation to be held by Executive
in trust and solely for the Corporation's benefit. Accordingly, Executive hereby
agrees that he shall not, at any time, either during or subsequent to his
employment hereunder, use, reveal, report, publish, transfer or otherwise
disclose to any person, corporation or other entity, any of the Corporation's
confidential information without the prior written consent of the Corporation,
except to responsible officers and employees of the Corporation and other
responsible persons who are in contractual or fiduciary relationship with the
Corporation or who have a need for such information for purposes in the interest
of the Corporation, and except for such information for purposes in the interest
of the Corporation, and except for such information which legally and
legitimately is or becomes of general public knowledge from authorized sources
other than Executive.
(b) Upon the termination of his employment with the Corporation for
any reason whatsoever, Executive shall promptly deliver to the Corporation all
drawings, manuals, letters, notes, notebooks, reports and copies thereof, and
all other materials, including, without limitation, those of a secret and
confidential nature, relating to the Corporation's business which are in
Executive's possession or control.
9. Non-Competition. Executive agrees that, during the term of this
Agreement and for a period of one year after the expiration or termination for
any cause of his employment with the Corporation, he shall not, anywhere in the
United States of America or elsewhere in the world (or in such small area or for
such lesser period as may be determined by a court of competent jurisdiction to
be a reasonable limitation on the competitive activity of Executive), directly
or indirectly:
(i) engage in a competitive line of products that the Corporation
currently sells or is in the process of developing for future sale, either for
his own account or with or for anyone else;
(ii) solicit or attempt to solicit business of any customers of the
Corporation for products or services the same or equivalent to those offered,
sold, produced or under development by the Corporation;
(iii) otherwise divert or attempt to divert from the Corporation any
business whatsoever;
(iv) solicit or attempt to solicit for any business endeavor any
employee of the Corporation;
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(v) interfere with any business relationship between the Corporation
and any other person; or
(vi) render any services the same or equivalent to those offered,
sold, produced or under development by the Corporation as an officer, director,
employee, partner, consultant or otherwise to, or have any interest as a
stockholder, partner, lender or otherwise in, any person which is so engaged.
Notwithstanding anything to the contrary contained in this Section 9, the
provisions hereof shall not prevent the Executive from purchasing or owning up
to 5% of the voting securities of any corporation, the stock of which is
publicly traded.
10. Remedies. Because the Corporation does not have an adequate remedy at
law to protect its business from Executive's competition or to protect its
interests in its trade secrets, privileged, proprietary or confidential
information and similar commercial assets, the Corporation shall be entitled to
injunctive relief, in addition to such other remedies and relief that would, in
the event of a breach of the provisions of Sections 8 or 9, be available to the
Corporation. In the event the parties must file or defend a claim regarding such
breach, and in addition to any other remedies, the prevailing party shall be
entitled to receive from the other party payment of, or reimbursement for, its
reasonable attorneys' fees and disbursements incurred in enforcing any such
provision.
11. Entire Agreement. This Agreement sets forth the entire understanding
of the parties and merges and supersedes any prior or contemporaneous agreements
between the parties pertaining to the subject matter hereof. This Agreement may
not be changed or terminated orally, and no change, termination or attempted
waiver of any of the provisions hereof shall be binding unless in writing and
signed by the party against whom the same is sought to be enforced; provided,
however, that Executive's compensation may be increased at any time by the
Corporation without in any way affecting any of the other terms and conditions
of this Agreement, which in all other respects shall remain in full force and
effect. Failure of a party to enforce one or more of the provisions of this
Agreement or to require at any time performance of any of the obligations hereof
shall not be construed to be a waiver of such provisions by such party nor to in
any way affect the validity of this Agreement of such party's right thereafter
to enforce any provision of this Agreement, nor to preclude such party from
taking any other action at any time which it would legally be entitled to take.
12. Successors and Assigns. Neither party shall have the right to assign
this personal Agreement, or any rights or obligations hereunder, without the
consent of the other party; provided, however, that upon the sale of all or
substantially all of the assets, business and goodwill of the Corporation to
another corporation, or upon the merger or consolidation of the Corporation with
another corporation, this Agreement shall inure to the benefit of, and be
binding upon, both Executive and the corporation purchasing such assets,
business and goodwill, or surviving such merger or consolidation, as the case
may be, in the same manner and to the same extent as though such other
corporation were the Corporation. Subject to the foregoing,
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this Agreement shall inure to the benefit of, and bind, the parties hereto and
their legal representatives, heirs, successors and assigns.
13. Additional Acts. Executive and the Corporation each agrees that he or
it shall, as often as requested to do so, execute, acknowledge and deliver and
file, or cause to be executed, acknowledged and delivered and filed, any and all
further instruments, agreements or documents as may be necessary or expedient in
order to consummate the transactions provided for in this Agreement and do any
and all further acts and things as may be necessary or expedient in order to
carry out the purpose and intent of this Agreement.
14. Communications. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time when mailed in any United States post office
enclosed in a registered or certified postage prepaid envelope and addressed to
the addresses set forth at the beginning of this Agreement, or to such other
address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
15. Construction. The headings of the paragraphs of this Agreement have
been inserted for convenience of reference only and shall in no way restrict or
otherwise affect the construction of the terms or provisions hereof. References
in this Agreement to Sections are to the sections of this Agreement.
16. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
17. Severability. If any provision of this Agreement is held to be invalid
or unenforceable by a court or tribunal of competent jurisdiction, such
invalidity or unenforceability shall not affect the validity and enforceability
of the other provisions of this Agreement and the provision held to be invalid
or unenforceable shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
18. Governing Law. This Agreement is made and executed and shall be
governed by the laws of the State of Florida (excluding rules relating to
conflict of laws).
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first set forth above.
IMX PHARMACEUTICALS, INC.
By: ________________________________
WILLIAM A. FORSTER, President
____________________________________
GARY SPIELFOGEL, Executive
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Exhibit 10.10
EMPLOYMENT AGREEMENT
Agreement, dated as of July 1, 1998, by and between IMX PHARMACEUTICALS,
INC., a Utah corporation, having its principal place of business at 2295
Corporate Boulevard, Suite 131, Boca Raton, Florida 33431 (the "Corporation"),
and MARC FALKIN, residing at 2295 Corporate Boulevard, Suite 131, Boca Raton,
Florida 33431 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ Executive as an executive
officer, and Executive is willing to accept such employment, all subject to the
terms and conditions set forth herein:
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement set forth herein, the parties hereto agree as follows:
1. Employment and Term. Subject to the terms and conditions hereof, the
Corporation hereby employs Executive, and Executive hereby accepts employment by
the Corporation, for a period of three years commencing the date first written
above (the "Term"). This Employment Agreement will supersede the Employment
Agreement dated June 1, 1997.
2. Duties. Executive shall serve the Corporation as its Senior
Vice-President. Executive shall perform such duties as are incidental to the
offices he holds and as may, from time to time, be assigned to him by the Board
of Directors of the Corporation.
3. Compensation.
(a) As base compensation for the services to be rendered by the
Executive hereunder, the Corporation agrees to pay to Executive the sum of
$80,000 ("Base Salary").
(b) The Base Salary shall be adjusted annually on or near each
anniversary of this Agreement to reflect an increase, if any (but not a
decrease), in the cost of living for the previous 12-month period as measured by
the change in the Consumer Price Index published by the United States Department
of Labor.
(c) The Corporation is a party to a Limited Liability Company
Agreement dated as of June 18, 1998 (the "LLC Agreement") with Medicis Partners
Incorporated ("Medicis"). Pursuant to Section 9.1 of the LLC Agreement, Medicis
has options on three successive years to acquire a portion of the Corporation's
Percentage Interest (as defined in the LLC Agreement). In the event Medicis
exercises its first option at a Sales Multiple (as defined in the LLC Agreement)
of two or greater, the Executive shall receive a bonus of 4% of the aggregate
option price received by the Company. In the event Medicis exercises its second
and/or third option at a Sales Multiple of two or greater, the Executive shall
receive a bonus of
<PAGE>
2 3/4% of the aggregate option price for each of these options. Bonuses earned
hereunder shall be paid to the Executive within 30 days after the option price
is received by the Corporation.
4. Benefits. The Corporation shall provide Executive with the following
benefits:
(a) He shall be entitled to a $600 per month car allowance for the
Term of this Agreement, plus $400 per month for related car expenses, or the use
of the Corporation car.
(b) He shall be entitled to reimbursement for all normal and
reasonable travel, entertainment and other expenses necessarily incurred by him
in the performance of his obligations hereunder. The Corporation shall reimburse
Executive for such expenses upon presentation to the Corporation, within a
reasonable time after such expenses are incurred, of an itemized account of such
expenses, together with such vouchers or receipts for individual expense items
as the Corporation may from time to time require under its established policies
and procedures.
(c) He shall be entitled to participate in, or benefit from, in
accordance with the eligibility and other provisions thereof, such medical
insurance, pension, retirement, life insurance, bonus, profit-sharing, stock
option, stock purchase or other fringe benefit plans or policies as the
Corporation may make available to, or have in effect for, its executive
personnel from time to time.
(d) He shall be entitled to two weeks of vacation per year with pay,
or such additional vacation time as Company policy dictates.
5. Termination on Disability or Death.
(a) In the event that Executive, due to physical or mental
disability or incapacity, is unable to substantially perform his duties
hereunder for a period of four successive months, the Corporation or Executive
shall have the right to terminate this Agreement and Executive's employment
hereunder upon 30-days prior written notice. During such time of disability
and/or incapacity, Executive shall be fully compensated and shall be able to
collect on any and all benefits as related to this Agreement and the Plan. In
the event that Executive shall be able to and shall recommence rendering
services and performing all of his duties hereunder within such 30-day notice
period, such notice shall be vitiated. Executive's employment shall terminate
immediately upon his death.
(b) Upon termination of Executive's employment by reason of his
death or disability as aforesaid, Executive, or in the case of Executive's
death, Executive's personal representatives, shall be entitled to receive all
base compensation earned or accrued to the date of such termination and not
theretofore paid, less any benefits paid to Executive by reason of such
disability.
6. Termination for Certain Causes. In the event of the (i) willful and
material misconduct of Executive in the performance of his duties hereunder,
(ii) willful and material breach of any provision of Sections 8 or 9, or (iii)
conviction of the Executive for any felony
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under federal or state law, this Agreement and Executive's employment hereunder
may be terminated by the Corporation without prior notice. Executive's refusal
to move out of the State of Florida at Corporation's request shall not
constitute grounds to terminate under this paragraph.
7. Change of Control. In order to protect the Executive against the
possible consequences and uncertainties of a Change of Control of the
Corporation (as hereinafter defined)
(a) If, during the term of this Agreement, the Executive's
employment is terminated by the Corporation at any time subsequent to a Change
of Control other than for the causes set forth in Paragraph 6, then in such
event, the Corporation shall pay the Executive all amounts due to Executive
pursuant to this Agreement, for the entire term of this Agreement. The base
salary of the Executive in effect at the time of termination pursuant to this
Paragraph 7(a) shall remain in effect for the remaining term of this Agreement.
All benefits provided to Executive pursuant to this Agreement shall continue to
be provided to Executive for the entire term of this Agreement.
(b) For purposes of this Paragraph 7, in the event, following a
Change of Control, the Executive shall resign from his employment with the
Corporation within 30 calendar days after he has obtained actual knowledge of
any significant and material change or proposed change in his title or nature of
duties, in each instance without his prior consent, such resignation shall be
deemed to be a termination of employment by the Corporation for purposes of
Paragraph 7(a) of this Agreement.
(c) As used in this Paragraph 7, a "Change of Control" shall be
deemed to have occurred if (i) any "person" or "group of persons" (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), becomes the "beneficial owner" (as defined in Rule
13d-3 promulgated under the 1934 Act), directly or indirectly, of securities of
the Corporation representing more than 50% of the Corporation's then outstanding
securities having the right to vote on the election of directors or (ii) if
directors constituting a majority of the Board of Directors are elected to the
Board of Directors without the recommendation or approval of the incumbent Board
of Directors.
8. Confidentiality.
(a) Executive understands and hereby acknowledges that as a result
of his employment with the Corporation, he will necessarily become informed of,
and have access to, certain valuable and confidential information of the
Corporation and any of its subsidiaries, joint ventures and affiliates,
including, without limitation, inventions, trade secrets, technical information,
know-how, plans, specifications, identity of customers and suppliers, and that
such information, even though it may be developed or otherwise acquired by
Executive, is the exclusive property of the Corporation to be held by Executive
in trust and solely for the Corporation's benefit. Accordingly, Executive hereby
agrees that he shall not, at any time, either during or subsequent to his
employment hereunder, use, reveal, report, publish, transfer or otherwise
disclose to any person, corporation or other entity, any of the Corporation's
confidential information without the prior written consent of the Corporation,
except to responsible officers and employees of the Corporation and other
responsible persons who are in
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<PAGE>
contractual or fiduciary relationship with the Corporation or who have a need
for such information for purposes in the interest of the Corporation, and except
for such information for purposes in the interest of the Corporation, and except
for such information which legally and legitimately is or becomes of general
public knowledge from authorized sources other than Executive.
(b) Upon the termination of his employment with the Corporation for
any reason whatsoever, Executive shall promptly deliver to the Corporation all
drawings, manuals, letters, notes, notebooks, reports and copies thereof, and
all other materials, including, without limitation, those of a secret and
confidential nature, relating to the Corporation's business which are in
Executive's possession or control.
9. Non-Competition. Executive agrees that, during the term of this
Agreement and for a period of two years after the expiration or termination for
any cause of his employment with the Corporation, he shall not, anywhere in the
United States of America or elsewhere in the world (or in such small area or for
such lesser period as may be determined by a court of competent jurisdiction to
be a reasonable limitation on the competitive activity of Executive), directly
or indirectly:
(i) engage in a competitive line of business to the business carried
on by the Corporation, either for his own account or with or for anyone else;
(ii) solicit or attempt to solicit business of any customers of the
Corporation for products or services the same or similar to those offered, sold,
produced or under development by the Corporation;
(iii) otherwise divert or attempt to divert from the Corporation any
business whatsoever;
(iv) solicit or attempt to solicit for any business endeavor any
employee of the Corporation;
(v) interfere with any business relationship between the Corporation
and any other person; or
(vi) render any services as an officer, director, employee, partner,
consultant or otherwise to, or have any interest as a stockholder, partner,
lender or otherwise in, any person which is so engaged.
Notwithstanding anything to the contrary contained in this Section 9, the
provisions hereof shall not prevent the Executive from purchasing or owning up
to 5% of the voting securities of any corporation, the stock of which is
publicly traded.
10. Remedies. Because the Corporation does not have an adequate remedy at
law to protect its business from Executive's competition or to protect its
interests in its trade secrets, privileged, proprietary or confidential
information and similar commercial assets, the
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<PAGE>
Corporation shall be entitled to injunctive relief, in addition to such other
remedies and relief that would, in the event of a breach of the provisions of
Sections 8 or 9, be available to the Corporation. In the event the parties must
file or defend a claim regarding such breach, and in addition to any other
remedies, the prevailing party shall be entitled to receive from the other party
payment of, or reimbursement for, its reasonable attorneys' fees and
disbursements incurred in enforcing any such provision.
11. Entire Agreement. This Agreement sets forth the entire understanding
of the parties and merges and supersedes any prior or contemporaneous agreements
between the parties pertaining to the subject matter hereof. This Agreement may
not be changed or terminated orally, and no change, termination or attempted
waiver of any of the provisions hereof shall be binding unless in writing and
signed by the party against whom the same is sought to be enforced; provided,
however, that Executive's compensation may be increased at any time by the
Corporation without in any way affecting any of the other terms and conditions
of this Agreement, which in all other respects shall remain in full force and
effect. Failure of a party to enforce one or more of the provisions of this
Agreement or to require at any time performance of any of the obligations hereof
shall not be construed to be a waiver of such provisions by such party nor to in
any way affect the validity of this Agreement of such party's right thereafter
to enforce any provision of this Agreement, nor to preclude such party from
taking any other action at any time which it would legally be entitled to take.
12. Successors and Assigns. Neither party shall have the right to assign
this personal Agreement, or any rights or obligations hereunder, without the
consent of the other party; provided, however, that upon the sale of all or
substantially all of the assets, business and goodwill of the Corporation to
another corporation, or upon the merger or consolidation of the Corporation with
another corporation, this Agreement shall inure to the benefit of, and be
binding upon, both Executive and the corporation purchasing such assets,
business and goodwill, or surviving such merger or consolidation, as the case
may be, in the same manner and to the same extent as though such other
corporation were the Corporation. Subject to the foregoing, this Agreement shall
inure to the benefit of, and bind, the parties hereto and their legal
representatives, heirs, successors and assigns.
13. Additional Acts. Executive and the Corporation each agrees that he or
it shall, as often as requested to do so, execute, acknowledge and deliver and
file, or cause to be executed, acknowledged and delivered and filed, any and all
further instruments, agreements or documents as may be necessary or expedient in
order to consummate the transactions provided for in this Agreement and do any
and all further acts and things as may be necessary or expedient in order to
carry out the purpose and intent of this Agreement.
14. Communications. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time when mailed in any United States post office
enclosed in a registered or certified postage prepaid envelope and addressed to
the addresses set forth at the beginning of this Agreement, or to such other
address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
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<PAGE>
15. Construction. The headings of the paragraphs of this Agreement have
been inserted for convenience of reference only and shall in no way restrict or
otherwise affect the construction of the terms or provisions hereof. References
in this Agreement to Sections are to the sections of this Agreement.
16. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
17. Severability. If any provision of this Agreement is held to be invalid
or unenforceable by a court or tribunal of competent jurisdiction, such
invalidity or unenforceability shall not affect the validity and enforceability
of the other provisions of this Agreement and the provision held to be invalid
or unenforceable shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
18. Governing Law. This Agreement is made and executed and shall be
governed by the laws of the State of Florida (excluding rules relating to
conflict of laws).
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first set forth above.
IMX PHARMACEUTICALS, INC.
By: __________________________________
WILLIAM A. FORSTER, President
______________________________________
MARC FALKIN, Executive
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Exhibit 21
IMX PHARMACEUTICALS, INC.
LIST OF SUBSIDIARIES
===========================================
NAME JURISDICTION
-------------------------------------------
Mother2Be.com, Inc. Florida
-------------------------------------------
Podiatrx, Inc. Florida
-------------------------------------------
Deep, Inc. Florida
-------------------------------------------
Sarah J., Inc. Florida
-------------------------------------------
Big Lips, Inc. Florida
-------------------------------------------
The Federation Pharmacy, Inc. Florida
-------------------------------------------
Someskin, Inc. Florida
-------------------------------------------
Helpline of Boca, Inc. Florida
-------------------------------------------
Proctozone, Inc. Florida
===========================================
