<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934. FOR THE QUARTERLY PERIOD ENDING MARCH 31, 2000.
Or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _____to_____.
Commission file number 000-25839
IMPLANT SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2837126
- ----------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification number)
107 Audubon Road, #5 Wakefield, MA 01880
- ----------------------------------- ---------------------------------
781-246-0700
(Issuers telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at March 31, 2000
Common Stock, $.10 par value 5,708,082
Transitional small business disclosure format (check one):
YES [_] NO [X]
This document consists of ___ pages.
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IMPLANT SCIENCES CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Balance Sheets as of March 31, 2000
and June 30, 1999 (unaudited) 3
Condensed Statement of Operations for the Three and
Nine Months Ended March 31, 2000 and March 31, 1999 4
(unaudited)
Condensed Statement of Cash Flows for the Nine
Months Ended March 31, 2000 and March 31, 1999 5
(unaudited)
Notes to Condensed Financial Statements (including
data applicable to unaudited periods) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security-Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE> 3
IMPLANT SCIENCES CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 6,239,699 $ 6,152,536
Accounts receivable, less allowances of $8,720 at March 31, 2000 897,992 421,737
and $2,000 at June 30, 1999
Inventories 46,138 367,386
Deferred income taxes 62,000 62,000
Refundable income taxes 24,785 24,785
Prepaid expenses 20,866 6,262
------------ -----------
Total current assets 7,291,480 7,034,706
Property and equipment, at cost:
Machinery and equipment 2,830,698 1,802,011
Leasehold improvements 213,275 71,356
Computers and software 234,267 47,757
Furniture and fixtures 146,669 60,509
Motor vehicles 14,822 14,822
Leased property under capital lease 28,360 28,360
------------ -----------
3,468,091 2,024,815
Less accumulated depreciation (980,804) (811,240)
------------ -----------
Net property and equipment 2,487,287 1,213,575
Other assets:
Patent costs, net of accumulated amortization
of $31,629 at March 31, 2000 and $22,629 at
June 30, 1999 183,690 177,194
Other noncurrent assets 107,441 37,921
----------- -----------
291,131 215,115
------------ -----------
Total Assets $ 10,069,898 $ 8,463,396
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ -- $ 155,000
Accounts payable 423,433 99,868
Accrued expenses 734,279 1,264,360
Current portion of long-term debt 176,471 185,376
Obligations under capital lease 5,672 5,672
------------ -----------
1,339,855 1,710,276
Long term liabilities:
Long-term debt, net of current portion 455,882 615,781
Obligations under capital lease 11,942 16,196
Deferred income taxes 29,000 29,000
------------ -----------
496,824 660,977
Stockholders' equity:
Common stock, $0.10 par value;
20,000,000 authorized and 5,708,082
and 5,069,320 outstanding at March
31, 2000 and June 30, 1999 570,808 506,932
Additional paid in capital 9,901,836 6,242,194
Deferred compensation (75,721) (121,154)
Accumulated deficit (2,163,704) (535,829)
------------ -----------
Total Stockholders' Equity 8,233,219 6,092,143
------------ -----------
Total Liabilities and Stockholders' Equity $ 10,069,898 $ 8,463,396
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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IMPLANT SCIENCES CORPORATION
PART I. FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product and contract research revenues
Medical $ 768,536 $ 540,167 $ 2,330,270 1,665,067
Semiconductor 129,329 136,413 402,986 361,584
Equipment -- -- 365,000 --
----------- ----------- ----------- -----------
Total revenues 897,865 676,580 3,098,256 2,026,651
Costs and expenses:
Cost of product and contract research revenues 696,455 427,562 1,908,764 1,216,896
Cost of equipment revenue -- -- 396,445 --
Research and development 428,442 140,341 906,534 298,639
Selling, general and administrative 536,881 255,747 1,650,861 726,496
----------- ----------- ----------- -----------
Total costs and expenses 1,661,778 823,650 4,862,604 2,242,031
Operating loss (763,913) (147,070) (1,764,348) (215,380)
Other income (expense)
Interest income 65,963 4,158 201,983 9,474
Interest expense (17,839) (17,102) (60,110) (45,330)
Other income -- -- 444 --
Equity loss in Epsilon Medical (1,766) -- (5,844) --
----------- ----------- ----------- -----------
Loss before benefit for income taxes (717,555) (160,014) (1,627,875) (251,236)
Benefit for income taxes -- -- -- (36,700)
----------- ----------- ----------- -----------
Net loss $ (717,555) $ (160,014) (1,627,875) $ (214,536)
=========== =========== =========== ===========
Net loss per share - basic $ (0.14) $ (0.04) $ (0.31) $ (0.06)
=========== =========== =========== ===========
Net loss per share - diluted $ (0.14) $ (0.04) $ (0.31) $ (0.06)
=========== =========== =========== ===========
Weighted average common shares outstanding used
for basic earnings per share 5,374,582 4,069,320 5,255,676 3,854,892
=========== =========== =========== ===========
Weighted average common shares outstanding used
for diluted earnings per share 5,374,582 4,069,320 5,255,676 3,854,892
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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IMPLANT SCIENCES CORPORATION
PART I. FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
March 31, March 31,
2000 1999
----------- ---------
<S> <C> <C>
CASH FLOWS OPERATING ACTIVITIES:
Net income (loss) $(1,627,875) $(214,536)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 182,917 89,058
Amortization of deferred compensation 45,433
Equity in loss of Epsilon Medical 5,844
Deferred income taxes -- --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (476,255) (124,611)
(Increase) decrease in Inventories 321,248 (89,742)
(Increase) decrease in prepaid income taxes -- 70,496
(Increase) decrease in prepaid expenses (14,604) 2,457
(Increase) decrease in other noncurrent assets (29,717) (562,319)
Increase (decrease) in accounts payable 323,565 69,453
Increase (decrease) in accrued expenses (530,081) 334,861
----------- ---------
Net cash used in operating activities (1,799,525) (424,883)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Investment in Epsilon Medical (50,000) --
Purchase of property and equipment (1,443,276) (410,695)
Capitalized patent costs (15,496) (21,132)
----------- ---------
Net cash used in investing activities (1,508,772) (431,827)
CASH FLOW USED IN FINANCING ACTIVITIES:
Proceeds from common stock 3,723,518 11,672
Proceeds from long-term debt -- 548,015
Repayments of long-term debt (173,058) (19,129)
Proceeds from revolving credit line -- 105,000
Repayments of revolving credit line (155,000) --
----------- ---------
Cash provided by financing activities 3,395,460 645,558
Net increase (decrease) in cash 87,163 (211,152)
Cash at beginning of year 6,152,536 311,189
----------- ---------
Cash at end of year $ 6,239,699 $ 100,037
=========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 19,392 $ 45,330
Income taxes paid $ 625 --
</TABLE>
See notes to unaudited condensed financial statements
5
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IMPLANT SCIENCES CORPORATION
PART I: FINANCIAL INFORMATION (continued)
ITEM 1: FINANCIAL STATEMENTS (continued)
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Information for the nine months ended March 31, 2000 is unaudited.)
1. Description of Business
Implant Sciences Corporation develops products for the medical device
industry using ion implantation and thin film coatings of radioactive and
non-radioactive materials. The company has received Food and Drug Administration
510(k) clearance to market its I-Plant(TM) Iodine-125 radioactive seed for the
treatment of prostate cancer. The company also has under development
interventional cardiology devices, radioactive coronary stents and temporary
coronary brachytherapy systems for the prevention of restenosis (reclosure of
the artery after balloon angioplasty). In addition, the company modifies the
surface characteristics of orthopedic joint implants to reduce polyethylene wear
and thereby increasing the life of the implant and provides ion implantation of
electronic dopants for the semiconductor industry.
2. Interim Financial Statements
The financial information for the three months ended March 31, 1999 and
2000, and for the nine months ended March 31, 1999 and 2000, is unaudited but
includes all adjustments (consisting only of normal recurring adjustments) which
the Company considers necessary for a fair presentation of the financial
position at such date and of the operating results and cash flows for these
periods. The results of operations and cash flows for the nine months ended
March 31, 1999 and 2000 are not necessarily indicative of results that may be
expected for the entire year. This form 10-QSB should be read in conjunction
with the audited financial statements, included in its form 10KSB as of and for
the year ending June 30, 1999 filed with the Securities and Exchange Commission.
Earnings Per Share
In 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128, Earnings per Share. This Standard revises certain
methodology for computing earnings per common share (EPS) and requires the
reporting of two earnings per share figures: basic earnings per share and
diluted earnings per share. Basic earnings per common share are computed by
dividing net income by the weighted-average number of common shares outstanding.
Diluted earnings per share are computed by dividing net income by the sum of the
weighted-average number of common shares outstanding plus the dilutive effect of
shares issuable through the exercise of stock options (common stock equivalents)
unless their inclusion would be antidilutive.
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3. Investment
On October 6, 1999 the Company entered into an agreement to acquire 38% of
the shares outstanding of Epsilon Medical, Inc. for $50,000. The Company has
accounted for this investment under the equity method and included the
investment in other assets. The carrying amount of the investment reflects the
Company's share of all losses as of March 31, 2000.
4. Accounts Receivable
Contract revenue under cost sharing research and development agreements is
recognized as eligible expenses are incurred. Invoicing of research and
development contracts occurs in accordance with the terms of the contact.
Revenue recognized but unbilled is recorded as unbilled accounts receivable. At
March 31, 2000 unbilled accounts receivable represented approximately 29.7% of
total accounts receivable.
5. Credit Arrangements
On December 22, 1999 the Company renegotiated its commercial banking
arrangements. The Company increased its revolving line of credit from a $300,000
secured line of credit to a $750,000 unsecured line of credit and reduced the
interest rate to prime from prime plus one percent. This line of credit is
renewable annually. The Company also has available a $750,000 equipment purchase
facility of which zero was outstanding at March 31, 2000. The Company also
renegotiated its covenants. The covenants are measured annually consistent with
the company's fiscal year end.
6. Related Party Transactions
In January 2000, the Company received notice of the award of a joint
research grant. Funding is provided through a $100,000 Phase I grant by the
National Heart, Lung & Blood Institute to CardioTech International and
sub-grants to the Company and Stanford University. Michael Szycher, President
and CEO of CardioTech International is a director of the Company.
In March 2000, the Company entered into a $250,000 joint research
agreement with CardioTech International to develop a proprietary porous polymer
biocompatible coating technology as a platform for the Company's proprietary
radioactive brachytherapy technology. Dr. Michael Szycher, President and CEO of
CardioTech International is a director of the Company.
7
<PAGE> 8
IMPLANT SCIENCES CORPORATION
PART 1: FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three months ended March 31, 2000 and 1999
Revenues. Total revenues increased to approximately $898,000 in the three
months ended March 31, 2000 from $677,000 in the three months ended March 31,
1999. This 32.7% increase was primarily attributable to a 15.8% increase in
orthopedic medical revenues and a 305% increase in government contract and grant
revenue. Less than 5% of all revenues were derived from foreign sources.
The Company's two major customers, the Howmedica/Osteonics Division of
Stryker Corporation and Biomet, Incorporated, accounted for 44.1% and 9.3%
respectively, of revenue for the three months ended March 31, 2000 and 56.2% and
6.5% in the three months ended March 31, 1999. The Company's government contract
and grant revenue accounted for 26.3% and 8.6% of revenue for the three months
ended March 31, 2000 and 1999, respectively.
Cost of Product and Contract Research Revenues. Cost of product and
contract research revenue increased to approximately $696,000 in the three
months ended March 31, 2000 from approximately $428,000 for the three months
ended March 31, 1999 and increased as a percent of revenues to 77.6% from
63.2%, respectively, in the same periods. This increase in cost is primarily
attributable to the increase in government contract and grant spending,
additional personnel and expenses to prepare for the commercialization of the
I-Plant radioactive prostate seed, increased depreciation expense and expenses
associated with implementing quality systems and preparing for ISO9001 and CE
Mark certifications.
Research and Development. Research and development expenses increased to
approximately $428,000 in the three months ended March 31, 2000 from
approximately $140,000 in the three months ended March 31, 1999, a 205.3%
increase, due to continued product development on the I-Plant seed and new and
on-going product development in both temporary and permanent brachytherapy
products. The Company anticipates in future periods its research and development
expenses will continue to increase in total dollars expended as a result of its
new product development plans.
Selling, General and Administrative. Selling, general and administrative
expenses increased to approximately $537,000 in the three months ended March 31,
2000 from approximately $256,000 in the
8
<PAGE> 9
three months ended March 31,1999. The 109.9% increase in selling, general and
administrative expenses is primarily attributable to increased personnel and
benefit costs, depreciation expense and new investor relations and shareholder
services expenses. The Company anticipates that in future periods its selling,
general and administrative expenses will increase in total dollars expended as a
result of its plans to commercialize new products.
Nine months ended March 31, 2000 and 1999
Revenues. Total revenues increased to approximately $3,098,000 in the nine
months ended March 31, 2000 from approximately $2,027,000 in the nine months
ended March 31, 1999. This 52.9% increase was primarily attributable to a 276%
increase in government contract and grant revenue as the company received
several new phase I and phase II government contracts, a 100% increase in
equipment revenue as the company built and shipped a customized piece of
manufacturing equipment, an 8.1% increase in orthopedic medical revenues and an
11.4% increase in semiconductor revenues. Less than 15% of all revenues were
derived from foreign sources.
The Company's two major customers, the Howmedica/Osteonics Division of
Stryker, Corporation and Biomet, Incorporated, accounted for 36.7% and 8.4%,
respectively, of revenue in the nine months ended March 31, 2000 and 54.3% and
7.8% respectively, in the nine months ended March 31, 1999. The Company's
government contract and grant revenue accounted for 26.7% and 10.8% of revenue
for the nine months ended March 31, 2000 and 1999, respectively.
Cost of Product and Contract Research Revenues. Cost of product and
contract research revenues increased to approximately $1,909,000 in the nine
months ended March 31, 2000 from approximately $1,217,000 for the nine months
ended March 31, 1999 and increased as a percentage of revenues to 61.6% from 60%
in the same periods. This increase in cost is primarily attributable to the
increase in government contract and grant revenue which are generally low
margin, additional personnel and expenses to prepare for product
commercialization, increased depreciation expense and regulatory costs and
expenses associated with implementing quality systems and preparing for ISO9001
and CE Mark certifications.
Research and Development. Research and development expenses increased to
approximately $907,000 in the nine months ending March 31, 2000 from
approximately $299,000 in the nine months ended March 31, 1999, a 203.5%
increase, due to current and future product development. The Company anticipates
in future periods its research and development expenses will continue to
increase in total dollars expended as a result of its new product development
plans.
Selling, General and Administrative. Selling, general and administrative
expenses increased to approximately $1,651,000 from approximately $726,000 in
the nine months ended
9
<PAGE> 10
March 31, 2000. The 127.4% increase in selling, general and administrative
expenses is primarily attributable to increased personnel and benefit costs,
depreciation expense and new investor relations and shareholder services
expenses. The Company anticipates that in future periods its selling, general
and administrative expenses will increase in total dollars expended as a result
of its plans to commercialize new products.
Liquidity and Capital Resources. As of March 31, 2000 the Company had
approximately $6,240,000 in cash in the form of cash and short-term investments.
The Company also had a $750,000 revolving line of credit from a commercial bank
at a rate of prime, of which the entire balance was available at March 31, 2000.
This line of credit expires on December 22, 2000. The Company also has an
equipment purchase facility with a commercial bank, under which approximately
$632,000 was outstanding at March 31, 2000. The Company also has available a new
$750,000 equipment purchase facility of which zero was outstanding at March 31,
2000. Under the provisions of its Loan Agreement, the Company is required to
maintain compliance with two financial covenants, minimum levels of net worth
and net loss limits. At June 30, 1999, under the former covenants, the Company's
debt service coverage was less than the required amounts. The Company's bank
waived its rights under the Loan Agreement with respect to compliance with these
financial covenants at June 30, 1999. Covenants are measured annually consistent
with the Company's fiscal year end.
During the nine months ending March 31, 2000, operating activities used
cash of approximately $1,800,000 due principally to the payment of operating
expenses and offering costs, a decrease in accrued expenses and an increase in
accounts receivable
During the nine months ending March 31, 2000, investing activities used
cash of approximately $1,509,000. Net cash used by investing activities included
$1,443,000 in purchases of property and equipment, a $50,000 equity investment
in Epsilon Medical, a joint venture and $15,000 of patent fees. The Company
intends to make significant investments over the next several years to support
the development and commercialization of its new products and the expansion of
its manufacturing equipment and capabilities.
During the nine months ended March 31, 2000, financing activities provided
approximately $3,395,000 in cash. Net cash provided by financing activities
primarily includes proceeds from the exercise of the underwriters over-allotment
option of 138,000 units, the sale of 500,000 shares of restricted common stock
to MEDTEC, Iowa, Inc. offset by payments on the Company's line of credit and
equipment and term loans. The Company plans to further increase its expenditures
to complete development and commercialize its new products, to increase its
manufacturing capacity, to ensure compliance with the FDA's Quality System
Regulations and to broaden its sales and marketing capabilities.
10
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IMPLANT SCIENCES CORPORATION
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities and Use of Proceeds
On March 2, 2000 the Company sold and issued 500,000 shares of common
stock to MedTec Iowa, Inc. for $3.0m. This transaction was exempt from
registration pursuant to Schedule 4(2) of the Securities Act of 1933, as
amended. The proceeds are to be used to advance the development of
additional applications for the Company's brachytherapy technology for
cancer treatment and intravascular radiation.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters of a Vote to Security-Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. List of Exhibits and Reports on Form 8-K
(a) The following exhibits, required by Item 601 of Regulation S-B, are
filed as part of this Quarterly Report on Form 10-QSB. Exhibit
numbers, where applicable, in the left column correspond to those of
Item 601 of Regulation S-B.
(b) The registrant has filed no reports on Form 8-K during the quarter
ended March 31, 2000.
EXHIBIT INDEX
The following are to be filed as part of this report
Exhibit
No. Description
--- -----------
[S] [C]
*3.2 By-Laws of the Company
*3.3 Articles of Amendment to the Articles of Organization of the
Company, dated June 9, 1999
*3.4 Restated Articles of Organization of the Company, dated June
9, 1999
**4.1 Specimen certificate for the Common Stock of the Company
**4.2 Specimen certificate for the Redeemable Warrants of the
Company
***4.3 Specimen certificate for the Units of the Company
**10.1 Employment Agreement with Anthony J. Armini, dated September
26, 1998
**10.2 Employment Agreement with Stephen N. Bunker, dated September
26, 1998
*10.3 Employment Offer Letter to Darlene Deptula-Hicks, dated June
15, 1998
*10.4 Employment Offer Letter to Alan Lucas, dated March 20, 1998
*10.5 Amendment to Employment Offer Letter to Alan Lucas, dated
September 24, 1998
*10.6 Form of Employee Agreement on Ideas, Inventions, and
Confidential Information used between 1993 and 1995
*10.7 Form of Employee Agreement on Ideas, Inventions, and
Confidential Information used in 1993
*10.8 Form of Employee Agreement on Ideas, Inventions, and
Confidential Information used between 1997 and 1998
*10.9 Loan Agreement between the Company and US Trust, dated May
1, 1996
*10.10 $100,000 Commercial Promissory Note signed by the Company in
favor of US Trust, dated May 1, 1996
*10.11 $300,000 Commercial Promissory Note signed by the Company in
favor of US Trust, dated May 1, 1996
*10.12 Guaranty of Loan Agreement between the Company and US Trust,
by Anthony J. Armini, dated May 1, 1996
*10.13 Security Agreement between the Company and US Trust, dated
May 1, 1996
*10.14 Lessor's Subordination and Consent between the Company and
Teacher's Insurance and Annuity Association of America,
dated May 1, 1996
*10.15 First Amendment to Loan Agreement between the Company and US
Trust, dated July 24, 1997
*10.16 $300,000 Commercial Promissory Note signed by the Company in
favor of US Trust, dated July 24, 1997
*10.17 $94,444.40 Commercial Promissory Note signed by the Company
in favor of US Trust, dated August 12, 1997
*10.18 Second Amendment to Loan Agreement between the Company and
US Trust, dated January 16, 1998
*10.19 $750,000 Commercial Promissory Note signed by the Company in
favor of US Trust, dated January 16, 1998
*10.20 Promissory Note signed by Anthony J. Armini in favor of the
Company, dated September 26, 1998
*10.21 Shareholders Agreement between NAR Holding Corporation and
Anthony J. Armini, dated July 15, 1987
*10.22 Lease between the Company and Teachers Insurance and Annuity
Association of America, dated September 29, 1995
*10.23 First Amendment to Lease and Expansion Agreement between the
Company and Teachers Insurance and Annuity Association of
America, dated July 29, 1998
*10.24 Standard Cooperative Research and Development Agreement
between the Company and the Naval Research Laboratory, dated
January 21, 1997+
*10.25 Cooperative Agreement between the Company and the United
States of America U.S. Army Tank-Automotive and Armaments
Command Armamanet Research, Development and Engineering
Center, dated September 30, 1997+
*10.26 Vendor Agreement Memorandum between the Company and
Osteonics, dated February 2, 1998+
*10.27 Sample Purchase Order between the Company and MicroSpring
Company, Inc., dated October 24, 1996+
*10.28 Asset Purchase Agreement between the Company and Falex
Corporation, dated November 17, 1995+
*10.29 Settlement between the Company and Erik Akhund, dated July
1, 1998
*10.30 1992 Stock Option Plan
*10.31 Form of Stock Option Agreement under the 1992 Stock Option
Plan
*10.32 1998 Incentive and Nonqualified Stock Option Plan
**10.33 Form of Incentive Stock Option under the 1998 Incentive and
Nonqualified Stock Option Plan
**10.34 Form of Nonqualified Stock Option under the 1998 Incentive
and Nonqualified Stock Option Plan
**10.35 Form of Nonqualified Stock Option for Non-Employee Directors
under the 1998 Incentive and Nonqualified Stock Option Plan
*10.36 Form of Lock-Up Agreement
**10.37 Agreement Appointing Transfer Agent and Registrar between
the Company and American Securities Transfer & Trust, Inc.,
dated October 19, 1998
**10.38 Certification of Corporate Secretary dated October 19, 1998
concerning Agreement Appointing Transfer Agent and Registrar
between the Company and American Securities Transfer &
Trust, Inc.
**10.39 Research and Development Agreement between the Company and
Guidant Corporation, dated May 20, 1998+
**10.40 Letter Agreement between the Company and Guidant
Corporation, dated September 29, 1998+
***10.41 Form of Medical Advisory Board Agreement
***10.42 Form of Loan Agreement, dated January 7, 1999, between the
Company and the following employees in the following
amounts: Donald J. Dench ($12,500), Diane J. Ryan ($12,500),
Mark and Kathleen Gadarowski ($12,500), Gregory Huntington,
Sr. ($12,500), Leonard DeMild ($25,000), Michael Nelson
($12,500), Richard Sahagian ($12,500), Darryl Huntington
($12,500), Dennis Gadarowski ($12,500) and David Santos
($12,500)
***10.43 Terms and Conditions from Sample Purchase Order between the
Company and Biomet, Incorporated
****10.44 Unit and Warrant Agreement between the Company and American
Securities Transfer & Trust, Inc., dated April 9, 1999
*10.45 Agreement between the Company and U.S. Army Space and
Missile Defense Command, dated May 27, 1999
*****10.46 Second Amendment to Lease and Extension Agreement
*****10.47 Sublease Agreement
*****10.48 Consent to Sublease Agreement
10.52 Distributorship agreement, dated January 26, 2000, by and between
Implant Sciences Corporation and Medtec Iowa, Inc. Portions of this
exhibit have been omitted pursuant to a request for confidential
treatment +
10.53 Stock Purchase Agreement, dated March 2, 2000, by and between
Implant Sciences Corporation and Medtec Iowa, Inc.
10.54 Research and Development Agreement, dated March 13, 2000, by and
between Implant Sciences Corporation and Cardiotech International
*21.1 Subsidiaries of the Company
*23.2 Consent of Foley, Hoag & Eliot LLP
*24.1 Power of Attorney
27.1 Financial Data Schedule
27.2 Financial Data Schedule - March 31, 2000
- -------------------------
* Previously filed in the Registration Statement on Form SB-2 (Registration
No. 333-64499) filed on September 29, 1998.
** Previously filed in Amendment No. 1 to the Registration Statement, filed
on December 21, 1998.
*** Previously filed in Amendment No. 2 to the Registration Statement, filed
on February 11, 1999.
**** Previously filed in Amendment No. 3 to the Registration Statement, filed
on April 30, 1999.
***** Previously filed in Form 10QSB for quarter ending December 31, 1999, filed
on February 14, 2000.
+ Filed under application for confidential treatment.
11
<PAGE> 12
IMPLANT SCIENCES CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Implant Sciences Corporation
Date: May 15, 2000 /s/ Anthony J. Armini
------------------------------
Anthony J. Armini
President and CEO
Date: May 15, 2000 /s/ Darlene M. Deptula-Hicks
------------------------------
Darlene M. Deptula-Hicks
Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
Date: May 15, 2000 /s/ Stephen N. Bunker
------------------------------
Stephen N. Bunker
Vice President and Chief Scientist,
Director
Date: May 15, 2000 /s/ Robert E. Hoisington
------------------------------
Robert E. Hoisington
Director
Date: May 15, 2000 /s/ Shunkuchi Shimizu
------------------------------
Shunkuchi Shimizu
Director
Date: May 15, 2000 /s/ Michael Szycher
------------------------------
Michael Szycher
Director
12
<PAGE> 13
EXHIBIT INDEX
The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
*3.2 By-Laws of the Company
*3.3 Articles of Amendment to the Articles of Organization of the
Company, dated June 9, 1999
*3.4 Restated Articles of Organization of the Company, dated June
9, 1999
**4.1 Specimen certificate for the Common Stock of the Company
**4.2 Specimen certificate for the Redeemable Warrants of the
Company
***4.3 Specimen certificate for the Units of the Company
**10.1 Employment Agreement with Anthony J. Armini, dated September
26, 1998
**10.2 Employment Agreement with Stephen N. Bunker, dated September
26, 1998
*10.3 Employment Offer Letter to Darlene Deptula-Hicks, dated June
15, 1998
*10.4 Employment Offer Letter to Alan Lucas, dated March 20, 1998
*10.5 Amendment to Employment Offer Letter to Alan Lucas, dated
September 24, 1998
*10.6 Form of Employee Agreement on Ideas, Inventions, and
Confidential Information used between 1993 and 1995
*10.7 Form of Employee Agreement on Ideas, Inventions, and
Confidential Information used in 1993
*10.8 Form of Employee Agreement on Ideas, Inventions, and
Confidential Information used between 1997 and 1998
*10.9 Loan Agreement between the Company and US Trust, dated May
1, 1996
*10.10 $100,000 Commercial Promissory Note signed by the Company in
favor of US Trust, dated May 1, 1996
*10.11 $300,000 Commercial Promissory Note signed by the Company in
favor of US Trust, dated May 1, 1996
*10.12 Guaranty of Loan Agreement between the Company and US Trust,
by Anthony J. Armini, dated May 1, 1996
*10.13 Security Agreement between the Company and US Trust, dated
May 1, 1996
*10.14 Lessor's Subordination and Consent between the Company and
Teacher's Insurance and Annuity Association of America,
dated May 1, 1996
*10.15 First Amendment to Loan Agreement between the Company and US
Trust, dated July 24, 1997
*10.16 $300,000 Commercial Promissory Note signed by the Company in
favor of US Trust, dated July 24, 1997
*10.17 $94,444.40 Commercial Promissory Note signed by the Company
in favor of US Trust, dated August 12, 1997
*10.18 Second Amendment to Loan Agreement between the Company and
US Trust, dated January 16, 1998
*10.19 $750,000 Commercial Promissory Note signed by the Company in
favor of US Trust, dated January 16, 1998
*10.20 Promissory Note signed by Anthony J. Armini in favor of the
Company, dated September 26, 1998
*10.21 Shareholders Agreement between NAR Holding Corporation and
Anthony J. Armini, dated July 15, 1987
*10.22 Lease between the Company and Teachers Insurance and Annuity
Association of America, dated September 29, 1995
*10.23 First Amendment to Lease and Expansion Agreement between the
Company and Teachers Insurance and Annuity Association of
America, dated July 29, 1998
*10.24 Standard Cooperative Research and Development Agreement
between the Company and the Naval Research Laboratory, dated
January 21, 1997+
*10.25 Cooperative Agreement between the Company and the United
States of America U.S. Army Tank-Automotive and Armaments
Command Armamanet Research, Development and Engineering
Center, dated September 30, 1997+
*10.26 Vendor Agreement Memorandum between the Company and
Osteonics, dated February 2, 1998+
*10.27 Sample Purchase Order between the Company and MicroSpring
Company, Inc., dated October 24, 1996+
*10.28 Asset Purchase Agreement between the Company and Falex
Corporation, dated November 17, 1995+
*10.29 Settlement between the Company and Erik Akhund, dated July
1, 1998
*10.30 1992 Stock Option Plan
*10.31 Form of Stock Option Agreement under the 1992 Stock Option
Plan
*10.32 1998 Incentive and Nonqualified Stock Option Plan
**10.33 Form of Incentive Stock Option under the 1998 Incentive and
Nonqualified Stock Option Plan
**10.34 Form of Nonqualified Stock Option under the 1998 Incentive
and Nonqualified Stock Option Plan
**10.35 Form of Nonqualified Stock Option for Non-Employee Directors
under the 1998 Incentive and Nonqualified Stock Option Plan
*10.36 Form of Lock-Up Agreement
**10.37 Agreement Appointing Transfer Agent and Registrar between
the Company and American Securities Transfer & Trust, Inc.,
dated October 19, 1998
**10.38 Certification of Corporate Secretary dated October 19, 1998
concerning Agreement Appointing Transfer Agent and Registrar
between the Company and American Securities Transfer &
Trust, Inc.
**10.39 Research and Development Agreement between the Company and
Guidant Corporation, dated May 20, 1998+
**10.40 Letter Agreement between the Company and Guidant
Corporation, dated September 29, 1998+
***10.41 Form of Medical Advisory Board Agreement
***10.42 Form of Loan Agreement, dated January 7, 1999, between the
Company and the following employees in the following
amounts: Donald J. Dench ($12,500), Diane J. Ryan ($12,500),
Mark and Kathleen Gadarowski ($12,500), Gregory Huntington,
Sr. ($12,500), Leonard DeMild ($25,000), Michael Nelson
($12,500), Richard Sahagian ($12,500), Darryl Huntington
($12,500), Dennis Gadarowski ($12,500) and David Santos
($12,500)
***10.43 Terms and Conditions from Sample Purchase Order between the
Company and Biomet, Incorporated
****10.44 Unit and Warrant Agreement between the Company and American
Securities Transfer & Trust, Inc., dated April 9, 1999
*10.45 Agreement between the Company and U.S. Army Space and
Missile Defense Command, dated May 27, 1999
*****10.46 Second Amendment to Lease and Extension Agreement
*****10.47 Sublease Agreement
*****10.48 Consent to Sublease Agreement
10.52 Distributorship agreement, dated January 26, 2000, by and between
Implant Sciences Corporation and Medtec Iowa, Inc. Portions of this
exhibit have been omitted pursuant to a request for confidential
treatment +
10.53 Stock Purchase Agreement, dated March 2, 2000, by and between
Implant Sciences Corporation and Medtec Iowa, Inc.
10.54 Research and Development Agreement, dated March 13, 2000, by and
between Implant Sciences Corporation and Cardiotech International
*21.1 Subsidiaries of the Company
*23.2 Consent of Foley, Hoag & Eliot LLP
*24.1 Power of Attorney
27.1 Financial Data Schedule
27.2 Financial Data Schedule - March 31, 2000
- -------------------------
* Previously filed in the Registration Statement on Form SB-2 (Registration
No. 333-64499) filed on September 29, 1998.
** Previously filed in Amendment No. 1 to the Registration Statement, filed
on December 21, 1998.
*** Previously filed in Amendment No. 2 to the Registration Statement, filed
on February 11, 1999.
**** Previously filed in Amendment No. 3 to the Registration Statement, filed
on April 30, 1999.
***** Previously filed in Form 10QSB for quarter ending December 31, 1999,
filed on February 14, 2000.
+ Filed under application for confidential treatment.
</TABLE>
13
<PAGE> 1
EXHIBIT 10.52
*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. CONFIDENTIAL PORTIONS HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION.
* CONFIDENTIAL TREATMENT REQUESTED
DISTRIBUTORSHIP AGREEMENT
This Agreement is made as of the 26th day of January, 2000 by and between
Implant Sciences Corporation, a corporation organized under the laws of the
Commonwealth of Massachusetts, with an office at 107 Audubon Road #5, Wakefield,
Massachusetts 01880 (hereinafter called "Manufacturer") and MED-TEC Iowa, Inc.,
a corporation organized under the laws of Iowa, with its principal office at
1401 8th Street, Orange City, Iowa 51041 (hereinafter called "Distributor").
WHEREAS, Distributor is in the business of marketing and distributing
products manufactured by various manufacturers and wishes to act as the
exclusive distributor of the Product (as hereinafter defined) within or into the
Territory (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Distributor.
1.1 Appointment of Distributor. Subject to the terms and conditions
of this Agreement, Manufacturer appoints Distributor, and Distributor agrees to
act as, the exclusive distributor of the Product in or into the Territory for
the term of this Agreement. As used herein, "Product" means Implant Sciences
I-Plant Iodine-125 Brachytherapy Seeds, which are indicated for temporary or
permanent interstitial or intracavity implantation or surface application to
treat selected localized tumors, can be used either as primary treatment (such
as for prostate cancer or unresectable tumors) or as treatment for residual
disease after excision of primary or recurrent tumors, and may be used
concurrently with, or following treatment with, other interventions, such as
external beam therapy, hyperthermia or chemotherapy; tumors of the head, neck,
lung, pancreas, prostate and other accessible tumors are commonly treated, as
such above-referenced seeds may be improved or enhanced during the term of this
Agreement provided that regulatory approvals are obtained. As used herein,
"Territory" means the fifty states of the United States of America, the District
of Columbia, and Puerto Rico. Manufacturer represents and warrants that as of
the date of execution of this Agreement, no person other than Distributor has
any rights to distribute the Product in or into the Territory. *
-1-
<PAGE> 2
* CONFIDENTIAL TREATMENT REQUESTED
*
1.2 Exclusive U.S. Distributorship; Conditions Pertaining to
Maintenance Thereof. Provided that Distributor complies with the minimum
purchase requirements of Section 1.1, Manufacturer shall not directly or
indirectly sell or distribute the Product to any person other than Distributor
for sale in or into the Territory during the Start Up Period. * if Distributor
fails to satisfy the foregoing exclusivity requirements (except in the case of a
shortfall caused by Manufacturer's inability to provide Product), appoint other
distributors without restriction, and sell Products to other distributors or to
any person, corporation or other entity in the Territory, or, should
Manufacturer wish to appoint a new exclusive distributor, terminate this
Agreement as set forth in Section 14.1. Termination of Distributor's exclusivity
or termination of the Agreement as set forth in this Section 1.2 shall be
Manufacturer's sole remedy for Distributor's failure to purchase the Weekly
Exclusivity Minimums. In the event of appointment of other distributors in the
Territory in accordance with this Agreement, provided that Distributor continues
to serve as a non-exclusive distributor of the Product, Manufacturer shall sell
to Distributor Product at a price and on terms at least as favorable as the best
price and term offered to the other distributors of the Product in the
Territory.
1.3 Responsibilities of Distributor. During the term of this
Agreement, Distributor shall at Distributor's sole expense:
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<PAGE> 3
*Confidential Treatment Requested
(a) Faithfully and diligently use commercially reasonable efforts to
promote, advertise, market, offer for sale and sell the Product in the Territory
and reasonably cooperate with Manufacturer in maximizing sales of the Product in
the Territory as well as servicing and satisfying customer demands and requests;
(b) Giving due regard to Manufacturer's suggested procedures, for
all Product sold by Distributor in the Territory, process customers' claims for
replacement of Product pursuant to the applicable warranties;
(c) Simultaneously with the execution of this Agreement, and on the
first day of each calendar quarter thereafter, provide Manufacturer with a
forecast of quantities by apparent activity strengths (as offered by the
Manufacturer) of the Product to be ordered by Distributor for each week during
the twelve month (12) month period commencing on the date of delivery of the
applicable forecast. Beginning forty-five (45) days before the commencement of
the Start Up Period, the following provision shall become applicable: *
(d) Submit a draft of its sales and public relations materials
relating to the Product to Manufacturer for Manufacturer's written approval
prior to any disclosure or use of such material;
(e) Undertake such education and instruction of physicians, patients
and other third parties as may be necessary and appropriate in Distributor's
reasonable judgment; and
(f) Comply in all material respects with all laws applicable to
Distributor relating to the sale of the Product in the Territory and, at its
expense, verify that its customers are qualified in all material respects to
purchase and receive the Product and have obtained all material consents,
licenses and approvals necessary for the purchase and receipt of the Product,
and provide information and documentation pertaining to the foregoing compliance
and verification to Manufacturer on a regular and timely basis.
-3-
<PAGE> 4
*Confidential Treatment Requested
1.4 Responsibilities of Manufacturer. During the term of this
Agreement, Manufacturer, to assist Distributor in the marketing and distribution
of the Product, shall at Manufacturer's sole expense:
(a) Make reasonable efforts to invest sufficient capital to ensure
production capacity adequate to meet Distributor's projected needs as set forth
in this Agreement;
(b) Manufacture and deliver Product pursuant to and in accordance
with Distributor Non-Cancelable Orders, provide non-sterile packaging therefor,
and ship such Product to Distributor's customers upon receipt of appropriate
shipping instructions;
(c) Provide technical advice and assistance to Distributor with
respect to the marketing, distribution, and sale of the Product, including but
not limited to access to a trained sales specialist designated for Distributor's
account;
(d) Provide Distributor with appropriate sales leads;
(e) Implement various sales promotion activities which may include
media advertising, direct mail campaigns, trade show participation, for the
purpose of generating leads for the Product;
(f) Make available to Distributor collateral materials to be used in
selling the Product;
*
(h) Exercise those efforts that it deems appropriate to protect its
intellectual property rights from infringement and preserve the distributorship
granted to Distributor hereunder.
2. Trademarks. So long as this Agreement is in effect, and Distributor
complies with all of Distributor's obligations hereunder, Distributor shall have
the right to use Manufacturer's trademarks listed on Exhibit C (each a "Mark"
and together the "Marks") in the Territory in connection with the marketing,
sale and distribution of the Product. Distributor shall
-4-
<PAGE> 5
not use any Mark other than as specifically permitted by the immediately
preceding sentence, shall not remove the Marks from any Product furnished by
Manufacturer and shall not make any use of any Marks in connection with any
goods or services other than the Product. So long as this Agreement is in effect
and thereafter, Distributor shall not adopt, register or make any use of any
trademark or brand name that is confusingly similar to any Mark. All rights in
the Marks shall, at all times during the term of this Agreement and thereafter,
be and remain the sole property of Manufacturer, and all goodwill and other
benefits associated therewith are hereby assigned to, and shall inure to,
Manufacturer. Distributor agrees to assist in the registration of the Marks in
the Territory in the name of Manufacturer, in renewal and maintenance of such
registration and in such recording of the Distributor as a registered user as
the Manufacturer may reasonably request. Any costs incurred by Distributor in
connection with such registration, maintenance and recording shall be at
Manufacturer's expense.
3. Purchase and Sale Requirements. Following notification that
Manufacturer is ready to deliver Product, and commencing no later than ninety
(90) days following such notification, Distributor shall commence purchasing
Product in accordance with Sections 1.1 and 1.2, as applicable. Manufacturer
shall supply and Distributor shall pay for such Product.
4. Distributor not Manufacturer's Agent. This Agreement shall not
constitute Distributor as the agent or legal representative of Manufacturer for
any purpose whatsoever, and Distributor shall not hold itself out as an agent of
Manufacturer. This Agreement creates no relationship of joint venturers,
partners, associates, employment or principal and agent between the parties, and
both parties are acting as independent contractors. Distributor is not granted
herein any right or authority to, and shall not attempt to, assume or create any
obligation or responsibility for or on behalf of Manufacturer. Distributor and
Manufacturer shall bear all of their own expenses for their respective
operations, including, without limitation, the compensation of their employees
and salesmen and the maintenance of their offices and other facilities and shall
be solely responsible for their own employees and salesmen and for their acts
and the things done by them.
5. Terms of Orders and Sales.
5.1 Terms to Govern. This Agreement shall govern all orders for
Product by Distributor and sales of Product by Manufacturer to Distributor. Any
different, conflicting or additional terms (other than terms as to quantities
and proposed delivery dates) in any purchase order or other writing from
Distributor or in any order acknowledgment or other writing from Manufacturer
shall be of no force or effect unless they shall constitute a waiver,
modification or amendment of this Agreement duly made in accordance with Section
16.6 or as specifically permitted by this Agreement.
-5-
<PAGE> 6
*Confidential Treatment Requested
5.2 Orders. Distributor shall forward all purchase orders to
Manufacturer at its head office. No order shall be final as to Manufacturer
until accepted in writing by Manufacturer. Orders shall be deemed accepted
unless rejected by Manufacturer in writing within ten (10) days of the date
thereof. Provided that Distributor is in compliance with the terms and
conditions of this Agreement (including, without limitation, the payment terms)
and the Product ordered are available from Manufacturer on a timely basis,
Manufacturer shall not reject Distributor's order. After acceptance of the
Distributor's order, it shall not be subject to cancellation. All sales are
final. No product will be accepted for return and no credit will be allowed on
any product returned unless Manufacturer has granted prior written permission.
Manufacturer and Distributor agree that end-user shall be permitted on a bases
mutually agreed between Manufacturer and Distributor to return unused Product to
Manufacturer for a credit.
5.3 Shipment, Delivery and Title. All Product will be tendered and
shipped F.O.B. Manufacturer's plant in Massachusetts, may be so tendered in
several lots, and, unless otherwise instructed by Distributor, shall be
drop-shipped to Distributor's customer in accordance with Manufacturer's usual
practices (generally by Federal Express next-day service, where available).
Shipments will be freight prepaid with the cost of shipping added to the price
of the relevant Product. In cases where Distributor, for any reason, requests
deliveries of Product on a basis that is not in conformity with Manufacturer's
usual practices, Distributor shall be responsible for all additional costs
associated with meeting Distributor's required delivery schedule. Distributor
will obtain all-risks insurance for all shipments at the Distributor's sole
expense in the amount of the purchase price of the relevant Product.
Manufacturer will not be deemed to assume any liability in connection with any
shipment because of the selection of a carrier or its failure to obtain
insurance. Title and risk of loss or damage to Product will pass to the
Distributor's customer when delivery is made to the possession of the carrier.
* All prices are F.O.B. Manufacturer's factory, warehouse or other
point of shipment by Manufacturer. Manufacturer reserves the right to correct
all typographical and clerical errors which may be present in the prices or
specifications contained in any list or invoice. The actual price charged by
Distributor to its customers for Products shall be set by Distributor in its
sole discretion.
-6-
<PAGE> 7
*Confidential Treatment Requested
5.5 Taxes and Governmental Charges. Prices do not include any taxes
or other governmental charges, including, without limitation, value-added,
sales, use or privileges taxes, or excise or similar taxes levied by any
government, now or hereafter enacted. In Manufacturer's discretion, any such
taxes and charges may be added to the price for any Product or may be billed
separately. The Distributor will, in any event, pay all such taxes and charges,
on or before their due dates. In the event Manufacturer is required at any time
to pay any such tax or charge, the Distributor will reimburse Manufacturer
therefor promptly on demand.
5.6 Terms of Payment. Provided that Distributor remains up-to-date
in its payment obligations and maintains an acceptable credit history, for
purchases of Product up to and including the minimum purchase commitments set
forth in Exhibit A, * Manufacturer will invoice Distributor as appropriate. All
payments by Distributor shall be made in United States Dollars and shall be paid
fully net, without set-off, deduction or counterclaim. Payment shall be by wire
transfer to Manufacturer's account at a commercial bank Manufacturer shall
designate. Distributor understands that, given the continuous nature of customer
orders, Manufacturer may from time to time calculate an invoice amount based on
a customer monthly sales volume assumption that proves to be incorrect. In such
case, the invoice shall, at Manufacturer's discretion, be adjusted or the
adjustment shall be made on the next invoice.
5.7 Late Charges. If the Distributor fails to pay the price or any
other payment due to Manufacturer promptly and when due, Manufacturer may
recover, in addition to the price or payment, interest thereon at a rate equal
to the lesser of 1-1/2% per month and the maximum rate of interest allowable
under applicable law.
5.8 Distributor's Customers. Distributor shall be solely responsible
for invoicing its customers, collecting and paying sales taxes (if applicable),
for customer credit, and for collection of payments for Product from its
customers and shall bear all credit risk with respect to customer non-payment.
5.9 Packing. Manufacturer will provide standard non-sterile
packaging and packing as required by regulations, and the cost of such standard
packaging and packing, as actually incurred by Manufacturer, shall be paid by
Manufacturer and included in the price of the Product. The parties may agree to
non-standard packaging and packing in which case the cost of such non-standard
packaging and packing, as actually incurred by Manufacturer, shall be paid by
the Distributor.
5.10 Specifications. Manufacturer may modify the specifications of
any Product furnished under any order or contract, provided the modifications do
not adversely affect
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<PAGE> 8
the performance of the Product. In addition, Manufacturer may furnish suitable
substitutes for materials unobtainable because of priorities or regulations
established by government authority or nonavailability of materials from
suppliers.
6. Sales Outside of Territory. Distributor shall advertise the Product
only in the Territory and shall not maintain branch offices, salesmen, or
representatives for the sale of the Product outside of the Territory, without
Manufacturer's prior written consent, which Manufacturer may withhold for any
reason. Distributor shall promptly transmit to Manufacturer any inquiries it
shall receive concerning the Product, whether (a) from outside the Territory or
(b) from within the Territory if the inquiry relates to a use of any Product
outside the Territory. Provided that neither Manufacturer nor another
distributor or sales agent is servicing the region outside the Territory to
which such inquiry relates, that Manufacturer has the appropriate licenses and
other governmental approvals necessary to sell the Product in such region, that
Distributor is prepared to comply with Section 10 hereof, and that Manufacturer
otherwise deems it appropriate that such extra-territorial sale be made,
Manufacturer expects that it will permit Distributor to make such
extra-territorial sale if Distributor so wishes, provided that Manufacturer's
permission must be in writing and may be granted or withheld in Manufacturer's
sole discretion.
7. Limitation of Warranties and Remedies.
7.1 Limited Warranty. Manufacturer represents and warrants that
Manufacturer shall pass to Distributor good and marketable title to the Product
free and clear of all liens, claims, options, changes, security interests,
encumbrances and restrictions of any kind. Manufacturer warrants to the
Distributor that each Product manufactured and sold by it will be newly
manufactured within Manufacturer's normal course of production, conform to the
Specifications when delivered to Distributor, be free from defects in materials
and workmanship and have passed tests required by the Manufacturer's FDA 510(k),
will meet applicable requirements of law, including, without limitations, FDA
requirements and the Commonwealth of Massachusetts Sealed Source requirements
for the Product. If any Product covered by this warranty is returned to the
original shipping point, transportation charges prepaid, within the applicable
warranty period set forth above and upon examination Manufacturer determines to
its satisfaction that such Product was defective in material or workmanship at
the time of delivery to the Distributor, Manufacturer will, at its option,
replace the Product or refund the original purchase price of the Product to the
Distributor and any transportation charges incurred in connection with the
return of the Product. The foregoing notwithstanding, Manufacturer will not be
responsible for damage to any product or person resulting from misuse,
negligence or accident or resulting from misrepresentations about the Product or
alterations to the Product, the labeling, or the instructions for use provided
therewith made by any person or firm not duly authorized by Manufacturer in
writing. Each Product distributed to end users will be subject to the
MANUFACTURER'S LIMITED WARRANTY included by Manufacturer with such
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<PAGE> 9
Product. Distributor shall process warranty requests by end users as set forth
in Section 1.4(b), and, if Manufacturer determines that the appropriate remedy
for a defective Product is refund of Distributor's purchase price, refund to the
end user (or arrange for the refund to the end user of) the full purchase price
paid by the end user to Distributor for such defective Product. For purposes of
this Agreement, "Specifications" shall mean the specifications set forth in
Manufacturer's FDA 510(k).
7.2 No Implied Warranties. THE WARRANTIES GIVEN IN THIS AGREEMENT
ARE THE ONLY WARRANTIES GIVEN BY THE MANUFACTURER WITH RESPECT TO THE PRODUCT
AND ARE GIVEN IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A
PARTICULAR PURPOSE. DISTRIBUTOR'S EXCLUSIVE REMEDIES, AND MANUFACTURER'S SOLE
LIABILITY, FOR ANY NONCONFORMITY OR DEFECT IN ANY PRODUCT SHALL BE THOSE
EXPRESSED HEREIN.
7.3 No Additional Warranties. The Distributor shall make no
representation or warranty concerning the quality, performance or other
characteristics of the Product other than those which are consistent in all
respects with, and do not expand the scope of, the warranties of Manufacturer
set forth in this Agreement.
8. Limitation of Liability. An essential purpose of the limited exclusive
liabilities and remedies in this Agreement is allocation of risks between
Manufacturer and Distributor, which allocation of risks is reflected in the
purchase price for the Product. UNDER NO CIRCUMSTANCES SHALL MANUFACTURER'S OR
DISTRIBUTOR'S LIABILITY ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
MANUFACTURER'S PERFORMANCE OR ASSERTED FAILURE TO PERFORM HEREUNDER, IN
CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EXCEED THE PURCHASE PRICE OF
THE PRODUCT TO WHICH SUCH LIABILITY RELATES, EXCEPT FOR LIABILITY ARISING UNDER
SECTION 12 OF THIS AGREEMENT. IN NO EVENT SHALL MANUFACTURER OR DISTRIBUTOR BE
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, DAMAGES RESULTING FROM LOSS OF USE, PROFITS, BUSINESS OR GOODWILL,
WHETHER OR NOT MANUFACTURER OR DISTRIBUTOR HAS BEEN ADVISED OF THE POSSIBILITY
THEREOF.
9. Protection of Proprietary Data.
9.1 Proprietary Data. The term "Proprietary Data", as used in this
Agreement, shall mean information and data in written, graphic, machine-readable
or machine-executable form (or in oral form if such information and data is
provided by Manufacturer to Distributor
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<PAGE> 10
during the course of consultation or training sessions) which is received by
Distributor from Manufacturer and is identified as being proprietary or
confidential, or which is not generally known or available to others in the
trade and about which Distributor may learn during the term of this Agreement.
"Proprietary Data" shall include, without limitation, all technical manuals
relating to the Product, and all know-how and technology required to utilize the
Product and such manuals including any of the foregoing information, including,
without limitation, instructions for use of the Product and product
specifications, and all inventions, developments, specifications, methods,
supply sources, customer lists, financial and cost information, marketing plans,
manufacturing methods, processes or techniques, treatments and compositions of
materials, plant layout and tooling, technical and engineering data, methods and
reports, and other intellectual property relating to the Product or the business
of Manufacturer which are not generally known or available to others in the
trade.
9.2 Non-Disclosure. Distributor shall (a) hold strictly confidential
all Proprietary Data, (b) limit use of and access to all Proprietary Data to
such of Distributor's employees, agents and independent contractors as must have
such access for the efficient operation of Distributor's business, (c) use such
Proprietary Data only in connection with the sale and service of the Product
under this Agreement and (d) take all such actions, including, without
limitation, instituting legal proceedings and requiring all persons having
access to Proprietary Data by or through Distributor to enter into
non-disclosure agreements, necessary to prevent disclosure or publication of any
of the Proprietary Data by Distributor's present and former employees, agents
and independent contractors. Distributor shall provide to Manufacturer such
information and data, and permit Manufacturer to review and copy all such
agreements, as Manufacturer shall reasonably request in connection with any
investigation of compliance with Distributor's foregoing obligation of
confidentiality.
9.3 Reproduction of Notices. Distributor shall reproduce and include
Manufacturer's patent, copyright, trademark and proprietary data notices with
any copies (in whole or in part) of any Proprietary Data in any form, including,
without limitation, any Product or related material.
9.4 Return of Proprietary Data. Upon termination of this Agreement,
Distributor shall return to Manufacturer all Proprietary Data and shall provide
to Manufacturer a certificate, executed by Distributor's chief executive
officer, to the effect that all documents and materials containing Proprietary
Data have been returned or destroyed.
9.5 Confidential Information of Distributor. Distributor
acknowledges and agrees that Manufacturer is in the business of developing new
applications, new fields of use and new customers for its products and
technology. To insure that Manufacturer is not constrained in its future
activities, Manufacturer does not wish to receive and Distributor agrees not to
provide Manufacturer with any information that Distributor deems confidential.
In the event that
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<PAGE> 11
Distributor wishes to share its confidential information with Manufacturer,
Distributor shall describe the general nature of such information to
Manufacturer and, if Manufacturer wants access to such information, the parties
shall negotiate in good faith a confidentiality and non-disclosure agreement
that pertains specifically to such information.
10. Export; Compliance With Laws. Distributor acknowledges and agrees that
this Agreement does not authorize Distributor to sell Product outside the
Territory. In the event that Manufacturer in the future authorizes Distributor
to sell Product outside the Territory pursuant to Section 6 hereof, Distributor
shall comply with all applicable laws within and without the Territory,
including, without limitation, the export control laws of the United States and
prevailing regulations which may be issued from time to time by the United
States government concerning the exporting, importing and reexporting of the
Product and the direct Product thereof. Without limiting the generality of the
foregoing, Distributor agrees that it shall not export or re-export any Product
or the direct product thereof without the prior written approval of
Manufacturer, which approval may be granted or denied in Manufacturer's sole
discretion. Distributor acknowledges that shipments of the Product are subject
to the export laws of the United States and that such laws could delay or
preclude delivery of Product in the future. Distributor shall also comply with
the United States Foreign Corrupt Practices Act, and shall indemnify the
Manufacturer from any failure to comply or violation of such Act by Distributor.
Distributor shall, at its sole cost and expense, obtain and maintain in effect
all permits, licenses and other consents necessary to the conduct of its
activities hereunder.
11. Distributor's Line of Products; Non-competition. From time to time on
request by Manufacturer, Distributor shall furnish Manufacturer with a list
containing the name and address of each manufacturer for whom Distributor is
acting as a representative, dealer, distributor or sales agent, and of the name
and description of all products of such manufacturer which Distributor currently
sells or markets. Distributor agrees that, during the term of this Agreement, it
will not purchase, market, sell, or offer for sale any product that is
competitive with the Product or assist any third party in doing any of the
foregoing.
12. Indemnification.
12.1 Mutual Indemnification. If notified promptly in writing and
given sole control of the defense and all related settlement negotiations, a
party shall indemnify and hold harmless the other party and its officers,
directors, agents, employees, affiliates, representatives, successors, and
assigns from and against all losses, liabilities, costs and expenses (including,
without limitation, attorneys' fees) arising out of or in connection with the
indemnifying party's negligent or intentionally wrongful acts or omissions
pertaining to the Product and their respective duties under this Agreement.
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<PAGE> 12
12.2 Intellectual Property Indemnification. If notified promptly in
writing and given sole control of the defense and all related settlement
negotiations, Manufacturer will defend Distributor against any claim based on an
allegation that a Product supplied hereunder or the Marks licensed pursuant to
Section 2 hereof infringe a U.S. or applicable foreign (within the Territory)
patent, copyright or trademark. Manufacturer will pay any resulting costs,
damages and attorney's fees finally awarded against Distributor by a court with
respect to any such claims. The foregoing obligation of Manufacturer does not
apply with respect to Product or portions or components thereof (i) made in
whole or in part in accordance with Distributor specifications, (ii) which are
modified by Distributor or Distributor's customer after shipment by
Manufacturer, if the alleged infringement relates to such modification, (iii)
combined by Distributor or Distributor's customer with other products, processes
or materials where the alleged infringement relates to such combination, (iv)
where Distributor continues the allegedly infringing activity after being
notified thereof and after being informed of actions that would have avoided the
alleged infringement, or (v) where the alleged use of the Product is not
strictly in accordance with instructions provided with the Product. If the
Product, or the operation thereof, becomes, or in Manufacturer's opinion are
likely to become, the subject of such a claim, Distributor will obtain
authorization for Manufacturer, at Manufacturer's option and expense, either to
procure the right for Distributor's customers to continue using such Product, or
replace the Product so that they become non-infringing. If neither of the
foregoing alternatives is available on terms that Manufacturer in its sole
discretion deems reasonable, all orders for the Product will be canceled and,
Manufacturer will authorize Distributor's customers to return, at Manufacturer's
expense, such Product on written request to Manufacturer. Manufacturer will
grant Distributor a credit equal to the prices paid by Distributor for such
returned Product, provided that such returned Product is in an undamaged
condition. The foregoing obligation of Manufacturer does not apply with respect
to any Mark used by Distributor after Manufacturer has terminated the license
granted in Section 2 hereof with respect to such Mark. Manufacturer may
terminate the trademark license granted in Section 2 with respect to any Mark in
the Territory or in any portion thereof by providing written notice of such
termination to Distributor, provided that Manufacturer provides such notice to
all similarly situated distributors and ceases its own use of such Mark to the
same extent that it requires Distributor to cease such use. This Section 12.2
sets forth Distributor's sole and exclusive remedies and Manufacturer's entire
liability with respect to intellectual property infringement. Manufacturer shall
have no obligation to Distributor for any suit or other action brought by a
third party with respect to the Product or marks beyond that stated in this
Section 12.
13. Duration of Agreement; Initial Term. This Agreement shall become
effective as of the date first above written upon its execution by both parties
hereto by their authorized representatives and, unless terminated as provided
elsewhere in this Agreement, shall remain in effect for an initial term of
thirty-six (36) months from the receipt by Manufacturer of Distributor's first
order of Product (which shall occur no later than ninety (90) days following
notification that Manufacturer is ready to deliver Product). This Agreement may
be extended for
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*Confidential Treatment Requested
one or more additional terms of two (2) years each by notice in writing to the
Manufacturer from Distributor at least 120 days prior to the expiration of the
then-current term of the Agreement, *
14. Termination of Agreement.
14.1 Termination. Distributor and Manufacturer shall each have the
right to terminate this Agreement upon the giving of at least 120 days prior
written notice to the other party in the event of a material breach by the other
party of any provision of the Agreement, provided that the party asserting such
breach specifies by written notice in reasonable detail the nature of such
breach; further provided that the party asserted to be in breach shall have
fifteen business days to correct the alleged breach from the date of such
notice. If such alleged breach is not so corrected, then this Agreement shall
terminate in accordance with such notice of termination. Manufacturer shall have
the right to terminate this Agreement pursuant to Section 1.1 and Section 1.2
hereof. The Agreement may also be terminated by a party who is deprived of the
benefits of the Agreement by the non-performance of the other party as a result
of a Force Majeure Event that lasts for a period of more than 120 days Upon any
termination of this Agreement other than pursuant to a breach by Distributor or
termination of Distributor for the reasons set forth in Section 14.2,
Manufacturer shall continue to supply Product to Distributor's customers with
respect to which Distributor has a contractual obligation to supply Products
which obligation continues beyond the effective date of termination, provided
that Manufacturer's obligation to supply such Products to Distributor's customer
shall terminate no later than the earlier of (a) one (1) year from the effective
date of termination of this Agreement or (b) one (1) year from the commencement
date of Distributor's supply agreement with its customer; further provided that
this post-termination supply obligation shall not apply to any agreement between
Distributor and a customer that was entered into after receipt by Distributor of
Manufacturer's written notice of its intent to terminate this Agreement.
14.2 Bankruptcy, etc. Either party upon written notice to the other
party may terminate this Agreement at any time in the event the other party
shall make an assignment or trust mortgage for the benefit of its creditors, or
shall file a voluntary petition under the bankruptcy, reorganization, insolvency
or similar laws of any jurisdiction to which it is subject, or shall suffer an
involuntary petition under such laws to be filed against it, or shall be
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adjudicated bankrupt or insolvent, or have an order for relief in bankruptcy
entered concerning it, under the laws of any jurisdiction to which it is
subject.
14.3 No Indemnity for Termination or Expiration. Distributor
acknowledges that this Agreement is for a limited period only. The expiration or
termination of this Agreement at the end of the original term or any renewal
term shall not give rise to the payment of any indemnity, compensation or
damages whatsoever by either party to the other. Without limiting the generality
of the foregoing, Distributor agrees that the expiration of this Agreement or
the termination of this Agreement by either party shall not entitle Distributor
to any termination or severance compensation or to any payment in respect of any
goodwill established by Distributor during the initial term of this Agreement,
or any renewals hereof, or render Manufacturer liable for damages on account of
the loss of prospective profits or on account of any expenditure, investment or
obligation incurred or made by Distributor. Distributor further agrees to make
every effort to minimize its costs and expenses related to this Agreement in the
event this Agreement is terminated or not extended for an additional term.
14.4 Discontinuance of Use of Marks. Upon and following any
expiration or termination of this Agreement in accordance with its terms for any
reason, Distributor shall immediately cease holding itself out as an authorized
distributor for Manufacturer and shall cease using the Marks and any and all
trade names and brand names owned by or associated with the Manufacturer.
15. Notices. Any notice or other communication in connection with this
Agreement shall be in writing and shall be deemed to be duly delivered if sent
to the address first set forth above (or to such other address as the addressee
shall have specified in a notice actually received by the addressor), Attention:
President; and if sent by certified or registered mail, postage prepaid, return
receipt requested, or by DHL or other express courier service., .
16. General.
16.1 Arbitration. In the event a dispute should arise between the
parties with respect to whether either party has performed its obligations
hereunder, the parties agree to use their best efforts to resolve such dispute
through good faith discussions, recognizing their mutual interests. If such
dispute is not resolved within fifteen (15) days of when the dispute arose,
except as otherwise set forth in this Section 16.1 and except for any
differences, disputes or claims that may arise out of or in connection with
Distributor's covenants and agreements in Section 9 hereof and for which
Manufacturer shall seek equitable relief, all differences, disputes or claims
arising out of or in connection with this Agreement or any transaction or
occurrence contemplated hereby shall be finally settled under the Arbitration
Rules of the American Arbitration Association in Boston, Massachusetts, by a
panel of three arbitrators. Within fifteen
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*Confidential Treatment Requested.
(15) days of the date of filing for arbitration by either party, each party
shall select one arbitrator, and within fifteen (15) days of their selection,
the two arbitrators so selected shall select a third neutral arbitrator. The
arbitration hearing shall occur within thirty (30) days of the selection of the
panel of arbitrators. All decisions shall be made by a majority of the
arbitrators, and the parties shall request that they render their decision
within thirty (30) days of the completion of the hearing. The arbitration
decision shall be in writing, shall be binding on both parties, and shall be
unappealable. All costs of the arbitration shall be borne by the losing party,
provided, however, that each party shall bear the expense of its own counsel,
experts and witnesses. The arbitrators shall not be empowered to award punitive
or multiple damages. The arbitrators' award, which may include an award of
damages, may be entered in any court having jurisdiction.
16.2 Force Majeure. In the event that, from time-to-time during the
term of this Agreement, orders submitted by Distributor and other persons for
Product manufactured by Manufacturer exceed Manufacturer's capacity to fill all
such orders in accordance with the terms and conditions of this Agreement (an
"Overutilization Period"), Manufacturer agrees to allocate to Distributor at
least * of its manufactured Product during the duration of
the Overutilization Period. Neither party shall be responsible for and the terms
of this Agreement shall be inapplicable to any defaults or delays (other than
payment defaults or delays) which are due to unforeseen causes beyond such
party's control when acting in good faith and with due diligence (each, a "Force
Majeure Event"), including, without limitation, the following, to the extent
beyond the reasonable control of the defaulting or delaying party seeking relief
under this provision: occurrence of any war and war measures (whether an actual
declaration thereof is made or not), sabotage, insurrection, riot or other act
of civil disobedience, act of a public enemy, force majeure, flood, storm or
other acts of God, acts of public authorities or courts, government orders and
requirements, strikes, lockouts, fires, explosions, natural disasters, shortages
of labor, fuel, raw materials or machinery or failures or delays of suppliers or
carriers. In the event that a Force Majeure Event is likely to result in any
failure or delay in the performance of such party's (an "Affected Party")
obligations under this Agreement, the Affected Party shall promptly inform the
other party (the "Nonaffected Party") of the occurrence of such Force Majeure by
telefax and confirm the same by written notice to the Nonaffected Party
delivered by registered letter (return receipt requested) to the address of the
Nonaffected Party first set forth above.
The Affected Party shall, following the occurrence of any Force
Majeure Event, thereafter undertake to use its best efforts to cure or remove
the Force Majeure Event as promptly as possible and limit damages to the
Nonaffected Party resulting from such Force Majeure Event as far as reasonably
possible, provided, that, neither party shall be liable for any cost, expense,
loss or other damages incurred by the other party by reason of any failure or
delay in performance under this Agreement occasioned by the occurrence of a
Force Majeure Event; provided, further that, Distributor shall in all
circumstances during the occurrence of a Force
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*Confidential Treatment Requested.
Majeure Event receive at least * of Manufacturer's output of Product up to the
amount ordered from time-to-time pursuant to Non-Cancelable Orders.
Declaration of a Force Majeure Event by Manufacturer that affects
the amount of Product shipped under Distributor's orders shall at Distributor's
option suspend Distributor's obligations and the rights of Manufacturer under
this Agreement relating to minimum weekly purchase amounts for all purposes
(including any obligations to purchase the Weekly Minimum Amounts, Weekly
Exclusivity Amounts and any rights of Manufacturer to terminate, fail to renew
or render non-exclusive this Agreement) for so long as such Force Majeure Event
remains in effect and for so long as the effects of such Force Majeure Event are
reflected in the marketplace, at the conclusion of which period such rights and
obligations shall recommence and the dates and deadlines set forth in this
Agreement shall be extended accordingly.
Notwithstanding the foregoing, in no event shall the occurrence of a
Force Majeure Event excuse the timely payment of monies owed pursuant to this
Agreement.
16.3 Construction of Agreement; Language. This Agreement shall be
governed by, and construed and enforced in accordance with, and the relations of
the parties shall be determined in accordance with, the substantive laws of The
Commonwealth of Massachusetts without regard to its principles of conflicts of
laws.
16.4. Survival of Provisions. Distributor agrees that the provisions
of Sections 7, 8, 9, 10, 12, the last sentence of 14.1, 14.3, 14.4, 15 and 16
shall survive the expiration or earlier termination of this Agreement for any
reason.
16.5 Prior Agreements. This Agreement (including, without
limitation, the Exhibits hereto) contains the entire agreement between the
parties concerning the subject hereof and supersedes all prior agreements and
understandings, written or oral, between them concerning such subject matter.
16.6 Non-Waiver and Amendment. This Agreement and the warranties,
representations and agreements contained herein may not be waived, modified or
amended, in whole or in part, except by written agreement executed by authorized
officers of the two parties, and no course of dealing or failure or delay by
Manufacturer shall constitute a waiver hereunder.
16.7 Severability. In the event that any provision of this Agreement
shall be determined to be unenforceable by any court of competent jurisdiction
by reason of its extending for too great a period of time or over too large a
geographic area or over too great a range of activities, it shall be interpreted
to extend over a maximum period of time, geographic area or range of activities
as to which it may be enforceable. If any provision of this Agreement or any
part thereof shall be found to be invalid, illegal or otherwise unenforceable by
a court of
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* Confidential treatment requested
competent jurisdiction, such provision shall to such extent be deemed null and
void and severed from this Agreement, and the remainder of the Agreement shall
remain in full force and effect.
16.8 ASSIGNMENT, ACQUISITION AND BENEFITS. Neither this Agreement nor
any interest in it shall be assigned directly or indirectly by either party
without the prior written consent of the other party, which consent may be
withheld for any reason. Notwithstanding the foregoing, in the event that the
Manufacturer is acquired, either through merger of acquisition of all of its
equity or substantially all of its assets by a third party, this Agreement may
be assigned by Manufacturer to its successor without the requirement of
obtaining Distributor's consent to such assignment. In the event of such a
transaction, Distributor, at its sole option, may require that this Agreement be
assigned to Manufacturer's successor in which case Manufacturer's successor
shall agree in writing to be bound by this Agreement and shall assume all of
Manufacturer's obligations hereunder and Manufacturer (if it survives such
transaction) shall be released from this Agreement and shall have no rights or
obligations hereunder. Subject to the foregoing provisions of this Section 16.8
this Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective legal representatives, successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
a contract under seal as of the date first above written.
MED-TEC IOWA, INC. IMPLANT SCIENCES CORPORATION:
By: /s/ Michael J. Richards By: /s/ Anthony J. Armini
------------------------- ---------------------------------------
Michael J. Richards Anthony J. Armini
Its Chairman of the Board Its President and Chief Executive Officer
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EXHIBIT A
Minimum Purchases; Seed Ramp Up Plan; Production Capacity
* Confidential Treatment Requested
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* Confidential Treatment Requested
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EXHIBIT B
Price Schedule
* Confidential Treatment Requested
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EXHIBIT C
Trademarks
I-Plant
Implant Sciences
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EXHIBIT 10.53
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is by and between Implant Sciences Corporation (the
"Company"), a Massachusetts corporation with its office at 107 Audubon Road #5,
Wakefield, Massachusetts 01880, and MED-TEC Iowa, Inc., an Iowa corporation with
its office at 1401 8th Street, Orange City, Iowa, 51041, (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement and
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
SECTION 1. Authorization of Shares. The Company has authorized (a) the
sale of 500,000 shares (the "Shares") of the Company's Common Stock, par value
$.10 per share (the "Common Stock").
SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing (as
defined below) the Company will issue and sell to the Purchaser, and the
Purchaser will buy from the Company, upon the terms and conditions hereinafter
set forth, the Shares at the price of $6.00 per share (the "Per Share Purchase
Price"), for an aggregate consideration of $3,000,000 (the "Purchase Price").
SECTION 3. Payment of Purchase Price. On or prior to the Closing Date, as
defined below, the Purchaser will deliver to the Company the full amount of the
Purchase Price by check or wire transfer.
SECTION 4. The Closing. The consummation of the transactions contemplated
by this Agreement (the "Closing") shall occur on March 2, 2000 (the "Closing
Date") or at such other time as shall be agreed by the Company and the
Purchaser. At the Closing, the Company shall deliver to the Purchaser one or
more certificates for the Shares registered in the name of the Purchaser or its
nominee.
SECTION 5. Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants to, and covenants with, the Purchaser as
follows:
5.1. Organization. The Company is duly organized, validly existing
and in good standing under the laws of The Commonwealth of Massachusetts. The
Company has full power and authority to own and operate its properties and to
conduct its business as currently conducted and is registered or qualified to do
business and is in good standing in each jurisdiction in which it owns or leases
property or transacts business and where the failure to be so qualified would
have a material adverse effect upon the business, financial condition,
properties or operations of the Company.
5.2. Due Authorization. The Company has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement,
and this Agreement has been duly authorized and validly executed and delivered
by the Company and constitutes the
<PAGE> 2
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. Non-Contravention. The execution and delivery of this
Agreement, the issuance and sale of the Shares to be sold by the Company
hereunder, and the consummation of the transactions contemplated hereby will not
conflict with or constitute a violation of, or default (with the passage of time
or otherwise) under, any material agreement or instrument to which the Company
is a party or by which it is bound or the Articles of Organization (the
"Charter") or the By-Laws of the Company nor result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction
whatsoever upon any of the material properties or assets of the Company or an
acceleration of indebtedness pursuant to any obligation, agreement or condition
contained in any material bond, debenture, note or any other evidence of
indebtedness or any material indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company is subject,
nor conflict with, or result in a violation of, any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company. The offer, sale and issuance of
the Shares in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act and from the registration or qualification requirements of the
laws of any applicable state or United States jurisdiction, except for required
Form D and Blue Sky filings which shall be made by the Company after the Closing
Date.
5.4. Capitalization, Issuance and Delivery The authorized and
outstanding capital stock of the Company and rights to acquire capital stock of
the Company are as set forth on Exhibit A hereto or in the SEC Filings (as
hereafter defined)Except as set forth in Exhibit A or in the SEC Filings, there
are no outstanding shares of, no warrants, options or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into any shares of capital stock of the Company. All of
the above securities of the Company were issued in compliance with all
applicable federal and state securities laws and were not issued in violation of
or subject to any preemptive rights or other rights to subscribe for or purchase
securities.. The Shares have been duly authorized, and when issued, paid for and
delivered in accordance with the terms of this Agreement, will be duly and
validly issued and delivered, fully paid and nonassessable and free and clear of
all pledges, liens, encumbrances and restrictions, except as disclosed in the
SEC Filings. No preemptive rights, or other rights to subscribe for or purchase,
or adjust exercise or conversion prices or make other anti-dilution adjustments,
exist with respect to the issuance or sale of the Shares by the Company pursuant
to this Agreement. No further approval or authority of the stockholders or Board
of Directors of the Company will be required for the issuance and sale of the
Shares to be sold by the Company as contemplated herein.
5.5. Legal Proceedings. Except as disclosed in the SEC Filings (as
defined in Section 5.10 below), there is no material legal or governmental
proceeding pending or, to the
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knowledge of the Company, threatened or contemplated to which the Company is or
may be a party or of which the business or property of the Company is or may be
subject.
5.6. No Violations. Except as disclosed in the SEC Filings under
the heading Legal Proceedings, the Company is not in violation of its Charter or
By-Laws, in violation of any law, administrative regulation, ordinance or order
of any court or governmental agency, arbitration panel or authority applicable
to the Company, which violation, individually or in the aggregate, would have a
material adverse effect on the business or financial condition of the Company,
or in default in any material respect in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness in any indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company is a party or by which the Company
is bound or by which the properties of the Company are bound or affected, and
there exists no condition which, with the passage of time or the giving of
notice or both, would constitute a material default under any such document or
instrument or result in the imposition of any material penalty or the
acceleration of any indebtedness.
5.7. Governmental Permits, Etc. Except as disclosed in the SEC
Filings, the Company has all necessary franchises, licenses, certificates and
other authorizations from any foreign, federal, state or local government or
governmental agency, department, or body that are currently necessary for the
operation of the business of the Company as currently conducted, the absence of
which would have a material adverse effect on the business or operations of the
Company.
5.8.Financial Statements; Properties Except as disclosed in the SEC
Filings, the financial statements of the Company and the related notes contained
in the SEC Filings present fairly the financial position of the Company as of
the dates indicated therein and its results of operations and cash flows for the
periods therein specified. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods therein
specified and are true, correct and complete in all respects. The Company has
good and marketable title to all the properties, with the exception of property,
plant and equipment pledged under the equipment term loans as reported in the
SEC Filings, to all the properties and assets reflected as owned by it in the
financial statements included in the SEC Filings, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except (i) those, if any, reflected in
such financial statements, or (ii) those which are not material in amount and do
not adversely affect the use made and promised to be made of such property by
the Company. The Company and any applicable subsidiary hold its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company.
5.9. No Material Adverse Change. Since December 31, 1999, the
Company has not incurred any material liabilities or obligations, direct or
contingent, other than in the ordinary course of business, and there has not
been any material adverse change in its business, financial condition or results
of operations.
5.10. Additional Information. The Company has filed in a timely
manner all documents that the Company was required to file under the Securities
Exchange Act of 1934, as
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amended (the "Exchange Act") during the 12 months preceding the date of this
Agreement. As of their respective filing dates, all documents filed by the
Company with the United States Securities and Exchange Commission (collectively,
the "SEC Filings") complied in all material respects with the requirements of
the Exchange Act or the Securities Act of 1933 (the "Securities Act"), as the
case may be, and all the rules and regulations thereunder and the information
contained therein was true and correct in all material respects as of the date
or effective date of such documents, and each of the SEC Filings as of the date
thereof did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5.11. Intellectual Property. The Company has the right to use all
intellectual property (the "Intellectual Property") now used by it in its
business. The Company owns or has right to use all right, title and interest in
and to, all of the intellectual property that is used in or necessary for the
conduct of its business as described in the SEC Filings, free and clear of any
liens or encumbrances or restrictions. In any case in which the Company does not
own the Intellectual Property, it has good and valid licenses for the same which
are in full force and effect. No claims have been asserted with respect to the
use of any such Intellectual Property or challenging or questioning the validity
or effectiveness of any such license or agreement and to the best knowledge of
the Company, it is not infringing on any rights of others.
5.12 Transfer Taxes. On the Closing Date, all stock transfer or
other taxes which are required to be paid in connection with the sale and
transfer of the Shares to be sold to the Purchaser hereunder will be, or will
have been, fully paid and provided for by the Company.
5.13 Insurance. The Company maintains insurance of the types and in
the amounts generally deemed adequate for its business and all such insurance is
in full force and effect.
5.14 Representations Complete. None of the representations or
warranties made by the Company in this Section 5, nor any statement made in any
schedule or certificate furnished by the Company pursuant to this Agreement
contains or will contain at the Closing, any untrue state of a material fact, or
omits or will omit at the Closing to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
SECTION 6. Representations, Warranties and Covenants of the Purchaser.
6.1 The Purchaser represents and warrants to, and covenants with,
the Company, as of the date hereof and as of the Closing Date, that: (i) the
Purchaser is an "accredited investor" as defined in Rule 501 of Regulation D
promulgated under the Securities Act; (ii) the Purchaser is acquiring the Shares
for its own account for investment and with no present intention of distributing
any of such Shares other than to any affiliate of the Purchaser; (iii) the
Purchaser will not, directly or indirectly, voluntarily offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares, except in compliance
with the Securities Act and the rules and regulations
-4-
<PAGE> 5
promulgated thereunder; (iv) the Purchaser has received and reviewed copies of
the SEC Filings, (v) the Purchaser has had an opportunity to ask questions and
receive answers from the management of the Company regarding the Company, its
business and the offering of the Shares; and (vi) the Purchaser has, in
connection with its decision to purchase Shares, relied solely upon the
documents described in Section 5.10 and the representations and warranties of
the Company contained herein.
6.2 The Purchaser agrees not to make any sale of the Shares except
pursuant to an effective registration statement under the Securities Act or an
exemption from the registration requirements thereof.
6.3 The Purchaser further represents and warrants to, and covenants
with, the Company that (i) the Purchaser has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
6.4 The Purchaser represents that it understands and agrees that,
until registered under the Securities Act or transferred pursuant to the
provisions of Rule 144 promulgated thereunder, all certificates evidencing the
Shares, whether upon initial issuance or upon any transfer thereof, shall bear a
legend, prominently stamped or printed therein, reading substantially as
follows:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or the securities laws of any state.
These securities have been acquired for investment and not with a view
toward distribution or resale. Such securities may not be offered for
sale, sold, delivered after sale, transferred, pledged or hypothecated in
the absence of an effective registration statement covering such
securities under the Act and any applicable state securities laws, unless
the holder shall have obtained an opinion of counsel reasonably
satisfactory to the Company that such registration is not required."
SECTION 7. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser set forth in section 5 and 6 shall survive the execution of this
Agreement, the delivery to the Purchaser of the Shares being purchased and the
payment therefor for a period of eighteen (18) months; provided that the
representations, warranties and covenants as set forth in Sections 5.1 through
and including 5.4 and 5.12 shall survive without limitation.
-5-
<PAGE> 6
SECTION 8. Registration Statement. On the earlier to occur of (a) the next
filing by the Company of a registration statement on Form S-3 providing for the
resale of its securities by security holders of the Company or (b) one year
following the date hereof, provided that the Purchaser has made a demand in
writing for the public offering of all or any portion of the Shares and any
shares of Company Common Stock issued in connection with Section 10 hereof
(collectively, the "Registrable Shares"), the reasonable anticipated aggregate
offering price of which would exceed $500,000, the Company shall file with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 (the "Registration Statement"), which may include other selling
stockholders, providing for the resale of the Registrable Shares by the
Purchaser from time to time in accordance with Rule 415 promulgated under the
Securities Act of 1933, as amended, provided that the Company shall not be
required to effect a registration pursuant to this Section 8 more than once in
any twelve month period. After the Registration Statement becomes effective, the
Company shall use its best efforts to keep the Registration Statement effective
until the time all the Registrable Shares have been sold pursuant to the
Registration Statement. The Company shall furnish to the Purchaser such number
of copies of the prospectus contained in the Registration Statement as the
Purchaser shall reasonably require to facilitate the public sale of the
Registrable Shares. The Company shall bear all expenses (exclusive of
underwriting discounts and commissions) of the registration of the Registrable
Shares, including the expense of one special counsel to the Purchaser in an
amount not to exceed $15,000. In addition, the Purchaser shall have piggyback
registration rights for the Shares anytime the Company shall register shares for
sale on its behalf in a capital raising transaction. These rights shall be
subject to underwriters cutbacks. Notwithstanding the foregoing, the
registration rights granted pursuant to this Section 8 shall terminate three (3)
years from the Closing Date.
SECTION 9. Lockup Agreements with Underwriters. In the event of an
underwritten public offering of the Company's securities, the Purchaser agrees
to enter into an agreement with the Underwriter or Underwriters' Representative
for such offering restricting the sale, transfer or other disposition of the
Shares, to the extent that such agreement is required to be executed by members
of senior management of the Company or for 180 days whichever is shorter.
SECTION 10. Anti-Dilution Rights.
10.1 Future Financings. If, on or before, the one year anniversary
of the Closing Date, the Company issues or sells any Company Equity (as defined
below) in a capital raising financing, (a "Qualified Transaction"), for a
consideration per share less than the Per Share Purchase Price, then, forthwith
upon such issue or sale, the Per Share Purchase Price of the Shares purchased
hereunder shall be reduced to the price determined by dividing (a) an amount
equal to the sum of (i) the Company Equity outstanding immediately prior to the
Qualified Transaction multiplied by the Per Share Purchase Price plus (ii) the
aggregate consideration received by the Company in the Qualified Transaction for
such new shares, by (b) the total number of shares of Company Equity outstanding
immediately after the Qualified Transaction, (the "Adjusted Per Share Purchase
Price"), and the Purchaser shall be entitled to receive a number of shares of
Common Stock of the Company equal to (a) the Purchase Price divided by the
Adjusted Per Share Purchase Price minus (b) the Shares. For the purposes hereof
"Company
-6-
<PAGE> 7
Equity" shall mean the Common Stock of the Company, or any stock or security
convertible into Common Stock, including without limitation warrants, options or
other rights to subscribe for or to purchase Common Stock or any stock or
security convertible into or exchangeable for Common Stock, whether or not such
warrant, option or right to subscribe, convert or exchange is then exercisable.
10.2 Certain Issues of Common Equity Excepted. Anything herein to
the contrary notwithstanding, the Company shall not be required to make any
adjustment of the Purchase Price in the case of (i) any outstanding Company
Equity on the date hereof, (ii) any Company Equity issued after the date hereof,
consistent with past practices of the Company which is not issued in a Qualified
Transaction (including without limitation warrants or options issued to
employees, Directors, medical advisory board members or consultants of the
Company), or (iii) such additional Company Equity as is approved in writing by
the Purchasers.
10.3 Fractional Shares. No fractional shares shall be issued upon
exercise of the anti-dilution rights set forth in this Section 10. In lieu of
delivering any such fractional share, the Company shall pay to the Purchaser an
amount in cash equal to the market price of such fractional share on the date of
the dilutive event triggering rights under this Section.
SECTION 11. Director Nominee. So long as Purchaser holds at least 13% of
the total voting power of the Company Equity (as defined above), Purchaser shall
have the right to designate one nominee (the "Purchaser Nominee") for election
as a Director of the Company at any and all meetings of stockholders of the
Company at which directors are to be elected or removed. So long as Purchaser
has the right to designate a Purchaser Nominee, the Company shall notify
Purchaser of any meeting of stockholders of the Company at which Directors are
to be elected prior to filing materials with the Securities and Exchange
Commission relating to such meeting. If Purchaser fails to designate the
Purchaser Nominee, the Company may nominate a person to stand for election in
place of the Purchaser Nominee to serve as a director until the next election of
directors.
SECTION 12. Conditions to Closing.
12.1 The obligations of the Purchaser to consummate the
transactions contemplated hereby shall be subject to the satisfaction by the
Company of each of the following conditions on or before the Closing Date, any
one or more of which may be waived in writing by the Purchaser:
(a) The representations and warranties of the Company set
forth in this Agreement delivered to the Purchaser by or on behalf of the
Company shall be true and correct as if made on the Closing Date.
(b) Each of the covenants, agreements and conditions to be
performed and satisfied by the Company pursuant to this Agreement at or prior to
Closing shall have been duly performed and satisfied.
-7-
<PAGE> 8
(c) Purchaser shall have received from Foley, Hoag & Eliot
LLP, counsel to the Company, an opinion dated the Closing Date, in form and
scope satisfactory to the Purchaser and its counsel with respect to the due
authorization of the transactions contemplated hereby, the valid issuance of the
Shares, exempt from registration and such other matters as are reasonable and
customary in the transactions contemplated hereby.
(d) At the request of Purchaser, the Company shall have
delivered to Purchaser such other certificates, instruments and documents as are
reasonable and customary in the transactions contemplated hereby.
13.2 The obligations of the Company to consummate the transactions
contemplated hereby shall be subject to the satisfaction by the Purchaser of
each of the following conditions on or before the Closing Date, any one or more
of which may be waived in writing by the Company:
(a) The representations and warranties of the Purchaser set
forth in this Agreement shall be true and correct as if made on the Closing
Date.
(b) Each of the covenants, agreements and conditions to be
performed and satisfied by the Purchaser pursuant to this Agreement at or prior
to Closing shall have been duly performed and satisfied.
(c) The Purchaser shall have paid the Purchase Price in
accordance with Section 3.
SECTION 13. No Brokers. The parties hereto hereby represent that there are
no brokers or finders entitled to compensation in connection with the
transactions contemplated hereby.
SECTION 14. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified mail, postage prepaid, and shall be deemed given when so
mailed:
(a) if to the Company to:
Implant Sciences Corporation
107 Audubon Road, #5
Wakefield, MA 01880
Attention: Chief Executive Officer
With a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02128
Attention: David A. Broadwin, Esq.
-8-
<PAGE> 9
(b) if to the Purchaser, at its address as set forth at the end of this
Agreement, or at such other address or addresses as may have been furnished to
the Company in writing.
SECTION 15. Termination. Either party to this Agreement may terminate this
Agreement upon written notice to the other at any time prior to the Closing.
SECTION 16. Changes. Any term of the Agreement may be amended or
compliance therewith waived with the written consent of the Company and the
holders of a majority of the Shares purchased hereunder.
SECTION 17. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 18. Severability. If any provision contained in this Agreement
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of The Commonwealth of
Massachusetts.
SECTION 20. Counterparts. This Agreement may be executed in two
counterparts, each of which shall constitute an original, but both of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
***
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be executed by their duly authorized representatives as of the following
date.
Dated: March 2, 2000 IMPLANT SCIENCES CORPORATION
By: /s/ Anthony J. Armini
--------------------------------------
Anthony J. Armini
President and Chief Executive Officer
MED-TEC Iowa, Inc.
By: /s/ Michael J. Richards, M.D.
--------------------------------------
Michael J. Richards, M.D.
Chairman of the Board
-9-
<PAGE> 10
EXHIBIT A
Implant Sciences Corporation
Capitalization as of March 2, 2000
AMEX Total Shares Outstanding
Issue Symbol: IMX, IMX.WS
-----------
Common Stock 5,208,082
Stock Option Issued 386,690
Warrants 1,252,440
-10-
<PAGE> 1
EXHIBIT 10.54
RESEARCH AND DEVELOPMENT AGREEMENT
THIS RESEARCH AND DEVELOPMENT AGREEMENT (this "Agreement"), dated March
13, 2000, by and between Implant Sciences Corporation, a Massachusetts
corporation ("Implant"), and CardioTech International, Inc., a Massachusetts
corporation ("CardioTech"),
W I T N E S S E T H T H A T:
WHEREAS, the parties hereto desire to develop polymer covered or coated
vascular stents (the "Stents") utilizing proprietary technologies of each party;
WHEREAS, CardioTech is willing to grant to Implant a perpetual worldwide
exclusive license to use, sublicense and otherwise deal in any technology
developed by CardioTech in connection with the development of the Stents;
WHEREAS, Implant is willing to provide Up to $250,000 in research and
development and equity financing for the development of the Stents on the terms
and conditions set forth herein; and
WHEREAS, CardioTech is willing to sell 100,000 shares of its common stock,
$.01 par value per share ("Common Stock"), to Implant at $1.00 per share as set
forth herein;
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Financing and Purchase of Common Stock. Upon execution of this
agreement, Implant shall make the $10,000 payment required for Phase 1 set forth
on Schedule A hereto. Thereafter, subject to CardioTech's performance of its
obligations hereunder and the right of the parties to terminate this Agreement,
Implant shall make the payments set forth on Schedule A for Phases 2 through 6.
CardioTech shall perform the services and deliver the deliverables set forth on
Schedule A within the time periods set forth on Schedule A.
Contemporaneously with the receipt of the payments for each of Phase 4, 5
and 6, CardioTech shall issue to Implant 40,000, 40,000 and 20,000 shares of
Common Stock, respectively. CardioTech shall reserve for issuance in accordance
with the Agreement, 100,000 shares of Common Stock, and, upon receipt of payment
therefore in accordance with this Agreement, such shares shall be duly and
validly issued, fully paid and nonassessable. Implant acknowledges that the
certificates representing such shares shall bear a legend indicating that the
shares have not been registered under the Securities Act of 1933, as amended.
<PAGE> 2
2. Licenses.
(a) CardioTech hereby grants to Implant a perpetual, worldwide,
royalty free license, except as defined in Section 3.0, to use any and all
technology specifically developed by CardioTech for use in the manufacture or
coating of the Stents. CardioTech hereby agrees to execute and deliver any and
all additional documentation Implant reasonably deems necessary or desirable to
transfer to Implant the rights set forth in this Section 3.
3. Sales of Stents. Implant and CardioTech agree, that upon completion of
the research and development contemplated by this Agreement, they will negotiate
and enter into an agreement pursuant to which Implant will have the exclusive
right to manufacture and sell the Stents and Implant will pay CardioTech a
royalty of between 3% and 5% of actual quarterly receipts. Should Implant
decline to sell the Stents, the right to sell the Stents shall transfer to
CardioTech. CardioTech will pay Implant a royalty of between 3% and 5% of actual
quarterly receipts.
In addition, CardioTech will coat the Stents and Implant will pay
CardioTech the lesser of $50 per stent or CardioTech's actual cost per stent
plus a twenty five percent (25%) profit for CardioTech's coating services. If
CardioTech's costs plus profit exceed $50 per stent, Implant will have the right
to coat the Stents itself and CardioTech shall cooperate fully in the transfer
of all technology and know how necessary or desirable for Implant to do so.
3.1 Territory. Implant shall have to rights to sell the Stents in all
countries except those exempted by U.S. law.
4. FDA Approval. Implant and CardioTech shall cooperate in good faith to
obtain FDA approval for the Stents. Such cooperation shall include negotiating
in good faith to arrive at an agreement for the financing and management of any
FDA trials and submissions.
5. Representations of Implant. Implant represents and warrants to
CardioTech that:
(a) Implant has the power and authority to enter into this Agreement and
perform its obligations hereunder. The execution, delivery and performance of
this Agreement have been approved by all requisite corporate action and, in
particular, has been approved by all of the Directors of Implant that are not
affiliated with CardioTech. The execution, delivery and performance of this
Agreement by Implant will not violate or constitute a breach of the charter or
bylaws of Implant or any material agreement to which Implant is a party. Implant
either owns or has sufficient right to use all technology and intellectual
property proposed to be used in the development of the Stents (other than
technology or intellectual property or rights thereon to be provided by
CardioTech) so that the use of such technology and intellectual property will
not violate or infringe upon the rights of any third party.
(b) CardioTech has the power and authority to enter into this Agreement
and perform its obligations hereunder. The execution, delivery and performance
of this Agreement have been approved by all requisite corporate action on the
part of CardioTech and, in particular,
2
<PAGE> 3
has been approved by all of the Directors of CardioTech that are not affiliated
with Implant. The execution, delivery and performance of this Agreement by
CardioTech will not violate or constitute a breach of the charter or bylaws of
CardioTech or any material agreement to which CardioTech is a party. CardioTech
either owns or has sufficient right to use all technology and intellectual
property proposed to be used in the development of the Stents (other than
technology or intellectual property or rights thereon to be provided by Implant)
so that the use of such technology and intellectual property will not violate or
infringe upon the rights of any third party.
6. Term and Termination.
(a) This Agreement shall continue in full force and effect until
termination in accordance herewith or (b) one year after the completion of the
research and development process set forth in Schedule A hereto.
(b) Subject to the second sentence of this clause (b), this Agreement may
be terminated by: (i) mutual agreement of the parties hereto, (ii) any party
that is not in material breach hereof upon thirty day's prior written notice to
the other party if such other party is in material breach of any provision of
this Agreement. The provisions of Sections 2 [licenses] and 7 [indemnification]
shall survive termination of this Agreement.
7. Indemnification. Each party hereto agrees to indemnify and hold
harmless the other party hereto against any losses, costs, and or damages
(including reasonable legal fees) incurred by such party as a result of the
failure or inaccuracy of any representation, warranty, covenant or agreement of
the indemnifying party.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified mail, postage prepaid, and shall be deemed given when so mailed:
(a) if to Implant to:
Implant Sciences Corporation
107 Audubon Road, #5
Wakefield, MA 01880
Attention: Chief Executive Officer
With a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02128
Attention: David A. Broadwin, Esq.
(b) if to CardioTech to:
3
<PAGE> 4
CardioTech International
78-E Olympia Avenue
Woburn, MA 01801-2057
Attention: Michael Szycher, Ph.D
9. Changes. Any term of the Agreement may be amended or compliance
therewith waived only with the written consent of the parties hereto.
10. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
11. Severability. If any provision contained in this Agreement shall be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts.
13. Counterparts. This Agreement may be executed in two counterparts, each
of which shall constitute an original, but both of which, when taken together,
shall constitute but one instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered to the other
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
IMPLANT SCIENCES CORPORATION
By: /s/ Anthony J. Armini 3-13-00
---------------------------------------
Anthony J. Armini
Chairman of the Board and CEO
CARDIOTECH INTERNATIONAL, INC.
By: /s/ Michael Szycher 3-13-00
---------------------------------------
Michael Szycher, Ph.D
Chairman of the Board and CEO
4
<PAGE> 5
SCHEDULE A
COOPERATIVE RESEARCH PROGRAM
<TABLE>
<CAPTION>
PHASE IDENTIFICATION DESCRIPTION COST EST. TIME
<S> <C> <C> <C> <C>
1 Design equipment (to be Lathe $10K (payed 1 month
fabricated at IMX and Movable Doctor blade upon
installed at CTE) Water sprayer program
Teflon mandrels start)
2 Make prototypes Deliver 6 covered $25K (payed 1 month
(solid PU) stents with solid 10 days after
polyurethane delivery)
3 Make prototypes Deliver 3 prototypes $25K (payed 1 month
(solid PU) with smooth inner 10 days after
walls delivery)
4 Make Heparinized Develop techniques $75K 1 month
prototypes (solid PU) of heparinizing ($35K for
with smooth inner inner wall, using prototypes,
walls PolyBiomed method. $40K to
Test emzymatic purchase
activity. Deliver shares)
3 prototypes.
5 Make prototypes Deliver 3 prototypes $75K 1 month
(microporous PU) ($35K for
prototypes,
$40K to
purchase
shares)
6 Make prototypes Deliver 3 prototypes $40K 1 month
(microporus PU) ($20K for
with smooth inner prototypes,
walls $20K to
purchase
shares
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INCOME
STATEMENT, BALANCE SHEET AND CASH FLOW AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001068874
<NAME> IMPLANT SCIENCES
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 6,239,699
<SECURITIES> 0
<RECEIVABLES> 906,712
<ALLOWANCES> 8,720
<INVENTORY> 46,138
<CURRENT-ASSETS> 7,291,480
<PP&E> 3,468,091
<DEPRECIATION> 980,804
<TOTAL-ASSETS> 10,069,898
<CURRENT-LIABILITIES> 1,339,855
<BONDS> 0
0
0
<COMMON> 570,808
<OTHER-SE> 7,662,411
<TOTAL-LIABILITY-AND-EQUITY> 10,069,898
<SALES> 3,098,256
<TOTAL-REVENUES> 3,098,256
<CGS> 4,862,604
<TOTAL-COSTS> 4,862,604
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142,317
<INCOME-PRETAX> (1,627,875)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,627,875)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,627,875)
<EPS-BASIC> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
