<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d) of
- --------- the Securities Exchange Act of 1934
For Quarterly period ended March 31, 1995 or
-----------------------------------
_________ Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File Number 1-9899
--------------------------
MedChem Products, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2471310
- -------------------------------------------------------------------------------
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
232 West Cummings Park, Woburn, MA. 01801
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 932-5900
----------------------------
- -------------------------------------------------------------------------------
(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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On May 1, 1995, 10,242,089 shares of common stock, par value $0.01 per share,
were outstanding.
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MEDCHEM PRODUCTS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Balance Sheets as of, March 31, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------
(Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $163,400 $157,591
Accounts receivable 4,359,465 4,032,487
Inventories 10,274,334 10,739,786
Prepaid expenses and other current assets 1,519,255 1,494,811
- -----------------------------------------------------------------------------------------------------
Total current assets 16,316,454 16,424,675
- -----------------------------------------------------------------------------------------------------
Property, plant and equipment 13,030,797 12,466,151
Less accumulated depreciation and amortization 3,197,845 3,021,975
- -----------------------------------------------------------------------------------------------------
Net property, plant and equipment 9,832,952 9,444,176
- -----------------------------------------------------------------------------------------------------
Note receivable - Anika Research, Inc. 1,000,000 1,000,000
Cost in excess of net assets of businesses acquired 35,521,949 35,887,747
Intangible and other assets 15,975,579 16,274,010
- -----------------------------------------------------------------------------------------------------
Total Assets $78,646,934 $79,030,608
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,903,613 $2,679,607
Accrued expenses 2,814,049 3,370,893
Note payable - Life Medical Sciences, Inc. 0 1,000,000
Current installments of long term debt 2,000,000 2,000,000
- -----------------------------------------------------------------------------------------------------
Total current liabilities 6,717,662 9,050,500
- -----------------------------------------------------------------------------------------------------
Deferred income taxes 616,944 626,809
Long-term debt, excluding current installments 12,000,000 11,000,000
Convertible subordinated debt 4,103,204 4,103,204
- -----------------------------------------------------------------------------------------------------
Total liabilities 23,437,810 24,780,513
- -----------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, $.01 par value: authorized 1,000,000
shares; no shares issued and outstanding - -
Common stock, $.01 par value: authorized
20,000,000 shares; issued 11,262,291 and 11,213,536
shares, respectively 112,623 112,135
Additional paid-in capital 37,646,273 37,493,085
Retained earnings 26,025,370 25,220,017
- -----------------------------------------------------------------------------------------------------
63,784,266 62,825,237
Treasury stock, 1,024,702 shares, at cost (8,575,142) (8,575,142)
- -----------------------------------------------------------------------------------------------------
Total stockholders' equity 55,209,124 54,250,095
- -----------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $78,646,934 $79,030,608
=====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
MEDCHEM PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended
------------------
March 31, 1995 March 31, 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $9,421,270 $7,933,510
Cost of sales 3,019,038 2,538,723
- --------------------------------------------------------------------------------------------------
Gross profit 6,402,232 5,394,787
Operating expenses:
Research and development 602,752 178,181
Selling, general and administrative 3,610,236 2,857,483
Depreciation and amortization 646,787 610,655
- --------------------------------------------------------------------------------------------------
Total operating expenses 4,859,775 3,646,319
Income from operations before interest and income taxes 1,542,457 1,748,468
Interest expense, net 378,511 247,703
- --------------------------------------------------------------------------------------------------
Income from operations before income taxes 1,163,946 1,500,765
Income tax expense 358,593 417,629
- --------------------------------------------------------------------------------------------------
Net income $805,353 $1,083,136
Income per share, primary and fully diluted: $0.08 $0.10
Weighted average number of shares outstanding:
Primary and fully diluted 10,350,000 10,330,000
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MEDCHEM PRODUCTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
------------------
March 31, 1995 March 31, 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $805,353 $1,083,136
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 835,717 847,212
Deferred income taxes (9,865) (1,329,760)
Changes in operating assets and liabilities:
Accounts receivable (326,978) (885,546)
Inventories 465,452 (218,130)
Prepaid expenses and other current assets (24,444) 348,189
Other assets 4,382 (10,945)
Accounts payable and accrued expenses (1,332,838) 589,609
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 416,779 423,765
- -----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (564,646) (518,390)
- -----------------------------------------------------------------------------------------------------
Net cash used for investing activities (564,646) (518,390)
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowing under revolving line of credit 1,500,000 100,000
Principal payments on bank debt (500,000) --
Principal payment on note payable - Life Medical Sciences, Inc. (1,000,000) --
Proceeds from exercise of stock options 153,676 --
- -----------------------------------------------------------------------------------------------------
Net cash provided by financing activities 153,676 100,000
- -----------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 5,809 5,375
Cash and cash equivalents at beginning of period 157,591 (5,375)
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $163,400 --
=====================================================================================================
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $282,639 $118,431
Income taxes 190,000 1,361,276
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
PART I: FINANCIAL INFORMATION
MEDCHEM PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
MARCH 31, 1995
(1) Nature of Business
------------------
MedChem Products, Inc. and subsidiaries ("the Company"), develop,
manufacture and market specialty medical products for use in surgical and
non-surgical procedures. The Company's two business groups are the
Surgical Specialties Group and the Drug Delivery Group. The Surgical
Specialties Group is comprised of the Company's Avitene(R) family of
topical hemostasis products used to control bleeding in surgical procedures
and the Sure-Closure product line, acquired in July 1994, used to close
skin-deficit wounds. The Drug Delivery Group is comprised of intravenous
("I.V")catheter products and disposable medical devices sold to the
neonatal, pediatric and adult markets by the Company's wholly owned
subsidiary, Gesco International, Inc. ("Gesco").
(2) Basis of Presentation
---------------------
The accompanying consolidated financial statements have been prepared by
the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Company, these
consolidated financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the
consolidated financial position of the Company as of March 31, 1995 and the
consolidated results of operations and cash flows for the three months
ended March 31, 1995 and 1994. The results of operations for the period
ended March 31, 1995 are not necessarily indicative of results to be
expected for the full year.
The accompanying consolidated financial statements and the related notes
should be read in conjunction with the Company's annual financial
statements filed with the Annual Report (Form 10-K) for the fiscal year
August 31, 1994, and the Company's financial statements filed with the
Transition Report (Form 10-Q) for the four months ended December 31, 1994.
The Company changed its fiscal year end from August 31, to December 31, and
accordingly, has restated its prior first quarter results to correspond to
the new calendar period.
Certain reclassifications were made to the 1994 period
5
<PAGE>
consolidated financial statements to conform to the current year
presentation.
(3) Long-Term Debt
--------------
Long term debt consists of the following:
March 31, December 31,
1995 1994
----------- ------------
(Audited)
$7,000,000 bank revolving line
of credit at the bank's prime
rate or cost of funds rate
plus two percent (8.15% at
March 31, 1995), secured
by tangible and intangible
property, payable by June, 1996. $ 5,500,000 $ 4,000,000
Term loan payable to a bank,
interest at the bank's prime
rate plus one-half of one
percent or LIBOR plus two percent
(8.15% at March 31, 1995)
payable in quarterly installments
of $500,000, with a final installment
of $4,500,000 on May 1, 1997,
secured by tangible and intangible
property. 8,500,000 9,000,000
----------- -----------
Total long-term debt 14,000,000 13,000,000
Less: current installments 2,000,000 2,000,000
----------- -----------
Long-term debt
less current installments $12,000,000 $11,000,000
=========== ===========
The Company has obtained a waiver, through March 31, 1995, of a covenant
pertaining to the ratio of indebtedness to net cash flow.
(4) Subsequent Event
----------------
On April 13, 1995, the bank increased the Company's revolving line of
credit to $9,000,000 from $7,000,000 at March 31, 1995, specifically, to
finance the signing fee of $2,000,000 pursuant to the terms and conditions
of the Distribution Agreement, dated March 31, 1995, between the Company
and Coletica, a Lyon, France-based manufacturer of medical devices
(referenced in Item 5 of Part II).
6
<PAGE>
(5) Contingencies
-------------
The Company's 1992 tax return is currently under review by the Internal
Revenue Service.
The Company is currently involved in three pending product liability claims
related to its Drug Delivery Business. At this time the Company cannot
estimate the exposure on its financial statements, if any, if the Company
were unsuccessful in its defense of these claims. However, the Company
feels that its product liability insurance is adequate to cover any
liability that may arise from these claims.
7
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Overview
------------------
The Company reported consolidated net income of $805,353, or $0.08 per
share, for the first quarter ended March 31, 1995, versus consolidated net
income of $1,083,136, or $0.10 per share, for the quarter ended March 31,
1994. Operating cash flow (EBITDA) was $2,378,174 for the three month
period ended March 31, 1995 as compared to $2,595,680 for the comparable
period in the prior year.
On July 29, 1994, the Company purchased substantially all of the assets and
assumed certain liabilities of the Sure-Closure product line from Life
Medical Sciences, Inc. The results of operations of the Sure-Closure
product line since the date of acquisition have been included with those of
the Company.
Results of Operations
---------------------
Total net sales for the three month period ended March 31, 1995 increased
19% to $9,421,270 from $7,933,510 in the comparable period last year.
During the first quarter of 1995, domestic sales increased 9% to $7,382,808
from $6,763,276 in the previous year's quarter. The increase in domestic
sales were primarily due to the sales generated by the recently acquired
Sure-Closure product line and increased Drug Delivery product sales from
the Company's Gesco subsidiary, offset by a decrease in domestic Avitene
sales. International sales for the period ended March 31, 1995 increased
74% to $2,038,462 from $1,170,234 in the comparable quarter, primarily due
to increased sales to the Company's Avitene partner in Japan. In the first
quarter of 1994, international sales to Japan were depressed due to the
overstocking position at the Company's Avitene partner in Japan which was
previously disclosed and rectified in calendar 1994. The Company
anticipates an overall increase in total international sales in calendar
1995 as compared to 1994 primarily due to increased sales volume and more
favorable exchange rates.
Gross profit, as a percentage of net sales, was 68% for the three month
period ended March 31, 1995 and 1994.
Research and development expense (which includes regulatory and clinical
trial expenses) increased $424,571 to $602,752 for
8
<PAGE>
the three month period ended March 31, 1995 from $178,181 in the prior year
due mainly to the research and development being conducted in connection
with the Sure-Closure product line and increased product development by the
Company's Drug Delivery Group products. The Company expects an increase in
spending for the full 1995 year as compared to 1994 in research and
development expenses due to the addition of the Sure-Closure product line
and increased product development related to its Drug Delivery product
line.
Selling, general and administrative expenses increased $752,753 to
$3,610,236 for the three month period ended March 31, 1995 from $2,857,483
in the prior year. The increase is attributable to the expansion of the
national Surgical Specialty sales force and marketing expenses resulting
from the addition of the Sure-Closure product line. The Company expects no
significant increase in selling, general and administrative expenses as a
percentage of net sales for the remaining quarters in 1995 as compared to
1994.
Depreciation and amortization expense for the first quarter ended March 31,
1995 totaled $646,787 compared to $610,655 in the comparable period in the
prior year.
The Company recorded net interest expense of $378,511 for the three month
period ended March 31, 1995 versus $247,703 for the same period in 1994.
The Company's effective tax rate for the three month period ended March 31,
1995 was 31% versus 28% in the comparable period last year. The increase
was due to the recently enacted changes in Section 936 regulations which
reduced the tax benefit to the Company. The Company anticipates its
effective tax rate will increase to the statutory rate during the year as
the Company completes the move of its Avitene manufacturing to the U.S.,
and accordingly loses its tax exemption under Section 936 regulations.
Liquidity and Capital Resources
-------------------------------
The Company generated operating cash flow (EBITDA), of $2,378,174 in the
first quarter of 1995 versus $2,595,680 in the comparable period last year.
At March 31, 1995, the Company had a revolving line of credit agreement
whereby the bank will lend the Company up to $7,000,000 at the bank's prime
rate or cost of funds rate plus two percent and a $10,000,000 term loan. At
March 31, 1995 there was $5,500,000 outstanding under this line and
$8,500,000 outstanding under the term loan.
9
<PAGE>
The line of credit expires in June 1996 and the $10,000,000 term loan is
payable to the bank in quarterly installments of $500,000 through 1997,
with a final payment of $4,500,000 due on May 1, 1997. On April 13, 1995,
the bank increased the Company's revolving line of credit to $9,000,000
from $7,000,000 at March 31, 1995, specifically, to finance the signing fee
of $2,000,000 pursuant to the terms and conditions of the Distribution
Agreement, dated March 31, 1995, between the Company and Coletica, a Lyon,
France-based manufacturer of medical devices (referenced in Item 5 of Part
II).
The $4,103,204 of convertible subordinated debt issued to Gesco's principal
sellers is convertible at the option of the holders into common stock at
$11.73 per share. The note can be prepaid in whole, but not in part, at
par at the Company's option, and is payable in full on August 4, 1997.
In connection with the purchase of the Sure-Closure product line, the
Company issued a note payable to Life Medical Sciences, Inc. ("LMS"), in
the principal amount of $2,000,000. The first installment of $1,000,000 on
the non-interest bearing note was paid on October 27, 1994. On January 27,
1995, the Company paid the final installment of $1,000,000 to LMS.
The Company believes that cash flow generated from its operating
activities, as well as funds available under its bank line of credit, will
be sufficient to enable the Company to conduct its operations and repay its
indebtedness.
Management continues to evaluate potential acquisitions and other
opportunities to expand and diversify the Company's product lines, although
there are no present agreements to enter into any such transactions. In the
event that the Company enters into any such transactions in the future,
additional financing may be required.
10
<PAGE>
PART II: OTHER INFORMATION
-----------------
ITEM 1: THROUGH ITEM 3: NOT APPLICABLE
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 14, 1995 the Company held its Annual Meeting of Stockholders at
which time the Stockholders voted on the following proposals; expansion of
the Board to seven members (Proposal I), the election of one Class I
director and two Class II directors to its Board of Directors (Proposal
II), the Company's 1994 Stock Option Plan (Proposal III), and the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors
(Proposal IV).
As of the record date of December 22, 1994 there were 10,188,834 shares of
common stock of the Company issued and outstanding and entitled to be
voted. Quorum was 9,359,711 shares of common stock or 91.862 percent of the
eligible voting shares tabulated.
The following proposals were approved at the Company's Annual Meeting of
Stockholders:
<TABLE>
<CAPTION>
Broker
For Against Abstain Nonvotes
--- ------- ------- --------
<S> <C> <C> <C> <C>
1. Proposal I (To 9,011,128 225,145 123,438 ---
increase the size
of the Board of
Directors.)
2. Proposal II (The
election of
Directors.)
Mr. Amin J. Khoury 9,136,004 224,050 --- ---
Dr. Henry M. Morgan 9,148,654 211,400 --- ---
Dr. Thomas W. Davison 9,140,636 219,075 --- ---
3. Proposal III 6,083,613 1,151,475 130,122 1,992,364
(The approval of
the Company's 1994
Stock Option Plan.)
4. Proposal IV (The 9,221,273 36,392 102,046 ---
selection of KPMG
Peat Marwick LLP
as the Company's
independent auditors
for the current fiscal year.)
</TABLE>
11
<PAGE>
ITEM 5: OTHER INFORMATION
On March 31, 1995, the Company signed a five-year exclusive distribution
agreement with Coletica ("Coletica"), a Lyon, France-based manufacturer of
medical devices, to distribute Coletica's Hemostagene(R) collagen
hemostatic sponge in the United States. The Company plans to market the
product, which provides hemostatic control for moderate bleeding in surgery
and wound treatment, under the trade name Avifoam(TM). In addition, the
agreement called for a signing fee of $2,000,000 by MedChem, and contains
provisions for the extension of the term of the agreement beyond five years
upon the achievement of certain sales volume goals. The Company also
received a right of first refusal for the distribution of Avifoam(TM)in
selected additional countries. Refer to Item 6., Exhibit No. 10.3(*).
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
----------- -----------
10.1 1994 Stock Option Plan.
10.2 Employment Agreement between
the Company and James F. Marten
dated January 1, 1995.
10.3 (*) Distribution Agreement between
the Company and Coletica dated
March 31, 1995.
10.4 Amendment to the Employment
Agreement between the
Company and Edward J. Quilty dated
March 1, 1995.
10.5 Employment Agreement between the
Company and John J. McDonough dated
February 13, 1995.
10.6 Employment Agreement between the
Company and Bradford R. Gay dated
February 13, 1995.
10.7 Employment Agreement between the
Company and Charles L. Putnam dated
February 13, 1995.
10.8 Employment Agreement between the
Company and Timothy J. Patrick dated
February 13, 1995.
11 Computation of earnings per
share
27 Financial Data Schedule
(*) The Company has requested confidential treatment of
certain portions of this agreement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1995.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDCHEM PRODUCTS, INC.
DATE: May 15, 1995 BY:/s/ Edward J. Quilty
-----------------------------
Edward J. Quilty
President
Chief Executive Officer
DATE: May 15, 1995 BY:/s/ John J. McDonough
----------------------------
John J. McDonough
Vice President
Chief Financial Officer
13
<PAGE>
EXHIBIT 10.1
MEDCHEM PRODUCTS, INC.
1994 STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for MedChem
Products, Inc. (the "Company") and its shareholders the benefits arising from
capital stock ownership by employees, officers and directors of, and consultants
or advisors to, the Company and its subsidiary corporations who are expected to
contribute to the Company's future growth and success. Except where the context
otherwise requires, the term "Company" shall include all present and future
subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code"). Those provisions of the Plan which make express reference to Section
422 shall apply only to Incentive Stock Options (as that term is defined in the
Plan).
2. Type of Options and Administration.
----------------------------------
(a) Types of Options. Options granted pursuant to the Plan may be
either incentive stock options ("Incentive Stock Options") meeting the
requirements of Section 422 of the Code or Non-Statutory Options which are not
intended to meet the requirements of Section 422 of the Code ("Non-Statutory
Options").
(b) Administration.
--------------
(i) The Plan will be administered by the Board of Directors of the
Company, whose construction and interpretation of the terms and provisions of
the Plan shall be final and conclusive. The Board of Directors may in its sole
discretion grant options to purchase shares of the Company's Common Stock
("Common Stock") and issue shares upon exercise of such options as provided in
the Plan. The Board shall have authority, subject to the express provisions of
the Plan, to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements, which
need not be identical, and to make all other determinations which are, in the
judgment of the Board of Directors, necessary or desirable for the
administration of the Plan. The Board of Directors may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any
option agreement in the manner and to the extent it shall deem expedient to
carry the Plan into effect and it shall be the sole and final judge of such
expediency. No director or person acting pursuant to authority delegated by the
Board of Directors shall be
<PAGE>
liable for any action or determination under the Plan made in good faith.
(ii) The Board of Directors may, to the full extent permitted by or
consistent with applicable laws or regulations and Section 3(b) of this Plan
delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.
(c) Applicability of Rule 16b-3. Those provisions of the Plan which
make express reference to Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3"), or which
are required in order for certain option transactions to qualify for exemption
under Rule 16b-3, shall apply only to such persons as are required to file
reports under Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
-----------
(a) General. Options may be granted to persons who are, at the time
of grant, employees, officers or directors of, or consultants or advisors to,
the Company; provided, that the class of employees to whom Incentive Stock
Options may be granted shall be limited to all employees of the Company. A
person who has been granted an option may, if he or she is otherwise eligible,
be granted additional options if the Board of Directors shall so determine.
Subject to adjustment as provided in Section 15 below, the maximum number of
shares with respect to which options may be granted to any employee under the
Plan shall not exceed 400,000 shares of common stock during the ten-year term of
the Plan. For the purpose of calculating such maximum number, (a) an option
shall continue to be treated as outstanding notwithstanding its repricing,
cancellation or expiration and (b) the repricing of an outstanding option or the
issuance of a new option in substitution for a cancelled option shall be deemed
to constitute the grant of a new additional option separate from the original
grant of the option that is repriced or cancelled.
(b) Grant of Options to Directors and Officers. From and after the
registration of the Common Stock of the Company under the Exchange Act, the
selection of a director or an officer (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option, the timing of
the option grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board of Directors,
of which all members shall be "disinterested persons" (as hereinafter defined),
or (ii) by two or more directors having full authority to act in the matter,
each of whom shall be a "disinterested person." For the purposes of the Plan, a
director shall be deemed to be a "disinterested person" only if such person
qualifies as a "disinterested person" within the meaning of
<PAGE>
Rule 16b-3, as such term is interpreted from time to time.
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock which may be issued and sold under the Plan is
1,000,000 shares. If an option granted under the Plan shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject to such option shall again be available for subsequent option grants
under the Plan. If shares issued upon exercise of an option under the Plan are
tendered to the Company in payment of the exercise price of an option granted
under the Plan, such tendered shares shall again be available for subsequent
option grants under the Plan; provided, that in no event shall such shares be
made available for issuance to Reporting Persons or pursuant to exercise of
Incentive Stock Options.
5. Forms of Option Agreements.
--------------------------
As a condition to the grant of an option under the Plan, each
recipient of an option shall execute an option agreement in such form not
inconsistent with the Plan as may be approved by the Board of Directors. Such
option agreements may differ among recipients.
6. Purchase Price.
--------------
(a) General. Subject to Section 3(b), the purchase price per share of
Common Stock deliverable upon the exercise of an option shall not be less than
100% of the fair market value of such Common Stock, as determined by the Board
of Directors, at the time of grant of such option, or less than 110% of such
fair market value in the case of options described in Section 11(b).
(b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, (i) by
delivery to the Company of shares of Common Stock of the Company already owned
by the optionee having a fair market value equal in amount to the exercise price
of the options being exercised or (ii) by any other means (including, without
limitation, by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Regulation T
promulgated by the Federal Reserve Board). The fair market value of any shares
of the Company's Common Stock or other non-cash consideration which may be
delivered upon exercise of an
<PAGE>
option shall be determined by the Board of Directors.
7. Option Period.
-------------
Each option and all rights thereunder shall expire on such date as
shall be set forth in the applicable option agreement, except that, in the case
of an Incentive Stock Option, such date shall not be later than ten years after
the date on which the option is granted and, in all cases, options shall be
subject to earlier termination as provided in the Plan.
8. Exercise of Options.
-------------------
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. Nontransferability of Options.
-----------------------------
Options shall not be assignable or transferable by the person to whom
they are granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution, and, during the life of the optionee,
shall be exercisable only by the optionee; provided, however, that Non-Statutory
Options may be transferred pursuant to a qualified domestic relations order (as
defined in Rule 16b-3).
10. Effect of Termination of Employment or Other Relationship.
---------------------------------------------------------
Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.
11. Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under
the Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (after taking into account the
attribution of stock
<PAGE>
ownership rules of Section 424(d) of the Code), then the following special
provisions shall be applicable to the Incentive Stock Option granted to such
individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value
of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years from the
date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), provided, that the agreement with respect to such option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-statutory
option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while in
the employ of the Company, the Incentive Stock Option may be exercised
within the period of one year after the date the optionee ceases to be such
an
<PAGE>
employee because of such disability (or within such lesser period as may be
specified in the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
---------------------
(a) Additional Option Provisions. The Board of Directors may, in its sole
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation restrictions on transfer,
repurchase rights, commitments to pay cash bonuses, to make, arrange for or
guaranty loans or to transfer other property to optionees upon exercise of
options, or such other provisions as shall be determined by the Board of
Directors; provided that such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised.
13. General Restrictions.
--------------------
(a) Investment Representations. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
(b) Compliance With Securities Laws. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or that the disclosure of
non-public information or the satisfaction of any
<PAGE>
other condition is necessary as a condition of, or in connection with, the
issuance or purchase of shares thereunder, such option may not be exercised, in
whole or in part, unless such listing, registration, qualification, consent or
approval, or satisfaction of such condition shall have been effected or obtained
on conditions acceptable to the Board of Directors. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
14. Rights as a Shareholder.
-----------------------
The holder of an option shall have no rights as a shareholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares.
No adjustment shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations and Related Transactions.
---------------------------------------------------------------------
(a) General. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan, without changing the aggregate purchase price as to which such
options remain exercisable. Notwithstanding the foregoing, no adjustment shall
be made pursuant to this Section 15 if such adjustment would cause the Plan to
fail to comply with Section 422 of the Code.
(b) Board Authority to Make Adjustments. Any adjustments under this
Section 15 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any
<PAGE>
such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
---------------------------------------------------
(a) General. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, (iii)
in the event of a merger under the terms of which holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such outstanding options
(to the extent then exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise price of all such outstanding options in exchange for
the termination of such options, and (iv) provide that all or any outstanding
options shall become exercisable in full immediately prior to such event.
(b) Substitute Options. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits.
-----------------------
<PAGE>
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
---------------------
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
shareholders of the Company is required under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options, or under Rule 16b-
3, the Board of Directors may not effect such modification or amendment without
such approval.
(b) The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected,
the Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to
amend or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.
20. Withholding.
-----------
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be
<PAGE>
determined by the Company as of the date that the amount of tax to be withheld
is to be determined. An optionee who has made an election pursuant to this
Section 20(a) may only satisfy his or her withholding obligation with shares of
Common Stock which are not subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3 (unless
it is intended that the transaction not qualify for exemption under Rule 16b-3).
21. Cancellation and New Grant of Options, Etc.
------------------------------------------
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
22. Effective Date and Duration of the Plan.
---------------------------------------
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, options previously granted
under the Plan shall not vest and shall terminate and no options shall be
granted thereafter. Amendments to the Plan not requiring shareholder approval
shall become effective when adopted by the Board of Directors; amendments
requiring shareholder approval (as provided in Section 19) shall become
effective when adopted by the Board of Directors, but no option granted after
the date of such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant such option to
a particular person) unless and until such amendment shall have been approved by
the Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any options granted on
or after the date of such amendment shall terminate to the extent that such
amendment was required to enable the Company to grant such option to a
particular optionee. Subject to this limitation, options may be granted under
the Plan at any time after the effective date and before the date fixed for
termination of the Plan.
<PAGE>
(b) Termination. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate upon the close of business on the day next preceding
the tenth anniversary of the date of its adoption by the Board of Directors.
Options outstanding on such date shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such options.
23. Provision for Foreign Participants.
----------------------------------
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
Adopted by the Board of Directors on
July 12, 1994.
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 1st day of January, 1995, by and between MedChem Products, Inc., a
Massachusetts corporation (the "Company"), and James F. Marten ("Marten").
WHEREAS, the Company desires to employ Marten, and Marten desires to
be employed by the Company, as Chairman of the Board and an employee of the
Company; and
WHEREAS, Marten and the Company are desirous that they enter into an
Employment Agreement reflecting such employment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and in consideration of Marten's being
employed by the Company, the parties agree as follows:
1. Employment. The Company agrees to employ Marten and Marten agrees
to serve the Company, upon the terms and conditions set forth in this Agreement.
2. Term. The employment of Marten under this Agreement shall be for
a term of five (5) years, commencing as of January 1, 1995, and ending on
December 31, 1999 (the "Employment Term"), unless extended or terminated earlier
as provided in this Agreement. The Employment Term may be extended upon the
mutual written consent of Marten and the Company.
3. Duties and Extent of Service.
----------------------------
(a) Duties. Marten's employment hereunder will be his primary
business activity and he will devote to the business of the Company that much of
his time as is required to discharge his duties under this Agreement during the
Employment Term. In the course of Marten's employment, Marten shall be an
employee and shall perform the duties of the Chairman of the Board of Directors
of the Company.
(b) Extent of Service. Marten shall devote a significant portion of
his time, attention and energies to the business of the Company and shall not
during the term of this Agreement be engaged (whether or not during normal
business hours), to any significant extent, in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage, provided that Marten shall not be prevented from
(i) investing his personal assets in businesses which do not compete with the
Company in such form or manner as will not require any significant services on
the part of Marten in the operation or the affairs of the companies in which
<PAGE>
such investments are made and in which his participation is solely that of an
investor, (ii) engaging in professional, civic, charitable or religious
activities or from serving on the board of directors of other entities, as long
as such activities and service do not interfere or conflict with Marten's
responsibilities to the Company and Marten's obligations under Sections 9(c) and
11, and (iii) purchasing, acquiring and/or investing in stock or other
securities of any corporation whose stock or securities are regularly traded on
the New York Stock Exchange, American Stock Exchange, or those which are
reported on the Nasdaq National Market, provided that such purchases shall not
result in Marten collectively owning beneficially at any time five percent or
more of the equity securities of any corporation engaged in a business
competitive to that of the Company.
4. Compensation.
------------
(a) Salary. As compensation for services rendered by Marten under
this Agreement, the Company shall pay to Marten a base salary of initially
$250,000 per year, payable to him during the Employment Term after withholding
and other required deductions, in equal semi-monthly installments or otherwise
in accordance with the Company's standard payroll policies as such policies
shall exist from time to time. Marten's base salary shall be subject to annual
review by the Company's Board of Directors and may be increased (in the sole
discretion of the Board), but shall not be decreased, at any such annual review;
provided, however, that Marten's base salary shall (at a minimum) be increased
annually in the same percentage as the increase in the Consumer Price Index, All
Urban Consumers (Boston, Massachusetts) for the prior calendar year (or a
similar index if such index shall not then be in effect).
(b) Reimbursement of Business Expenses. During the Employment Term,
the Company shall reimburse Marten for reasonable authorized business expenses
incurred on behalf of the Company in accordance with Company policy. Any
reimbursements pursuant to this Section 4(b) shall be made upon presentation of
written receipts or other such evidence, reasonably satisfactory to the Company.
5. Employee Benefits. Marten shall have the right to participate in
any retirement plan, profit-sharing plan, group life insurance plan, health or
accident insurance plan or other employee benefit plan which may now be in
effect or hereafter adopted by the Company for its employees, subject to the
eligibility requirements of each such plan. Participation in any such plans
shall be consistent with Marten's rate of compensation to the extent that
compensation is a determinative factor with respect to coverage under any such
plans. Marten shall be entitled to the holidays and annual vacation leave in
accordance with the Company's policy as it exists from time to time.
-2-
<PAGE>
6. Bonus. The Company shall pay to Marten such bonuses and other
incentive compensation as the Company's Board of Directors may, in its sole
discretion, from time to time determine.
7. Disability. If, during the term of this Agreement, Marten should
fail to perform his duties under this Agreement on account of illness or other
incapacity which an independent physician satisfactory to both the Company and
Marten shall determine renders Marten incapable of performing his duties under
this Agreement, and such illness or other incapacity shall continue for a period
of more than 90 days, the Company shall have the right, upon written notice to
Marten, to terminate this Agreement. In the event of such termination, Marten
shall be entitled to continue to receive (a) 60% of his base salary (as in
effect on the date of such termination), in semi-monthly installments (after
withholding and other required deductions) or otherwise in accordance with the
Company's standard payroll policies as such policies shall exist from time to
time, for the remainder of the Employment Term (without taking into account such
termination) and (b) disability payments and coverage upon the basis available
to Company employees under, and subject to the terms and provisions of,
disability benefit plans of the Company which may from time to time be in effect
and applicable to employees of the Company. Upon the cessation of salary
payments pursuant to the preceding clause (a), Marten shall then be entitled to
receive Post Employment Benefits (as defined in, and as provided in, Section
12).
8. Termination Due to Death. If Marten shall die during the
Employment Term, the employment of Marten shall thereupon terminate. In the
event of such termination, the estate of Marten shall be entitled to (a) Post
Employment Benefits (as defined in, and only upon the terms provided in, Section
12(b) hereof), and (b) such payments and coverage available to Company employees
under, and for the remainder of the Employment Term subject to the terms and
provisions of, group life insurance or other employee benefit plans of the
Company which may from time to time be in effect and applicable to employees of
the Company.
9. Termination by the Company.
--------------------------
(a) Termination For Cause. Except as otherwise provided in this
Agreement, the Company may terminate the employment of Marten "for cause" at any
time upon written notice to Marten specifying the cause of termination. For
purposes of this Agreement, "for cause" shall mean the discharge resulting from
a determination by a vote of the Board of Directors that Marten (i) has been
convicted of a felony involving dishonesty, fraud, theft or embezzlement or any
other felony, (ii) has willfully and persistently failed to attend to material
duties or obligations imposed on him under this Agreement, which failure
continues for thirty (30) days following notice thereof to Marten,
-3-
<PAGE>
or (iii) has performed or failed to act, which if he were prosecuted and
convicted, would constitute a crime or offense involving money or property of
the Company (in either case in an amount or at a value in excess of $5,000), or
which would constitute a felony in the jurisdiction involved. In the event of
Marten's termination by the Company under this Section 9(a), Marten shall be
subject to the obligations set forth in Section 9(c) but shall in no event be
entitled to receive (A) any base salary, bonus or other amounts for any period
beyond the date of termination or (B) any Post Employment Benefits (as defined
in Section 12). A termination by the Company under this Section 9(a) shall not
prejudice any remedy to which the Company may be entitled at law, in equity or
under this Agreement.
(b) No Termination Without Cause. Marten's employment under this
Agreement may only be terminated by the Company for disability (pursuant to
Section 7), death (pursuant to Section 8) or "for cause" (pursuant to Section
9(a)).
(c) Covenant Not to Compete. During the Employment Term (as it may be
extended or sooner terminated) and for a period of five (5) years thereafter,
Marten will not (i) induce or encourage any employee of the Company to become
employed by him or by any Competitor (defined below); (ii) own, directly or
indirectly, over 5% of the total equity interest in any Competitor; (iii) serve
as a consultant to, or an officer, director, employee, agent or partner of any
Competitor; or (iv) intentionally or actively interfere with, disrupt or attempt
to disrupt the relationships, contractual or otherwise, between the Company and
any significant customer, client, supplier, consultant, employee or stockholder
of the Company. For purposes of this Section 9(c), a Competitor shall be any
individual, partnership, corporation or other business organization engaged in
the development, manufacturing, marketing or distribution of products and/or
technology (whether patented or otherwise) involving (A) topical hemostasis
products, skin deficit wound treating devices or intravenous catheters for the
neonatal, pediatric or adult intravenous drug therapy market (to the extent that
the Company is engaged in any of such businesses as of the date on which Marten
is terminated) or (B) any other business in which the Company is engaged as of
the date on which Marten is terminated. Marten's obligations under this Section
9(c) are an express condition precedent to the Company's obligation, if any, to
provide Marten with Post Employment Benefits under Section 12. If Marten
proposes to take any action which might be considered to violate this Section
9(c), Marten may provide written notice by certified mail to the Company with
copies to the Company's Board of Directors, and Philip P. Rossetti, Esq., Hale
and Dorr, 60 State Street, Boston, Massachusetts 02109, describing such proposed
action in reasonable detail. If the Company shall not have objected to such
proposed action by written notice to Marten within thirty (30) days of such
written notice from Marten, then
-4-
<PAGE>
Marten may take such proposed action and shall conclusively be deemed not to
have violated this Section 9(c) by reason of such proposed action. If the
Company shall have objected to the proposed action and the Company and Marten
cannot reach a resolution as to the matter, the Company shall submit the matter
to binding arbitration in Boston, Massachusetts in accordance with the rules of
the American Arbitration Association relating to commercial disputes and
reasonable expenses (including legal fees) with respect to such arbitration
shall be paid by the unsuccessful party to the arbitration. It is the parties'
intent that the provisions of this Section 9(c) shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Section 9(c) shall be adjudicated to be invalid or
unenforceable, this Section 9(c) shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of this Section 9(c) in the particular
jurisdiction in which such adjudication is made. Nothing in this Section 9(c)
shall reduce or abrogate Marten's obligations under Section 3 during the term of
this Agreement.
10. Company's Insurance on Marten. The Company shall secure, at its
own expense, a term life insurance policy for the Employment Term in the face
amount of $1,000,000 for the benefit of such beneficiary or beneficiaries as
Marten shall designate. Marten agrees to assist the Company in procuring such
insurance by submitting to the usual and customary medical and other
examinations and other instruments in writing as may be reasonably required by
the insurance companies to which application is made for such insurance.
Notwithstanding the foregoing, the Company shall not be obligated to obtain such
insurance if after such medical examinations Marten is rated as a high risk and
this rating results in unreasonably high premium payments.
11. Confidentiality Agreement. Marten acknowledges that he has
executed an Employee Confidentiality Agreement with the Company (the "Employee
Confidentiality Agreement"). Marten acknowledges and understands that his
obligations under the Employee Confidentiality Agreement shall survive the
termination of this Agreement.
12. Post Employment Benefits. Subject to the proviso below, upon the
termination of the Employment Term under this Agreement, Marten shall be
entitled to receive from the Company, for a period of eight years, 50% of his
base salary (as in effect on the date of such termination), in semi-monthly
installments after withholding and other required deductions and in accordance
with the Company's standard payroll policies as such policies shall exist from
time to time (the "Post Employment Benefits"); provided, however, that such Post
Employment Benefits shall,
-5-
<PAGE>
(a) in the event of termination due to disability pursuant to Section
7, commence upon the cessation of salary payments pursuant to clause (a) of
Section 7;
(b) in the event of termination due to death pursuant to Section 8, be
payable to Marten's estate if and only if the Company shall not have maintained
$1,000,000 of term life insurance on Marten's life as provided in Section 10 and
such insurance shall not have been in effect as of the date of such death
(otherwise, no Post Employment Benefits shall be payable hereunder);
(c) in the event of termination for cause pursuant to Section 9(a),
under no circumstances be payable and shall be deemed waived by Marten; and
(d) in the event of voluntary termination by Marten pursuant to
Section 13, under no circumstances be payable and shall be deemed waived by
Marten.
13. Termination by Marten. Marten may voluntarily terminate the
Employment Term under this Agreement upon 90 days' advance written notice to the
Company to such effect. In the event of such termination, Marten shall be
entitled to receive payments of base salary to the date of such termination, but
shall not be entitled to receive any Post Employment Benefits pursuant to
Section 12.
14. Violation of Covenants. If Marten violates any of his covenants
under Sections 9(c) and 11, Marten agrees and acknowledges that such violation
or threatened violation will cause irreparable injury to the Company and the
Company will be entitled to injunctive relief without the necessity of proving
actual damages.
15. Miscellaneous.
-------------
(a) Waiver. A waiver by either party of a breach of any provision of
this Agreement shall not be deemed or construed to be a waiver of any other
provision or any subsequent breach of the same provision.
(b) Notices. Any and all notices required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given five (5)
days after deposited in the United States mail, certified or registered mail,
postage prepaid and addressed as follows:
-6-
<PAGE>
To Marten:
James F. Marten
78 Nichols Road
Cohasset, MA 02025
To the Company:
MedChem Products, Inc.
232 West Cummings Park
Woburn, MA 01801
With a copy to:
Philip P. Rossetti, Esq.
Hale and Dorr
60 State Street
Boston, MA 02109
Either party may change by notice the address to which notices to it are to be
addressed.
(c) Assignment. Neither party may assign this Agreement or any rights
or duties hereunder without the other party's prior written consent.
(d) Expenses. Each party shall bear its own expenses in connection
with the preparation and entering into of this Agreement. In the event either
party initiates litigation to enforce any other party's obligations or such
party's rights hereunder, the prevailing party shall be entitled to
reimbursement of reasonable attorneys' fees and actual costs incurred in
connection therewith.
(e) Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof. This Agreement cannot be changed, altered or amended except in
an instrument in writing signed by all parties.
(f) Severability. If any provision of this Agreement as applied to
either party or to any circumstances shall be adjudged by a court to be void,
voidable or unenforceable, the same shall in no way affect any other provision
of this Agreement.
-7-
<PAGE>
(g) Applicable Law. This Agreement has been entered into and shall be
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
(h) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, Marten and the Company have executed this
Agreement, effective as of the day and year first above written.
MEDCHEM PRODUCTS, INC.
By:/s/ Edward J. Quilty
---------------------------
Edward J. Quilty
Chief Executive Officer
/s/ James F. Marten
------------------------------
James F. Marten
-8-
<PAGE>
EXHIBIT 10.3
DISTRIBUTION AGREEMENT
Agreement, dated March 31, 1995 (the "Agreement Date"), between MedChem
Products, Inc., a Massachusetts corporation ("MedChem"), and Coletica, a French
Societe Anonyme, governed by articles 118 to 150 of the statute of July 24, 1966
("Coletica").
WHEREAS Coletica manufactures and has available for sale a biological
hemostatic compress bearing the trademark "HEMOSTAGENE(R)" which is described
below, for the manufacturing processes of which the following patents have been
issued:
-FRANCE: N/o/ 87 15 880 of 4/27/90 and Soleau envelope N/o/ 73 552
-EUROPE: N/o/ 03 17 411 of 8/12/92
-USA: N/o/ 4 953 299 of 9/4/90
N/o/ 5331092 of 7/19/94
WHEREAS Coletica owns the trademark HEMOSTAGENE(R) which has been
registered in various countries including the United States of America (1483819
of 6/28/88),
WHEREAS Coletica wishes to market such compress through distributors in
order to develop the sale thereof throughout the world,
WHEREAS MedChem manufactures and sells a hemostatic agent under the brand
name AVITENE(R),
(*) Confidential Material omitted and filed separately with the Securities
and Exchange Commission
<PAGE>
WHEREAS MedChem on account of its organization, specialized personnel and
experience, is in a position to promote the sales and to sell such compress in
the United States of America,
WHEREAS MedChem desires that Coletica appoint it as an exclusive
distributor of such compress in the United States of America upon the terms and
subject to the conditions set forth in this Agreement.
NOW THEREFORE, Coletica and MedChem hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings.
1.1 "Agreement" means this Agreement and any amendment or supplement
thereto, concluded in accordance with the provisions of Section 12.6 hereof.
1.2 "Avitene" means the topical collagen hemostat that is marketed
throughout the world in various forms by MedChem.
1.3 "Coletica Technology" means all know-how, trade secrets and technical
information owned or controlled by Coletica, relating to the Product, including
to the extent they exist, inventions (whether or not patentable), ideas,
concepts, practices, formulas, techniques, procedures, ingredients, laboratory
notebook information, reports, engineering drawings, production manuals,
2
<PAGE>
specifications, computer software and software documentation, design information
and test procedures.
1.4 "Confidential Information" means all materials, trade secrets or other
information, regarding the Product or Coletica that are designated as
confidential in writing by the disclosing party prior to or at the time any such
material,trade secret or other information is disclosed. Notwithstanding the
foregoing, materials, trade secrets or other information that are orally or
visually disclosed, or are disclosed in writing without such designation shall
constitute Confidential Information if the disclosing party, within thirty (30)
days after such disclosure, delivers to the other party a written document
describing the materials, trade secrets or other information and referencing the
place and date of such oral, visual or written disclosure and the names of the
persons to whom such disclosure was made.
1.5 "Customer" means those persons who purchase the Product directly from
MedChem.
1.6 "Net Sales" means the price paid by Customers to MedChem for the
Product, less rebates, returns, allowances and discounts.
1.7 "Patents" means the patents described in the preamble to this
Agreement, together with any patent applications, and includes any divisions,
continuations, continuations-in part, or reissuances thereof, presently owned or
controlled by or
3
<PAGE>
hereafter acquired or controlled by Coletica, relating to the Product,
including, without limitation, the production and use thereof.
1.8 "Premarket Approval" means the approval by the Food and Drug
Administration required prior to the distribution of the Product in the
Territory.
1.9 "Product" means an aseptic fully absorbable hemostatic compress
composed of lyophilized non-denatured collagen as further described on Exhibit A
attached hereto.
1.10 "Territory" means the United States of America.
1.11 "Transfer Price" shall have the meaning set forth in Section 5.2 of
this Agreement.
1.12 "Units" means one hemostatic compress in its blister pack.
2. APPOINTMENT; COLETICA OBLIGATIONS
2.1 Appointment. Coletica appoints MedChem, which appointment MedChem
accepts, as its exclusive distributor of the Product within the Territory for
the term of this Agreement and, by virtue of such appointment, MedChem shall
have the right, upon the terms and subject to the conditions hereinafter set
forth, to purchase Product from Coletica for resale by MedChem.
2.2 By appointing MedChem as its exclusive distributor for the Territory,
Coletica agrees that, during the term of this
4
<PAGE>
Agreement, it will not appoint any other person or company situated within the
Territory as a distributor of the Product or sell the Product to any person or
Company in the Territory, and by accepting such appointment *.
2.3 MedChem shall not sell the Product directly or indirectly to customers
situated outside the Territory and shall forward to Coletica any order, inquiry
or call for the Product if originating from potential or actual customers
located outside the Territory.
2.4 MedChem shall not seek business with respect to the Product directly
or indirectly through a branch, a subsidiary or otherwise outside the Territory
and shall not maintain any inventories of the Product outside the Territory.
2.5 Obligations of Coletica.
-----------------------
(a) Coletica shall provide MedChem at Coletica's expense with
marketing and technical assistance in the form of week-long semi-annual
visits by two Coletica representatives.
(b) Coletica shall furnish MedChem its sales and marketing
materials, if available, for the Product. MedChem
5
(*) Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
shall have the right, at its expense, to copy, distribute and create
derivative works (including translations) of such materials for use in
distribution of the Product, subject to any applicable copyrights.
(c) Coletica shall use its best efforts to obtain Premarket
Approval by *; provided, however, that such date may be
extended for successive thirty (30) day periods, upon the mutual agreement,
in their respective sole discretion, of MedChem and Coletica.
(d) Commencing on the date of this Agreement, and with a view to
conducting its due diligence, MedChem shall be permitted access to Coletica
Technology and Coletica's premises and financial information to enable
MedChem to evaluate (i) the efficacy and quality of the Product, (ii)
whether Coletica manufactures the Product in compliance with Good
Manufacturing Practices (as such term is used by the Food and Drug
Administration) and (iii) Coletica's ability to meet its obligations under
this Agreement. Such access shall be limited to the extent necessary to
accomplish, and the information gathered through such review shall be used
for, the specific purposes set forth in the prior sentence only, and for no
other purposes, and all of such information shall be deemed to be
Confidential Information for purposes of this Agreement, subject to the
provisions of Section 8 hereof, without any further notice, designation or
other act on
6
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
Coletica's part. Furthermore, any such access shall be subject to
reasonable rules that may be imposed from time to time by Coletica and
shall be conducted by MedChem in such a manner as to avoid any disruption
of Coletica's business. Such due diligence will include, without
limitation, the activities described on Exhibit C hereto in the time frames
set forth on such Exhibit, and shall be carried out at the latest by *
assuming Coletica meets its obligations in a timely manner.
(e) Semi-annually, MedChem shall be permitted access to Coletica
Technology and Coletica's premises to enable MedChem to evaluate whether
Coletica is in compliance with Good Manufacturing Practices with respect to
the Product. Such access shall be limited to the extent necessary to
accomplish, and the information gathered through such review shall be used
for, the specific purpose set forth in the prior sentence only, and for no
other purpose, and all of such information shall be deemed to be
Confidential Information for purposes of this Agreement, subject to the
provisions of Section 8 hereof, without any further notice, designation or
other act on Coletica's part. Furthermore, any such access shall be
subject to reasonable rules that may be imposed from time to time by
Coletica and shall be conducted by MedChem in such a manner as to avoid any
undue disruption of Coletica's business. It is understood that the access
referred to in
7
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
this subsection (e) shall be provided to *.
(f) Coletica shall furnish MedChem copies of (i) the Premarket
Approval and documentation relating thereto (other than proprietary
manufacturing technology) and (ii) any published or proposed articles
relating to the Product as soon as reasonably possible after such articles
have been published or prepared in order to assist MedChem in the
distribution of the Product. MedChem shall have the right, at its expense,
to translate, copy, distribute and create derivative works (including
translations) of such articles for use in distribution of the Product,
subject to any applicable copyrights and any non-disclosure agreements
under which Coletica agrees to keep confidential the identity of a person
performing services for Coletica.
(g) Coletica shall not sell Product to any person outside of the
Territory which it has reason to believe intends to resell the Product,
directly or indirectly, in the Territory.
(h) Coletica shall furnish MedChem with copies of its financial
information made available to the public.
3. ADDITIONAL TERRITORIES
----------------------
(a) Not earlier than * or later than *, MedChem may deliver written
notice to Coletica requesting
8
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
Coletica to enter into exclusive distribution agreements, on terms substantially
similar to those contained herein for such countries outside of the Territory as
MedChem shall designate * together with such other terms as may be reasonably
requested by MedChem and or Coletica because of the commercial circumstances of
the country so designated. MedChem shall furnish Coletica a description of
MedChem's plans and resources to commercialize the Product in such countries and
the sales force to be used for such purpose, which plans and force shall be (i)
included as terms of the agreement for such countries and (ii) acceptable to
Coletica in the exercise of its reasonable discretion in light of the relevant
market for the Product. MedChem may not require Coletica to enter into a
distribution agreement pursuant to this Section 3(a) in any country where (i)
Coletica does not wish to register the Product with the appropriate health
authorities, if required, to permit the Product to be distributed in such
country or (ii) the laws of such country require Coletica to waive its rights to
the confidentiality of its proprietary information. The terms of the
distribution agreement as set forth above shall be evidenced by an agreement for
each such country, which shall be negotiated in good faith, based on the terms
set forth in this Section 3(a) and shall be entered into by MedChem and
Coletica.
(b) After *, Coletica may negotiate with third parties regarding
distribution of the Product in any country (or portion thereof) outside of the
Territory not covered by a
9
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
distribution agreement with MedChem entered into pursuant to Section 3(a) *.
Coletica shall notify MedChem prior to entering into any such agreement in any
such country and the terms thereof. If MedChem provides to Coletica (i) written
notice of its intent to enter into such agreement in such country and, at the
time of giving such notice, a description of MedChem's plans to commercialize
the Product in such country (which, as determined by Coletica, in the exercise
of its reasonable judgment, shall be at least as favorable to Coletica as the
plans for such commercialization by such third party), MedChem and Coletica
shall enter into a distribution agreement for such country (or portion thereof)
on the terms contained herein unless the proposed agreement is *. In such event
MedChem and Coletica shall enter into a distribution agreement for such country
on such *. Notwithstanding the foregoing, if MedChem exercises its right of
first refusal hereunder, the price terms for such distribution agreement shall
be no less favorable to Coletica, in Coletica's reasonable judgment, than those
contained in the distribution agreement proposed between Coletica and such third
party. The terms of such distribution agreement shall be evidenced by an
agreement for each such country, which shall be negotiated in good faith based
on the terms set forth in this Section 3(b), and shall be entered into by
MedChem and Coletica.
10
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
Unless Coletica has granted rights to the Product in a country to a
third party after MedChem failed to exercise its right of first refusal
described above with respect to such country, MedChem shall have the right, by
giving written notice to Coletica, at any time to add such country * to the
Territory. Any such election by MedChem shall be treated as if it were an
election pursuant to Section 3(a), for purposes of determining the terms of any
such agreement, except that Coletica shall not be required to add such country
to the Territory if within 90 days from the date Coletica receives MedChem's
written notice, Coletica notifies MedChem of the terms and conditions under
which a third party (which Coletica identifies) is willing to enter into a
distribution agreement for such country and MedChem fails, within thirty (30)
days thereafter, to agree to such terms and conditions.
MedChem's rights under this Section 3 are conditioned upon MedChem's
being in compliance with the terms and conditions of this Agreement at the time
of its exercise of such rights.
MedChem may appoint subdistributors in any territory covered by
distribution agreements with Coletica, upon prior written notice to Coletica,
but in any event MedChem shall be responsible for all aspects of this Agreement
notwithstanding such appointment and Coletica shall have no obligation with
respect to such subdistributors.
4. Supply of Product
-----------------
11
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
4.1 Supply and Sourcing. As soon as the Specifications and the test
plan and quality certificate referred to in Section 4.2 hereof have been
determined and Premarket Approval has been received, Coletica shall supply
MedChem with MedChem's requirements of the Product and shall manufacture the
Product in compliance with Good Manufacturing Practices and with all other
applicable laws and regulations in the Territory. During and upon completion of
the manufacture of the Product Coletica shall conduct adequate quality control,
sterility tests and inspections to support the compliance of the Product with
the Specifications and the representations and documentation provided by
Coletica to the FDA in connection with the Premarket Approval including, without
limitation, as to safety and efficacy. In addition, Coletica will source the
hides used in the manufacture of the Product to be sold in the Territory from
the United States and will use its best efforts to arrange for such sourcing by
April 1, 1995; provided, however, that MedChem may, in the exercise of its
discretion, agree on a different country of origin for the hides if
circumstances change.
4.2 Coletica warrants that the Product sold to MedChem will be in
conformity with the definition of Product (Exhibit A attached hereto) and with
specifications describing the existing performance and quality of the Product
and labelling and packaging to be established by MedChem and Coletica prior to
* and to be set forth on Exhibit B to this Agreement (the
"Specifications"). Other warranties as to the merchantability,
12
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
fitness for particular purposes or other matters are hereby expressly
disclaimed.
As part of the Specifications, MedChem and Coletica shall establish prior
to * (a) a in vitro test plan to certify the conformity of the
Product sold to MedChem with the Specifications and (b) the form of the quality
certificate to be submitted with respect to each shipment of the Product. It is
understood that such test plan shall be repeatable by MedChem at its facilities.
MedChem and Coletica shall negotiate the costs of any additional tests not
provided for in the Premarket Approval or current quality plan except that
MedChem shall bear the costs of extraordinary tests that it requests.
4.3 Forecasting and Ordering Procedures. As soon as the conditions
set forth in the first sentence of Section 4.1 hereof have been satisfied,
MedChem may issue purchase orders to Coletica by fax confirmed by an executed
copy of such purchase order by air mail, postage prepaid, to the office of
Coletica set forth in Section 12.4 hereof from time to time specifying the
number of Units in whole batches (with a one batch minimum) that MedChem desires
to purchase from Coletica. Coletica shall acknowledge receipt and acceptance of
each purchase order within 8 days of receipt by returning an executed copy of
such purchase order together with delivery dates to MedChem by telecopier
transmission, confirmed by delivery of an executed copy of such purchase order
by air mail, postage prepaid, to the office of MedChem set forth in
13
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
Section 12.4 hereof. Subject to the provisions of Section 12.11 (Force
Majeure), Coletica shall deliver the orders on or before the dates indicated.
Not later than the tenth business day after Coletica has informed MedChem of the
issuance of the Premarket Approval, MedChem shall send to Coletica a forecast of
its requirements of the Product for each quarter in the next twelve months
commencing on the first day of the month after such business day. Not later
than the thirtieth business day prior to the commencement of each quarterly
period thereafter, MedChem shall send to Coletica a forecast of its requirements
of the Product for each quarter in the following twelve months. MedChem shall
purchase the Units forecast for the first quarterly period covered by each such
forecast. Coletica shall not be obligated hereunder to deliver a quantity of
Product in any quarter than exceeds by * the amount forecast for such quarter by
MedChem, although it will endeavor to deliver all of the Product ordered by
MedChem hereunder.
MedChem shall inform Coletica, as soon as possible, of any commercial
success of the Product which is likely to entail an increase by * of the
forecasted volume of orders for any quarter within any twelve (12) month period.
In such a case, the parties shall agree on a progressive increase in the rhythm
of manufacturing and delivery, taking into account the time constraint for
Coletica to effect the necessary investment to increase its production capacity.
Coletica shall make diligent efforts to meet the additional needs of MedChem
including, without limitation,
14
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
making such capital investments as may be required for such purpose.
4.4 Delivery. Within eight (8) days of receipt of a purchase order
from MedChem, Coletica shall confirm such purchase order and within thirty (30)
days of such confirmation, Coletica shall deliver to MedChem the Units ordered
F.O.B. Boston Airport. MedChem shall pay all United States customs duties and
related expenses arising from such delivery and shall be responsible for
obtaining and maintaining all necessary U.S. import licenses, permits and
approvals and for clearing the Product through U.S. customs. Coletica shall
furnish with each shipment of the Product relevant certificates of quality
defined in Section 4.2 or in such form as may be amended by mutual agreement or
as required by health or customs authorities in the Territory. If for any
reason Coletica is unable to deliver any portion of an order, Coletica shall
notify MedChem. In such event MedChem may, within five (5) business days of the
notification, cancel all or a portion of such order. In the event of any
inconsistency between the terms of this Agreement and the terms of any purchase
order, the terms of this Agreement shall control. Notwithstanding anything in
this Section 4 to the contrary, MedChem agrees that its orders placed during the
* days after the conditions set forth in the first sentence of Section 4.1
hereof have been satisfied shall not exceed * units, in the aggregate, and that
Coletica shall have * to fill any such initial orders.
15
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
4.5 Rejection of Non-Conforming Product. MedChem may reject
by written notice delivered to Coletica any Unit that does not conform with the
Specifications. Such notice shall contain MedChem's reasons for such rejection.
Coletica shall respond to such notice specifying the reason(s) for the non-
conformance and identifying the corrective action to be taken to prevent further
occurrences. MedChem may, at its discretion and at its sole cost, perform on-
site audits of such corrective action. MedChem shall notify Coletica within * of
Units to Boston airport of any non-conformance that can be readily observed
without the use of equipment. MedChem shall inspect the Product within a
reasonable time after receipt. Upon rejection of non-conforming Product,
Coletica shall use reasonable efforts to replace the non-conforming Product
within thirty (30) days of receipt by Coletica of MedChem's notice of rejection.
At Coletica's request, Non-conforming Product shall be returned to Coletica at
Coletica's expense. Coletica shall bear the expense of any recall of the Product
in the Territory if such recall is attributable to the design or the manufacture
of the Product. MedChem shall bear the expense of any recall of the Product in
the Territory attributable to the negligence of, or misconduct by, MedChem
unrelated to the design and manufacture of the Product. MedChem shall have no
right to reject Product that conformed to the Specifications upon delivery,
MedChem assuming all risk of loss or damage thereafter, and Coletica shall have
the right to inspect all Product delivered to MedChem, whether at the point of
delivery, or in storage, or
16
(*) Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
elsewhere. MedChem shall use its reasonable efforts to identify any non-
conforming Product within *.
4.6 Inability to Satisfy MedChem's Requirements. If Coletica is
unable to satisfy MedChem's requirements for the Product, Coletica shall
allocate its supply of Product such that MedChem receives all of Coletica's
supply until such requirements are met.
4.7 MedChem's Right to Manufacture. If (i) Coletica fails to deliver
* of MedChem's orders for the Product for any consecutive * or * of such orders
for any consecutive * so long as such orders are in accordance with the terms
hereof and (ii) MedChem terminates this Agreement pursuant to Section 9.3 as a
result thereof within ninety (90) days by written notice, then, MedChem shall
have the right, upon written notice to Coletica given with such termination
notice, to manufacture the Product. If MedChem elects to manufacture the
Product, Coletica shall be deemed to have granted to MedChem, without any
further action on its part, an exclusive license in the Territory under the
Coletica Technology and the Patents to make and have made the Product for
distribution in the Territory. Such license shall remain in effect for what
would have been the remaining term of this Agreement, had MedChem not given
notice of termination. In connection with such license, Coletica shall provide
MedChem, at MedChem's cost, with all assistance and know-how reasonably
requested by MedChem to enable MedChem or its
17
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
designated supplier to manufacture the Product. The royalty for such license
shall be * of MedChem's Net Sales, payable quarterly. At Coletica's request,
such exclusive licensing agreement shall be set forth in a written agreement
between Coletica and MedChem, which shall include standard licensing agreement
provisions, including those relating to inspection and quality control.
5. PAYMENTS
5.1 Deposit Fee. Upon the later to occur of the Agreement Date and
April 14, 1995, MedChem shall deposit with Fleet Bank of Maine, as escrow agent
(the "Escrow Agent"), two million dollars ($2,000,000) (the "Deposit Fee") to be
held and disbursed pursuant to the Escrow Agreement executed as of the date
hereof, on the following basis: if the Effective Date (as defined below) occurs
on or before this Agreement is terminated, then the amounts held in escrow shall
be distributed to Coletica; if the Effective Date has not occurred by the date
that this Agreement is terminated, then the amounts held in escrow shall be
distributed to MedChem. The term "Effective Date" shall mean the date on which
the last of the following shall occur:
(a) the completion of MedChem's due diligence pursuant to Section
2.5(d) of this Agreement, (b) the establishment by MedChem and Coletica of
the Specifications pursuant to Section 4.2 of this Agreement, (c)
production by Coletica of one batch of Product made from hides sourced in
18
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
the Territory, as contemplated by clause (iv) of Section 9.2(a) of the
Agreement and (d) Premarket Approval.
5.2 Promotional Samples and Price of Specific Product
(a) Together with the delivery of the first order for the Product and
on each semi-annual anniversary of the date of such order, Coletica shall
deliver, * deliverable under this Section 5.4(a) to be used by MedChem to
promote the sale of the Product (the "Promotional Samples"); provided, however,
that the maximum Promotional Samples shall be * subject to this Agreement,
including pursuant to Section 5.4 hereof.
(b) The price ("Transfer Price") paid by MedChem to Coletica for each
Unit other than Promotional Samples shall be as follows, calculated at the date
Coletica received the order for the Product with Unit volume measured over the
life of this Agreement (A) * for each of the first * Units of hemostatic
compresses subject to this Agreement, including pursuant to Section 5.4 hereof
and (B) * for each additional Unit.
(c) Coletica shall issue an invoice for Units upon shipment.
Invoices are payable within sixty (60) days of their date.
19
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
(d) Coletica may, in its sole discretion and at its sole expense,
request MedChem to provide an irrevocable and confirmed letter of credit
covering the payment by MedChem of invoices issued by Coletica.
5.3 Additional Compensation
-----------------------
(a) After MedChem sells * in the aggregate, of all sizes of hemostatic
compresses subject to this Agreement, including pursuant to Section 5.4 hereof,
measured over the life of this Agreement, for each of the **** *** *******
*********** Units (other than Promotional Samples) sold by MedChem, MedChem
shall pay to Coletica a sum equal to ********* ***** of the excess of Net Sales
attributable to such Unit over ****** ******* ********, which will be considered
as an increase in the Transfer Price.
(b) For each Unit (other than Promotional Samples) in the aggregate,
of all sizes of Product, measured over the life of this Agreement in excess of
*** ******* *********** Units sold by MedChem, MedChem shall pay to Coletica a
sum equal to ******** ***** of the excess of Net Sales attributable to such Unit
over ****** ******* ********, which will be considered as an increase in the
Transfer Price.
(c) MedChem shall deliver to Coletica within forty-five (45) days
after the end of each calendar quarter a report showing its computation of the
additional compensation due to Coletica for such calendar quarter; together with
payment of all
20
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
amounts shown to be due. MedChem's obligation to pay the amounts due under this
Section 5, including under this Section 5.3, shall survive any termination or
expiration of the term of this Agreement.
5.4 Other Products
--------------
Coletica and MedChem shall negotiate in good faith an amendment to
this Agreement *. Such amendment shall provide, without limitation, for a * as
well as appropriate labelling and packaging. If Coletica and MedChem cannot
agree on such amendment, Coletica may not enter into an agreement with any other
party to distribute such other product in the Territory.
Notwithstanding the foregoing, MedChem and Coletica have agreed upon
the following Transfer Price of a size variation of the Product in the form of a
3 1/2" x 5" x 1/4" compress: For Units other than Promotional Samples, (A) * for
each of the first * Units of all sizes of hemostatic compresses subject to this
Agreement, including pursuant to this Section 5.4, and (B) * for each additional
Unit. Coletica shall apply for an amendment to the Premarket Approval to include
the size product referred to in this paragraph.
5.5 Pricing and Marketing Decisions. MedChem shall establish the sales
price of the Product in its sole discretion and
21
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
shall have the right to distribute the Product in any manner it deems
appropriate. MedChem shall provide to customers such warranty provisions as are
strictly in compliance with the requirements resulting from any laws,
regulations and practices applicable to distribution of the Product in the
Territory; provided, however, that Coletica shall never be bound by warranties
which would exceed the ones expressed in Section 4.2 of this Agreement.
5.6 Payment Currency. All amounts due under this Agreement shall be
paid in United States currency by wire transfer to an account in a bank
designated by the receiving Party or in such other form and/or manner as the
receiving Party may reasonably request.
6. REPRESENTATIONS AND WARRANTIES
------------------------------
6.1 Coletica hereby represents and warrants to MedChem as follows:
(a) Binding Obligation. This Agreement has been duly authorized
by all necessary action by Coletica and constitutes its valid and binding
obligation enforceable in accordance with the terms hereof.
(b) Right, Power and Authority. Coletica has the full right,
power and authority to enter into this Agreement and the execution,
delivery and performance of this Agreement by Coletica will not violate the
provisions of any law, rule or regulation applicable to it or conflict with
or result in
22
<PAGE>
the breach or termination of, or constitute a default under, any agreement
or instrument to which it is a party.
(c) Title to Product and Coletica Technology. Coletica owns all
rights, title and interest in and to the Product and the Coletica
Technology, free and clear of all liens, claims and encumbrances whatsoever
and no other person or entity has any rights to the Product or the Coletica
Technology in the Territory.
(d) Infringement of Coletica. To the best of Coletica's
knowledge, no person or entity is infringing, violating or misappropriating
the Coletica Technology.
(e) Capacity. Coletica has the capacity to manufacture *******
***** **** * *** * ****** per year.
6.2 MedChem hereby represents and warrants to Coletica as follows:
(a) Binding Obligation. This Agreement has been duly authorized
by all necessary action by MedChem and constitutes its valid and bonding
obligation enforceable in accordance with the terms hereof.
(b) Right, Power and Authority. MedChem has the full right,
power and authority to enter into this Agreement and the execution,
delivery and performance of this Agreement by MedChem will not violate the
provisions of any law, rule or regulation applicable to it or conflict with
or result in the
23
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
breach or termination of, or constitute a default under, any agreement or
instrument to which it is a party.
7. INTELLECTUAL PROPERTY
---------------------
7.1 Ownership of Coletica Technology. Coletica shall retain sole
ownership of the Coletica Technology, subject to the express terms thereof and
to any licensing agreements not prohibited hereby and to the sale of the
Coletica Technology to a third party in connection with the sale of
substantially all of Coletica's business related to the Agreement.
7.2 Trademarks.
----------
(a) Coletica hereby grants MedChem the exclusive license in the
Territory during the term of this Agreements to use the trademark
"HEMOSTAGENE" (the "Trademark") in connection with distribution of the Product
in the Territory. MedChem acknowledges that Coletica owns the Trademark.
(b) Coletica shall take reasonable steps to protect its rights in the
Trademark in the Territory and shall bear all expenses incurred in connection
therewith, including expenses of renewal of the Trademark registration as it
becomes due. MedChem shall exercise due care in protecting the Trademark,
including watching for infringement and potential infringement of the Trademark
and shall notify Coletica of all infringements and potential infringement which
may come to its attention and shall cooperate with Coletica in the prosecution
of infringers, which shall be carried forward at Coletica's expense. Coletica
shall
24
<PAGE>
conduct and bear the expense of any suits against MedChem arising out of its use
of the Trademark in accordance with the terms of this Agreement and save MedChem
harmless from any judgement arising out of such suits.
(c) In order to protect and safeguard the Trademark and good will with
respect to the Products which are to be distributed in the Territory, MedChem
shall at all times during the term of this Agreement:
(i) Ensure that all labels, wrappers, directions for use,
pamphlets, advertisements and all other printed communications and/or
articles prepared by it for the Product bearing the Trademark, to the
extent reasonably required for the protection of the Trademark, state that
the Trademark is a registered trademark of Coletica.
(ii) Give Coletica or its representatives periodic access, at
reasonable hours and on reasonable notice, to the distribution, sales and
marketing offices of MedChem to inspect and take samples of the Product.
(iii) Submit to Coletica at reasonable intervals, samples and
specimens of all packaging, labelling, promotional pieces and advertising
being used in connection with the Product.
(d) MedChem shall not have any right to use the name of Coletica or
any of its affiliates, or to use the Trademark,
25
<PAGE>
except in connection with the distribution of the Products. MedChem shall not,
directly or indirectly, take any action which might impair the right, title or
interest of Coletica to the Trademark, and agrees that it will not attempt to
acquire any right, title or interest therein. MedChem shall not in any manner
represent that it has any ownership interest in the Trademark. MedChem shall
have no right to grant sublicenses or other rights in the Trademark to any third
party, and shall keep its interests in the Trademark free and clear of all
liens, encumbrances and claims of third parties.
(e) Coletica grants permission to MedChem to sell the Product under
the trademark AVIFOAM. MedChem shall take reasonable steps to protect its
rights in such trademark and shall bear all expenses incurred in connection
therewith. MedChem shall have the right to register or cause to be registered
such trademark for the sale and promotion of the Product in the Territory. The
cost of said registration shall be borne by MedChem who will submit it in its
own name and for its own account. Coletica shall have no right, title, or
interest in such trademark. MedChem shall notify Coletica of all infringements
of the trademark AVIFOAM which may come to its attention. MedChem shall conduct
and bear the expense of any suits against Coletica arising out of or relating to
such trademark, and shall save Coletica harmless from any judgments arising out
of such suits.
26
<PAGE>
7.3 Patents. Coletica shall file, prosecute and maintain the
Patents. If Coletica elects not to file, prosecute or maintain any Patent in
the Territory it shall give notice of such fact to MedChem. In such event,
MedChem may, in the exercise of its sole discretion, on behalf of Coletica,
file, prosecute and maintain such Patent in the Territory and credit against the
Transfer Price the complete cost, including reasonable attorney's fees, to take
such action.
8. CONFIDENTIAL INFORMATION
------------------------
8.1 Treatment of Confidential Information. Each party hereto shall
not disclose the Confidential Information of the other party to others, or use
it for any purpose, except to carry out the objectives of this Agreement, and
shall exercise every reasonable precaution to prevent the disclosure of such
Confidential Information not authorized under this Section 8.1 by or through any
of its directors, officers, employees, consultants, or agents.
8.2 Release from Restrictions. The provisions of Section 8.1 shall
-------------------------
not apply to any Confidential Information which:
(a) was known or used by the receiving party prior to its date of
disclosure to the receiving party, as evidenced by the prior written
records of the receiving party; or
(b) is lawfully disclosed to the receiving party by sources (other
than the disclosing party) rightfully in possession of the Confidential
Information; or
27
<PAGE>
(c) becomes published or generally known to the public through no
fault or omission on the part of the receiving party or an affiliated
party; or
(d) is independently developed by or for the receiving party without
reference to or reliance upon the Confidential Information; or
(e) is required to be disclosed by the receiving party to comply with
applicable laws, to defend or prosecute litigation or to comply with
governmental regulations, provided that the receiving party provides prior
written notice of such disclosure to the other party and takes reasonable
and lawful actions to avoid and/or minimize the degree of such disclosure.
In any event, Coletica and MedChem shall be released from any obligations
under this Section 8 after a period of * years after the date of termination or
expiration of the term of this Agreement.
9. TERM AND TERMINATION
--------------------
9.1 Term. The term of this Agreement shall expire on the fifth
anniversary (the "Initial Termination Date") of the first day of the month
immediately following the receipt by Coletica of notification of the issuance of
Premarket Approval (Coletica shall inform MedChem of such issuance within five
(5) business days from the date of such receipt) unless earlier terminated in
accordance
28
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
with the provisions of this Section 9. MedChem may extend the term to (i) the
second anniversary of the Initial Termination Date (the "Second Termination
Date") if MedChem has sold between * and * Units of hemostatic compresses
subject to this Agreement, including the 3 1/2" x 5" x 1/4" compress referred to
in Section 5.4 hereof, during the twelve month period ending on the Initial
Termination Date, and (ii) the fifth anniversary of the Initial Termination Date
if MedChem has sold more than * Units of hemostatic compresses subject to this
Agreement, including the 3 1/2" x 5" x 1/4" compress referred to in Section 5.4
hereof, during such twelve month period.
9.2 Termination for Failure *. (a) MedChem may terminate this
Agreement if (i) * (or such extended date as may be agreed upon pursuant to
Section 2.5(c)) and, within thirty (30) days thereafter, MedChem delivers a
written termination notice to Coletica or (ii) MedChem determines in the
exercise of its sole discretion with respect to the Product and Coletica's
ability to meet its obligations under this Agreement, after conducting its due
diligence as provided in Section 2.5(d) hereto, that the * (iii) MedChem and
Coletica *; provided, however, that, subject to the provisions of this
Agreement, including,
29
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
without limitation, Section 2.5(d) and Section 2.5(e) hereto, MedChem's rights
under this Section 9.2(a)(ii) and Section 9.2(a)(iii) shall expire if Coletica
has not received a written termination notice from MedChem on or before * * or
(iv) * and, within thirty (30) days thereafter, MedChem delivers a written
termination notice to Coletica. Such Product shall not in the determination of
MedChem differ from the Specifications.
(b) Coletica may terminate this Agreement if (i) * (or such extended
date as may be agreed upon pursuant to Section 2.5(c)) and, within thirty (30)
days thereafter, Coletica delivers a written termination notice to MedChem or
(ii) Coletica determines in the exercise of its sole discretion that the * in
the manner contemplated by this Agreement or (iii) MedChem and Coletica *;
provided, however, that Coletica can exercise such right by notice delivered to
MedChem not later than *.
9.3 Termination for Breach. Each party (the "non-breaching party")
shall be entitled to terminate this Agreement by written notice to the other
party (the "breaching party") if the breaching party is in default of any of its
material obligations hereunder and fails to remedy such default within 30 days
after
30
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
written notice thereof by the non-breaching party; provided, however, that any
failure to pay an amount due shall entitle the non-breaching party to terminate
this Agreement if the breaching party fails to make the payment within ten (10)
days after receipt of written notice thereof by the non-breaching party. It is
understood that MedChem shall have the right to elect to manufacture the Product
pursuant to Section 4.7 only if Coletica fails to deliver the Product to MedChem
for the periods set forth in Section 4.7. Coletica may also terminate this
Agreement after giving MedChem 30 days' notice if MedChem, directly or
indirectly, comes under the control of persons or entities different from those
having control of MedChem on the Agreement Date and who directly or indirectly
manufacture, distribute or sell a hemostatic collagen compress or a gelatin
compress competing with the Product; provided, however, that Coletica may not
terminate this Agreement for such reason if such persons or entities cease
manufacturing, distributing and selling such competing compress within sixty
(60) days after Coletica's notice of termination. Upon termination of this
Agreement pursuant to this Section 9.3, neither party shall be relieved of any
obligations incurred prior to such termination.
9.4 Consequences of Termination. Upon termination of this Agreement
pursuant to Section 9.2, the Escrow Agent shall immediately deliver to MedChem
the Deposit Fee and interest thereon as set forth in the Escrow Agreement. Upon
termination of this Agreement pursuant to Section 9.1, 9.2 or 9.3, each party
shall
31
<PAGE>
promptly return to the other party all written Confidential Information, and all
copies thereof, of such other party.
Upon termination of this Agreement, (i) all orders already placed by
MedChem with Coletica will be carried out in accordance with the conditions
thereof and those of this Agreement which survive the termination of this
Agreement exclusively for the purpose of carrying out such orders (except in the
case of a default due to non-payment), (ii) all invoices issued by Coletica or
to be issued by Coletica in connection with such orders shall be paid by MedChem
at their maturity date and (iii) Coletica may at its option either (a) allow
MedChem to dispose of the inventory of Product in its possession or (b)
repurchase such inventory of Product at the Transfer Price invoiced to MedChem
for such inventory.
If Coletica elects to repurchase such inventory, MedChem shall immediately
cease to use the Trademark on any of its signs, printed materials and commercial
documents and shall promptly package the Product for reshipment Coletica F.O.B.
Boston Airport.
9.5 Survival of Obligations. Notwithstanding any termination or
expiration of the term of this Agreement, the provisions of Section 8
(Confidential Information) and Section 10 (Indemnification) shall survive.
9.6 Remedies Not Exclusive; No Consequential Damages. Termination of
this Agreement by either party shall not constitute
32
<PAGE>
an election of remedies, and all other remedies shall remain available
notwithstanding any such termination. Neither party, however, shall be liable
for consequential damages under this Agreement.
10. INDEMNIFICATION
---------------
10.1 Product Liability Indemnification. Coletica shall defend
MedChem at Coletica's cost and expense, and will indemnify and hold MedChem
harmless from and against, any and all claims, losses, costs, damages, fees or
expenses arising out of or in connection with (a) the design and manufacture of
the Product or (b) use of the Product for its intended purpose and in accordance
with its instructions and United States governmental rules, regulations or
orders applicable to such use, including, but not limited to, any actual or
alleged injury, damage, death, or other consequence, claimed by reason of breach
of warranty, negligence, strict liability, product defect or other similar cause
of action, regardless of the form in which any such claim is made, except to the
extent that such claim, loss, cause, damage, fee or expense (together, "Excluded
Claims"), arises out of the negligence of, or misconduct by, MedChem, unrelated
to the design and manufacture of the Product or the use of the Product as set
forth in clause (b) above, in which case MedChem shall indemnify and hold
Coletica harmless from and against such Excluded Claims. The procedures to
implement the provisions of this Section 10.1 are set forth in Exhibits D(1) and
D(2).
33
<PAGE>
10.2 Insurance. Commencing not later than the date of the first
shipment of Product to MedChem, Coletica shall maintain product liability
insurance in the amount of * against any amounts for which it is obligated to
indemnify MedChem under Section 10.1 above. The policies representing such
insurance shall specify MedChem as a named insured and shall expressly refer to
the terms and conditions of such indemnity. Coletica shall provide MedChem with
certificates of insurance from the insurance carrier maintaining such insurance
certifying that such coverage is in force, which certificate shall also provide
that MedChem shall receive at least thirty (30) days advance notice of any
cancellation or expiration of such policies.
10.3 Intellectual Property Indemnification by Coletica. Coletica
shall indemnify, hold harmless and defend MedChem from and against any and all
suits, actions, damages, costs, losses, expenses (including settlement awards
and reasonable attorneys' fees) and other liabilities arising from or in
connection with any claim alleging that the Product infringes any patent,
copyright, trademark, trade secret, or other intellectual property right and
shall pay all costs and damages awarded. The procedures to implement the
provisions of this Section 10.3 are set forth in Exhibit D(1).
10.4 Intellectual Property Indemnification by MedChem. MedChem shall
indemnify, hold harmless and defend Coletica from and against any and all suits,
actions, damages, costs, losses,
34
(*) Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
expenses (including settlement awards and reasonable attorneys' fees) and other
liabilities arising from or in connection with any claim alleging that the
Product infringes the trademark Avifoam and shall pay all costs and damages
awarded. The procedures to implement the provisions of this Section 10.4 are
set forth in Exhibit D(2).
11. OBLIGATIONS OF MEDCHEM
----------------------
11.1 MedChem shall promote and develop the sale of the Product within
the Territory, provide Customers with information relating to the Product so as
to facilitate the sale and use thereof, perform any and all activities as shall
be necessary or advisable to provide adequate coverage for the Product
throughout the Territory and, generally, shall perform its obligations hereunder
in accordance with sound commercial practice.
11.2 MedChem shall translate or cause to be translated, as its own
expenses, into the English language any technical, descriptive or sales
literature furnished by Coletica. It will include the Product in its catalogues
and other commercial documentation.
11.3 If required to do so by Coletica, MedChem shall provide its assistance
to Coletica so as to facilitate the obtaining of the Premarket Approval from the
Food and Drug Administration ("FDA") and any other governmental authorizations
with respect to the registration or sale of the Product. From and after the
delivery to MedChem of the Product, MedChem shall comply with all relevant laws,
rules, regulations, orders and ordinances with respect to the
35
<PAGE>
import, storage, transportation, handling, sale and marketing of the Product,
including those of the FDA. MedChem shall promptly send copies to Coletica of
any communication that it receives from or sends to the FDA or other regulatory
authorities with respect to the Product, and shall make available for inspection
by Coletica any records or other documentation required to be maintained with
respect to the Product by the FDA or other regulatory authorities.
11.4 MedChem shall use premises which are adequately located and fitted out
for the storage and display of the Product. Coletica reserves the right to
visit, at reasonable hours and on reasonable notice, the distribution, sales and
marketing offices of MedChem and its sub-distributors.
11.5 (a) Medchem agrees to furnish to Coletica quarterly reports on the
sales of the Product containing appropriate information on the market conditions
in the Territory, competing products, forecasts of sales to Customers, existing
inventories, Customers' criticisms or complaints and on any other activities
conducted by MedChem pursuant to this Agreement.
(b) Coletica shall have the right (not to exceed once during each calendar
year) to engage at its expense an independent certified public accountant,
reasonably acceptable to MedChem, to inspect, during normal business hours and
upon reasonable advance notice, such books, records and other supporting data of
MedChem as may be necessary to verify MedChem's reports and computations as
described in Section 5.3(c) hereof.
36
<PAGE>
11.6 During the 12 months after receipt of the first shipment of
Units, MedChem shall invest * in the following marketing and promotional
actions: paper advertising; conventions, fairs and exhibitions; direct mailing
in conjunction with national conventions; "how to" video developments; and
papers and special reprints. MedChem shall provide to Coletica from time to time
copies of invoices relating to such actions and such other examples of such
actions as Coletica shall reasonably request.
12. MISCELLANEOUS
-------------
12.1 Publicity. No party shall originate any publicity, news
release or other public announcement, written or oral, relating to this
Agreement without the prior written approval of the other party except as
otherwise required by law. Such approval shall not be unreasonably withheld.
12.2 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of New York.
12.3 Waiver. The waiver by any party of a breach or a default of
any provision of this Agreement by the other party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of a party to exercise or avail itself of any
right, power or privilege that it has or may have hereunder operate as a waiver
of any such right, power or privilege by such party.
37
(*) Confidential material omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
12.4 Notices. Unless otherwise specifically provided, all notices
required or permitted by this Agreement shall be in writing and may be delivered
personally, or may be sent by fax, telex, or air mail or by overnight courier,
return receipt requested, addressed to the party to be served at the address set
forth below or such other address as either party may from time to time
designate to the other. If the notice is sent by telex or fax, a confirmed copy
of such telex or fax shall be sent by air mail or overnight courier. All
notices shall be effective when actually received.
If to MedChem: MedChem Products, Inc.
232 West Cummings Park
Woburn, Massachusetts 01801
Attention: President
Telecopy: (617) 932-4125
If to Coletica: Coletica
32, rue St. Jean-de-Dieu
69007 Lyon
France
Attention: President
Telecopy: 33 78580971
12.5 No Agency. MedChem shall purchase the Product from Coletica
and resell the Product in its own name and for its own account and will maintain
throughout the term of this Agreement its status as an independent contractor.
Nothing herein shall be deemed to constitute MedChem, on the one hand, or
Coletica, on the other hand, as the agent or representative of the other, or as
joint venturers or partners for any purpose. Neither MedChem nor Coletica shall
be responsible for the acts or omissions of the other. MedChem shall have no
right or authority to execute any
38
<PAGE>
agreement in the name of Coletica or to make any representation, warranty or
commitment for or in the name of Coletica, except as expressly authorized
herein.
12.6 Entire Agreement and Modifications. This Agreement together
with the Exhibits hereto constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements
between the parties, whether written or oral, relating to the same subject
matter. No modifications, amendments, or supplements to, or approvals or
consents under this Agreement shall take effect for any purpose unless set forth
in writing and signed by the party to be bound.
12.7 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in construing this
Agreement.
12.8 Severability. If any court of competent jurisdiction, or
arbitrator having authority, finds any provision of this Agreement invalid or
unenforceable, the invalidity of such provision shall not affect the other
provisions of this Agreement and all provisions not affected by such invalidity
shall remain in full force and effect. The invalidity of a provision in one
jurisdiction shall not affect the validity or enforceability of the provision in
any other jurisdiction.
12.9 Successors and Assigns. Neither party shall assign its rights
or duties under this Agreement without the prior written
39
<PAGE>
consent of the other party, which consent shall not be unreasonably withheld;
provided, however, that MedChem shall have the right to assign this Agreement in
connection with a sale of substantially all of its business related to this
Agreement unless the purchaser of such business directly or indirectly
manufactures, distributes or sells an hemostatic collagen compress or a gelatin
compress, which, in Coletica's reasonable judgment, competes with the Product
and does not cease manufacturing, distributing and selling such competing
compress within sixty (60) days of such assignment. Similarly, Coletica shall
have the right to assign this Agreement in connection with sale of substantially
all of its business related to this Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their successors and
permitted assigns. Upon a permitted assignment, the assigning party shall have
no further rights or obligations hereunder, but shall continue to be bound by
all preexisting rights or obligations.
12.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of such together
shall constitute one and the same instrument.
12.11 Force Majeure. No party to this Agreement shall be responsible
to the other party for nonperformance or delay in performance of the terms of
this Agreement, except for the payment of money and except in the circumstances
contemplated by Section
40
<PAGE>
4.7 hereof, due to force majeure, including acts of God, war, riots, strikes,
restrictions in supplies or energy or other events beyond the control of such
party, affecting such party or its sub-contractors' production facilities or the
sale or transportation of the Product to MedChem. The occurrence of force
majeure has to be immediately notified to the other party.
12.12 Arbitration. (a) Any claim, dispute or controversy arising
out of or relating to this Agreement, including, without limitation, the breach
or alleged breach hereof, shall be submitted by the parties to arbitration to be
held in New York City in accordance with the rules of the American Arbitration
Association then in effect. The decision of the arbitrators shall be final and
binding. The parties consent to the jurisdiction of the Supreme Court of the
State of New York, and of the United States District Court for the Southern
District of New York, for all purposes in connection with such arbitration,
including the entry of judgement on any award. The parties agree that any
process or notice of motion or other application to either of said courts, and
any paper in connection with such arbitration, may be served inside or outside
the State of New York by certified or registered mail or by personal service,
provided a reasonable time for appearance is allowed. Any provisional remedy
(including injunctive relief) which, but for this agreement to arbitrate
disputes, would be available at law, shall be available to the parties hereto
pending arbitration.
41
<PAGE>
(b) Each of the parties (i) hereby irrevocably submits itself and
acknowledges and recognizes the jurisdiction of the Supreme Court of the State
of New York, and of the United States District Court for the Southern District
of New York, for any purpose under this Agreement, including, without
limitation, obtaining any provisional remedy arising out of, under, or in
connection with, relating to, or based upon a breach of this Agreement, and (ii)
waives and agrees not to assert, as a defense or otherwise, in any such suit,
action or proceeding, any claim that such courts to not have jurisdiction over
it or that such suit, action or proceeding is brought in an inconvenient forum.
The parties agree that any process or notice of motion or other application to
either of said courts, and any paper in connection with such provision remedy,
may be served inside or outside the State of New York, by certified or
registered mail or by personal service, provided a reasonable time for
appearance is allowed.
(c) Each of the parties, to the full extent allowed by law, hereby
reserves all other rights to object to such jurisdiction, the submission to
jurisdiction set forth in this
42
<PAGE>
Section 12.12 being intended solely for the purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names by their properly and duly authorized officers as of the
date first above written.
MEDCHEM PRODUCTS, INC.
By: /s/ Edward J. Quilty
------------------------------
Name: Edward J. Quilty
Title: President
COLETICA
By: /s/ Pierre Devictor
------------------------------
Name: Pierre Devictor
Title: President
43
<PAGE>
Exhibit No. 10.4
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
This Agreement (the "Agreement"), made as of this 1st day of March,
1995, is entered into by and between MedChem Products, Inc., a Massachusetts
corporation with its principal place of business at 232 West Cummings Park,
Woburn, Massachusetts 01801 (the "Company"), and Edward J. Quilty, residing at
620 Grindan Drive, Yardley, PA 19067 ("Quilty").
The Company and Quilty are parties to an Employment Agreement dated
July 13, 1994 (the "Employment Agreement"). The Company and Quilty desire to
make certain amendments to the Employment Agreement. In consideration of these
premises, the mutual covenants and promises contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties hereto agree as follows:
1. The Employment Agreement is hereby amended by deleting Section 10
in its entirety and inserting in lieu thereof the following:
"10. Stock Options.
-------------
(a) Concurrently herewith, the Company shall grant to Quilty an
option (the "First Option") to purchase 200,000 shares of its Common
Stock under its 1993 Stock Option Plan (at an exercise price equal to
the closing sale price for the Common Stock on the New York Stock
Exchange for July 13, 1994), which option shall vest ratably over four
years with the initial 25% of the shares covered by such option
vesting on July 13, 1995 and the remaining 75% vesting ratably on July
13 of the succeeding three years, with the final 25% vesting on July
13, 1998. In addition, the Company will grant Quilty an option (the
"Second Option") to purchase an additional 200,000 shares on August 1,
1994 under the Company's newly-adopted 1994 Stock Option Plan (which
is subject to approval by the Company's stockholders) (at an exercise
price equal to the closing sale price for the Common Stock on the New
York Stock Exchange on August 1, 1994), which option shall vest
ratably over seven years (subject to acceleration of such seven-year
vesting upon the attainment of milestones to be determined by the
Company's Board of Directors on or before 120 days from the date
hereof).
<PAGE>
(b) In the event that the employment of Quilty is terminated
pursuant to Sections 7, 8 or 9(b) only, the exercisability of the
First Option shall be accelerated by one year so that such First
Option shall be exercisable to purchase the number of shares of Common
Stock Quilty would otherwise have been able to purchase if Quilty's
employment was terminated on the first anniversary of the date on
which it was actually terminated; provided, however, that if, after
such acceleration, Quilty is still not vested in, and entitled to
purchase, an aggregate of 200,000 shares pursuant to the First Option
and the Second Option (but excluding from such calculation of 200,000
shares any shares as to which vesting was accelerated due to the
attainment of milestones determined by the Company's Board of
Directors, as set forth above in this Section 10 (the "Accelerated
Shares")), then, in such event, the vesting under the First Option
will be further accelerated such that it shall be exercisable, in the
aggregate, for that number of shares of Common Stock as is equal to
the difference between 200,000 and the number of shares of Common
Stock exercisable under the Second Option as of the date of
termination (excluding any Accelerated Shares). The vesting under the
Second Option shall not be accelerated in connection with any such
termination of employment.
(c) Notwithstanding the foregoing, in the event a Change in
Control (as defined below) of the Company occurs during the Employment
Term, all options to purchase capital stock of the Company previously
granted to Quilty pursuant to any stock option plan or other employee
benefit arrangement of the Company shall immediately vest and become
fully exercisable in accordance with their terms. A "Change in
---------
Control" of the Company shall occur or be deemed to have occurred only
-------
if any of the following events occurs: (i) any "person," as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the Company, any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any corporation owned directly or
indirectly by the stockholders of the Company in substantially the
same proportion as their ownership of stock of the Company) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's
then outstanding
-2-
<PAGE>
securities; (ii) individuals who, as of the date hereof, constitute
the Board (as of the date hereof, the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that
any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election
of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the
Incumbent Board; or (iii) the stockholders of the Company approve a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets."
2. This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to conflict of laws provisions.
3. This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the amendment or modification of the Employment Agreement.
4. In all respects other than as specifically provided in this
Agreement, the Employment Agreement is hereby ratified and affirmed.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
MEDCHEM PRODUCTS, INC.
By: /s/ James F. Marten
---------------------------
Title: Chairman
------------------------
/s/ Edward J. Quilty
------------------------------
Edward J. Quilty
-4-
<PAGE>
Exhibit No. 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 13th day of
February, 1995, is entered into by MedChem Products, Inc., a Massachusetts
corporation with its principal place of business at 232 West Cummings Park,
Woburn, Massachusetts 01801 (the "Company"), and John McDonough, residing at 44
Vinebrook Road, Westford, Massachusetts 01886 (the "Employee").
The Company desires to employ the Employee, and the Employee desires
to be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
------------------
Employee, and the Employee hereby accepts employment with the Company, upon the
terms set forth in this Agreement, for the period commencing on February 13,
1995 (the "Commencement Date") and ending on February 13, 1998 (such period, as
it may be extended, the "Employment Period"), unless sooner terminated in
accordance with the provisions of Section 4.
2. Title; Capacity. The Employee shall serve as Vice President and
---------------
Chief Financial Officer or in such other position as the Company or its Board of
Directors (the "Board") may determine
<PAGE>
from time to time. The Employee shall be based at the Company's headquarters in
Woburn, Massachusetts. The Employee shall be subject to the supervision of, and
shall have such authority as is delegated to him by, the Board or such officer
of the Company as may be designated by the Board.
The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company during
the Employment Period. The Employee agrees to abide by the rules, regulations,
instructions, personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the Company. The Employee
acknowledges receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Employee, in equal semi-
------
monthly installments or otherwise in accordance with the Company's standard
payroll policies as such policies may exist from time to time (after withholding
and other required deductions), an annual base salary of $115,000 for the one-
year period commencing on the Commencement Date. Such salary shall be
-2-
<PAGE>
subject to adjustment upward thereafter, as determined by the Board, on an
annual basis each year on the anniversary date of the Employee's original date
of employment by the Company (i.e., December 1), but the Board shall not
decrease the Employee's annual base salary at any annual review.
3.2 Fringe Benefits. The Employee shall be entitled to participate
----------------
in all bonus and benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that Employee's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Employee shall also be entitled to holidays and annual
vacation leave in accordance with the Company's policy as it exists from time to
time.
3.3 Reimbursement of Expenses. The Company shall reimburse the
-------------------------
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
-------- -------
amount available for such travel, entertainment and other expenses may be fixed
in advance by the Board.
-3-
<PAGE>
4. Employment Termination. The employment of the Employee by the
----------------------
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
4.1 Expiration of the Employment Period in accordance with
Section 1;
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this Section
4.2, cause for termination shall be deemed to exist upon (a) a good faith
finding by the Company of failure of the Employee to perform his assigned duties
for the Company (which failure continues for thirty (30) days following written
notice thereof to the Employee), dishonesty, negligence or misconduct, (b) the
breach by the Employee of Section 7 of this Agreement or any provision of any
confidentiality, invention and non-disclosure, non-competition or similar
agreement between the Employee and the Company, or (c) the conviction of the
Employee of, or the entry of a pleading of guilty or nolo contendere by the
Employee to, any crime involving moral turpitude or any felony;
4.3 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of the
Employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360-day period, to perform the services
contemplated under this Agreement. A determination of disability shall be made
-4-
<PAGE>
by a physician satisfactory to both the Employee and the Company, provided that
-------- ----
if the Employee and the Company do not agree on a physician, the Employee and
the Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties;
4.4 At the election of either party, upon not less than thirty days'
prior written notice of termination (the "Notice of Termination").
5. Effect of Termination.
---------------------
5.1 Termination for Cause or at Election of Either Party. In the
----------------------------------------------------
event the Employee's employment is terminated for cause pursuant to Section 4.2,
or at the election of the Employee pursuant to Section 4.4, the Company shall
pay to the Employee the compensation and benefits otherwise payable to him under
Section 3 through the last day of his actual employment by the Company (the
"Date of Termination"). In the event the Employee's employment is terminated at
the election of the Company pursuant to Section 4.4, the Company shall pay the
Employee the compensation that would otherwise have been payable to the
Employee, after withholding and other required deductions and in accordance with
standard Company payroll policies and procedures, for a period of one year after
the Date of Termination.
-5-
<PAGE>
5.2 Termination for Death or Disability. If the Employee's
-----------------------------------
employment is terminated by death or because of disability pursuant to Section
4.3, the Company shall pay to the estate of the Employee or to the Employee, as
the case may be, the compensation which would otherwise be payable to the
Employee up to the end of the month in which the termination of his employment
because of death or disability occurs.
5.3 Survival. The provisions of Sections 5, 6, 7 and 8 shall
--------
survive the termination of this Agreement.
6. Change in Control.
-----------------
6.1 Notwithstanding the foregoing, in the event that the Employee's
employment is terminated (i) by the Company pursuant to Section 4.4 or (ii) by
the Employee pursuant to Section 4.4 for Good Reason (as defined in Section
6.4), in either case within 12 months following a Change in Control (as defined
in Section 6.3) of the Company, the Company shall not be required to pay the
Employee the compensation and benefits set forth in Section 5.1, but instead
shall provide the Employee with the following benefits:
(i) the Company shall pay to the Employee (A) the Employee's full base
salary and all other compensation through the Date of Termination at the rate in
effect at the time the Notice of Termination is given, no later than the fifth
full day following the Date of Termination, plus all other amounts to which
-6-
<PAGE>
the Employee is entitled under any compensation plan of the Company at the time
such payments are due and (B) if the Employee so elects, in lieu of his right to
continue to receive deferred compensation under any deferred compensation plan
of the Company then in effect, no later than the fifth full day following the
Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts
together with any earnings credited on such amounts under such plan;
(ii) for a 12-month period after termination, the Company will pay as
severance pay to the Employee an amount equal to the sum of (A) the higher of
(x) the Employee's annual base salary in effect on the Date of Termination or
(y) the Employee's annual base salary in effect immediately prior to the Change
in Control of the Company, plus (B) the higher of (x) the amount of the cash
performance bonuses paid or awarded to the Employee with respect to the
Company's most recent full fiscal year for which such a bonus was paid or
awarded to the Employee or (y) the amount of cash performance bonuses paid or
awarded to the Employee with respect to the Company's last full fiscal year
prior to the Change in Control of the Company for which such a bonus was paid or
awarded to the Employee, in each case after withholding and other required
deductions and in accordance with standard Company payroll policies and
procedures;
-7-
<PAGE>
(iii) all matching contributions by the Company accrued, but
unvested, for the Employee's account under the Company's Savings and Investment
(401(k)) Plan shall immediately vest, and the Company shall promptly pay all
such previously unvested amounts into the Employee's account under such Plan;
(iv) for a 12-month period after termination, the Company shall
arrange to provide the Employee with life, disability, dental, accident, travel
and group health insurance benefits substantially similar to those which the
Employee was receiving immediately prior to the Notice of Termination.
Notwithstanding the foregoing, the Company shall not provide any benefit
otherwise receivable by the Employee pursuant to this paragraph (iv) if an
equivalent benefit is actually received by the Employee during the 12-month
period following his termination, and any such benefit actually received by the
Employee shall be reported to the Company; and
(v) for a six-month period after termination, the Company shall
reimburse the Employee for reasonable fees and expenses incurred by him for the
purpose of locating employment, including the fees and expenses of consultants
and other persons retained by him for such purpose, promptly upon receipt by the
Company of satisfactory evidence of payment of such fees and expenses.
-8-
<PAGE>
6.2 In the event a Change in Control of the Company occurs during the
Employment Period, all options to purchase shares of capital stock of the
Company previously granted to the Employee pursuant to any stock option plan or
other employee benefit arrangement of the Company shall immediately vest and
become fully exercisable in accordance with their terms.
6.3 A "Change in Control" of the Company shall occur or be deemed to
-----------------
have occurred only if any of the following events occurs: (i) any "person," as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as their ownership of stock of
the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's then
outstanding securities; (ii) individuals who, as of the date hereof, constitute
the Board (as of the date hereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was
-9-
<PAGE>
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
-10-
<PAGE>
6.4 "Good Reason" means the occurrence after a Change in Control of
-----------
the Company of any of the following circumstances:
(i) any significant diminution in the Employee's position, duties,
responsibilities, title or office as in effect immediately prior to a Change in
Control;
(ii) any reduction in the Employee's annual base salary as in effect
on the date hereof or as the same may be increased from time to time;
(iii) the failure of the Company to continue in effect any
material compensation or benefit plan in which the Employee participates
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue the Employee's
participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and
the level of the Employee's participation relative to other participants, as
existed at the time of the Change in Control or the failure by the Company to
award cash bonuses to its executives in amounts substantially consistent with
past practice in light of the Company's financial performance;
(iv) the failure by the Company to continue to provide the Employee
with benefits substantially similar to those
-11-
<PAGE>
enjoyed by the Employee under any of the Company's insurance, medical, health
and accident, or disability plans in which the Employee was participating at the
time of the Change in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such benefits, or the
failure by the Company to provide the Employee with the number of paid vacation
days to which he is entitled in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control or in accordance with any
agreement between the Employee and the Company existing at the time of the
Change in Control;
(v) any requirement by the Company or of any person in control of the
Company that the location at which the Employee performs his principal duties
for the Company at the time of the Change in Control (the "Prior Location") be
changed to a new location outside a radius of 50 miles from such Prior Location;
(vi) any requirement by the Company or of any person in control of the
Company that the Employee travels on an overnight basis to an extent not
substantially consistent with his business travel obligations immediately prior
to a Change in Control of the Company;
-12-
<PAGE>
(vii) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement; or
(viii) any purported termination of the Employee's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9, which purported termination shall not be effective
for purposes of this Agreement.
7. Non-Compete.
-----------
(a) For the purposes of this Agreement:
(i) "Proprietary Information" means all information and know-how,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business or financial affairs, including, without
limitation, inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data, clinical
data, financial data, personnel data, computer programs and customer and
supplier lists.
(ii) "Competing Products" means any products or processes of any
person or organization other than the Company in existence or under development,
which are substantially the same, may be substituted for, or applied to
substantially the same end use as the products or processes with which the
Employee works during the time of his employment with the Company or about which
-13-
<PAGE>
he acquires confidential information through his work with the Company.
(iii) "Competing Organization" means any person or organization
engaged in, or about to become engaged in, research or development, production,
distribution, marketing or selling of a Competing Product.
(b) The Employee understands that information regarding the Company
and its affiliates including, without limitation, Proprietary Information, is
considered confidential to the Company and is of substantial commercial value to
the Company. Any entrusting of such confidential information to the Employee by
the Company is done so in reliance upon the confidential relationship arising
from the terms of his employment with the Company. Therefore, in consideration
of his employment with the Company, the Employee agrees that he will not render
services of any nature, directly or indirectly, to any Competing Organization in
connection with any Competing Product within such geographical territory as the
Company and such Competing Organization are or would be in actual competition,
for a period of one year, commencing on the date of termination of his
employment. The Employee understands that services rendered to such Competing
Organization may have the effect of supporting actual competition in various
geographic areas, and may be prohibited by this Agreement regardless of the
geographic area in which such services
-14-
<PAGE>
are physically rendered. The Company may, in its sole discretion, elect to
waive, in whole or in part, the obligation set forth in the previous sentence,
such waiver to be effective only if given in writing by the Company.
8. Confidentiality and Assignment of Inventions. The Employee
--------------------------------------------
acknowledges that he has, on or prior to the date of this Agreement, executed
and delivered to the Company a Non-Disclosure Agreement (the "Confidentiality
Agreement"). The Employee hereby affirms and ratifies his obligations
thereunder.
9. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 9.
10. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement, together with the Confidentiality
----------------
Agreement, constitutes the entire agreement between the parties and supersedes
all prior agreements and
-15-
<PAGE>
understandings, whether written or oral, relating to the subject matter of this
Agreement.
12. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
14. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business; provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
15. Miscellaneous.
-------------
15.1 No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
15.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
-16-
<PAGE>
15.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an
instrument under seal as of the day and year first set forth above.
MEDCHEM PRODUCTS, INC.
By:/s/ Edward J. Quilty
--------------------------------
Title:
-----------------------------
EMPLOYEE
/s/ John McDonough
-----------------------------------
John McDonough
-17-
<PAGE>
Exhibit No. 10.6
----------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 13th day of
February, 1995, is entered into by MedChem Products, Inc., a Massachusetts
corporation with its principal place of business at 232 West Cummings Park,
Woburn, Massachusetts 01801 (the "Company"), and Bradford Gay, residing at 353
Elm Street, Concord, Massachusetts 01742 (the "Employee").
The Company desires to employ the Employee, and the Employee desires
to be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
------------------
Employee, and the Employee hereby accepts employment with the Company, upon the
terms set forth in this Agreement, for the period commencing on February 13,
1995 (the "Commencement Date") and ending on February 13, 1998 (such period, as
it may be extended, the "Employment Period"), unless sooner terminated in
accordance with the provisions of Section 4.
2. Title; Capacity. The Employee shall serve as Executive Vice
---------------
President or in such other position as the Company or its Board of Directors
(the "Board") may determine from time to time.
<PAGE>
The Employee shall be based at the Company's headquarters in Woburn,
Massachusetts. The Employee shall be subject to the supervision of, and shall
have such authority as is delegated to him by, the Board or such officer of the
Company as may be designated by the Board.
The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company during
the Employment Period. The Employee agrees to abide by the rules, regulations,
instructions, personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the Company. The Employee
acknowledges receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Employee, in equal semimonthly
------
installments or otherwise in accordance with the Company's standard payroll
policies as such policies may exist from time to time (after withholding and
other required deductions), an annual base salary of $165,000 for the one-year
period commencing on the Commencement Date. Such salary shall be
-2-
<PAGE>
subject to adjustment upward thereafter, as determined by the Board, on an
annual basis each year on the anniversary date of the Employee's original date
of employment by the Company (i.e., August 1), but the Board shall not decrease
the Employee's annual base salary at any annual review.
3.2 Fringe Benefits. The Employee shall be entitled to participate
----------------
in all bonus and benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that Employee's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Employee shall also be entitled to holidays and annual
vacation leave in accordance with the Company's policy as it exists from time to
time.
3.3 Reimbursement of Expenses. The Company shall reimburse the
-------------------------
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
-------- -------
amount available for such travel, entertainment and other expenses may be fixed
in advance by the Board.
-3-
<PAGE>
4. Employment Termination. The employment of the Employee by the
----------------------
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
4.1 Expiration of the Employment Period in accordance with Section 1;
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this Section
4.2, cause for termination shall be deemed to exist upon (a) a good faith
finding by the Company of failure of the Employee to perform his assigned duties
for the Company (which failure continues for thirty (30) days following written
notice thereof to the Employee), dishonesty, negligence or misconduct, (b) the
breach by the Employee of Section 7 of this Agreement or any provision of any
confidentiality, invention and non-disclosure, non-competition or similar
agreement between the Employee and the Company, or (c) the conviction of the
Employee of, or the entry of a pleading of guilty or nolo contendere by the
Employee to, any crime involving moral turpitude or any felony;
4.3 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of the
Employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360-day period, to perform the services
contemplated under this Agreement. A determination of disability shall be made
-4-
<PAGE>
by a physician satisfactory to both the Employee and the Company, provided that
-------- ----
if the Employee and the Company do not agree on a physician, the Employee and
the Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties;
4.4 At the election of either party, upon not less than thirty days'
prior written notice of termination (the "Notice of Termination").
5. Effect of Termination.
---------------------
5.1 Termination for Cause or at Election of Either Party. In the
----------------------------------------------------
event the Employee's employment is terminated for cause pursuant to Section 4.2,
or at the election of the Employee pursuant to Section 4.4, the Company shall
pay to the Employee the compensation and benefits otherwise payable to him under
Section 3 through the last day of his actual employment by the Company (the
"Date of Termination"). In the event the Employee's employment is terminated at
the election of the Company pursuant to Section 4.4, the Company shall pay the
Employee the compensation that would otherwise have been payable to the
Employee, after withholding and other required deductions and in accordance with
standard Company payroll policies and procedures, for a period of one year after
the Date of Termination.
-5-
<PAGE>
5.2 Termination for Death or Disability. If the Employee's
-----------------------------------
employment is terminated by death or because of disability pursuant to Section
4.3, the Company shall pay to the estate of the Employee or to the Employee, as
the case may be, the compensation which would otherwise be payable to the
Employee up to the end of the month in which the termination of his employment
because of death or disability occurs.
5.3 Survival. The provisions of Sections 5, 6, 7 and 8 shall
--------
survive the termination of this Agreement.
6. Change in Control.
-----------------
6.1 Notwithstanding the foregoing, in the event that the Employee's
employment is terminated (i) by the Company pursuant to Section 4.4 or (ii) by
the Employee pursuant to Section 4.4 for Good Reason (as defined in Section
6.4), in either case within 12 months following a Change in Control (as defined
in Section 6.3) of the Company, the Company shall not be required to pay the
Employee the compensation and benefits set forth in Section 5.1, but instead
shall provide the Employee with the following benefits:
(i) the Company shall pay to the Employee (A) the Employee's full base
salary and all other compensation through the Date of Termination at the rate in
effect at the time the Notice of Termination is given, no later than the fifth
full day following the Date of Termination, plus all other amounts to which
-6-
<PAGE>
the Employee is entitled under any compensation plan of the Company at the time
such payments are due and (B) if the Employee so elects, in lieu of his right to
continue to receive deferred compensation under any deferred compensation plan
of the Company then in effect, no later than the fifth full day following the
Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts
together with any earnings credited on such amounts under such plan;
(ii) for a 12-month period after termination, the Company will pay as
severance pay to the Employee an amount equal to the sum of (A) the higher of
(x) the Employee's annual base salary in effect on the Date of Termination or
(y) the Employee's annual base salary in effect immediately prior to the Change
in Control of the Company, plus (B) the higher of (x) the amount of the cash
performance bonuses paid or awarded to the Employee with respect to the
Company's most recent full fiscal year for which such a bonus was paid or
awarded to the Employee or (y) the amount of cash performance bonuses paid or
awarded to the Employee with respect to the Company's last full fiscal year
prior to the Change in Control of the Company for which such a bonus was paid or
awarded to the Employee, in each case after withholding and other required
deductions and in accordance with standard Company payroll policies and
procedures;
-7-
<PAGE>
(iii) all matching contributions by the Company accrued, but
unvested, for the Employee's account under the Company's Savings and Investment
(401(k)) Plan shall immediately vest, and the Company shall promptly pay all
such previously unvested amounts into the Employee's account under such Plan;
(iv) for a 12-month period after termination, the Company shall
arrange to provide the Employee with life, disability, dental, accident, travel
and group health insurance benefits substantially similar to those which the
Employee was receiving immediately prior to the Notice of Termination.
Notwithstanding the foregoing, the Company shall not provide any benefit
otherwise receivable by the Employee pursuant to this paragraph (iv) if an
equivalent benefit is actually received by the Employee during the 12-month
period following his termination, and any such benefit actually received by the
Employee shall be reported to the Company; and
(v) for a six-month period after termination, the Company shall
reimburse the Employee for reasonable fees and expenses incurred by him for the
purpose of locating employment, including the fees and expenses of consultants
and other persons retained by him for such purpose, promptly upon receipt by the
Company of satisfactory evidence of payment of such fees and expenses.
-8-
<PAGE>
6.2 In the event a Change in Control of the Company occurs during the
Employment Period, all options to purchase shares of capital stock of the
Company previously granted to the Employee pursuant to any stock option plan or
other employee benefit arrangement of the Company shall immediately vest and
become fully exercisable in accordance with their terms.
6.3 A "Change in Control" of the Company shall occur or be deemed to
-----------------
have occurred only if any of the following events occurs: (i) any "person," as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as their ownership of stock of
the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's then
outstanding securities; (ii) individuals who, as of the date hereof, constitute
the Board (as of the date hereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was
-9-
<PAGE>
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
-10-
<PAGE>
6.4 "Good Reason" means the occurrence after a Change in Control of
-----------
the Company of any of the following circumstances:
(i) any significant diminution in the Employee's position, duties,
responsibilities, title or office as in effect immediately prior to a Change in
Control;
(ii) any reduction in the Employee's annual base salary as in effect
on the date hereof or as the same may be increased from time to time;
(iii) the failure of the Company to continue in effect any
material compensation or benefit plan in which the Employee participates
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue the Employee's
participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and
the level of the Employee's participation relative to other participants, as
existed at the time of the Change in Control or the failure by the Company to
award cash bonuses to its executives in amounts substantially consistent with
past practice in light of the Company's financial performance;
(iv) the failure by the Company to continue to provide the Employee
with benefits substantially similar to those
-11-
<PAGE>
enjoyed by the Employee under any of the Company's insurance, medical, health
and accident, or disability plans in which the Employee was participating at the
time of the Change in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such benefits, or the
failure by the Company to provide the Employee with the number of paid vacation
days to which he is entitled in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control or in accordance with any
agreement between the Employee and the Company existing at the time of the
Change in Control;
(v) any requirement by the Company or of any person in control of the
Company that the location at which the Employee performs his principal duties
for the Company at the time of the Change in Control (the "Prior Location") be
changed to a new location outside a radius of 50 miles from such Prior Location;
(vi) any requirement by the Company or of any person in control of the
Company that the Employee travels on an overnight basis to an extent not
substantially consistent with his business travel obligations immediately prior
to a Change in Control of the Company;
-12-
<PAGE>
(vii) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement; or
(viii) any purported termination of the Employee's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9, which purported termination shall not be effective
for purposes of this Agreement.
7. Non-Compete.
-----------
(a) For the purposes of this Agreement:
(i) "Proprietary Information" means all information and know-how,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business or financial affairs, including, without
limitation, inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data, clinical
data, financial data, personnel data, computer programs and customer and
supplier lists.
(ii) "Competing Products" means any products or processes of any
person or organization other than the Company in existence or under development,
which are substantially the same, may be substituted for, or applied to
substantially the same end use as the products or processes with which the
Employee works during the time of his employment with the Company or about which
-13-
<PAGE>
he acquires confidential information through his work with the Company.
(iii) "Competing Organization" means any person or organization
engaged in, or about to become engaged in, research or development, production,
distribution, marketing or selling of a Competing Product.
(b) The Employee understands that information regarding the Company
and its affiliates including, without limitation, Proprietary Information, is
considered confidential to the Company and is of substantial commercial value to
the Company. Any entrusting of such confidential information to the Employee by
the Company is done so in reliance upon the confidential relationship arising
from the terms of his employment with the Company. Therefore, in consideration
of his employment with the Company, the Employee agrees that he will not render
services of any nature, directly or indirectly, to any Competing Organization in
connection with any Competing Product within such geographical territory as the
Company and such Competing Organization are or would be in actual competition,
for a period of one year, commencing on the date of termination of his
employment. The Employee understands that services rendered to such Competing
Organization may have the effect of supporting actual competition in various
geographic areas, and may be prohibited by this Agreement regardless of the
geographic area in which such services
-14-
<PAGE>
are physically rendered. The Company may, in its sole discretion, elect to
waive, in whole or in part, the obligation set forth in the previous sentence,
such waiver to be effective only if given in writing by the Company.
8. Confidentiality and Assignment of Inventions. The Employee
--------------------------------------------
acknowledges that he has, on or prior to the date of this Agreement, executed
and delivered to the Company a Non-Disclosure Agreement (the "Confidentiality
Agreement"). The Employee hereby affirms and ratifies his obligations
thereunder.
9. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 9.
10. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement, together with the Confidentiality
----------------
Agreement, constitutes the entire agreement between the parties and supersedes
all prior agreements and
-15-
<PAGE>
understandings, whether written or oral, relating to the subject matter of this
Agreement.
12. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
14. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business; provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
15. Miscellaneous.
-------------
15.1 No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
15.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
-16-
<PAGE>
15.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an
instrument under seal as of the day and year first set forth above.
MEDCHEM PRODUCTS, INC.
By:/s/ Edward J. Quilty
--------------------------------
Title:
-----------------------------
EMPLOYEE
/s/ Bradford Gay
-----------------------------------
Bradford Gay
-17-
<PAGE>
Exhibit No. 10.7
----------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 13th day of
February, 1995, is entered into by MedChem Products, Inc., a Massachusetts
corporation with its principal place of business at 232 West Cummings Park,
Woburn, Massachusetts 01801 (the "Company"), and Charles Putnam, residing at 11
Woodview Drive, Belle Meade, New Jersey 08502 (the "Employee").
The Company desires to employ the Employee, and the Employee desires
to be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
------------------
Employee, and the Employee hereby accepts employment with the Company, upon the
terms set forth in this Agreement, for the period commencing on February 13,
1995 (the "Commencement Date") and ending on February 13, 1998 (such period, as
it may be extended, the "Employment Period"), unless sooner terminated in
accordance with the provisions of Section 4.
2. Title; Capacity. The Employee shall serve as Executive Vice
---------------
President of Research and Development or in such other position as the Company
or its Board of Directors (the "Board")
<PAGE>
may determine from time to time. The Employee shall be based at the Company's
office in Princeton, New Jersey. The Employee shall be subject to the
supervision of, and shall have such authority as is delegated to him by, the
Board or such officer of the Company as may be designated by the Board.
The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company during
the Employment Period. The Employee agrees to abide by the rules, regulations,
instructions, personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the Company. The Employee
acknowledges receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Employee, in equal
------
semimonthly installments or otherwise in accordance with the Company's standard
payroll policies as such policies may exist from time to time (after withholding
and other required deductions), an annual base salary of $140,000 for the one-
year period commencing on the Commencement Date. Such salary shall be
-2-
<PAGE>
subject to adjustment upward thereafter, as determined by the Board, on an
annual basis each year on the anniversary date of the Employee's original date
of employment by the Company (i.e., August 1), but the Board shall not decrease
the Employee's annual base salary at any annual review.
3.2 Fringe Benefits. The Employee shall be entitled to participate
----------------
in all bonus and benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that Employee's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Employee shall also be entitled to holidays and annual
vacation leave in accordance with the Company's policy as it exists from time to
time.
3.3 Reimbursement of Expenses. The Company shall reimburse the
-------------------------
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
-------- -------
amount available for such travel, entertainment and other expenses may be fixed
in advance by the Board.
-3-
<PAGE>
4. Employment Termination. The employment of the Employee by the
----------------------
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
4.1 Expiration of the Employment Period in accordance with
Section 1;
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this Section
4.2, cause for termination shall be deemed to exist upon (a) a good faith
finding by the Company of failure of the Employee to perform his assigned duties
for the Company (which failure continues for thirty (30) days following written
notice thereof to the Employee), dishonesty, negligence or misconduct, (b) the
breach by the Employee of Section 7 of this Agreement or any provision of any
confidentiality, invention and non-disclosure, non-competition or similar
agreement between the Employee and the Company, or (c) the conviction of the
Employee of, or the entry of a pleading of guilty or nolo contendere by the
Employee to, any crime involving moral turpitude or any felony;
4.3 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of the
Employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360-day period, to perform the services
contemplated under this Agreement. A determination of disability shall be made
-4-
<PAGE>
by a physician satisfactory to both the Employee and the Company, provided that
-------- ----
if the Employee and the Company do not agree on a physician, the Employee and
the Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties;
4.4 At the election of either party, upon not less than thirty days'
prior written notice of termination (the "Notice of Termination").
5. Effect of Termination.
---------------------
5.1 Termination for Cause or at Election of Either Party. In the
----------------------------------------------------
event the Employee's employment is terminated for cause pursuant to Section 4.2,
or at the election of the Employee pursuant to Section 4.4, the Company shall
pay to the Employee the compensation and benefits otherwise payable to him under
Section 3 through the last day of his actual employment by the Company (the
"Date of Termination"). In the event the Employee's employment is terminated at
the election of the Company pursuant to Section 4.4, the Company shall pay the
Employee the compensation that would otherwise have been payable to the
Employee, after withholding and other required deductions and in accordance with
standard Company payroll policies and procedures, for a period of one year after
the Date of Termination.
-5-
<PAGE>
5.2 Termination for Death or Disability. If the Employee's
-----------------------------------
employment is terminated by death or because of disability pursuant to Section
4.3, the Company shall pay to the estate of the Employee or to the Employee, as
the case may be, the compensation which would otherwise be payable to the
Employee up to the end of the month in which the termination of his employment
because of death or disability occurs.
5.3 Survival. The provisions of Sections 5, 6, 7 and 8 shall
--------
survive the termination of this Agreement.
6. Change in Control.
-----------------
6.1 Notwithstanding the foregoing, in the event that the Employee's
employment is terminated (i) by the Company pursuant to Section 4.4 or (ii) by
the Employee pursuant to Section 4.4 for Good Reason (as defined in Section
6.4), in either case within 12 months following a Change in Control (as defined
in Section 6.3) of the Company, the Company shall not be required to pay the
Employee the compensation and benefits set forth in Section 5.1, but instead
shall provide the Employee with the following benefits:
(i) the Company shall pay to the Employee (A) the Employee's full
base salary and all other compensation through the Date of Termination at the
rate in effect at the time the Notice of Termination is given, no later than the
fifth full day following the Date of Termination, plus all other amounts to
which
-6-
<PAGE>
the Employee is entitled under any compensation plan of the Company at the time
such payments are due and (B) if the Employee so elects, in lieu of his right to
continue to receive deferred compensation under any deferred compensation plan
of the Company then in effect, no later than the fifth full day following the
Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts
together with any earnings credited on such amounts under such plan;
(ii) for a 12-month period after termination, the Company will pay as
severance pay to the Employee an amount equal to the sum of (A) the higher of
(x) the Employee's annual base salary in effect on the Date of Termination or
(y) the Employee's annual base salary in effect immediately prior to the Change
in Control of the Company, plus (B) the higher of (x) the amount of the cash
performance bonuses paid or awarded to the Employee with respect to the
Company's most recent full fiscal year for which such a bonus was paid or
awarded to the Employee or (y) the amount of cash performance bonuses paid or
awarded to the Employee with respect to the Company's last full fiscal year
prior to the Change in Control of the Company for which such a bonus was paid or
awarded to the Employee, in each case after withholding and other required
deductions and in accordance with standard Company payroll policies and
procedures;
-7-
<PAGE>
(iii) all matching contributions by the Company accrued, but
unvested, for the Employee's account under the Company's Savings and Investment
(401(k)) Plan shall immediately vest, and the Company shall promptly pay all
such previously unvested amounts into the Employee's account under such Plan;
(iv) for a 12-month period after termination, the Company shall
arrange to provide the Employee with life, disability, dental, accident, travel
and group health insurance benefits substantially similar to those which the
Employee was receiving immediately prior to the Notice of Termination.
Notwithstanding the foregoing, the Company shall not provide any benefit
otherwise receivable by the Employee pursuant to this paragraph (iv) if an
equivalent benefit is actually received by the Employee during the 12-month
period following his termination, and any such benefit actually received by the
Employee shall be reported to the Company; and
(v) for a six-month period after termination, the Company shall
reimburse the Employee for reasonable fees and expenses incurred by him for the
purpose of locating employment, including the fees and expenses of consultants
and other persons retained by him for such purpose, promptly upon receipt by the
Company of satisfactory evidence of payment of such fees and expenses.
-8-
<PAGE>
6.2 In the event a Change in Control of the Company occurs during the
Employment Period, all options to purchase shares of capital stock of the
Company previously granted to the Employee pursuant to any stock option plan or
other employee benefit arrangement of the Company shall immediately vest and
become fully exercisable in accordance with their terms.
6.3 A "Change in Control" of the Company shall occur or be deemed to
-----------------
have occurred only if any of the following events occurs: (i) any "person," as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as their ownership of stock of
the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's then
outstanding securities; (ii) individuals who, as of the date hereof, constitute
the Board (as of the date hereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was
-9-
<PAGE>
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
-10-
<PAGE>
6.4 "Good Reason" means the occurrence after a Change in Control of
-----------
the Company of any of the following circumstances:
(i) any significant diminution in the Employee's position,
duties, responsibilities, title or office as in effect immediately prior to a
Change in Control;
(ii) any reduction in the Employee's annual base salary as in
effect on the date hereof or as the same may be increased from time to time;
(iii) the failure of the Company to continue in effect any
material compensation or benefit plan in which the Employee participates
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue the Employee's
participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and
the level of the Employee's participation relative to other participants, as
existed at the time of the Change in Control or the failure by the Company to
award cash bonuses to its executives in amounts substantially consistent with
past practice in light of the Company's financial performance;
(iv) the failure by the Company to continue to provide the
Employee with benefits substantially similar to those
-11-
<PAGE>
enjoyed by the Employee under any of the Company's insurance, medical, health
and accident, or disability plans in which the Employee was participating at the
time of the Change in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such benefits, or the
failure by the Company to provide the Employee with the number of paid vacation
days to which he is entitled in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control or in accordance with any
agreement between the Employee and the Company existing at the time of the
Change in Control;
(v) any requirement by the Company or of any person in control of the
Company that the location at which the Employee performs his principal duties
for the Company at the time of the Change in Control (the "Prior Location") be
changed to a new location outside a radius of 50 miles from such Prior Location;
(vi) any requirement by the Company or of any person in control of the
Company that the Employee travels on an overnight basis to an extent not
substantially consistent with his business travel obligations immediately prior
to a Change in Control of the Company;
-12-
<PAGE>
(vii) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement; or
(viii) any purported termination of the Employee's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9, which purported termination shall not be effective
for purposes of this Agreement.
7. Non-Compete.
-----------
(a) For the purposes of this Agreement:
(i) "Proprietary Information" means all information and know-how,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business or financial affairs, including, without
limitation, inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data, clinical
data, financial data, personnel data, computer programs and customer and
supplier lists.
(ii) "Competing Products" means any products or processes of any
person or organization other than the Company in existence or under development,
which are substantially the same, may be substituted for, or applied to
substantially the same end use as the products or processes with which the
Employee works during the time of his employment with the Company or about which
-13-
<PAGE>
he acquires confidential information through his work with the Company.
(iii) "Competing Organization" means any person or organization
engaged in, or about to become engaged in, research or development, production,
distribution, marketing or selling of a Competing Product.
(b) The Employee understands that information regarding the Company
and its affiliates including, without limitation, Proprietary Information, is
considered confidential to the Company and is of substantial commercial value to
the Company. Any entrusting of such confidential information to the Employee by
the Company is done so in reliance upon the confidential relationship arising
from the terms of his employment with the Company. Therefore, in consideration
of his employment with the Company, the Employee agrees that he will not render
services of any nature, directly or indirectly, to any Competing Organization in
connection with any Competing Product within such geographical territory as the
Company and such Competing Organization are or would be in actual competition,
for a period of one year, commencing on the date of termination of his
employment. The Employee understands that services rendered to such Competing
Organization may have the effect of supporting actual competition in various
geographic areas, and may be prohibited by this Agreement regardless of the
geographic area in which such services
-14-
<PAGE>
are physically rendered. The Company may, in its sole discretion, elect to
waive, in whole or in part, the obligation set forth in the previous sentence,
such waiver to be effective only if given in writing by the Company.
8. Confidentiality and Assignment of Inventions. The Employee
--------------------------------------------
acknowledges that he has, on or prior to the date of this Agreement, executed
and delivered to the Company a Non-Disclosure Agreement (the "Confidentiality
Agreement"). The Employee hereby affirms and ratifies his obligations
thereunder.
9. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 9.
10. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement, together with the Confidentiality
----------------
Agreement, constitutes the entire agreement between the parties and supersedes
all prior agreements and
-15-
<PAGE>
understandings, whether written or oral, relating to the subject matter of this
Agreement.
12. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
14. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business; provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
15. Miscellaneous.
-------------
15.1 No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
15.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
-16-
<PAGE>
15.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an
instrument under seal as of the day and year first set forth above.
MEDCHEM PRODUCTS, INC.
By:/s/ Edward J. Quilty
--------------------------------
Title:
-----------------------------
EMPLOYEE
/s/ Charles Putnam
-----------------------------------
Charles Putnam
-17-
<PAGE>
Exhibit No. 10.8
----------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 13th day of
February, 1995, is entered into by MedChem Products, Inc., a Massachusetts
corporation with its principal place of business at 232 West Cummings Park,
Woburn, Massachusetts 01801 (the "Company"), and Timothy Patrick, residing at
3785 Newport Bay Drive, Alpharetta, Georgia 30202 (the "Employee").
The Company desires to employ the Employee, and the Employee desires
to be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
------------------
Employee, and the Employee hereby accepts employment with the Company, upon the
terms set forth in this Agreement, for the period commencing on February 13,
1995 (the "Commencement Date") and ending on February 13, 1998 (such period, as
it may be extended, the "Employment Period"), unless sooner terminated in
accordance with the provisions of Section 4.
2. Title; Capacity. The Employee shall serve as President of Gesco
---------------
International, Inc., a wholly owned subsidiary of the Company, or in such other
position as the Company or its Board of
<PAGE>
Directors (the "Board") may determine from time to time. The Employee shall be
based at the Company's office in NorCross, GA. The Employee shall be subject to
the supervision of, and shall have such authority as is delegated to him by, the
Board or such officer of the Company as may be designated by the Board.
The Employee hereby accepts such employment and agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him. The Employee agrees to devote his entire business
time, attention and energies to the business and interests of the Company during
the Employment Period. The Employee agrees to abide by the rules, regulations,
instructions, personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the Company. The Employee
acknowledges receipt of copies of all such rules and policies committed to
writing as of the date of this Agreement.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Employee, in equal semimonthly
------
installments or otherwise in accordance with the Company's standard payroll
policies as such policies may exist from time to time (after withholding and
other required deductions), an annual base salary of $165,000 for the one-year
period commencing on the Commencement Date. Such salary shall be
-2-
<PAGE>
subject to adjustment upward thereafter, as determined by the Board, on an
annual basis each year on the anniversary date of the Employee's original date
of employment by the Company (September 15), but the Board shall not decrease
the Employee's annual base salary at any annual review.
3.2 Fringe Benefits. The Employee shall be entitled to participate
----------------
in all bonus and benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that Employee's position,
tenure, salary, age, health and other qualifications make him eligible to
participate. The Employee shall also be entitled to holidays and annual
vacation leave in accordance with the Company's policy as it exists from time to
time.
3.3 Reimbursement of Expenses. The Company shall reimburse the
-------------------------
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
-------- -------
amount available for such travel, entertainment and other expenses may be fixed
in advance by the Board.
-3-
<PAGE>
4. Employment Termination. The employment of the Employee by the
----------------------
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
4.1 Expiration of the Employment Period in accordance with
Section 1;
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this Section
4.2, cause for termination shall be deemed to exist upon (a) a good faith
finding by the Company of failure of the Employee to perform his assigned duties
for the Company (which failure continues for thirty (30) days following written
notice thereof to the Employee), dishonesty, negligence or misconduct, (b) the
breach by the Employee of Section 7 of this Agreement or any provision of any
confidentiality, invention and non-disclosure, non-competition or similar
agreement between the Employee and the Company, or (c) the conviction of the
Employee of, or the entry of a pleading of guilty or nolo contendere by the
Employee to, any crime involving moral turpitude or any felony;
4.3 Thirty days after the death or disability of the Employee. As
used in this Agreement, the term "disability" shall mean the inability of the
Employee, due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360-day period, to perform the services
contemplated under this Agreement. A determination of disability shall be made
-4-
<PAGE>
by a physician satisfactory to both the Employee and the Company, provided that
-------- ----
if the Employee and the Company do not agree on a physician, the Employee and
the Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties;
4.4 At the election of either party, upon not less than thirty days'
prior written notice of termination (the "Notice of Termination").
5. Effect of Termination.
---------------------
5.1 Termination for Cause or at Election of Either Party. In the
----------------------------------------------------
event the Employee's employment is terminated for cause pursuant to Section 4.2,
or at the election of the Employee pursuant to Section 4.4, the Company shall
pay to the Employee the compensation and benefits otherwise payable to him under
Section 3 through the last day of his actual employment by the Company (the
"Date of Termination"). In the event the Employee's employment is terminated at
the election of the Company pursuant to Section 4.4, the Company shall pay the
Employee the compensation that would otherwise have been payable to the
Employee, after withholding and other required deductions and in accordance with
standard Company payroll policies and procedures, for a period of one year after
the Date of Termination.
-5-
<PAGE>
5.2 Termination for Death or Disability. If the Employee's
-----------------------------------
employment is terminated by death or because of disability pursuant to Section
4.3, the Company shall pay to the estate of the Employee or to the Employee, as
the case may be, the compensation which would otherwise be payable to the
Employee up to the end of the month in which the termination of his employment
because of death or disability occurs.
5.3 Survival. The provisions of Sections 5, 6, 7 and 8 shall
--------
survive the termination of this Agreement.
6. Change in Control.
-----------------
6.1 Notwithstanding the foregoing, in the event that the Employee's
employment is terminated (i) by the Company pursuant to Section 4.4 or (ii) by
the Employee pursuant to Section 4.4 for Good Reason (as defined in Section
6.4), in either case within 12 months following a Change in Control (as defined
in Section 6.3) of the Company, the Company shall not be required to pay the
Employee the compensation and benefits set forth in Section 5.1, but instead
shall provide the Employee with the following benefits:
(i) the Company shall pay to the Employee (A) the Employee's full base
salary and all other compensation through the Date of Termination at the rate in
effect at the time the Notice of Termination is given, no later than the fifth
full day following the Date of Termination, plus all other amounts to which
-6-
<PAGE>
the Employee is entitled under any compensation plan of the Company at the time
such payments are due and (B) if the Employee so elects, in lieu of his right to
continue to receive deferred compensation under any deferred compensation plan
of the Company then in effect, no later than the fifth full day following the
Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts
together with any earnings credited on such amounts under such plan;
(ii) for a 12-month period after termination, the Company will pay as
severance pay to the Employee an amount equal to the sum of (A) the higher of
(x) the Employee's annual base salary in effect on the Date of Termination or
(y) the Employee's annual base salary in effect immediately prior to the Change
in Control of the Company, plus (B) the higher of (x) the amount of the cash
performance bonuses paid or awarded to the Employee with respect to the
Company's most recent full fiscal year for which such a bonus was paid or
awarded to the Employee or (y) the amount of cash performance bonuses paid or
awarded to the Employee with respect to the Company's last full fiscal year
prior to the Change in Control of the Company for which such a bonus was paid or
awarded to the Employee, in each case after withholding and other required
deductions and in accordance with standard Company payroll policies and
procedures;
-7-
<PAGE>
(iii) all matching contributions by the Company accrued, but
unvested, for the Employee's account under the Company's Savings and Investment
(401(k)) Plan shall immediately vest, and the Company shall promptly pay all
such previously unvested amounts into the Employee's account under such Plan;
(iv) for a 12-month period after termination, the Company shall
arrange to provide the Employee with life, disability, dental, accident, travel
and group health insurance benefits substantially similar to those which the
Employee was receiving immediately prior to the Notice of Termination.
Notwithstanding the foregoing, the Company shall not provide any benefit
otherwise receivable by the Employee pursuant to this paragraph (iv) if an
equivalent benefit is actually received by the Employee during the 12-month
period following his termination, and any such benefit actually received by the
Employee shall be reported to the Company; and
(v) for a six-month period after termination, the Company shall
reimburse the Employee for reasonable fees and expenses incurred by him for the
purpose of locating employment, including the fees and expenses of consultants
and other persons retained by him for such purpose, promptly upon receipt by the
Company of satisfactory evidence of payment of such fees and expenses.
-8-
<PAGE>
6.2 In the event a Change in Control of the Company occurs during the
Employment Period, all options to purchase shares of capital stock of the
Company previously granted to the Employee pursuant to any stock option plan or
other employee benefit arrangement of the Company shall immediately vest and
become fully exercisable in accordance with their terms.
6.3 A "Change in Control" of the Company shall occur or be deemed to
-----------------
have occurred only if any of the following events occurs: (i) any "person," as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as their ownership of stock of
the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's then
outstanding securities; (ii) individuals who, as of the date hereof, constitute
the Board (as of the date hereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was
-9-
<PAGE>
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
-10-
<PAGE>
6.4 "Good Reason" means the occurrence after a Change in Control of
-----------
the Company of any of the following circumstances:
(i) any significant diminution in the Employee's position,
duties, responsibilities, title or office as in effect immediately prior to a
Change in Control;
(ii) any reduction in the Employee's annual base salary as in
effect on the date hereof or as the same may be increased from time to time;
(iii) the failure of the Company to continue in effect any
material compensation or benefit plan in which the Employee participates
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue the Employee's
participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and
the level of the Employee's participation relative to other participants, as
existed at the time of the Change in Control or the failure by the Company to
award cash bonuses to its executives in amounts substantially consistent with
past practice in light of the Company's financial performance;
(iv) the failure by the Company to continue to provide the
Employee with benefits substantially similar to those
-11-
<PAGE>
enjoyed by the Employee under any of the Company's insurance, medical, health
and accident, or disability plans in which the Employee was participating at the
time of the Change in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such benefits, or the
failure by the Company to provide the Employee with the number of paid vacation
days to which he is entitled in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control or in accordance with any
agreement between the Employee and the Company existing at the time of the
Change in Control;
(v) any requirement by the Company or of any person in control of the
Company that the location at which the Employee performs his principal duties
for the Company at the time of the Change in Control (the "Prior Location") be
changed to a new location outside a radius of 50 miles from such Prior Location;
(vi) any requirement by the Company or of any person in control of the
Company that the Employee travels on an overnight basis to an extent not
substantially consistent with his business travel obligations immediately prior
to a Change in Control of the Company;
-12-
<PAGE>
(vii) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement; or
(viii) any purported termination of the Employee's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9, which purported termination shall not be effective
for purposes of this Agreement.
7. Non-Compete.
-----------
(a) For the purposes of this Agreement:
(i) "Proprietary Information" means all information and know-how,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business or financial affairs, including, without
limitation, inventions, products, processes, methods, techniques, formulas,
compositions, compounds, projects, developments, plans, research data, clinical
data, financial data, personnel data, computer programs and customer and
supplier lists.
(ii) "Competing Products" means any products or processes of any
person or organization other than the Company in existence or under development,
which are substantially the same, may be substituted for, or applied to
substantially the same end use as the products or processes with which the
Employee works during the time of his employment with the Company or about which
-13-
<PAGE>
he acquires confidential information through his work with the Company.
(iii) "Competing Organization" means any person or organization
engaged in, or about to become engaged in, research or development, production,
distribution, marketing or selling of a Competing Product.
(b) The Employee understands that information regarding the Company
and its affiliates including, without limitation, Proprietary Information, is
considered confidential to the Company and is of substantial commercial value to
the Company. Any entrusting of such confidential information to the Employee by
the Company is done so in reliance upon the confidential relationship arising
from the terms of his employment with the Company. Therefore, in consideration
of his employment with the Company, the Employee agrees that he will not render
services of any nature, directly or indirectly, to any Competing Organization in
connection with any Competing Product within such geographical territory as the
Company and such Competing Organization are or would be in actual competition,
for a period of one year, commencing on the date of termination of his
employment. The Employee understands that services rendered to such Competing
Organization may have the effect of supporting actual competition in various
geographic areas, and may be prohibited by this Agreement regardless of the
geographic area in which such services
-14-
<PAGE>
are physically rendered. The Company may, in its sole discretion, elect to
waive, in whole or in part, the obligation set forth in the previous sentence,
such waiver to be effective only if given in writing by the Company.
8. Confidentiality and Assignment of Inventions. The Employee
--------------------------------------------
acknowledges that he has, on or prior to the date of this Agreement, executed
and delivered to the Company a Non-Disclosure Agreement (the "Confidentiality
Agreement"). The Employee hereby affirms and ratifies his obligations
thereunder.
9. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 9.
10. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
11. Entire Agreement. This Agreement, together with the Confidentiality
----------------
Agreement, constitutes the entire agreement between the parties and supersedes
all prior agreements and
-15-
<PAGE>
understandings, whether written or oral, relating to the subject matter of this
Agreement.
12. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
14. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business; provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
15. Miscellaneous.
-------------
15.1 No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
15.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
-16-
<PAGE>
15.3 In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an
instrument under seal as of the day and year first set forth above.
MEDCHEM PRODUCTS, INC.
By:/s/ Edward J. Quilty
--------------------------------
Title:
-----------------------------
EMPLOYEE
/s/ Timothy Partick
-----------------------------------
Timothy Patrick
-17-
<PAGE>
EXHIBIT 11
MedChem Products, Inc. and Subsidiaries
Computation of Primary and Fully Diluted Earnings Per Share
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
---------- ----------
<S> <C> <C>
Net income $805,353 $1,083,136
PRIMARY:
Weighted average number of common
shares outstanding 10,233,255 10,089,384
Dilutive effect of outstanding
stock options 116,895 240,864
---------- ----------
Weighted average number of common
shares as adjusted 10,350,150 10,330,248
Primary earnings per share $0.08 $0.10
========== ==========
FULLY DILUTED:
Weighted average number of common
shares outstanding 10,233,255 10,089,384
Dilutive effect of outstanding
stock options 116,895 240,864
---------- ----------
Weighted average number of common
shares as adjusted 10,350,150 10,330,248
Fully diluted earnings per share $0.08 $0.10
========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 163
<SECURITIES> 0
<RECEIVABLES> 4,369
<ALLOWANCES> 0
<INVENTORY> 10,274
<CURRENT-ASSETS> 16,316
<PP&E> 13,031
<DEPRECIATION> 3,198
<TOTAL-ASSETS> 78,647
<CURRENT-LIABILITIES> 6,718
<BONDS> 0
<COMMON> 113
0
0
<OTHER-SE> 55,097
<TOTAL-LIABILITY-AND-EQUITY> 78,647
<SALES> 9,421
<TOTAL-REVENUES> 9,421
<CGS> 3,019
<TOTAL-COSTS> 3,019
<OTHER-EXPENSES> 4,860
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 379
<INCOME-PRETAX> 1,164
<INCOME-TAX> 359
<INCOME-CONTINUING> 805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 805
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
