<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______
Commission File No. 0-12943
IMRE CORPORATION
(Exact Name of registrant as specified in its charter)
_______________
DELAWARE 22-2389839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 QUEEN ANNE AVENUE NORTH
SEATTLE, WASHINGTON 98109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 298-9400
__________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
__________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK $.02 PAR VALUE
COMMON STOCK PURCHASE WARRANTS
UNITS CONSISTING OF THREE (3) SHARES OF
COMMON STOCK AND ONE (1) COMMON STOCK PURCHASE WARRANT
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
<PAGE>
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 31, 1996 was $65,395,874.
The number of shares outstanding of the Registrant's Common Stock as of January
31, 1996 was 28,279,297.
DOCUMENTS INCORPORATED BY REFERENCE
None
2
<PAGE>
IMRE CORPORATION
FORM 10-K
INDEX
PART I
ITEM 1 BUSINESS
Introduction and Overview
Rheumatoid Arthritis
Other Indications
Other Technology
Science Program Process
Marketing and Customers
Distribution Agreement with Baxter Healthcare Corporation
Other
Patents and Proprietary Technology
FDA Regulations Affecting the Company
Competition
Raw Materials Supply
Human Resources
Management Changes
Restructuring Plan
Risk Factors
ITEM 2 PROPERTIES
ITEM 3 LEGAL PROCEDINGS
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5 MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
ITEM 6 SELECTED FINANCIAL DATA
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Results of Operations
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
3
<PAGE>
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11 EXECUTIVE COMPENSATION
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
SIGNATURES
4
<PAGE>
PART I
ITEM 1. BUSINESS
INTRODUCTION AND OVERVIEW
IMRE Corporation ("IMRE" or the "Company") was incorporated in 1981 to
research, develop, manufacture and market medical devices for the treatment and
diagnosis of select immune-mediated diseases, transplantations, and cancers.
The Company's first product, the PROSORBA-Registered Trademark- column, is a
medical device that treats a patient's defective immune system so that it can
more effectively respond to certain diseases. The Company received marketing
approval from the U.S. Food and Drug Administration ("FDA") in December 1987 to
distribute the PROSORBA-Registered Trademark- column for treatment of idiopathic
thrombocytopenic purpura ("ITP"), an immune-mediated bleeding disorder. Since
1987, the Company has had sales of the PROSORBA-Registered Trademark- column of
approximately $23 million.
The PROSORBA-Registered Trademark- column treats a defective immune system
by modulating the immune system to respond more effectively. The modulation can
result in the clearance of antigens or control of an autoimmune disease. The
Company believes that the PROSORBA-Registered Trademark- column treats a
dysfunctional immune system response rather than treating the disease itself.
The Company's PROSORBA-Registered Trademark- column is a therapeutic,
extracorporeal immunoadsorption device which removes circulating immune
complexes (CIC) and immunoglobulin G (IgG) from a patient's plasma in a
procedure that takes place in an extracorporeal loop (outside the body) and
returns all the other necessary plasma components back to the same patient. CIC
are composed of an IgG antibody bound to an antigen. The PROSORBA-Registered
Trademark- column is a plastic cylinder measuring three inches in diameter and
three and one half inches in height. The cylinder contains a solid binding
matrix composed of protein A bound to dry silica (sand) granules. Protein A, a
molecule produced by the fermentation of a bacterium, specifically binds to both
CIC and IgG, with a preference for CIC. During PROSORBA-Registered Trademark-
column therapy, blood is drawn from one arm of the patient, plasma and red blood
cells are separated, the plasma is filtered through the PROSORBA-Registered
Trademark- column to remove unwanted CIC and IgG, then combined with the red
blood cells and returned to the same patient's other arm.
The FDA considers the PROSORBA-Registered Trademark- column to be a medical
device. The Company produces the PROSORBA-Registered Trademark- column at its
own manufacturing facility which meets FDA good manufacturing practice ("GMP")
regulations for the manufacture of the product in commercial quantities.
The Company believes that a key factor in the Company's commercial
performance will be its ability to improve PROSORBA-Registered Trademark- column
sales for its currently approved indication, obtain FDA marketing approval for
additional disease indications for the PROSORBA-Registered Trademark- column,
and obtain and develop complementary therapeutic and diagnostic technologies.
The Company is seeking opportunities to generate licensing fees and product
development revenue by establishing agreements with corporate sponsors
interested in accessing the Company's technology and products
5
<PAGE>
in development. The Company's current clinical efforts are focused primarily on
rheumatoid arthritis.
RHEUMATOID ARTHRITIS
Rheumatoid arthritis is a potentially crippling autoimmune disease that is
estimated to affect over 5,000,000 people in North America and Europe. In
rheumatoid arthritis, the body's immune system inappropriately makes antibodies,
called rheumatoid factors, that collect in the joints and surrounding soft
tissue causing inflammation and tissue damage. Joints, typically those in the
hand, become painful and swollen, lose movement, and become deformed. These
individuals not only suffer a significantly reduced quality of life, but also a
shortened life expectancy.
In September 1995, the Company announced the results of its 15 patient
pilot clinical trial that used the PROSORBA-Registered Trademark- column for
therapy in rheumatoid arthritis. The results showed a statistically significant
76% reduction in painful joints and a 70% reduction in swollen joints in 11
patients three months after completing treatment with the PROSORBA-Registered
Trademark- column. The Company believes that these findings confirm the
potential utility of the PROSORBA-Registered Trademark- column in treating
rheumatoid arthritis reported by an earlier independent study published in the
JOURNAL OF RHEUMATOLOGY in May 1994.
Also in September 1995, the Company submitted the final results of the
pilot study as well as a proposed pivotal trial protocol to the FDA. The
protocol submitted to the FDA described a prospective, randomized, multi-center,
double-blind, controlled trial involving 268 patients. The 268 patients are to
be randomly entered into two treatment groups. Approximately 134 patients will
be treated with the PROSORBA-Registered Trademark- column and 134 patients with
a placebo treatment. In November 1995, the Company announced that the FDA had
conditionally approved its application to begin a pivotal trial at 12 centers
using the PROSORBA-Registered Trademark- column in the treatment of patients
with rheumatoid arthritis. A conditional approval grants the Company permission
to begin a trial following approval by the treating institution's institutional
review board provided that the Company agrees to submit information and revise
the protocol as requested by the FDA. The Company currently expects the
commencement of this clinical study to be delayed until 1997. It will be
preceded in 1996, instead, by a smaller controlled study in rheumatoid arthritis
patients to verify the previously observed effects. The Company believes that
favorable results from such a trial will be critical in obtaining the corporate
support required to finance a larger pivotal clinical trial.
OTHER INDICATIONS
While there are multiple additional indications in which the PROSORBA-
Registered Trademark- column has demonstrated some clinical effects, the Company
has most recently dedicated most of its internal resources, apart from
rheumatoid arthritis, toward the indication of kidney transplantation. About
25% of patients awaiting kidney transplantation are ineligible for a transplant
because they have developed antibodies, called alloantibodies, to a variety of
donor tissues. These alloantibodies would immediately recognize a transplanted
kidney as "foreign" and mount an immune attack against it. Prevention of this
acute rejection involves the use of immunosuppressive drugs to reduce the body's
tendency to reject foreign tissue, but drug therapy does not remove the
sensitized
6
<PAGE>
antibodies. Patients waiting for a transplant are typically on dialysis which
is an expensive medical maintenance procedure which provides no permanent
therapeutic benefit.
In August 1995, the Company began a pilot clinical trial to evaluate the
PROSORBA-Registered Trademark- column as a means to increase the number of
patients eligible for kidney transplantation. The study was designed to
determine if the PROSORBA-Registered Trademark- column treatments will reduce
the level of sensitizing antibodies which cause acute organ rejection and which
prevent a significant portion of the patient population from receiving donor
kidneys. The Company has suspended enrollment of patients in this study and is
in the process of evaluating the merits of continuing the study in light of the
other opportunities available to it.
Additionally, the Company intends over-time to pursue applications for the
use of the PROSORBA-Registered Trademark- column in the treatment of certain
other autoimmune diseases, organ transplantations and cancers. The Company's
Investigational Device Exemptions ("IDEs") which allow the Company to perform
human clinical trials include the following diseases: rheumatoid arthritis,
cancer, myasthenia gravis, systemic lupus erythematosus, multiple sclerosis,
thrombotic thrombocytopenic purpura, and kidney transplantation. Such trials
would be initiated if sufficient financing is obtained and the business
potential of each therapeutic opportunity is consistent with the Company's
goals. The Company is presently unable to predict when, or if, FDA approval for
any such indications will be obtained.
OTHER TECHNOLOGY
In November 1994, the Company's diagnostic division entered into a
licensing agreement under which it has licensed the right to use proprietary
nucleic acid probe technology (a genetic screening test) to predict which
rheumatoid arthritis patients will develop severe disease and hence may benefit
from early aggressive therapy. The test is currently a manually performed
reference laboratory test. In January 1995, the Company obtained the rights to
hybridization and chemical signal generation technology as well as automated
clinical instrumentation which combined could provide the Company with the
opportunity to create an automated laboratory test using the nucleic acid probe
technology.
The diagnostics division was originally formed in 1992 as a majority owned
subsidiary called CELx Corporation ("CELx"). During the quarter ended June 30,
1995, the Company and CELx agreed to the merger of CELx into the Company and the
exchange of shares of CELx held by persons other than the Company into an
aggregate of 312,500 shares of the Company's Common Stock. The dissolution of
CELx resulted in a $625,000 "purchased in process research and development"
expense. The expense was based on the fair market value of the Company's Common
Stocks as of the date of the merger. The diagnostics division was originally
created to employ proprietary immunoassay technology to develop specific assays
that provide greater sensitivity and specificity than presently available in the
market. The diagnostics program is currently under evaluation within the Company
and an active effort to find appropriate partners for the program is underway.
7
<PAGE>
In 1995, 1994 and 1993, the Company spent approximately $3.22 million,
$2.11 million and $2.06 million, respectively, on research and development.
SCIENCE PROGRAM PROGRESS
Beginning in 1995, the Company created a program to enhance its standing in
the scientific and medical community regarding IMRE's technology, with
particular attention to be focused on its application for rheumatoid arthritis.
The program includes using the services of a scientific advisory board and a
group of consultants. The scientific advisory board's primary function is to
evaluate IMRE's clinical development program.
The scientific advisory board is composed of internationally recognized
rheumatologists including Gerald T. Nepom, Ph.D., M.D., Scientific Director of
the Virginia Mason Research Center in Seattle, Washington, and Harold E. Paulus,
M.D., Professor of Medicine, Division of Rheumatology, UCLA School of Medicine.
In addition, K. Frank Austen, M.D., Director, Inflammation & Allergic Diseases
Research Section, Division of Rheumatology & Immunology, Harvard Medical School,
serves as a consultant to the scientific advisory board.
MARKETING AND CUSTOMERS
DISTRIBUTION AGREEMENT WITH BAXTER
Historically, the PROSORBA-Registered Trademark- column was sold by the
Company's internal sales force to physicians in the fields of immunology,
hematology and oncology. The Company's domestic sales force consisted of 15
sales representatives, all of whom had technical backgrounds and prior sales
experience in the medical products area. The Company's marketing program
included direct mail, telemarketing, journal advertising, trade show
participation, and physician seminars.
In February 1994, the Company entered into a 10-year exclusive distribution
agreement, with certain "take or pay" and purchase commitments, with Baxter
Healthcare Corporation ("Baxter") granting distribution rights of its PROSORBA-
Registered Trademark- column in the United States and Canada for the treatment
of thrombocytopenia and the first right to negotiate for new PROSORBA-Registered
Trademark- column indications. Baxter assumed its sales and distribution
responsibilities in April 1994. Baxter, at its own expense, was to provide
sales and marketing support for the sale of the product during the term of the
agreement. The Company was to provide significant marketing and promotional
support to Baxter for the first three years of the agreement. The Company no
longer maintains a domestic internal sales force.
The "take or pay" commitments and purchase minimums were primarily subject
to the Company having FDA marketing approval for immune thrombocytopenic purpura
and the lack of any new significant competitive technology being introduced
before October 1995 to the thrombocytopenia therapy marketplace. The Company
received a response from the FDA in January 1995 to a PMA supplement filed in
March 1993 requesting the name of the Company's approved indication be changed
from idiopathic thrombocytopenic purpura to immune
8
<PAGE>
thrombocytopenic purpura. The request was made by the Company as it believes
the two names are used interchangeably by the medical community. The FDA's
response denied the Company's request for such a change.
As a result of the FDA action, Baxter exercised its right to re-negotiate
minimums in February 1995. In March 1995, the two companies amended the
agreement whereby Baxter: (a) made a take-or-pay payment for the first sales
year of $3.0 million on March 31, 1995 compared to the original $3.5 million
due, (b) agreed to purchase $1.0 million of product during the second quarter of
1995, (c) released the Company from its obligation to provide marketing and
promotional support for the second and third years of the agreement, (d) gave
the Company the right to co-market with Baxter, (e) relinquished its first right
to negotiate for new PROSORBA-Registered Trademark- column indications, and (f)
agreed under certain circumstances to provide advance payments to the Company
for Baxter's 1996 purchases. The Company has agreed to eliminate purchase
minimums and the take-or-pay concept included in the original agreement and has
freed Baxter to pursue competing thrombocytopenia therapies. The term of the
agreement remains ten years, and consistent with the original agreement, both
companies have agreed to review the terms at the end of the third year. Both
companies have the right to terminate the agreement as of September 30, 1997, if
the parties are unable to agree on terms for the remainder of the agreement or
based on performance through September 30, 1997.
OTHER
In the international arena, the Company has entered into exclusive
agreements for distribution of the PROSORBA-Registered Trademark- column in
Spain, Korea, Mexico, Brazil, Argentina, and Hong Kong. However, sales to
international customers represent less than 10% of the Company's product sales.
Generally, in the United States the cost of treatment for ITP using the
PROSORBA-Registered Trademark- column has been reimbursed by third-party payers.
No customer represented more than 10% of the Company's annual sales during
the year ended December 31, 1993. For the years ended December 31, 1994 and
1995, sales to Baxter represented approximately 70% and 91% respectively, of the
Company's sales.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company believes that its success depends primarily on the experience,
capabilities, and skills of its personnel. Notwithstanding this fact, however,
the Company seeks to protect its intellectual property rights by a variety of
means, including patents, maintaining trade secrets and proprietary know-how,
and technological innovation to develop and maintain its competitive position.
There can be no assurance that the Company will be able to obtain additional
patents either in the United States or in foreign jurisdictions or that, if
issued, such patents will provide sufficient protection or be of commercial
benefit to the Company. Insofar as the Company relies on trade secrets and
unpatented proprietary know-how, there can be no assurance that others will
9
<PAGE>
not independently develop similar technology or that secrecy will not be
breached. Finally, there can be no assurance that the Company will be able to
develop further technological innovations.
The Company presently owns nine issued U.S. patents and four foreign
patents which expire during 2004 to 2009. The process used in manufacturing the
PROSORBA-Registered Trademark- column is covered by one of these patents. The
Company has an exclusive license for a U.S. patent for a genetic screening test
to predict which rheumatoid arthritis patients will develop severe disease. In
addition, the Company has an exclusive license for a U.S. patent for treating
cellular Fc receptor-mediated hypersensitivity immune disorders.
There can be no assurance that the Company's patents will afford
commercially significant protection of its proprietary technology or have
commercial application. There has been no judicial determination of the
validity or scope of its proprietary rights. Moreover, the patent laws in
foreign countries may differ from those of the United States, and the degree of
protection afforded by foreign patents may be different.
Others have filed applications for, or have been issued, patents and may
obtain additional patents and other proprietary rights relating to products or
processes competitive with those of the Company. The scope and validity of such
patents is presently unknown. If existing or future patents are upheld as valid
by courts, the Company may be required to obtain licenses to use technology
covered by such patents.
In November 1995, a complaint was filed with the United States District
Court, Northern District of California, claiming that the Company's PROSORBA-
Registered Trademark- column allegedly infringes a patent issued to David S.
Terman, M.D. which was assigned in July 1993 to DTER-ENT, Inc., a California
corporation. The Company first received notice of a claim of infringement from
DTER-ENT, Inc. in July 1993. The Company has disclosed this claim in its public
filings for the past two years. The Company has reviewed this matter with
patent counsel and has been advised that the claims of the patent allegedly
infringed are invalid or unenforceable or that the PROSORBA-Registered
Trademark- column does not infringe the claims. Although the Company intends to
vigorously contest the claim, there can be no assurances that the Company will
be successful.
Opinions of patent counsel are based upon certain facts and information
available at the time such opinions are rendered. The prosecution and defense
of validity and infringement issues before the forums in which such issues may
be raised are complicated, and it is not possible to predict the outcome with
certainty. Opinions of patent counsel are not binding on such forums.
Various scientific personnel of the Company in the past have been
associated with non-profit research or educational institutions that typically
require researchers to execute agreements giving such institutions broad rights
to inventions created or developed during the period that the scientist is
associated with such institution. The Company's Chairman of the Board and Chief
Scientific Officer Dr. Frank R. Jones have been parties to such agreements in
the past. While no such institution has to date asserted rights to the
Company's technology, such assertions may be made in the future. If such
assertions are made, the Company may be forced to litigate to protect its rights
to such technology.
10
<PAGE>
PROSORBA-Registered Trademark- column is a registered trademark of the
Company.
FDA REGULATIONS AFFECTING THE COMPANY
The PROSORBA-Registered Trademark- column is regulated by the FDA as a
Class III device. The regulatory approval of a Class III device in the United
States intended for therapeutic use in humans involves many steps including
preclinical and clinical testing. Preclinical evaluation of a Class III device
includes testing to demonstrate that in clinical studies with human subjects the
product would not present an unreasonable hazard. Preclinical evaluation of the
PROSORBA-Registered Trademark- column was conducted as part of the approval
process for treatment of patients with ITP.
For each additional disease that the Company wants to treat with the
PROSORBA-Registered Trademark- column, clinical testing must be conducted.
Before such clinical testing can begin, an investigational device exemption
("IDE") application must be prepared and filed with the FDA. This application
consists of (i) information on the composition of the product, (ii)
manufacturing data, (iii) results of all preclinical safety and effectiveness
studies, and (iv) a design of the study and protocol. If the application has
not been denied or if additional information has not been requested by the FDA
within 30 days of submission, the applicant may then begin clinical trials.
The clinical testing of a device may consist of a preliminary feasibility
study leading to a larger study of safety and effectiveness, or it may consist
of only the larger safety and effectiveness study. Upon completion of the study
and compilation of the data, a pre-market approval ("PMA") application can be
filed. The FDA is required to respond to the PMA submission within 180 days,
although the FDA may not and often does not adhere to this schedule and further
review may take additional time. After the FDA completes its review of the PMA
application, the clinical study data is reviewed by an advisory panel of medical
experts who are not part of the FDA. The applicant is required to answer
questions posed by this panel. Based on its review of the data, the advisory
panel may make a recommendation of approval or nonapproval to the FDA. The FDA
usually follows the recommendation of the panel but is not required to.
Assuming the advisory panel recommends approval of the PMA, the FDA may approve
the application and the product may then be commercially distributed.
The manufacture and distribution of medical devices are subject to
continuing FDA regulation. In addition to the requirement that the device be
marketed only for its approved uses, applicable law requires compliance with the
FDA's good manufacturing practices ("GMP") regulations. Failure to comply with
the GMP regulations or with other applicable legal requirements can lead to
federal seizure of volatile products, injunctive actions brought by the federal
government, and potential criminal liability on the part of the Company and of
the officers and employees of the Company who are responsible for the activities
that lead to the violations.
Even though the Company has received marketing approval from the FDA for
the treatment of ITP with the PROSORBA-Registered Trademark- column, there can
be no assurance that any marketing clearances for other diseases or products
will be granted on a timely basis, or at all, or that it will be economically
feasible to commercialize the PROSORBA-Registered Trademark- column for these
other diseases. The FDA may also require post-marketing testing and
surveillance programs to monitor the
11
<PAGE>
effectiveness and safety of the Company's products. Product marketing approvals
may be withdrawn for noncompliance with regulatory standards or the occurrence
of unforeseen problems following initial marketing.
The PROSORBA-Registered Trademark- column is commercially distributed under
a PMA that was approved by the FDA in 1987. Changes to the product and its
manufacturing process, and certain types of labeling changes must be approved by
the FDA prior to implementation. The Company currently has one supplement to
the PMA pending with the FDA for a labeling change, such change dealing with the
use of ancillary equipment during the use of the PROSORBA-Registered Trademark-
column. The FDA has indicated to the Company that the PMA supplement would be
approvable if certain additional information is provided. There can be no
assurance that any future supplements will be approved by the FDA.
COMPETITION
The PROSORBA-Registered Trademark- column, as well as other products which
may be developed by the Company in the future, are intended to compete with
conventional methods of treatment which generally consist of surgery, drug, or
radiation therapy and which have been accepted by the medical community as
classical treatment methods. In addition, the Company intends to compete with
methods of treatment focusing on the artificial stimulation and/or modification
of the human immune system by material or synthetic drugs or genetically
engineered compounds which are being pursued by numerous biotechnology and
medical companies and research institutions. Many of the Company's potential
competitors have significantly greater resources than the Company. The
PROSORBA-Registered Trademark- column as well as the other products currently
under consideration for development by the Company represent a different
approach to the treatment of immune-related diseases inasmuch as they focus on
the removal of CIC that are suppressive to the body's immune system. The
Company is aware of a select number of other companies which are known to be
pursuing approaches to disease treatment similar to the Company's methodology.
In addition, it is always possible that established companies and research
institutions with greater resources may develop other treatment methods for
various diseases.
The Company believes that its success will depend primarily on, among other
things, the market acceptance of its therapeutic approach, its scientific
expertise, the PROSORBA-Registered Trademark- column's performance measured
against competing products, adequate funding, and on its ability to develop,
protect, and market products in the future.
The Company's competitive success will also depend on its continued ability
to attract and retain skilled and experienced personnel, to develop and secure
the rights to advanced proprietary technology and to commercially exploit its
technology prior to the development of competitive products by others.
RAW MATERIALS SUPPLY
The Company believes that raw materials and other components are available
in sufficient quantities to meet production requirements for the PROSORBA-
Registered Trademark- column. Sale of the PROSORBA-Registered Trademark- column
is not subject to seasonal fluctuation.
12
<PAGE>
HUMAN RESOURCES
In early January 1996, the Company notified approximately twenty employees,
which was slightly greater than half of its work force, that their positions
were being terminated immediately as part of a restructuring. Such positions
were from all departments of the Company. As of January 31, 1996, the Company
employed approximately 20 full-time employees, including seven who have
doctorate degrees and three who are registered nurses.
None of the Company's employees is covered by a collective bargaining
agreement, and the Company considers its employee relations to be excellent.
MANAGEMENT CHANGES
In December 1995, Martin D. Cleary resigned as Chief Executive Officer and
a member of the Board of Directors of the Company, and Harvey J. Hoyt resigned
as Executive Vice President and a member of the Board of Directors. Jay D.
Kranzler, M.D., Ph.D. was appointed as Chief Executive Officer and Vice Chairman
of the Board of Directors and Debby Jo Blank, M.D. was appointed as President,
Chief Operating Officer and a member of the Board of Directors. Frank R. Jones,
Ph.D. serves as the Company's Chief Scientific Officer and Chairman of the Board
of Directors.
RESTRUCTURING PLAN
The Company is in the process of implementing a substantial restructuring
plan. The restructuring plan includes a streamlining of operations and a
pending relocation of all operations of the Company, except manufacturing
operations, to San Diego, California by the end of 1996. Such a restructuring
and relocation is expected to result in the loss of a majority of the
employees of the Company. In parallel, the Company's new management is
reviewing the Company's current activities and long term strategy, which also
may be subject to revision.
RISK FACTORS
Except for the historical information contained herein, the following
discussion contains forward-looking statements within the meaning of Section
21E of the Exchange Act that involves risks and uncertainties. The Company's
actual results could differ materially from those discussed below and
elsewhere in this Report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and
elsewhere in this Report. In analyzing the Company and its business, investors
should carefully consider, among other things, the following risk factors:
NEED FOR ADDITIONAL CAPITAL.
The Company is actively seeking opportunities to raise additional capital
through the private equity market or corporate partners. Such capital would be
used primarily to support research and development activities, including
funding clinical trials for rheumatoid arthritis and certain platelet disorders.
The amount of required capital is primarily dependent upon the following:
results of clinical trials, results of current research and development efforts,
the FDA regulatory process, potential competitive and technological advances,
and levels of product sales. Because the Company is unable to predict the
outcome of the previously noted factors, some of which are
13
<PAGE>
beyond the Company's control, the Company is unable to estimate, with certainty,
its mid- to long-term total capital needs. If the Company is unable to obtain
additional financing, however, it may be required to delay, scale back or
eliminate some or all of its activities, to license to third parties
technologies that the Company would otherwise seek to develop itself, to seek
financing through the debt market and/or to seek additional methods of
financing.
HISTORY OF OPERATING LOSSES.
The Company has operated at a loss since its formation in October, 1981.
In the years ended December 31, 1994 and 1995, the Company had revenues of
$4,918,126 and $4,104,224 and net losses of $6,151,312 and $6,826,252,
respectively. As of December 31, 1995, the Company had an accumulated
deficit of $44,041,634. The ability of the Company to achieve profitability
is dependent upon successful completion of anticipated clinical trials and
obtaining FDA marketing approval of the PROSORBA-Registered Trademark- column
for the treatment of additional diseases in a timely manner, among other
factors. The Company would have to significantly scale back its plans,
curtail clinical trials, and limit its present operations in order to become
profitable or operate on a break-even basis if it does not receive marketing
approval from the FDA for the PROSORBA-Registered Trademark- column for the
treatment of diseases in addition to idiopathic thrombocytopenic purpura
("ITP"). There can be no assurance that the Company will meet applicable
regulatory standards or successfully market its products to generate
sufficient revenues to render the Company profitable.
MANAGEMENT CHANGES; RESTRUCTURING PLAN; DEPENDENCE UPON KEY PERSONNEL.
The Company has recently undergone changes in senior management and new
management is in the process of developing and implementing a substantial
restructuring plan. The restructuring plan has not been completed and there can
be no assurance that it will be completed. Even if such a restructuring plan is
completed, there can be no assurance that the restructuring will be successfully
implemented. The Company's success is dependent upon certain key management and
technical personnel, including the new senior management members. The loss of
the services of any of these key employees could have a material adverse effect
on the Company. See "Management Changes" and "Restructuring Plan."
FDA APPROVAL AND REGULATIONS.
The Company is currently planning to conduct a controlled clinical trial of
the PROSORBA-Registered Trademark- column for treatment of rheumatoid arthritis.
Although the FDA has approved the commercial sale of the PROSORBA-Registered
Trademark- column for the treatment of ITP, there can be no assurance that
current or future clinical trials will produce data satisfactory to the FDA to
establish the effectiveness of the PROSORBA-Registered Trademark- column for
treatment of diseases other than ITP, such as rheumatoid arthritis,
transplantations and certain cancers, or that the FDA will approve the PROSORBA-
Registered Trademark- column for treatment of such diseases in a timely manner,
if at all.
The PROSORBA-Registered Trademark- column is commercially distributed under
a pre-market approval ("PMA") application that was approved by the FDA in 1987.
Changes to the product and its manufacturing process, and certain types of
labeling changes must be approved by the FDA prior to
14
<PAGE>
implementation. The Company currently has one supplement to the PMA pending
with the FDA for a labeling change dealing with the use of ancillary equipment
during the use of the PROSORBA-Registered Trademark- column. The FDA has
indicated to the Company that the PMA supplement would be approvable if certain
additional information is provided. There can be no assurance that the Company
will receive approval of its pending PMA supplement or any future PMA
supplements will be approved by the FDA.
Even if FDA approval is granted to market a product for treatment of a
particular disease, subsequent discovery of previously unknown problems may
result in restrictions on the product's future use or withdrawal of the product
from the market. In addition, any other products developed in the future will
require clinical testing and FDA marketing approval before they can be
commercially exploited in the United States. Such approval process is typically
very lengthy and there is no assurance that approvals will be obtained.
The manufacture and distribution of medical devices are subject to
continuing FDA regulation. In addition to the requirement that the device be
marketed only for its approved use, applicable law requires compliance with the
FDA's good manufacturing practices ("GMP") regulations. Failure to comply with
the GMP regulations or with other applicable legal requirements can lead to
federal seizure of non-complying products, injunctive actions brought by the
federal government, and potential criminal liability on the part of the Company
and of the officers and employees of the Company who are responsible for the
activities that lead to the violations.
COMPETITIVE ENVIRONMENT; TECHNOLOGICAL CHANGE; EFFECTIVENESS OF PRODUCTS.
The field of medical devices in general and the particular areas in which
the Company will market its products are extremely competitive. In developing
and marketing medical devices to treat immune-mediated diseases and cancers, the
Company competes with other products, therapeutic techniques and treatments
which are offered by national and international healthcare and pharmaceutical
companies, many of which have greater marketing, human and financial
resources than the Company.
The immunological therapies market is characterized by rapid technological
change and potential introductions of new products or therapies. To respond to
these changes, the Company may be required to develop or purchase new products
to protect its technology from obsolescence. There can be no assurance that the
Company will be able to develop or obtain such products, or, if developed or
obtained, that such products will be commercially viable. In addition, there
can be no
15
<PAGE>
assurance that the Company's products will prove effective in the treatment of
diseases other than ITP.
DEPENDENCE OF THIRD PARTY ARRANGEMENTS.
The Company's commercial sale of its proposed products and its future
product development may be dependent upon entering into arrangements with
corporate partners and other third parties for the development, marketing,
distribution and/or manufacturing of products utilizing the Company's
proprietary technology. While the Company is currently seeking collaborative
research and development arrangements and joint venture opportunities with
corporate sponsors and other partners, there can be no assurance that the
Company will be successful in entering into such arrangements or joint ventures
or that any such arrangements will prove to be successful.
EXCLUSIVE AGREEMENT WITH BAXTER.
In February 1994, the Company entered into a 10-year exclusive distribution
agreement, with Baxter Healthcare Corporation ("Baxter") granting to Baxter
distribution rights of its PROSORBA-Registered Trademark- column in the United
States and Canada for the treatment of thrombocytopenia and the first right to
negotiate for new PROSORBA-Registered Trademark- column indications. The
distribution agreement also contained certain "take or pay" and minimum
purchase committments. Baxter, at its own expense, was to provide sales and
marketing support for the sale of the product during the term of the agreement.
Baxter assumed the Company's sales and distribution responsibilities in April
1994. The Company was to provide significant marketing and promotional support
to Baxter for the first three years of the agreement. The Company no longer
maintains a domestic sales force.
The "take or pay" commitments and purchase minimums were primarily subject
to the Company having FDA marketing approval for immune thrombocytopenic purpura
and the lack of any new significant competitive technology being introduced
before October 1995 to the thrombocytopenia therapy marketplace. The Company
received a response from the FDA in January 1995 to a PMA supplement filed in
March 1993 requesting the name of the Company's approved indication be changed
from idiopathic thrombocytopenic purpura to immune thrombocytopenic purpura.
The request was made by the Company as it believes the two names are used
interchangeably by the medical community. The FDA's response denied the
Company's request for such a change.
As a result of the FDA action, in February 1995 Baxter exercised its right
to re-negotiate the minimum purchase commitments. In March 1995, the two
companies amended the agreement whereby Baxter: (a) made a take-or-pay payment
for the first sales year of $3.0 million on March 31, 1995 compared to the
original $3.5 million due, (b) agreed to purchase $1.0 million of product
during the second quarter of 1995, (c) released the Company from its obligation
to provide marketing and promotional support for the second and third years of
the agreement, (d) gave the Company the right to co-market with Baxter, (e)
relinquished its first right to negotiate for new PROSORBA-Registered Trademark-
column indications, and (f) agreed under certain circumstances to provide
advance payments to the Company for Baxter's 1996 purchases. The Company has
agreed to eliminate purchase minimums and the take-or-pay concept included in
the original agreement and freed Baxter to pursue competing thrombocytopenia
therapies. The term of the agreement remains ten years, and consistent with the
16
<PAGE>
original agreement, both companies have agreed to review the terms at the end of
the third year. Both companies have the right to terminate the agreement as of
September 30, 1997, if the parties are unable to agree on terms for the
remainder of the agreement or based on performance through September 30, 1997.
No assurance can be given that Baxter will maximize the Company's potential
sales in North America, or that Baxter will be successful in marketing the
Company's PROSORBA-Registered Trademark- column.
UNCERTAINTY OF PATENT PROTECTION AND CLAIMS TO TECHNOLOGY.
The Company currently holds nine United States and four foreign patents
relating to its technology, and has also filed other patent applications. In
addition, the Company has an exclusive license for a U.S. patent for a genetic
screening test to predict which rheumatoid arthritis patients will develop the
severe form of the disease. Neither the protection afforded by these patents
nor their enforceability can be assured. Furthermore, there can be no assurance
that additional patents will be obtained either in the United States or in
foreign jurisdictions or that, if issued, such additional patents will provide
sufficient protection to the Company's technology or be of commercial benefit
to the Company. Insofar as the Company relies on trade secrets and unpatented
proprietary know-how, there can be no assurance that others will not
independently develop similar technology or that secrecy will not be breached.
There can also be no assurance that the Company will be able to develop further
technological innovations.
Others have filed applications for, or have been issued, patents and may
obtain additional patents and other proprietary rights relating to products or
processes competitive with those of the Company. The scope and validity of such
patents is presently unknown. If existing or future patents are challenged in
litigation or interference proceedings, the Company may become subject to
significant liabilities to third parties or be required to seek licenses from
third parties. There can be no assurance that such licenses would be available
or, if available, obtainable on acceptable terms.
In November 1995, a complaint was filed with the United States District
Court, Northern District of California, claiming that the Company's PROSORBA-
Registered Trademark- column allegedly infringes a patent issued to David S.
Terman, M.D., which patent subsequently was assigned in July 1993 to DTER-ENT,
Inc., a California corporation. The Company first received a notice of a claim
of infringement from DTER-ENT, Inc. in July 1993. Althought the Company intends
to vigorously contest the claim, there can be no assurances that the Company
will be successful.
In addition, various scientific personnel of the Company were previously
associated with non-profit research or education institutions that typically
require researchers to execute agreements giving such institutions broad rights
to inventions created or developed during the period that the scientist is
associated with such institution. Dr. Frank R. Jones, Chairman of the Board and
Chief Scientific Officer of the Company, has been a party to such agreements in
the past. While no such institution has to date asserted rights to the
Company's technology, such assertions may be made in the future, and if made,
there can be no assurances that the Company will be successful in any such
litigation.
17
<PAGE>
CONCENTRATION OF OWNERSHIP.
Allen & Company Incorporated beneficially owns approximately 18.1% of the
outstanding Common Stock of the Company and is the largest stockholder of the
Company.
SALES AND MARKETING.
In addition to marketing through Baxter, the Company also conducts limited
marketing of the PROSORBA-Registered Trademark- column outside the United States
through foreign distributors. Sales to foreign distributors have not been
material to the Company's results from operations. There can be no assurance,
however, that such domestic sales efforts or foreign sales arrangements will
become material to the Company's results of operations.
INSURANCE REIMBURSEMENT.
Successful commercialization of a new medical product, such as the
PROSORBA-Registered Trademark- column depends, in part, on reimbursement by
public and private health insurers to health care providers for use of such
product. The availability of such reimbursement is subject to a variety of
factors, many of which could affect the Company as it commercializes use of the
PROSORBA-Registered Trademark- column. Although, the Company has been generally
successful in assisting health care providers in arranging reimbursement for the
use of the PROSORBA-Registered Trademark- column in the treatment of ITP, there
can no assurance that public and private insurers will continue to reimburse for
the use of the PROSORBA-Registered Trademark- column.
UNCERTAINTY OF HEALTH CARE REFORM.
There are widespread efforts to control health care costs in the U.S. and
worldwide. Various federal and state legislative initiatives regarding health
care reform and similar issues continue to be at the forefront of social and
political discussion. These trends may lead third-party payors to decline or
limit reimbursement for the Company's product, which could negatively impact
the pricing and profitability of, or demand for, the Company's product. The
Company believes that government and private efforts to contain or reduce health
care costs are likely to continue. There can be no assurance concerning the
likelihood that any such legislative or regulatory initiative will be enacted,
or market reform initiated, or that, if enacted such reform or initiative will
not result in a material adverse impact on the business, financial condition or
results of operations of the Company.
PRODUCT LIABILITY.
The use of the PROSORBA-Registered Trademark- column involves the
possibility of adverse effects occurring to end-users that could expose the
Company to product liability claims. Although the Company currently maintains
product liability insurance coverage, there can be no assurance that such
coverage or any increased amount of coverage will be adequate to protect the
Company and there can be no assurance that the Company will have sufficient
resources to pay any liability resulting from such a claim.
18
<PAGE>
POSSIBLE VOLATILITY OF STOCK PRICE; ABSENCE OF DIVIDENDS.
There has been a history of significant volatility in the market prices of
securities of biotechnology companies, including the Company's Common Stock.
Factors such as announcements by the Company or others of technological
innovations, results of clinical trials, new commercial products, regulatory
approvals or proprietary rights developments, coverage decisions by third-party
payers for therapies and public concerns regarding the safety and other
implications of biotechnology all may have a significant impact on the Company's
business and market price of the Company's Common Stock. No dividends have been
paid on the Common Stock to date, and the Company does not anticipate paying
cash dividends on the Common Stock in the foreseeable future.
HAZARDOUS MATERIAL.
The Company's research and development programs involve the controlled use
of biohazard materials, such as viruses including the HIV virus that causes
AIDS. Although the Company believes that its safety procedures for handling
such materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any damages that result, and any such liability could
exceed the resources of the Company.
LIMITATION OF NET OPERATING LOSS CARRY FORWARDS.
The Company's sale of Common Stock in November 1990, September 1991, April
1993, and January 1996 when taken together with prior issuances, caused the
limitation of Section 382 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), to be applicable. This limitation will allow the
Company to use only a portion of the net operating losses which it has
accumulated in any future year to offset future taxable income, if any, for
federal income tax purposes. Based on the limitations of Section 382 and before
consideration of the effect of the sale of securities offered hereby, the
Company may be allowed to use no more than approximately $3,700,000 of such
losses each year to reduce taxable income, if any. To the extent not utilized
by the Company, unused losses will carry forward subject to the limitations to
offset future taxable income, if any, until such unused losses expire. All
unused net operating losses will expire 15 years after any year in which they
were generated. The years in which such expiration will take place range from
1998-2010.
ITEM 2. PROPERTIES
In October 1991, the Company entered into an eight-year lease for 14,400
square feet of production, laboratory and administrative facilities in Seattle,
Washington. The Company assembles the PROSORBA-Registered Trademark- column at
these facilities.
The Company leases 8,000 square feet for its raw materials manufacturing
facility in Redmond, Washington. The facility is used to produce commercial
quantities of both protein A
19
<PAGE>
and the chemically coated silica matrix used in the manufacture of the PROSORBA-
Registered Trademark- column. The Company's lease expires in 2004.
Both of the Company's manufacturing facilities comply with the FDA's GMP
regulations.
In 1996, the Company intends to combine the manufacturing operations in its
Redmond facility and seek a tenant to assume its lease for the facility in
Seattle. The Company believes that the combined facility will be adequate to
meet the foreseeable manufacturing requirements of the Company. The Company
intends to occupy office space in San Diego, California for its administrative,
research and medical personnel.
ITEM 3. LEGAL PROCEEDINGS
On February 15, 1994, the Company issued a press release announcing the
restatement of its results of operations for the third quarter ended September
30, 1993. The Company filed a Current Report on Form 8-K, dated June 23, 1994,
with the Securities and Exchange Commission with respect to changing the
Company's certifying accountant. On August 16, 1994, the Company received a
letter from the Commission notifying the Company that the Commission was
conducting a preliminary inquiry into the restatement of the Company's results
of operations and the change in the Company's certifying accountant and
requesting certain information. The Company has cooperated with the Commission.
In January 1996, Commission staff notified the Company that it intended to
propose that the Commission initiate proceedings to seek injunctive relief
against the Company enjoining it from future violations of the federal
securities laws. The Commission staff further advised the Company that it
intended to seek similar injunctive relief and civil penalties against Alex P.
de Soto, the Chief Financial Officer of the Company. The Commission invited
both the Company and Mr. de Soto to prepare and file with the Commission a Wells
Submission to provide the Commission with any additional relevant information
prior to formal action by the Commission. The Company is fully cooperating
with the Commission staff in order to resolve the matters as expeditiously as
possible.
In November 1995, a complaint was filed with the United States District
Court, Northern District of California, claiming that the Company's PROSORBA-
Registered Trademark- column allegedly infringes a patent issued to David S.
Terman, M.D. which was assigned in July 1993 to DTER-ENT, Inc., a California
corporation ("DTER-ENT"). The Company first received notice of a claim of
infringement from DTER-ENT in July 1993. The Company has disclosed this claim
in its public filings for the past two years. The Company has reviewed this
matter with patent counsel and has been advised that the claims of the patent
allegedly infringed are invalid or unenforceable or that the PROSORBA-Registered
Trademark- column does not infringe the patent rights of DTER-ENT.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
As of December 15, 1995, the Company had received written consents from the
holders of 10,154,722 shares of Common Stock, representing 54.66 percent of the
18,579,148 shares of Common Stock outstanding on November 6, 1995, the record
date for the consent solicitation,
20
<PAGE>
authorizing an amendment to the Certificate of Incorporation of the Company to
authorize a new class of "blank check" preferred stock and give the Board of
Directors the authority to fix by resolution or resolutions any of the
designations and the powers, preferences and rights and the qualifications,
limitations or restrictions thereof, of series of preferred stock of the
Company.
21
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
a) The Company's Common Stock is traded on the Nasdaq Small Cap Market.
The principal market for the Company's Common Stock is the over-the-
counter market. Set forth below are the high and low closing bid
prices for the Company's Common Stock for each quarter of 1995 and
1994 as reported by the Nasdaq Stock Market, Inc.
<TABLE>
<CAPTION>
1995 High Bid Low Bid
---- -------- -------
<S> <C> <C>
First Quarter . . . . . . . . . . . . 2 1/8 1 1/4
Second Quarter . . . . . . . . . . . . 2 1/8 1 7/16
Third Quarter . . . . . . . . . . . . 4 1/2 1 7/8
Fourth Quarter . . . . . . . . . . . . 3 5/8 1 3/4
1994 High Bid Low Bid
---- -------- -------
First Quarter . . . . . . . . . . . . 3 15/16 3 1/4
Second Quarter . . . . . . . . . . . . 3 1/4 2 3/8
Third Quarter . . . . . . . . . . . . 2 7/16 1 3/4
Fourth Quarter . . . . . . . . . . . . 2 1/2 1 15/16
</TABLE>
The above quotations are interdealer prices, without retail mark-up, mark-
down, or commission and may not necessarily represent actual transactions.
b) At January 31, 1996, there were approximately 1,100 holders of
record of the Company's Common Stock.
c) The Company has never paid cash dividends on its Common Stock.
22
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues $ 4,104,224 $ 4,918,126 $ 5,410,530 $ 4,076,021 $ 2,712,120
Interest income 118,994 71,986 134,483 363,539 192,526
------------ ------------ ------------ ------------ ------------
4,223,218 4,990,112 5,545,013 4,439,560 2,904,646
Costs and expenses
Production costs 2,041,422 2,571,168 1,582,986 1,166,025 458,832
Sales and marketing 819,907 3,550,037 4,758,427 3,952,481 1,987,141
Research and development 3,219,324 2,107,694 2,059,129 1,506,742 920,993
General and administrative 2,626,817 2,694,489 2,105,743 1,279,077 988,046
Interest 261,958 218,036 7,659 16,721 4,441
------------ ------------ ------------ ------------ ------------
8,969,428 11,141,424 10,513,944 7,921,046 4,359,453
------------ ------------ ------------ ------------ ------------
Purchase of in process research
and development 625,000
Debt conversion expense 810,386
Restrucuring expense 644,656
------------ ------------ ------------ ------------ ------------
11,049,470 11,141,424 10,513,944 7,921,046 4,359,453
------------ ------------ ------------ ------------ ------------
Loss from operations (6,826,252) (6,151,312) (4,968,931) (3,481,486) (1,454,807)
Minority interest in loss 47,711 38,260 1,435
------------ ------------ ------------ ------------ ------------
Net loss $(6,826,252) $(6,151,312) $(4,921,220) $(3,443,226) $(1,453,372)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net loss per share $ (0.39) $ (0.40) $ (0.33) $ (0.25) $ (0.14)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average number
of shares for the year
ended December 31 17,598,735 15,243,860 14,716,472 14,030,224 10,159,938
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total assets at December 31 $ 4,563,709 $ 7,721,013 $ 7,761,598 $ 8,441,703 $ 11,109,825
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Convertible Debentures and
Other Long Term Liabilities $ 1,539,722 $ 4,247,759 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Working capital at December 31 $ (688,771) $ 4,360,749 $ 3,787,412 $ 6,902,330 $ 10,135,987
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
23
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULT OF OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in
Item 1 and Item 2 contained herein.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital as of December 31, 1995, 1994 and 1993 was a
deficit of $0.69 million, and a positive balance of $4.36 million and $3.79
million, respectively. The $5.05 million decrease in working capital in 1995 is
principally attributable to the $6.83 million loss from operations for the year
ended December 31, 1995 and $0.71 million of capital expenditures which were
partially offset by $2.50 million of expenses which did not impact working
capital. The $0.57 million increase in working capital in 1994 is principally
attributable to $4.25 million of proceeds from the April 1994 issuance of 7%
Convertible Debentures due March 31, 2001, (the "7% Convertible Debentures") and
$2.63 million of proceeds from a private placement of common stock in December
1994, offset by the $6.15 million loss from operations for the year ended
December 31, 1994.
The Company expects to incur further operating losses until the Company can
obtain marketing approval from the FDA for additional disease indications for
the PROSORBA-Registered Trademark- column or until sales to the Company's North
American distributor, Baxter Healthcare Corporation, for the PROSORBA-Registered
Trademark- column for its existing indication of idiopathic thrombocytopenic
purpura increase significantly. A controlled clinical trial is planned in 1996
for using the PROSORBA-Registered Trademark- column for rheumatoid arthritis
therapy as a follow on to a successful pilot clinical trial completed in 1995.
The Company believes that a successful clinical trial would be necessary to
attract corporate partners to fund a subsequent pivotal clinical trial. A
successful pivotal clinical trial is necessary to apply for marketing approval
from the FDA.
In September 1995, the Company completed an exchange offering to holders of
its 7% Convertible Debentures. The Company offered to exchange the 7%
Convertible Debentures for common stock at a price of $2.25 per share. Of the
original $4,245,000 outstanding principal amount of the 7% Convertible
Debentures, $2,200,000 was converted pursuant to the exchange offering.
Subsequent to September 1995, an additional $700,000 of 7% Convertible
Debentures has been converted into Common Stock under their original $2.875 per
share conversion price. As of December 31, 1995, there was outstanding
principal of $1,345,000 of the 7% Convertible Debentures.
In January 1996, the Company completed a private placement of approximately
8.5 million shares of its Common Stock resulting in net proceeds to the Company
of approximately $12.0 million (the "Private Placement").
24
<PAGE>
In January 1996, the Company also began implementing a restructuring plan
which includes consolidating its manufacturing facilities to one location in the
state of Washington and moving all other operations of the Company to San Diego,
California. As part of the restructuring plan, the Company, in January 1996,
notified approximately twenty employees, which was slightly greater than half of
its work force, that their positions were being terminated immediately. The
annual salary savings from this reduction in the work force is expected to be in
excess of $1.0 million. The Company estimates it will incur approximately $1.0
million of capital expenditures to consolidate its two Washington manufacturing
facilities. The Company believes that the funds resulting from the Private
Placement coupled with the Company's restructuring will provide the resources
necessary to fund operations, including clinical trials, through the latter half
of 1997.
The Company will require additional financing in order to fund the
completion of a pivotal clinical trial in rheumatoid arthritis, initiate pivotal
clinical trials using the PROSORBA-Registered Trademark- column in other
diseases and apply the Company's technology to applications beyond the PROSORBA-
Registered Trademark- column. The Company is seeking corporate partners to fund
additional clinical trials.
The principal changes in the components of working capital since
December 31, 1994 were a $2.66 million decrease in cash resulting from the
excess of cash expenditures for 1995 over the $1.0 million of proceeds
received from debt financing, a $0.39 million decrease in trade accounts
receivable resulting from the lower amount of sales during the end of 1995
compared to 1994, a decrease of $0.35 million in inventory to reflect the
lower sales demands of Baxter, and a combined increase of $0.54 million in
accounts payable, accrued compensation and accrued liabilities due primarily
to increasing payment cycles to suppliers to preserve the Company's cash
position as of December 31, 1995.
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Effective April 2, 1994, the Company entered into a 10-year exclusive
distribution agreement with Baxter Healthcare Corporation granting distribution
rights for the treatment of thrombocytopenia and the first right to negotiate
for new PROSORBA-Registered Trademark- column indications. The agreement
provided for an annual "take or pay" commitment from Baxter to the Company for
the first two sales years. These minimums were subject to the Company having FDA
product approval for immune thrombocytopenic purpura.
The Company received a response from the FDA in January 1995 to a pre-
market application (PMA) supplement filed in March 1993 requesting the name of
the Company's approved indication be changed from idiopathic thrombocytopenic
purpura to immune thrombocytopenic purpura. The request was made by the Company
as it believed the two names are used interchangeably by the medical community.
The FDA's response denied the Company's request for such a change.
25
<PAGE>
As a result of the FDA action, Baxter exercised its right to re-negotiate
minimums in February 1995. In March 1995, the two companies amended the
agreement whereby Baxter: 1) made a take-or-pay payment for the first sales
year of $3.0 million compared to the original $3.5 million due March 31, 1995,
2) purchased $1.0 million of product during the second quarter of 1995, 3)
released the Company from its obligation to provide marketing and promotional
support for the second and third years of the agreement, 4) gave the Company the
right to co-market with Baxter, 5) relinquished its first right to negotiate for
new PROSORBA-Registered Trademark- column indications, and 6) under certain
circumstances, agreed to provide advance payments to the Company for Baxter's
1996 purchases. The Company agreed to eliminate purchase minimums and the take-
or-pay concept included in the original agreement and freed Baxter to pursue
competing thrombocytopenia therapies. The term of the agreement remains ten
years and consistent with the original agreement, both companies agreed to
review the terms at the end of the third year. Both companies have the right to
terminate the agreement as of September 30, 1997 if the parties are unable to
agree on terms for the remainder of the agreement or based on performance
through September 30, 1997.
The impact of the revised Baxter agreement referred to above had a variety
of effects on the operations of the Company during the year ended December 31,
1995. The Company's revenue included the $3.0 million take or pay payment made
by Baxter in March 1995 and sales and marketing costs relative to sales
decreased based on Baxter agreeing to assume all marketing and promotional
costs.
Net sales decreased 77.5% from $4.92 million in 1994 to $1.10 million in
1995. Approximately 91% of the 1995 sales were to Baxter, with the remaining 9%
primarily to international customers of the Company. The decrease in net sales
was due primarily to Baxter selling approximately 50% less product to customers
than when the Company sold directly to health care providers. In addition,
there is a lower sales price charged to Baxter than the Company previously
charged to its customers. A substantial amount of the columns shipped by the
Company to Baxter remained in Baxter's ending inventory as of December 31, 1995
because of continued delays by Baxter in fully implementing a sales and
marketing program for the PROSORBA-Registered Trademark- column. The Company is
unable to predict if shipments in 1996 will exceed those of 1995.
Total operating expenses, excluding $2.08 million of non-recurring charges,
decreased 19.5% from $11.14 million in 1994 to $8.97 million in 1995.
Production costs decreased 20.6% from $2.57 million in 1994 to $2.04 million in
1995. The decrease is primarily a result of the decrease in the number of units
shipped in 1995 compared to 1994. The majority of production costs in 1995
represent labor and overhead charges as no significant production occurred
during the last six months of 1995. As a result of the previously discussed
restructuring, the Company is working to reduce its manufacturing overhead,
including a reduction of personnel.
Sales and marketing expenses decreased 76.9% from $3.55 million in 1994 to
$0.82 million in 1995. Such expenses decreased primarily because beginning
April 1, 1995, under the revised distribution agreement, Baxter provided
complete sales and marketing support for the sale of the product. The Company no
longer maintains a sales force and terminated three sales employees in 1995 as
part of the amended Baxter agreement.
26
<PAGE>
Research and development expenses increased 52.7% to $3.22 million in 1995
from $2.11 million in 1994. The increase was primarily a result of the Company
conducting its rheumatoid arthritis clinical trial for 15 patients in 1995 and
the commencement of a pilot clinical trial in kidney transplantation during the
last six months of 1995. In 1994, the Company began its rheumatoid arthritis
clinical trial during the last six months of the year and conducted no other
clinical trials. In January 1996, the Company suspended enrollment of patients
in its kidney transplantation study while it evaluates the merits of continuing
the study in light of other clinical opportunities.
General and administrative expenses decreased 2.5% to $2.63 million in 1995
from $2.69 million in 1994. The decrease is principally a result of a reduction
in investor relations and legal expenses partially offset by an increase in
salary expenses. This increase resulted from $0.40 million of salary expenses
associated with the severance agreement for the Company's former Chief Executive
Officer who resigned in December 1995 and $100,000 of signing bonuses paid to
the Company's new Chief Executive Officer and its new President. General and
administrative salary expenses are expected to increase in 1996 as the Chief
Executive Officer and President positions were held by one person in 1995.
In 1995, the Company and CELx Corporation ("CELx"), the Company's former
majority owned subsidiary, agreed to the merger of CELx into the Company and the
exchange of shares of CELx by persons other than the Company into an aggregate
of 312,500 shares of the Company's common stock. The dissolution of CELx
resulted in a charge of $625,000 recorded as purchased in process research and
development. The charge was based on the fair market value of the Company's
common stock.
The Company recorded a non-cash expense of $0.81 million in 1995 as a debt
conversion expense for the conversion of the 7% Convertible Debentures discussed
above. The expense represents the fair market value of the increased number of
shares issued under the terms of the exchange offering compared to the original
terms of the 7% Convertible Debentures.
In December 1995, the Company recorded a restructuring charge aggregating
$645,000 relating to the Company's restructuring plan. The restructuring charge
includes approximately $350,000 related to write-downs of equipment and
leasehold improvements for the manufacturing facility expected to be vacated in
1996, $200,000 related to abandonment of leases, with the remainder related to a
severance agreement with its former Executive Vice President. Costs related to
the termination of employees in January 1996 as part of the Company's
restructuring plan were $150,000 and will be recorded as a restructuring expense
and charged to operations in the quarter ending March 31, 1996. The annual
salary savings from these terminations is in excess of $1.0 million. The
Company estimates it will incur approximately $0.30 million in costs associated
with moving the administration, research and medical departments to San Diego,
with most costs being attributable to relocation costs of the few members of
management moving to San Diego. Such costs will be expensed as incurred in
1996.
27
<PAGE>
The increase in net loss from $6.15 million in 1994 to $6.83 million in
1995 was primarily a result of the decrease in revenues.
FISCAL 1994 COMPARED TO FISCAL 1993
The impact of the original Baxter agreement referred to above had a variety
of effects on the operations of the Company during the year ended December 31,
1994. The per unit sales price under the Baxter agreement is lower than formerly
charged to end users. The Company began expanding its manufacturing capacity,
however, in the short-term, this resulted in a lower utilization of
manufacturing overhead costs. Thus the gross margin on sales to Baxter was
currently less than the Company received when it sold directly to end users.
Net sales decreased 9.1% from $5.41 million to $4.92 million.
Approximately 70% of the 1994 sales were to Baxter, with the remaining 30%
primarily to domestic customers of IMRE. There were no material sales to
international customers. The decrease in net sales was due primarily to the
lower sales price charged to Baxter than the Company previously charged to its
customers. This lower sales price did not offset the increased number of
PROSORBA-Registered Trademark- columns shipped by IMRE in 1994 as compared to
1993. However, a substantial amount of the columns shipped by IMRE to Baxter
remained in their ending inventory as of December 31, 1994 because of delays by
Baxter in fully implementing a sales and marketing program for the PROSORBA-
Registered Trademark- column in 1994.
Total operating expenses increased 6.0% from $10.51 million in 1993 to
$11.14 million in 1994. Production costs increased 62.7% from $1.58 million in
1993 to $2.57 million in 1994. The increase was primarily a result of an
increase in the number of units shipped in 1994 compared to 1993. Production
costs as a percentage of sales increased to approximately 52.3% in 1994 compared
to 29.3% in 1993 principally because the sales price charged to Baxter for the
nine months ended December 31, 1994 was less than the sales price the Company
formerly charged to end users. In addition, the Company began increasing its
manufacturing overhead in 1994 to meet the original shipment demands of Baxter.
Sales and marketing expenses decreased 25.4% from $4.76 million in 1993 to
$3.55 million in 1994. Such expenses decreased primarily because Baxter
provided partial sales and marketing support for the sale of the product during
1994. Eight sales employees of the Company became employees of Baxter and five
other Company sales employees were terminated as a result of the Baxter
agreement thus resulting in lower salary, commission and travel costs.
Research and development expenses increased 2.4% from $2.06 million in 1993
to $2.11 million in 1994. The increase was less than expected primarily as a
result of the Company not beginning its rheumatoid arthritis clinical trial as
soon as expected. In addition, the Company did not conduct a clinical trial for
the treatment of the classical form of thrombotic thrombocytopenic purpura in
1994 as planned because of difficulties in agreeing upon an acceptable treatment
protocol with the FDA. The conditions mandated by the FDA would make the
clinical trial too costly to perform in relation to potential investment return
from product sales. The increase is
28
<PAGE>
primarily a result of increased payroll costs for senior management hired in
1994 offset by a reduction in treatment data costs.
General and administrative expenses increased 27.5% from $2.11 million in
1993 to $2.69 million in 1994. The increase is principally a result of costs
associated with the development of the Company's diagnostic business plan,
including expenses associated with seeking funding for the development of the
diagnostics technology. Such funding has not been obtained. The increase is
also a result of costs associated with hiring the Company's new Chief Executive
Officer and the annualized payroll cost effect of increasing the number of
management and support personnel in 1993.
Interest expense increased from $8,000 in 1993 to $220,000 in 1994 because
of the issuance in April 1994 of $4.25 million of 7% convertible debentures due
March 31, 2001.
The increase in total operating expenses and the decrease in revenues
resulted in increasing the net loss from $4.92 million in 1993 to $6.15 million
in 1994.
29
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . 31
Consolidated Balance Sheets, December 31, 1995 and 1994 . . . . . . . 32
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . . . 33
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . . . 34
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . 35
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . 36
30
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
IMRE CORPORATION
We have audited the consolidated balance sheets of IMRE Corporation as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1995 and 1994 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of IMRE
Corporation as of December 31, 1995 and 1994, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Seattle, Washington
January 23, 1996
31
<PAGE>
IMRE CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------ ------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,009,878 $ 3,670,616
Accounts receivable:
Trade 23,850 418,399
Other 533,989 61,398
Inventories 1,148,506 1,494,311
Prepaid expenses 143,755 208,560
---------- ----------
Total current assets 2,859,978 5,853,284
---------- ----------
Property and equipment, net 1,425,020 1,347,532
Convertible debenture issuance costs, net 278,711 520,197
---------- ----------
Total assets $4,563,709 $7,721,013
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 892,501 $ 610,478
Accrued compensation 456,939 266,395
Accrued liabilities 672,488 606,609
Senior convertible debentures 1,500,000
Current portion of notes payable 26,821 9,053
---------- ----------
Total current liabilities 3,548,749 1,492,535
---------- ----------
Convertible debentures 1,345,000 4,245,000
Notes payable, net of current portion 25,972 2,759
Accrued compensation 168,750
---------- ----------
5,088,471 5,740,294
---------- ----------
Commitments and contingencies (Note 8)
Stockholders' equity (deficit):
Common stock, $.02 par value; authorized 35,000,000
shares; issued and outstanding, 18,693,595 and
17,000,012 shares at December 31, 1995 and 1994 373,872 340,000
Additional paid-in capital 43,143,000 38,856,101
---------- ----------
43,516,872 39,196,101
Accumulated deficit (44,041,634) (37,215,382)
---------- ----------
(524,762) 1,980,719
----------- -----------
Total liabilities and stockholders' equity (deficit) $4,563,709 $7,721,013
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
32
<PAGE>
IMRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
Revenues (Note 4) $4,104,224 $4,918,126 $5,410,530
Interest income 118,994 71,986 134,483
---------- ---------- ----------
4,223,218 4,990,112 5,545,013
---------- ---------- ----------
Costs and expenses:
Production costs 2,041,422 2,571,168 1,582,986
Sales and marketing 819,907 3,550,037 4,758,427
Research and development 3,219,324 2,107,694 2,059,129
General and administrative 2,626,817 2,694,489 2,105,743
Interest 261,958 218,036 7,659
--------- ---------- ----------
8,969,428 11,141,424 10,513,944
Purchase of in process research
and development (Note 2) 625,000
Debt conversion expense(Note 10) 810,386
Restructuring expense 644,656
----------- ---------- ----------
11,049,470 11,141,424 10,513,944
----------- ---------- ----------
Loss from operations (6,826,252) (6,151,312) (4,968,931)
Minority interest in loss 47,711
----------- ----------- -----------
Net loss $(6,826,252) $(6,151,312) $(4,921,220)
------------ ------------ ------------
------------ ------------ ------------
Net loss per share $ (0.39) $ (0.40) $ (0.33)
------------ ------------ -------------
------------ ------------ -------------
Weighted average number
of shares outstanding
during the year 17,598,735 15,243,860 14,716,472
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
33
<PAGE>
IMRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers $ 4,486,792 $ 5,629,001 $ 4,987,231
Interest received 118,994 71,986 183,169
Payments to suppliers and employees (7,202,948) (10,539,166) (10,120,964)
Interest paid (322,968) (11,824) (7,659)
-------------- -------------- --------------
Net cash used by operating activities (2,920,130) (4,850,003) (4,958,223)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (714,947) (549,486) (563,645)
Proceeds from sale of fixed assets 30,393
Maturity of short-term investments, net 4,438,934
Other 1,329
-------------- -------------- --------------
Net cash (used) provided by investing activities (684,554) (549,486) 3,876,618
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible debentures 1,000,000 4,245,000
Principal payments under capital lease obligation (22,140)
Debt conversion costs (22,102)
Notes payable, net (11,812) (12,853) (14,900)
Net proceeds from issuance of common stock 2,648,228 2,093,409
Debt issuance costs (93,853)
-------------- -------------- --------------
Net cash provided by financing activities 943,946 6,786,522 2,078,509
-------------- -------------- --------------
Net (decrease) increase in cash and cash equivalents (2,660,738) 1,387,033 996,904
Cash and cash equivalents at beginning of year 3,670,616 2,283,583 1,286,679
-------------- -------------- --------------
Cash and cash equivalents at end of year $ 1,009,878 $ 3,670,616 $ 2,283,583
-------------- -------------- --------------
-------------- -------------- --------------
RECONCILIATION OF NET LOSS TO NET
CASH USED BY OPERATING ACTIVITIES:
Net loss $ (6,826,252) $ (6,151,312) $ (4,921,220)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 373,306 325,549 162,144
Loss on disposal of fixed assets 23,437
Purchased research and development 625,000
Debt conversion expense 810,386
Restructuring expense 644,656
Common stock issued for services and expenses 248,884 161,078 175,489
Minority interest (3,436) (47,711)
Net change in operating accounts:
Accounts receivable 394,549 2,228,102 (2,075,019)
Other receivables 30,034 (14,634) 39,938
Inventories 345,806 (159,292) (317,241)
Prepaid expenses 64,805 174,232 (9,431)
Accounts payable and accrued expenses 345,259 (1,410,290) 2,034,828
-------------- -------------- --------------
Net cash used by operating activities $ (2,920,130) $ (4,850,003) $ (4,958,223)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
34
<PAGE>
IMRE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
-----------------------------------------------------
<TABLE>
<CAPTION>
Per Par Additional Accumulated
Share Shares Value Paid-in Capital Deficit Total
------- -------------- ------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 14,073,343 $281,467 $33,353,430 $(26,142,850) $7,492,047
- ----------------------------------------- -------------- ------------- ---------------- ----------------- --------------
Stock options exercised 2.00 10,000 200 19,800 20,000
Stock warrants exercised 2.00 43,400 868 85,932 86,800
Stock issued for services 1.44 348 7 493 500
Stock issued to match
401(k) contributions 3.10 56,481 1,129 173,860 174,989
Stock issued in
private placement 2.23 888,900 17,778 1,968,831 1,986,609
Net loss (4,921,220) (4,921,220)
- ----------------------------------------- -------------- ------------- ---------------- ----------------- --------------
Balance, December 31, 1993 15,072,472 301,449 35,602,346 (31,064,070) 4,839,725
- ----------------------------------------- -------------- ------------- ---------------- ----------------- --------------
Stock options exercised 2.63 1,000 20 2,605 2,625
Stock warrants exercised 1.88 6,500 130 12,058 12,188
Stock warrants issued
for services 483,000 483,000
Stock issued to match
401(k) contributions 2.30 70,040 1,401 159,677 161,078
Stock issued in
private placement 1.42 1,850,000 37,000 2,596,415 2,633,415
Net loss (6,151,312) (6,151,312)
- ----------------------------------------- -------------- ------------- ---------------- ----------------- --------------
Balance, December 31 1994 17,000,012 340,000 38,856,101 (37,215,382) 1,980,719
- ----------------------------------------- -------------- ------------- ---------------- ----------------- --------------
Stock issued for services 1.43 61,141 1,223 86,322 87,545
Stock issued to match
401(k) contributions 2.48 65,125 1,303 160,036 161,339
Stock issued for minority
interest in CELx 2.00 312,500 6,250 618,750 625,000
Stock issued for
debt conversion 2.75 1,254,817 25,096 3,421,791 3,446,887
Net loss (6,826,252) (6,826,252)
- ----------------------------------------- -------------- ------------- ---------------- ----------------- --------------
Balance, December 31, 1995 18,693,595 $373,872 $43,143,000 $(44,041,634) $(524,762)
- ----------------------------------------- -------------- ------------- ---------------- ----------------- --------------
- ----------------------------------------- -------------- ------------- ---------------- ----------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
35
<PAGE>
IMRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_____________________________
1. FORMATION AND BUSINESS OF THE COMPANY.
IMRE Corporation (the "Company") is engaged in the business of developing,
manufacturing and bringing to market devices and products applicable to the
treatment and diagnosis of certain types of immune-mediated diseases,
transplantations and cancer. The Company commenced business activities in
January 1982.
The U.S. Food and Drug Administration ("FDA") approved the Company's
product, the PROSORBA-Registered Trademark- column, for commercial sale on
December 23, 1987, for the treatment of patients with idiopathic
thrombocytopenic purpura ("ITP"), an immune-related bleeding disorder. The
product is approved for the removal of immunoglobulin G ("IgG") and circulating
immune complexes containing IgG from plasma of patients with ITP with platelet
counts below 100,000/mm3.
The Company continues to devote most of its efforts to obtaining FDA
marketing approval for additional autoimmune diseases, transplantations and
certain cancers. The Company is currently planning in 1996 to conduct a
controlled clinical trial using the PROSORBA-Registered Trademark- column for
therapy for rheumatoid arthritis as a follow on to a pilot clinical trial
completed in September 1995 and clinical trials for certain platelet disorders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material inter-company accounts and
transactions have been eliminated.
In 1995, the Company and CELx Corporation ("CELx"), the Company's former
majority owned subsidiary, agreed to the merger of CELx into the Company and the
exchange of shares of CELx by persons other than the Company into an aggregate
of 312,500 shares of the Company's common stock. The dissolution of CELx
resulted in a charge of $625,000 recorded as purchased in process research and
development. The charge was based on the fair market value of the Company's
common stock.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
36
<PAGE>
CONCENTRATION OF CREDIT RISK
The Company invests its excess cash in money market funds with major
financial institutions. The securities in such money market funds typically
mature within 90 to 180 days and, therefore, bear minimal risk. The Company has
not experienced any losses on these investments.
The PROSORBA-Registered Trademark- column is sold to its exclusive
distributor in North America, Baxter Healthcare Corporation (see Note 4), and a
diverse group of international health-care institutions. The Company has not
experienced any material losses from the collection of its accounts receivable.
Approximately 91% of the Company's sales for the year ended December 31, 1995,
were for shipments to Baxter.
CASH EQUIVALENTS
The Company considers all investments with an original maturity of three
months or less to be cash equivalents. Cash equivalents primarily represent
funds invested in a money market fund whose costs approximate market value.
INVENTORIES
Inventories are stated at average weighted cost, determined on the first-
in, first-out method, but not in excess of net realizable value. The Company
maintains access to adequate sources of supply of raw materials.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided by
the straight-line method over useful lives of three to five years, and leasehold
improvements are amortized over the term of the related lease.
CONVERTIBLE DEBENTURE ISSUANCE COSTS
Convertible debenture issuance costs are comprised primarily of the value
assigned to stock warrants issued for placement agent services (see Note 10),
other placement agent fees and legal expenses. Such costs are being amortized
over the life of the related debentures.
STOCK AND STOCK WARRANTS ISSUED FOR SERVICES
Common stock and common stock warrants issued for services rendered to the
Company are generally recorded at the fair market value of the stock or stock
warrant issued or the value of the services rendered, whichever is more clearly
determinable.
37
<PAGE>
STOCK COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options. Generally stock
compensation, if any, is measured as the difference between the exercise price
of a stock option and the fair market value of the Company's stock at the date
of grant, which is then amortized over the related service period.
REVENUE RECOGNITION
The Company records sales of its product as earned revenue when the product
is shipped.
Revenue resulting from the settlement of the annual take or pay provisions
of the Company's distribution agreement, discussed in Note 4, was recognized at
the end of the sales year period ended March 31, 1995.
ADVERTISING COSTS
Advertising costs are expensed as incurred.
NET LOSS PER SHARE
The computation of net loss per share is based on the weighted average
number of shares of common stock outstanding for each period. Options, warrants
and Convertible Debentures have not been considered in the calculation inasmuch
as they would have the effect of decreasing net loss per share.
3. RESTRUCTURING EXPENSE
In December 1995, the Company recorded a restructuring charge aggregating
$645,000 relating to the Company's plan to consolidate its manufacturing
facilities to one location in the state of Washington and to move all other
operations to San Diego, California. This charge includes approximately
$350,000 related to write-downs of equipment and leasehold improvements for the
manufacturing facility expected to be vacated in 1996, $200,000 related to
abandonment of leases in Seattle and Princeton with the remainder related to a
severance commitment with its former Executive Vice President who resigned on
December 28, 1995.
The Company estimates it will incur approximately $300,000 in costs
associated with moving the administration, research and medical departments to
San Diego, with most costs being attributable to relocation costs of the few
members of management moving to San Diego. Such costs will be recorded as
general and administrative expenses as incurred in 1996. The Company estimates
it will incur approximately $1,000,000 of capital expenditures to consolidate
its two Washington manufacturing facilities.
38
<PAGE>
In January 1996, the Company notified approximately twenty employees, which
was slightly greater than half of its work force, that their positions were
being terminated immediately as part of the restructuring. Such positions were
from all departments of the Company. Costs related to these terminations are
approximately $150,000 and will be recorded as a charge to operations as a
restructuring expense in the quarter ending March 31, 1996.
4. DISTRIBUTION AGREEMENT.
On February 15, 1994, the Company entered into a 10-year exclusive
distribution agreement with Baxter granting distribution rights of its PROSORBA-
Registered Trademark- column in the United States and Canada for the treatment
of thrombocytopenia and the first right to negotiate for new PROSORBA-Registered
Trademark- column indications. Baxter assumed its sales and distribution
responsibilities on April 2, 1994. The agreement provided for an annual "take
or pay"and purchase commitment from Baxter to the Company for the first two
sales years.
Baxter, at its own expense, provides sales and marketing support for the
sale of the product during the term of the Agreement, however, the Company was
to provide significant marketing and promotional support to Baxter for the first
three years of the agreement. During 1994, eight sales and marketing employees
of the Company became employees of Baxter and five other sales and marketing
employees of the Company were terminated. There was no material impact on net
loss associated with these terminations. The Company no longer maintains a
domestic sales force.
The purchase minimums were primarily subject to the Company having FDA
product approval for immune thrombocytopenic purpura and the lack of any new
significant competitive technology being introduced before October 1995 to the
thrombocytopenic therapy marketplace. The Company received a response from the
FDA in January 1995 to a Pre-market Application (PMA) supplement filed in March
1993 requesting the name of the Company's approved indication be changed from
idiopathic thrombocytopenic purpura to immune thrombocytopenic purpura. The
request was made by the Company as it believes the two names are used
interchangeably by the medical community. The FDA's response denied the
Company's request for such a change.
As a result of the FDA action, Baxter exercised its right to re-negotiate
minimums in February 1995. In March 1995, the two companies amended the
agreement whereby Baxter: 1) made a take-or-pay payment for the first sales
year of $3.0 million compared to the original $3.5 million due March 31, 1995,
2) purchased $1.0 million of product during the second quarter of 1995, 3)
released the Company from its obligation to provide marketing and promotional
support for the second and third years of the agreement, 4) gave IMRE the right
to co-market with Baxter, 5) relinquished its first right to negotiate for new
PROSORBA-Registered Trademark- column indications, and 6) under certain
circumstances, would provide advance payments to the Company for Baxter's 1996
purchases. IMRE has agreed to eliminate purchase minimums and the take-or-pay
concept included in the original agreement and has freed Baxter to pursue
competing thrombocytopenia
39
<PAGE>
therapies. The term of the agreement remains ten years and consistent with the
original agreement, both companies have agreed to review the terms at the end of
the third year. Both companies have the right to terminate the agreement as of
September 30, 1997 if the parties are unable to agree on terms for the remainder
of the agreement or based on performance through September 30, 1997.
5. INVENTORIES.
Inventories are comprised of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Raw materials and components $ 513,883 $ 571,800
Work in progress 557,222 884,373
Finished goods 77,401 38,138
------------ ------------
$ 1,148,506 $ 1,494,311
------------ ------------
------------ ------------
</TABLE>
6. PROPERTY AND EQUIPMENT.
Property and equipment are comprised of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Laboratory and production equipment $ 602,152 $ 681,149
Office equipment 281,914 498,190
Vehicles 52,097 108,651
Leasehold improvements 48,585 385,565
Construction in progress 976,671 366,309
------------ ------------
1,961,419 2,039,864
Accumulated depreciation and
amortization (536,399) (692,332)
------------ ------------
$ 1,425,020 $ 1,347,532
</TABLE>
7. ACCRUED LIABILITIES.
Accrued liabilities are comprised of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Accrued clinical trial fees $ 250,858 $ 169,151
Accrued convertible debenture interest 64,200 206,212
Other 357,430 231,246
------------ ------------
$ 672,488 $ 606,609
------------ ------------
------------ ------------
</TABLE>
40
<PAGE>
8. COMMITMENTS AND CONTINGENCIES.
OPERATING LEASES
In October 1991, the Company entered into an eight-year lease for 14,400
square feet of production, laboratory and administrative facilities in Seattle,
Washington. The lease requires the Company to pay the costs associated with
building operations including property taxes, insurance, maintenance and other
operating costs, and provides for scheduled rent increases during the term of
the lease. In connection with the restructuring plan described in Note 3, the
Company is in the process of seeking a tenant to sub-lease this facility. The
Company leases approximately 8,000 square feet of material preparation
facilities in Redmond, Washington. This lease expires in 2004.
The table below indicates future minimum lease payments due over the
remaining life of the leases, under the agreements in place as of December 31,
1995:
1996 $397,000
1997 397,000
1998 397,000
1999 397,000
2000 96,000
Thereafter through 2004 384,000
-----------
$2,068,000
-----------
-----------
Total rental expense was approximately $521,000, $417,000 and $463,000 for
the years ended December 31, 1995, 1994, and 1993, respectively.
DEFINED CONTRIBUTION PENSION PLAN
The Company sponsors a defined contribution pension plan pursuant to
Section 401(k) of the Internal Revenue Code of 1986. This plan covers
substantially all employees who provide more than 1,000 hours of service during
the year.
The Plan provides for matching contributions whereby the Company
contributes common stock to the Plan on behalf of participants in an amount
equal to 100% of the participants' contributions during the six-month periods
ending on the last day of June and December. The Company's contributions will
vest six months after the amount of the contribution is determined if the
employee is still employed by the Company at the end of the vesting period,
except for employees who have been with the Company more than five years for
whom contributions will vest immediately. The expense recognized for shares
contributed on behalf of employees was approximately $161,000, $161,000 and
$175,000 for the years ended December 31, 1995, 1994 and 1993, respectively,
based on the market value of the Company's common stock on the date of the
contribution.
41
<PAGE>
PATENT CONTINGENCY
In November 1995, a complaint was filed claiming the PROSORBA-Registered
Trademark- column infringes an issued patent. The Company first received a
notice of a claim of infringement in July 1993. The Company has reviewed this
matter with two independent outside patent counsel and, in both instances, has
been advised that the claims of patent infringement are invalid or
unenforceable, or not infringed. The Company intends to vigorously contest the
claim. The Company does not expect the resolution of this issue to have a
material impact on its financial position or results of operations.
SEVERANCE AGREEMENT
The Company entered into a severance agreement as of December 28, 1995 with
its former Chief Executive Officer. The terms of the severance agreement were
based primarily on the termination clause of the employment agreement entered
into between the former officer and the Company in September 1994. Such terms
include the payment of $225,000 in 1996 and $168,750 by December 31, 1997. As
of December 31, 1995, the officer had vested in options, under the Company's
Non-Qualified Stock Option Plan, to purchase 500,000 shares of common stock at
$2.1875. Such options will expire on March 30, 1996. The total cost of this
severance agreement of $393,750 has been included in general and administrative
expenses in the 1995 statement of operations.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements as of December 28, 1995
through December 31, 2000 with a new Chief Executive Officer and a new
President, Chief Operating Officer. The Agreements provide for specified
compensation which include salary, signing bonuses, annual performance bonuses
and a lump sum payment in the event of a termination of employment, without
cause, as defined. Signing bonuses of approximately $100,000 have been included
in general and administrative expenses in the accompanying statement of
operations. An additional $270,000 of bonuses are due upon certain events which
may occur in 1996.
The Agreements provide for the granting of options to purchase 8% and 3%,
respectively, of the fully diluted shares then outstanding, including these
options, at the fair market value of the Company's stock upon the date of grant.
The options were granted in January 1996 upon the closing of the private
placement discussed in Note 15. Options to purchase 25% of the total amount
granted will vest on the date of grant with the remainder to vest daily over a
four year period. Such options will vest immediately upon a merger of the
Company or in the event of a termination of employment without cause, as
defined. The options granted under the agreements are subject to shareholder
approval.
The Company entered into an employment agreement as of December 28, 1995
with its Chief Scientific Officer. The Agreement provides for specified
compensation for 1996 and a lump sum payment equal to one year's salary in the
event of termination of employment in 1996.
42
<PAGE>
9. INCOME TAXES.
Significant components of the Company's deferred income tax assets as of
December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net operating loss carry forwards $9,139,000 $7,874,000
Other 741,000 448,000
------------- ------------
9,880,000 8,322,000
Valuation allowance (9,880,000) (8,322,000)
------------- ------------
Net deferred income tax assets $ 0 $ 0
------------- ------------
------------- ------------
</TABLE>
As of December 31, 1995 and 1994, the Company has accumulated net operating
loss carry-forwards of approximately $39,100,000 and $35,400,000, respectively,
which expire beginning 1998 through 2010. Additionally, the Company has
research and development tax credit carry-forwards of approximately $400,000 as
of December 31, 1995.
As a result of the Company's sales of common stock in November 1990,
September 1991, April 1993, and January 1996 the utilization of net operating
loss carry-forwards which had accumulated as of those dates will be limited
to a prescribed amount in each successive year. Based on these limitations
the Company may be allowed to use no more than approximately $3,700,000 of
such losses each year to reduce taxable income, if any. Approximately
$12,200,000 of net operating loss carry-forwards are expected to expire prior
to utilization due to the annual Internal Revenue Code Section 382
limitation, accordingly, the tax on this portion of the net operating loss
carry-forwards has been excluded from the above table.
10. 7% CONVERTIBLE DEBENTURES.
On April 22, 1994, the Company completed a private placement of $4,245,000
principal amount of 7% convertible debentures due March 31, 2001 ("7%
Convertible Debentures"). Interest is payable on the 7% Convertible Debentures
in cash or shares of Common Stock at the option of the Company. The conversion
price for the principal amount is $2.875 per share of registered Common Stock,
the fair market value on the date of closing. The conversion price for the
interest is the lower of $4.00 per share of Common Stock or the average closing
price for the 10 days prior to the annual April 30 interest payment date. The
debentures are redeemable by the Company after April 1, 1998 at a redemption
price of 106% of the principal amount reduced to 104% and 102% the following two
years. Allen & Company Incorporated ("Allen & Company"), a shareholder of the
Company, acted as placement agent with respect to a majority of this private
placement and received a five-year warrant valued at $483,000 to purchase
300,000 shares of Common Stock at $2.875 for its services as placement agent.
The cost of issuing the 7% Convertible Debentures, including the cost of the
warrants, is deferred and is reported on the accompanying balance sheet net of
amortization expense being recorded over the term of the 7% Convertible
Debentures. Of the total $4,245,000 principal amount of 7% Convertible
Debentures, $1,000,000 was purchased by Allen & Company.
43
<PAGE>
In September 1995, the Company completed an exchange offering to holders of
the 7% Convertible Debentures. The Company offered to exchange the 7%
Convertible Debentures for restricted common stock at $2.25 per share. Of the
original $4,245,000 outstanding principal amount, $2,200,000 of the 7%
Convertible Debentures were converted. The Company recorded a non-cash expense
of $810,000 which represents the fair market value of the increased number of
shares issued under the terms of the offering compared to the original
conversion terms. Subsequent to September 1995, an additional $700,000 of 7%
Convertible Debentures were converted into common stock at the original
conversion price. For substantially all 7% Convertible Debentures that were
converted, the interest accrued up to the date of conversion was paid through
the issuance of common stock at either $2.25 per share or $2.875 per share. The
Company also charged $314,000 to additional paid-in capital for the year ended
December 31, 1995 for the unamortized deferred debt issuance costs related to
the converted debentures.
11. SENIOR CONVERTIBLE DEBENTURES.
On December 29, 1995, the Company completed a private placement of
$1,500,000 principal amount of senior convertible debentures due July 1, 1996
("Senior Convertible Debentures") to a group of investors including $500,000
issued to Allen & Company Incorporated, a shareholder of the Company. The
Company received $1,000,000 of cash on December 29, 1995. The remaining
$500,000 was received during the first week of January 1996 and is recorded in
Other Receivables on the accompanying balance sheet. The cost of issuing the
Senior Convertible Debentures was approximately $140,000, including placement
agent fees of $90,000, and is deferred and reported on the accompanying balance
sheet as convertible debenture issuance costs.
In January 1996, the Senior Convertible Debentures, under their original
terms, were automatically converted at $1.50 per share into 1,000,000 shares of
the Company's common stock. The conversion was made simultaneously with the
closing of a private placement of common stock (See Note 15).
12. STOCKHOLDERS' EQUITY.
AUTHORIZED SHARES
In December 1995, the shareholders of the Company authorized 15,000,000
shares of "blank check" preferred stock. Terms and rights of such preferred
stock shall be determined by the Board of Directors when such preferred stock,
if any, is issued. As of December 31, 1995, the Company has not amended its
Articles of Incorporation with the State of Delaware for this authorization.
STOCK OPTIONS
INCENTIVE STOCK OPTIONS. In June 1985, the Company adopted an Incentive
Stock Option and Appreciation Plan. The plan authorizes options to purchase,
and appreciation rights with respect to, the Company's common stock, which may
be granted to such officers and key employees as may be selected by the Board of
Directors or a committee appointed by the Board
44
<PAGE>
to administer the plan. The plan was amended in June 1992 to increase the number
of shares reserved for issuance to 750,000. The plan expired in 1995, however
options granted under the plan remain effective according to their respective
terms and conditions.
NON-QUALIFIED STOCK OPTIONS. The Company has reserved 2,750,000 shares of
common stock for issuance under its 1988 Non-qualified Stock Option Plan, as
amended in 1992 and 1995 (the "1988" Plan). Under the 1988 Plan, directors,
officers, employees and consultants, may be granted non-qualified stock options
at exercise prices determined by the Board of Directors. Stock options granted
under the 1988 Plan will become exercisable for terms up to 10 years in one or
more installments in the manner and at the times specified by the Board.
STOCK OPTIONS-OTHER. The Company has, at various times, granted to
employees and others options to purchase common stock, other than from under a
formal option plan.
WARRANTS
The Company has issued warrants to purchase common stock as compensation
for services rendered in connection with raising capital. Warrants were also
issued in connection with private placements and the 1991 public offering of
common stock.
In 1991, the Company granted warrants to purchase 749,900 shares of common
stock to certain officers, directors and employees, which are now exercisable at
$1.875 per share. The warrants will expire on June 10, 2001. In September
1991, the Company granted warrants to purchase 1,850,000 shares of common stock
at an exercise price of $2.50 per share in connection with its public offering
of units. The warrants will expire on August 29, 1996, and are now redeemable
by the Company at $0.75 each. The Company issued Allen & Company a five-year
warrant to purchase 300,000 shares of Common stock at $2.875 for its services as
a placement agent for the April 22, 1994 7% Convertible Debenture private
placement (see Note 10).
45
<PAGE>
The following table summarizes the activity of the Company's stock options
and warrants:
<TABLE>
<CAPTION>
Number of Warrants/Options
------------------------------------------------
Incentive
Stock Non-Qualified Other
Warrants Options Stock Options Options
---------- ---------- ------------- --------
<S> <C> <C> <C> <C>
Balance, January 1, 1993 2,643,300 236,000 10,000 590,230
Granted 77,100 75,000 228,605
Exercised (43,400) (10,000)
Canceled (30,200) (96,900) (56,000)
---------- ---------- ------------- --------
Balance, December 31, 1993 2,569,700 216,200 75,000 762,835
Granted 300,000 100,500 810,000 110,000
Exercised (6,500) (1,000)
Canceled (20,300) (5,000)
Expired (65,000) (40,000)
------------------------------------------------
Balance, December 31, 1994 2,842,900 310,700 820,000 832,835
Granted 1,179,000 20,000
Canceled (476,500)
Expired (23,100) (42,100) (177,000)
---------- ---------- ------------- --------
Balance, December 31, 1995 2,819,800 268,600 1,522,500 675,835
---------- ---------- ------------- --------
---------- ---------- ------------- --------
</TABLE>
<TABLE>
<CAPTION>
Incentive
Stock Non-Qualified Other
Warrants Options Stock Options Options
---------- ---------- ------------- --------
<S> <C> <C> <C> <C>
Remaining options/warrants
available to be issued at
12/31/95 0 0 1,227,500 0
Range of exercise price $1.875 to $2.00 to $1.75 to $1.75 to
$2.875 $3.875 $3.375 $3.8125
Exercisable options and
warrants at 12/31/95 2,819,800 255,268 627,500 675,835
</TABLE>
13. SUPPLEMENTARY INFORMATION
The Company incurred advertising expenses of approximately $77,000,
$658,000, and $775,000 for the years ended December 31, 1995, 1994 and 1993,
respectively all of which were substantially for advertising agency costs.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents, receivables and accounts payable approximate their fair value.
46
<PAGE>
As of December 31, 1995 there was $1,345,000 outstanding principal of the
7% Convertible Debentures with a conversion rate of $2.875. The estimated fair
value of these securities is estimated to approximate their carrying value based
on the fair market value of the Company's common stock as of December 31, 1995,
which was $2.8125 per share.
As the conversion price of the Senior Convertible Debentures was based on
the expected offering price of the Company's January 1996 private placement (See
Note 15), the estimated fair value of these securities approximates their
carrying value.
15. SUBSEQUENT EVENT
In January 1996, the Company sold approximately 8,500,000 shares of common
stock for $1.50 per share in a private placement. The shares are to be
registered in February 1996 for re-sale, under the Securities Act of 1933, as
amended. The net proceeds to the Company were approximately $12,000,000, or
$1.41 per share, after placement costs of approximately $800,000. As a result
of this private placement, the Senior Convertible Debentures referred to in Note
11 automatically converted to 1,000,000 shares of common stock. In addition,
upon closing of the private placement, the Company issued stock options to the
new Chief Executive Officer and President aggregating 4,159,824 shares at an
exercise price of $1.50 per share.
47
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by Item 304 of Regulation S-K was previously
reported on Form 8-K dated June 23, 1994, filed with the Securities and Exchange
Commission, and is incorporated by reference herein.
48
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Subsequent to the year ended December 31, 1995, Frank R. Jones, a Director
and Chief Scientific Officer of the Company, filed a Form 5 which delinquently
reported the disposition of certain shares in the Company held by his childrens'
trusts, for which Dr. Jones disclaims beneficial ownership. In 1995, Dr. Jones
was late in filing one Form 4 and in reporting four transactions on Form 4.
EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Jay D. Kranzler, M.D., Ph.D.(1) 38 Chief Executive Officer and
Vice Chairman of the Board of
Directors
Debby Jo Blank, M.D.(1) 44 President, Chief Operating
Officer and Director
Frank R. Jones, Ph.D. 51 Chairman of the Board of
Directors and Chief Scientific
Officer
Alex P. de Soto(1) 33 Vice President, Chief
Financial Officer and
Secretary
Richard M. Crooks, Jr.(2)(3)(4) 56 Director
Philip J. O'Reilly(2)(3)(4) 57 Director
Jack H. Vaughn(2)(4) 75 Director
(1)Member of the 401(k) Plan Committee
(2)Member of Audit Committee
(3)Member of Stock Option Committee
(4)Member of Compensation Committee
Jay D. Kranzler, M.D., Ph.D. was appointed Chief Executive Officer and Vice
Chairman of the Board of Directors of the Company in December 1995. From
January 1989 until August 1995, Dr. Kranzler served as President, Chief
Executive Officer and a Director of Cytel Corporation, a publicly held
biotechnology company. Before joining Cytel, Dr. Kranzler was employed by
49
<PAGE>
McKinsey & Company, a management consulting firm, as a consultant specializing
in the pharmaceutical industry from 1985 to January 1989. In addition,
Dr. Kranzler has been an adjunct member of the Research Institute of Scripps
Clinic since January 1989.
Debby Jo Blank, M.D., was appointed President, Chief Operating Officer and
Director of the Company in December 1995. Prior to joining IMRE, from 1994 to
December 1995, Dr. Blank was Senior Vice President, Marketing, for Advanced
Technology Laboratories, a publicly-held manufacturer and distributor of
ultrasound equipment. From 1993 to 1994, she was Vice President, U.S. Marketing
for Syntex. From 1989 to 1993, she held various positions at the DuPont Company
and the DuPont Merck Pharmaceutical Company ("Dupont"), including Vice President
Worldwide Marketing, Vice President, New Product Planning & Licensing, and Vice
President, Strategy and Business Development. Before joining DuPont, she was
employed by the management consulting firm, Arthur D. Little, from 1986 to 1989
as a consultant in its pharmaceutical practice.
Frank R. Jones, Ph.D., a founder of the Company, is the Company's Chairman
of the Board of Directors and Chief Scientific Officer. He has served as
Chairman of the Board of Directors since 1981, Chief Executive Officer of the
Company from 1981 to September 1994, and President of the Company from 1986 to
November 1989. From 1983 to 1986, Dr. Jones was the director of the Immune
System Response Program of the Pacific Northwest Research Foundation. Dr. Jones
was a Researcher in the Department of Complement and Effector Biology at
Memorial Sloan-Kettering Cancer Center (MSKCC) in New York City from 1980 to
1981 and was a Research Associate in the Laboratory of Veterinary Oncology at
MSKCC from 1981 until 1983. Dr. Jones holds degrees from California State
University (M.A., Bacteriology/Immunology) and the University of Washington
(Ph.D., Biological Structure/ Cellular Immunology).
Alex P. de Soto joined the Company in September 1993 as Vice President,
Chief Financial Officer and Chief Accounting Officer and also was appointed
Secretary of the Company in February 1995. From 1986 through 1993, Mr. de Soto
worked as a certified public accountant in the audit practice of Coopers &
Lybrand in Seattle and London and was an audit manager in its high technology
practice. Mr. de Soto graduated from the University of Southern California.
Richard M. Crooks, Jr. was appointed a Director of the Company in April
1994. Since June 1990, Mr. Crooks has served as President of RMC Consultants, a
financial advisory services firm. Mr. Crooks is also a Director of and
consultant to Allen & Company Incorporated, a privately held investment banking
firm, which is the Company's principal stockholder. Mr. Crooks served as a
Managing Director of Allen & Company Incorporated for more than five years prior
to June 1990. Mr. Crooks is also a Director of Excalibur Technologies
Corporation.
Philip J. O'Reilly a partner in the law firm of O'Reilly, Marsh, Kearney &
Corteselli, P.C., in Mineola, New York, became a Director of the Company in
April 1994. Mr. O'Reilly has been in private practice for the past five years.
Mr. O'Reilly is also a Director of Excalibur Technologies Corporation.
Jack H. Vaughn was appointed a Director of the Company in 1991. Currently,
Mr. Vaughn is Chairman of ECOTRUST, a Portland, Oregon-based foundation
promoting environmentally friendly development in the Pacific Northwest. From
1988 to 1992, he was the U.S. Government's
50
<PAGE>
Senior Environmental Advisor for Central America. Prior to 1988, Mr. Vaughn was
the founding Chairman of Conversation International, a private foundation
encouraging biological diversity. Mr. Vaughn has been a director of Allegheny &
Western Energy Corporation since 1981 and is a member of its Compensation
Committee.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation for the
fiscal years 1995, 1994 and 1993 for services in all capacities to the Company
by each person who served as Chief Executive Officer of the Company during
fiscal year 1995 as well as those executive officers whose salary and bonus for
fiscal year 1995 exceeded $100,000 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation(1)
--------------------- -----------------
Number of All Other
Fiscal Securities Compensation
Name and Principal Year Salary($) Bonus($) Underlying ($)
Position Options (#)
- ------------------------- ------ --------- -------- ----------- --------------
<S> <C> <C> <C> <C>
Jay D. Kranzler, M.D., 1995 $ - 50,000 - -
Ph.D.(2)
Chief Executive Officer,
Vice Chairman
Martin D. Cleary(3) 1995 $225,000 - - $403,170(4)(5)
Former Chief Executive 1994 $ 56,250 $ 25,000 750,000 -
Officer, President and
Chief Operating Officer,
Director
Frank R. Jones, Ph.D.(6) 1995 $220,000 - - $ 9,240(4)
Chairman and 1994 $215,000 $ 25,000 85,000 $ 9,240(4)
Chief Scientific Officer 1993 $200,000 $ 50,000 90,000 $ 8,994(4)
Harvey J. Hoyt, M.D.(7) 1995 $175,000 - 47,500 $ 94,430(4)(8)
Former Executive Vice
President, Director
Debby Jo Blank, M.D. 1995 $ - 50,000 - $ -
President, Chief Operating
Officer, Director(9)
</TABLE>
(1) The Company's Incentive Stock Option and Appreciation Plan (the "ISO
Plan"), the Plan and other non-formal option plans are intended to further
the interests of the Company by
51
<PAGE>
providing certain incentives to key employees of the Company. The plans
provide for the granting of options to purchase shares of the Company's
Common Stock at not less than fair market value and the ISO Plan permits
the grant of stock appreciation rights. There were no SARs granted in
1995.
(2) Dr. Kranzler was appointed Chief Executive Officer on December 28, 1995 and
received approximately $20,000 as a consultant during 1995.
(3) Mr. Cleary resigned as Chief Executive Officer, President and Chief
Operating Officer, Director on December 28, 1995.
(4) All Other Compensation includes Company 401(k) contributions in the form of
Company Common Stock.
(5) Includes $393,750 of compensation to be paid in 1996 and 1997 as part of a
severance agreement dated December 28, 1995.
(6) Dr. Jones was Chief Executive Officer until September 30, 1994, at which
time he became Chief Scientific Officer.
(7) Dr. Hoyt resigned as Executive Vice President, Director on December 28,
1995.
(8) Includes $87,500 of compensation to be paid in 1996 as part of a
severance/consulting agreement dated December 28, 1995.
(9) Dr. Blank was appointed President and Chief Operating Officer on December
28, 1995, and received $20,000 as a consultant during 1995.
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1995, to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
% of Total Potential Realizable Value at
Number of Options Assumed Annual Rates of
Securities Granted to Exercise Stock Price Appreciation
Underlying Employees in Price for Option Term (4)
Options Fiscal per Expiration -------------------
Name Granted(#) Year Share Date 5% 10%
- ------------------------------------------- -------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Harvey J. Hoyt(1) 5,000 0.5% $ 2.125 09/30/96 $ 398 $ 797
Former Executive 42,500 4.2% $ 1.75 09/30/96 $ 2,789 $ 5,578
Vice President,
Director
</TABLE>
(1) Dr. Hoyt resigned as Executive Vice President, Director on December 28,
1995.
(2) The potential realizable value is based on the assumption that the price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end option term. Actual realizable value,
if any, on stock option exercises is dependent on the future performance of
the Common Stock and overall market conditions, as well as the option
holder's continued employment through the vesting period.
52
<PAGE>
The following table sets forth certain information as of December 31, 1995,
regarding options held by the Named Executive Officers. None of such
individuals exercised any options during the fiscal year ended December 31,
1995. There were no stock appreciation rights outstanding at December 31, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options at FY-
Options at FY-End(#) End(1)
---------------------------- -----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Martin D. Cleary 500,000 250,000 $312,500 $156,250
Frank R. Jones 705,000 - $466,939 -
Harvey J. Hoyt 47,500 - $ 48,594 -
</TABLE>
(1) Calculation based on $2.8125, the closing price of the Common Stock on the
Nasdaq Small Cap Market on December 31, 1995, less the exercise price.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Company has entered into a five-year term employment agreement with Dr.
Jay D. Kranzler, the Company's Chief Executive Officer. Dr. Kranzler's annual
compensation consists of base salary of $240,000, performance based bonuses of
up to an additional twenty-five percent (25%) of annual base salary. In
addition, Dr. Kranzler's employment agreement provides for a sign-on bonus of
$185,000, payable in installments upon the occurrence of certain milestone
events achieved by the Company and Dr. Kranzler. As of the date hereof,
approximately $100,000 of the total sign-on bonus has been paid to Dr. Kranzler.
In addition to his base salary and bonus, Dr. Kranzler was granted an
option to purchase eight percent (8%) of the Company's Common Stock on a
fully diluted basis at an exercise price equal to $1.50 per share. The
options vest twenty-five percent (25%) immediately upon grant and thereafter
notably and daily over a four (4) year period. Dr. Kranzler's options shall
fully vest upon the occurrence of any merger, consolidation, corporate
reorganization or transfer of all or substantially all of the assets of the
Company and upon the termination without cause of Dr. Kranzler's employment
with the Company. Such options are subject to stockholder approval.
The Company has entered into a five-year term employment agreement with
Dr. Debby Jo Blank, the Company's President and Chief Operating Officer. Dr.
Blank's annual compensation consists of base salary of $210,000 and
performance based bonuses of up to an additional twenty-five percent (25%) of
annual base salary. In addition, Dr. Blank's employment
53
<PAGE>
agreement provides for a sign-on bonus of $185,000, payable in installments upon
the occurrence of certain milestone events achieved by the Company and Dr.
Blank. As of the date hereof, approximately $100,000 of the sign-on bonus has
been paid to Dr. Blank.
In addition to her base salary and bonus, Dr. Blank was granted an option
to purchase three percent (3%) of the Company's Common Stock on a fully diluted
basis at an exercise price equal to $1.50 per share. The options vest twenty-
five percent (25%) immediately upon grant and thereafter notably and daily over
a four (4) year period. Dr. Blank's options shall fully vest upon the
occurrence of any merger, consolidation, corporate reorganization or transfer of
all or substantially all of the assets of the Company and upon the termination
without cause of Dr. Blank's employment with the Company. Such options are
subject to stockholder approval.
The Company entered into a one-year employment agreement effective as of
December 28, 1995 with Frank R. Jones, Ph.D., the Company's Chief Scientific
Officer. The employment agreement provides for an annual base salary of
$220,000 and a lump sum severance payment equal to one year's base salary in the
event of termination of employment with or without cause within one year of the
date of the agreement. The employment agreement also provides that in the event
of termination of employment with or without cause prior to December 28, 1996,
previously granted options will be extended or re-issued by the Company so as to
remain exercisable until the applicable expiration of such options.
The Company entered into a six-month employment agreement on January 8,
1996 with Alex P. de Soto, the Company's Chief Financial Officer and Secretary,
which agreement expires by its terms on June 30, 1996, unless otherwise extended
by mutual agreement of the parties. The employment agreement provides that the
Company shall pay Mr. de Soto a base salary of $10,000 per month for the period
January 1, 1996 through March 31, 1996 and $8,000 per month for the period April
1, 1996 through June 30, 1996. In addition to the base salary, Mr. de Soto will
be paid a bonus on April 1, 1996 in the amount of $15,000 in the event he has
not terminated his employment with the Company as of such date. Mr. de Soto is
also entitled to an additional payment equal to $25,000 in the event he
continues his employment with the Company after June 1, 1996. Under the
employment agreement, Mr. de Soto was granted an option to purchase 60,000
shares of the Company's Common Stock (the "Option") at an exercise price of
$1.50 per share, which option shall vest and become exercisable as to 50% of the
shares subject to the option on the date of grant and the remaining 50% of the
shares on June 1, 1996, subject to continued employment on such date. The
Option was issued in exchange for all outstanding options to purchase shares of
the Company's Common Stock previously granted to Mr. de Soto.
54
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company believes that a competitive, goal-oriented compensation policy
is critically important to the creation of value for stockholders. To that end,
the Company has created an incentive compensation program intended to reward
outstanding individual performance.
COMPENSATION PHILOSOPHY
The Company's compensation program is intended to implement the following
principles:
- Compensation should be related to the value created for
stockholders.
- Compensation programs should support the short-term and long-term
strategic goals and objectives of the Company.
- Compensation programs should reflect and promote the Company's
values and reward individuals for outstanding contributions to
the Company's success.
- Short-term and long-term compensation programs play a critical
role in attracting and retaining well-qualified executives.
- While compensation opportunities should be based in part upon
individual contribution, the actual amounts earned by executives
in variable compensation programs should also be based on how the
Company performs.
COMPENSATION MIX AND MEASUREMENT
The Company's executive compensation for the Chief Executive Officer and
all other executives is based upon three components, each of which is intended
to serve the Company's compensation principles:
BASE SALARY
Base salary is targeted at the competitive median for similar companies in
the biotechnology industry. For the purpose of establishing these levels, the
Compensation Committee compares the Company's compensation structure from time
to time to the companies covered in a compensation survey of the biotechnology
industry entitled, BIOTECHNOLOGY COMPENSATION AND BENEFITS SURVEY which is
prepared by Radford Associates and sponsored by the Biotechnology Industry
Organization. Many of the Companies covered in that survey are also included in
the published industry line-of-business index included in the Company's Stock
Price Performance Graph included elsewhere in this Report.
The Committee reviews the salaries of the Chief Executive Officer and other
executive officers each year and such salaries may be increased based upon
(i) the individual's performance and contribution to the Company and
(ii) increases in median competitive pay levels.
55
<PAGE>
ANNUAL INCENTIVES
The Company has a cash bonus program whereby bonus amounts are determined
based upon the achievement of corporate goals and individual performance. Each
executive officer has a target bonus amount calculated as a percentage of his or
her annual base salary. The bonus percentage is based in part on Company
performance and in part on individual performance. Corporate goals seek
advancements in the areas of business development efforts as well as research
and development activities as they relate to the overall success of the Company.
The Committee believes the target bonus amounts are based upon levels similar to
other companies in the biotechnology industry. Bonuses awarded during 1995 were
less than targeted amounts because of the Company's minimal cash position as of
the end of 1995.
LONG-TERM INCENTIVES
Long-term incentive compensation is provided through grants of options to
purchase shares of the Company's Common Stock to the Named Executive Officers
and others. The stock options are intended to retain and motivate all employees
to improve long-term performance of the Company. It is common in the
biotechnology industry to grant stock options to all employees. As of the
beginning of 1995, stock options had been granted to all employees of the
Company. The Committee believes the amount and value of such grants are based
upon levels similar to other companies in the biotechnology industry.
Stock options are granted with an exercise price equal to prevailing market
value. Generally, the stock options vest in increments over a period of years,
and an employee must be employed by the Company at the time of vesting in order
to exercise his or her options.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Company appointed Jay D. Kranzler, M.D., Ph.D. as its new Chief
Executive Officer on December 28, 1995. Accordingly, his compensation was
determined based on biotechnology industry prevailing compensation packages to
attract an individual of Dr. Kranzler's caliber. His compensation includes an
annualized base salary of $240,000, performance cash bonus opportunities and a
signing bonus potential of $185,000. In addition, Dr. Kranzler's employment
agreement provides that the Company issue to him options to purchase that number
of shares of Common Stock of the Company equal to eight percent (8%) of the
equity of the Company on a fully diluted basis. In January 1996, Dr. Kranzler
was granted options to purchase 3,025,327 shares of the Company's
Common Stock at an exercise price of $1.50 per share, subject to stockholder
approval.
Under the Omnibus Budget Reconciliation Act of 1993, beginning in 1994, the
federal income tax deduction for certain types of compensation paid to the Chief
Executive Officer and four other most highly compensated officers of publicly
held companies is limited to $1,000,000 per officer per fiscal year unless such
compensation meets certain requirements. The Committee
56
<PAGE>
is aware of this limitation and believes that the deductibility of compensation
payable in 1995 will not be affected by this limitation.
STOCK OPTION COMMITTEE COMPENSATION COMMITTEE
Richard M. Crooks, Jr. Richard M. Crooks, Jr.
Philip O'Reilly Philip O'Reilly
Jack H. Vaughn
STOCK PRICE PERFORMANCE GRAPH
COMPARISON OF 5-YEAR CUMULATIVE RETURN
The following Stock Price Performance Graph compares the Company's
cumulative total stockholder return on the Company's Common Stock for the
periods indicated with the cumulative total return of the NASDAQ OTC Index and a
published industry line-of-business index. The Board of Directors approved the
use of the NASDAQ Pharmaceuticals Stock Index. Although the Company previously
used the Coopers & Lybrand Index as its published line-of-business index, it
changed to the NASDAQ Pharmaceuticals Stock Index because of the greater number
of peer companies represented and because the Company believes it is a more
complete representation of the biotechnology industry. The Company has not
declared any dividends since its inception.
57
<PAGE>
The Board of Directors and its Compensation Committee recognize that the
market price of stock is influenced by many factors, only one of which is
Company performance. The historical stock price performance shown on the Stock
Price Performance Graph is not necessarily indicative of future stock price
performance.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG IMRE CORPORATION, NASDAQ OTC, NASDAQ PHARMACUETICAL INDEX
AND COOPERS & LYBRAND INDUSTRY INDEX
<TABLE>
<CAPTION>
Fiscal Year Ended IMRE NASDAQ OTC NASDAQ Coopers &
Corporation Pharmaceutical Lybrand Industry
Index Index
<S> <C> <C> <C> <C>
Measurement Pt.
12/31/90 $100 $100 $100 $100
FYE 12/31/91 $162 $161 $266 $230
FYE 12/31/92 $170 $187 $221 $290
FYE 12/31/93 $225 $215 $197 $285
FYE 12/31/94 $128 $210 $148 $268
FYE 12/31/95 $160 $296 $271 $393
</TABLE>
The above comparison assumes $100 invested in the Company's Common Stock
and each index on December 31, 1990.
COMPENSATION OF DIRECTORS
Messrs. O'Reilly and Vaughn each received $12,000 in cash compensation for
service as a director during fiscal year 1995. Each of Messrs. Crooks, O'Reilly
and Vaughn received options to purchase 10,000 shares of Common Stock for
service as a director during fiscal year 1995. Directors who are employees of
the Company do not receive any fee for their services as directors. None of the
Company's directors receive any compensation for their service on the Board of
Directors or any of its Committees. All of the Company's directors are
reimbursed for their out-of-pocket travel and accommodation expenses incurred in
connection with their service as directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of January 31, 1996 known by
the Company with respect to (i) each stockholder known to the Company to be the
beneficial owner of more than five percent of its outstanding Common Stock,
(ii) each director and nominee, (iii) each of the Named Executive Officers
described in the Summary Compensation Table and (iv) all directors and executive
officers of the Company as a group. Except as set forth below, each of
58
<PAGE>
the named persons and members of the group has sole voting and investment power
with respect to the shares shown.
Amount and Nature of
Name and Address Beneficial Ownership Percent of Class
---------------- -------------------- ----------------
Allen & Company Incorporated 5,322,462(1) 18.1%
711 Fifth Avenue
New York, New York 10022
Aries Financial Services 1,790,832(2) 6.3%
375 Park Avenue, Suite 1501
New York, New York 10152
Richard M. Crooks, Jr. 1,171,565(3) 4.1%
Frank R. Jones 1,105,411(4) 3.8%
Martin D. Cleary 503,982(5) 1.7%
Jay D. Kranzler 218,881(6) *
Debby Jo Blank 218,881(6) *
Jack Vaughn 56,000(7) *
Philip J. O'Reilly 64,625(8) *
Harvey J. Hoyt 51,683(9) *
All Directors and Named Executive
Officers as a Group (8 persons) 3,149,206(10) 10.6%
________________________
*less than one percent
(1) Includes warrants to purchase 1,060,590 shares of Common Stock. Does not
include 2,303,890 shares of Common Stock and warrants to purchase 31,600
shares of Common Stock owned by certain individuals who may be considered
affiliates of Allen & Company Incorporated. Allen & Company Incorporated
disclaims beneficial ownership of these shares of Common Stock. This
information is derived from a Schedule 13D dated January 22, 1996, filed
by Allen & Company Incorporated.
(2) This information is dervived from a Schedule 13D dated January 22, 1996,
filed by Aries Financial Services.
(3) Includes presently exercisable warrants and options to purchase 30,000
shares of Common Stock. Includes 712,498 shares of Common Stock and
presently exercisable warrants to purchase 26,666 shares of Common Stock
held by Allen & Company for which the director has beneficial interest in
profits upon sale.
(4) Includes presently exercisable warrants and options to purchase 705,000
shares of Common Stock.
(5) Includes presently exercisable options to purchase 500,000 shares of Common
Stock.
(6) Includes 218,881 shares of Common Stock held by the Company's 401(k) plan
for which the officer as co-trustee of the plan has voting rights to such
shares.
(7) Includes presently exercisable options to purchase 55,000 shares of Common
Stock.
(8) Includes presently exercisable warrants and options to purchase 48,825
shares of Common Stock.
(9) Includes presently exercisable options to purchase 22,500 shares of Common
Stock.
(10) Includes warrants and options that are presently exercisable to purchase
1,367,992 shares of Common Stock.
59
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 29, 1995, Allen & Company purchased, through a private
placement, $500,000 principal amount of Senior Convertible Debentures due July
1, 1996 (the "Debentures"). The Debentures were convertible at $1.50 per share
of Common Stock. Allen & Company acted as placement agent for this private
placement and received 20,000 shares of Common Stock as a placement agent fee.
The Debentures were converted into 333,333 shares of the Company's Common Stock
on January 22, 1996, in conjunction with the closing of a private placement of
8.5 million shares of Common Stock at a purchase price of $1.50 per share.
60
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements Page
----
Report of Ernst & Young LLP, Independent Auditors. . . 31
Consolidated Balance Sheets, December 31, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . 32
Consolidated Statements of Operations for the Years
Ended December 31, 1995, 1994 and 1993 . . . . . . . . 33
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993 . . . . . . . . 34
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993 . . . . . 35
Notes to Consolidated Financial Statements . . . . . . 36
(2) Financial Statement Schedules
All schedules are omitted because of the absence of the conditions
under which they are required to be reported or because the required
information is included in the Financial Statements and their Notes.
(3) Exhibits
Exhibit No. Description of Exhibit Incorporated by Reference to
----------- ---------------------- -----------------------------
3.1 Certificate of Exhibit 3.1 to this Form 10-K
Incorporation, as for the year ended December
amended 31, 1995 ("1995 Form 10-K")
3.2 By-laws, as amended Exhibit 3.2 to 1995 Form 10-K
4.1 Form of Stock Exhibit 3.1 to Form S-1
Certificate Registration Statement
No. 33-41225 ("Form S-1")
4.2 Form of Common Stock Exhibit 3.1 to Form S-1
Purchase Warrant
61
<PAGE>
Exhibit No. Description of Exhibit Incorporated by Reference to
----------- ---------------------- ----------------------------
4.3 Incentive Stock Option Exhibit 28.2 to Form S-8
Registration Statement No.
33-20188 ("Form S-8")
4.4 Form of Nonqualified Exhibit 28.2 to Form S-8
Stock Option
4.5 Form of Stock Option - Exhibit 4.5 to Form 10-K for
Other the year ended December 31,
1993 ("1993 Form 10-K")
4.6 Form of Employee Stock Exhibit 10.13 of Form S-1
Warrant
4.7 Form of 7% Convertible Exhibit 10.1 to Form 10-Q for
Debentures the quarter ended March 31,
1994
4.8 Warrant Agreement Exhibit 10.3 to Form 10-Q for
dated as of April 22, the quarter ended March 31,
1994 between IMRE 1994
Corporation and Allen
& Company Incorporated
4.9 Form of 7% Convertible Exhibit 10.4 to Form 10-Q for
Debenture Purchase the quarter ended March 31,
Agreement 1994
4.10 Form of Senior Exhibit 4.10 to 1995 Form 10-K
Convertible Debenture
4.11 Form of Senior Exhibit 4.11 to 1995 Form 10-K
Convertible Debenture
Purchase Agreement
4.12 Form of a Stock Exhibit 4.12 to 1995 Form 10-K
Purchase Agreement for
January 1996 Private
Placement
10.1 Stock Option and Stock Exhibit 28.1 to Form S-8
Appreciation Plan
10.2 1988 Nonqualified Exhibit 28.3 to Form S-8
Stock Option Plan
62
<PAGE>
Exhibit No. Description of Exhibit Incorporated by Reference to
----------- ---------------------- ----------------------------
10.3 Sub-lease Agreement Exhibit 10.3 to 1993 Form
dated October 11, 1991 10-K
10.4 Lease Agreement dated Exhibit 10.4 to Form 10-K for
April 26, 1994 the year ended December 31,
1994 ("1994 Form 10-K")
10.5 Warrant Agreement Exhibit 99.1 to Form S-3
dated as of August 29, Registration Statement No.
1991 between IMRE 33-71278
Corporation and
Manufacturers Hanover
Trust Company of
California (now known
as Chemical Trust
Company of California)
10.6 Severance Agreement Exhibit 10.6 to 1995 Form
with Martin D. Cleary 10-K
10.7 Consulting Agreement Exhibit 10.7 to 1995 Form
with Harvey J. Hoyt 10-K
10.8 Employment Agreement Exhibit 10.8 to 1995 Form
with Jay D. Kranzler 10-K
10.9 Employment Agreement Exhibit 10.9 to 1995 Form
with DebbyJo Blank 10-K
10.10 Employment Arrangement Exhibit 10.10 to 1995
with Frank R. Jones Form 10-K
10.11 Employment Agreement Exhibit 10.11 to 1995
with Alex P. de Soto Form 10-K
10.12 Baxter Distribution Exhibit 10.1 to Form
Agreement 8-K filed March 18,
1994
10.13 Amendment No. 1 Exhibit 10.1 to Form
dated March 28, 8-K dated March 25, 1995
1995 to Baxter
Distribution Agreement
63
<PAGE>
Exhibit No. Description of Exhibit Incorporated by Reference to
----------- ---------------------- ----------------------------
11.1 Statement regarding Item 8 of 1995 Form 10-K
computation of per
share loss
16.1 Letter regarding Exhibit 16.1 to 1994 Form 10-K
change in certifying
accountant
23.1 Consent of Ernst Exhibit 23.1 to 1995 Form 10-K
& Young LLP, 1994
and 1995 auditors
23.2 Report of Coopers Exhibit 23.2 to 1995 Form 10-K
& Lybrand LLP,
1993 auditors
23.3 Consent of Coopers Exhibit 23.3 to 1995 Form 10-K
& Lybrand, LLP,
1993 auditors
24.1 Powers of Attorney Exhibit 24.1 to 1995 Form 10-K
27.1 Financial Data Schedule Exhibit 27.1 to 1995 Form 10-K
64
<PAGE>
(b) Reports on Form 8-K
On November 27, 1995, the Company filed a Current Report on Form
8-K which disclosed certain information reported under Item 3.
On January 26, 1996 the Company filed a Current Report on Form
8-K which disclosed certain information under Item 5.
(c) Exhibits
The Company hereby files as part of this Form 10-K the exhibits
listed in Item 14(a)(3) set forth above.
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on February 19, 1996.
IMRE Corporation
By: /s/ Jay D. Kranzler
------------------------------------
Jay D. Kranzler, M.D., Ph. D.
Chief Executive Officer,
Vice Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Jay D. Kranzler
_____________________________ February 19, 1996
Jay D. Kranzler, M.D., Ph. D. Vice Chairman of the Board
Chief Executive Officer
/s/ Debby Jo Blank
_____________________________ February 19, 1996
Debby Jo Blank, M.D. Director,
President and Chief
Operating Officer
/s/ Frank R. Jones
_____________________________ February 19, 1996
Frank R. Jones, Ph.D. Chairman of the Board
and Chief Scientific
Officer
/s/ Alex P. de Soto
_____________________________ February 19, 1996
Alex P. de Soto Vice President,
Chief Financial Officer
and Chief Accounting
Officer
/s/ Richard M. Crooks
_____________________________ Director* February 19, 1996
Richard M. Crooks, Jr.
/s/ Philip J. O'Reilly
_____________________________ Director* February 19, 1996
Philip J. O'Reilly
/s/ Jack H. Vaughn
_____________________________ Director* February 19, 1996
Jack H. Vaughn
*By Alex P. de Soto as attorney-in-fact.
66
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
3.1 Certificate of Incorporation, as amended
3.2 By-laws, as amended
4.10 Form of Senior Convertible Debentures
4.11 Form of Senior Convertible Debenture Purchase
Agreement
4.12 Form of Stock Purchase Agreement for January 1996
Private Placement
10.6 Severance Agreement with Martin D. Cleary
10.7 Consulting Agreement with Harvey J. Hoyt
10.8 Employment Agreement with Jay D. Kranzler
10.9 Employment Agreement with Debby Jo Blank
10.10 Employment Arrangement with Frank R. Jones
10.11 Employment Agreement with Alex P. de Soto
23.1 Consent of Ernst & Young LLP, 1995 and 1994
auditors
23.2 Report of Coopers & Lybrand LLP, 1993 auditors
23.3 Consent of Coopers & Lybrand LLP, 1993 auditors
24.1 Powers of Attorney
27.1 Financial Data Schedule
67
<PAGE>
EXHIBIT 3.1
BOOK V 73 PAGE 269 00872
STATE
OF
DELAWARE
OFFICE OF SECRETARY OF STATE
I, Glenn C. Kenton, Secretary of State of the State of Delaware,
do hereby certify that the attached is a true and correct copy of
Certificate of Incorporation filed in this office on October 21,
1981.
Glenn C. Kenton
---------------
RECEIVED FOR RECORD Glenn C. Kenton, Secretary of State
Oct. 21 A.D. 1981 By: M. Tool
---------
Robert J. Donaway Date: October 21, 1981
RECORDER
<PAGE>
BOOK V 73 PAGE 270
CERTIFICATE OF INCORPORATION
OF
IMMUNE RESPONSE SYSTEMS, INC
The undersigned, a natural person, for the purpose
of organizing a corporation for conducting the business and
promoting the purposes hereinafter stated, under the provi-
sions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the
Delaware Code and the acts amendatory thereof and supplemen-
tal thereto, and known, identified and referred to as the
"General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter
called the "Corporation") is Immune Response Systems, Inc.
SECOND: The address, including street, number,
city and county, of the registered office of the Corporation
in the State of Delaware is 306 South State Street, City of
Dover, County of Kent; and the name of the registered agent
of the Corporation in the State of Delaware at such address
is United States Corporation Company.
THIRD: The nature of the business and purposes to
be conducted or promoted by the Corporation is to engage in
<PAGE>
BOOK V 73 PAGE 271
any lawful act or activity for which corporations may be or-
ganized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares of all classes
of stock which the Corporation shall have authority to issue
is 200,000. The par value of each of such shares is $ .01.
All such shares are of one class and are shares of Common
Stock.
FIFTH: The name of the incorporator is Jack H.
Halperin and his mailing address is 250 Park Avenue, New
York, New York 10017.
SIXTH: The following provisions are inserted for
the regulation and conduct of the affairs of the Corporation,
and it is expressly provided that they are intended to be in
furtherance and not in limitation or exclusion of the powers
elsewhere conferred herein or in the By-Laws of the Corporation
or conferred by law:
1. The original By-Laws of the Corporation
shall be adopted by the incorporator named in Article
Fifth. Thereafter, in furtherance and not in limita-
tion of the powers conferred under the General Corpo-
<PAGE>
BOOK V 73 PAGE 272
raton Law of the State of Delaware, the Board of
Directors of the Corporation is expressly authorized
to make, alter or repeal By-Laws not inconsistent
with law or with its Certificate of Incorporation.
2. Election of directors need not be by writ-
ten ballot, unless the By-Laws of the Corporation
shall so provide.
Signed at New York, New York, on October 19, 1981.
Jack H. Halperin
----------------
Incorporator
<PAGE>
RECORDED In the Office for the Recording of Deeds, Etc
at Dover, In and for the said County of Kent, In Corp.
Record V Vol. 73 Page 269 Etc.
the 21st day of October A.D. 1981
WITNESS my Hand and the Seal of said office.
Robert J. Donaway, Recorder
------------------
<PAGE>
STATE
OF
DELAWARE
OFFICE OF SECRETARY OF STATE
I, Glenn C. Kenton, Secretary of State of the State of Delaware,
do hereby certify the attached is a true and correct copy of the
Certificate of Amendment filed in this office on October 14, 1982.
RECEIVED FOR RECORD Glenn C Kenton
--------------
Glenn C. Kenton, Secretary of State
RECEIVED FOR RECORD BY: K. Saggs
---------
Oct. 14, A.D. 1982 DATE: October 14, 1982
----------------
Robert J Donaway
RECORDER
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IMMUNE RESPONSE SYSTEMS, INC.
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
We, Frank R. Jones, Chairman of the Board and Lois Yoshida, Secretary of
Immune Response Systems, Inc., a corporation existing under the laws of the
State of Delaware, do hereby certify as follows:
FIRST: That the Certificate of Incorporation of said corporation has been
amended as follows:
By striking out the whole of Article FIRST thereof as it now exists and
inserting in lieu and instead thereof a new Article FIRST, reading as follows:
The name of the corporation is IMRE Corporation.
SECOND: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of Delaware by the written consent of
the holders of not less than a majority of the outstanding stock entitled to
vote thereon and that written notice of the corporate action has been given to
those stockholders who have not consented in writing, all in accordance with the
provisions of Section 228 of the General Corporation Law.
IN WITNESS WHEREOF, we have signed this certificate this 11th day of
October, 1982.
Frank R Jones
-------------
Chairman of the Board
Frank R. Jones
ATTEST: Lois Yoshida
------------
Secretary
Lois Yoshida
<PAGE>
INDEXED
State of Delaware
Kent County
RECORDED in the Office for the Recording of Deeds, Etc., at Dover,
In and for the said County of Kent, In Corp.
RECORD: H VOL: 78 PAGE: 218, ETC. the 14TH day of OCTOBER AD
1982
WITNESS my hand and the Seal of said office.
Robert Donaway, Recorder
---------------
<PAGE>
STATE
OF
DELAWARE
OFFICE OF SECRETARY OF STATE
I, Glenn C. Kenton, Secretary of State of the State of Delaware
do hereby certify that the attached is a true and correct copy of the
Certificate of Amendment filed in this office on March 1, 1983.
RECEIVED FOR RECORD: Glenn C Kenton
--------------
March 1, 1983 Glenn C. Kenton, Secretary of State
- -------------
Robert J. Donaway By: M.Tool
RECORDER DATE: March 1, 1983
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IMRE CORPORATION
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
We, Frank R. Jones, Chairman of the Board and Lois Yoshida, Secretary of
IMRE corporation, a corporation existing under the laws of the State of
Delaware, do hereby certify as follows:
FIRST: That the Certificate of Incorporation of said corporation as
heretofore amended, is further amended as follows:
By striking out the first sentence of Article FOURTH thereof as it now
exists and inserting in lieu and instead thereof a new first sentence of Article
FOURTH, reading as follows:
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 1,000,000.
SECOND: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of Delaware by the written consent of
the holders of not less than a majority of the outstanding stock entitled to
vote thereon and that written notice of the corporate action has been given to
those stockholders who have not consented in writing, all in accordance with the
provisions of Section 228 of the General Corporation Law.
IN WITNESS WHEREOF, we have signed this certificate this 24th day of
February, 1983.
Frank R Jones
-------------
Frank R. Jones
Chairman of the Board
ATTEST: Lois Yoshida
------------
Lois Yoshida
Secretary
<PAGE>
STATE
OF
DELAWARE
OFFICE OF SECRETARY OF STATE
I, Glenn C. Kenton, Secretary of State of the State of Delaware
do hereby certify the attached is a true and correct copy of the
Certificate of Amendment of IMRE Corporation filed in this office on
the tenth day of May, A.D. 1983, at 9 0'clock A.M.
RECEIVED FOR RECORD: Glenn C Kenton
--------------
June 21 A.D. 1983 Glenn C. Kenton, Secretary of State
Robert J. Donaway
RECORDER AUTHENTICATION: 0006915
DATE: 6/21/1983
831511918
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IMRE CORPORATION
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
We, John King, President and Lois Yoshida, Secretary of IMRE Corporation, a
corporation existing under the laws of the State of Delaware, do hereby certify
as follows:
FIRST: That the Certificate of Incorporation of said corporation as
heretofore amended, is further amended as follows:
By striking out Article FOURTH thereof as it now exists and inserting in
lieu and instead thereof a new Article FOURTH, reading as follows:
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 10,000,0000. The par value of each of such
shares is $.01. All such shares are of one class and are shares of Common
Stock.
Each share of the Corporation's Common Stock outstanding on the date hereof
shall be split into 20 shares of the Corporation's Common Stock. To effect the
20 for 1 split of the outstanding shares of Common Stock of the Corporation
provided for and effected by these articles of amendment, certificates
representing 20 shares of the Corporation's Common Stock, par value $.01 per
share, shall be issued in exchange for each share of the Corporation's Common
Stock, par value $.01 per share, outstanding on the date hereof.
SECOND: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of Delaware by the written consent of
the holders of not less than a majority of the outstanding stock entitled to
vote thereon and that written notice of the corporate action has been given to
those stockholders who have not consented in writing, all in accordance with the
provisions of Section 228 and 242 of the General Corporation Law.
IN WITNESS WHEREOF, we have signed this certificate this 29th day of April,
1983.
John King
---------
John King
President
ATTEST: Lois Yoshida
------------
Lois Yoshida
Secretary
<PAGE>
STATE
OF
DELAWARE
OFFICE OF SECRETARY OF STATE
I, Michael Harkins, Secretary of State of the State of Delaware
do hereby certify the attached is a true and correct copy of the
Certificate of Amendment of IMRE Corporation filed in this office on
the ninth day of May, A.D. 1986, at 9 o'clock a.m.
RECEIVED FOR RECORD Michael Harkins
---------------
May 22 A.D. 1986 Michael Harkins, Secretary of State
Robert J. Donaway
RECORDER AUTHENTICATION: 0828570
DATE: 05/22/1986
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IMRE CORPORATION
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
We, Frank R. Jones, Chairman of the Board, and Lois Yoshida, Secretary, of
IMRE Corporation, a corporation existing under the laws of the State of
Delaware, do hereby certify as follows:
FIRST: That the Certificate of Incorporation of said corporation as
heretofore amended, is further amended as follows:
By striking our Article FOURTH thereof as it now exists and inserting in
lieu and instead thereof a new Article FOURTH, reading as follows:
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 15,000,000. The par value of each of such
shares is $.01. All such shares are of one class and are shares of Common
Stock.
SECOND: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of Delaware by the affirmative votes
of the holders of not less than a majority of the outstanding stock of the
Corporation entitled to vote thereon at the annual meeting of stockholders duly
called and held on April 24, 1986 following adoption by the Board of Directors
of a resolution setting forth and declaring the advisability of the proposed
amendment, all in accordance with Section 242 of the General Corporation Law of
Delaware.
IN WITNESS WHEREOF, we have signed this certificate this 30th day of April,
1986.
Frank R Jones
-------------
Frank R. Jones
Chairman of the Board
ATTEST: Lois Yoshida
------------
Lois Yoshida
Secretary
<PAGE>
STATE
OF
DELAWARE
OFFICE OF SECRETARY OF STATE
I, Michael Harkins, Secretary of State of the State of Delaware
do hereby certify the attached is a true and correct copy of the
Certificate of Amendment IMRE Corporation filed in this office on the
ninth day of January, A.D. 1987, at 9 o'clock A.M.
RECEIVED FOR RECORD Michael Harkins
----------------
March 3 A.D. 1987 Michael Harkins, Secretary of State
Michael T. Scuse
RECORDER
AUTHENTICATION: 1146509
870090211 DATE: 2/28/1987
<PAGE>
0262H
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IMRE CORPORATION
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
We, Frank R. Jones, President, and Lois Yoshida, Secretary of IMRE
Corporation, a corporation existing under the laws of the State of Delaware, do
hereby certify as follows:
FIRST: That the Certificate of Incorporation of said corporation as
heretofore amended, is further amended as follows:
By adding Article SEVENTH which shall read as follows:
SEVENTH: No director shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director, except (i) for breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Article Seventh shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
SECOND: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of Delaware by the Board of Directors
of said corporation and by the holders of not less than a majority of the
outstanding stock entitled to vote thereon at meetings duly called and held, all
in accordance with the provisions of Section 242 of the General Corporation Law.
IN WITNESS WHEREOF, we have signed this certificate this 23rd day of
December, 1986.
Frank R Jones
-------------
Frank R. Jones
President
ATTEST: Lois Yoshida
------------
Lois Yoshida
Secretary
<PAGE>
STATE OF DELAWARE INDEXED
KENT COUNTY
RECORDED In the Office for the Recording of Deeds, ETC
at Dover, In and for the said County of Kent, In Corp.
Record W Vol. 103 Page 15 Etc.
the 3rd day of March A.D. 1987
WITNESS my Hand and the Seal of said office.
MICHAEL T. SCUAE, Recorder
-----------------
<PAGE>
STATE
OF
DELAWARE
OFFICE OF SECRETARY OF STATE
I, Michael Harkins, Secretary of State of the State of Delaware,
do hereby certify the attached is a true and correct copy of the
Certificate of Amendment of IMRE Corporation filed in this office on
the ninth day of November, A.D. 1990, at 11:30 o'clock A.M.
RECEIVED FOR RECORD MICHAEL HARKINS
---------------
Nov. 13 A.D. 1990 Michael Harkins, Secretary of State
Michael T. Scuae
RECORDER AUTHENTICATION: 2850266
909313016 DATE: 11/09/1990
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IMRE CORPORATION
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
We, Frank R. Jones, Chairman of the Board, and Lois H. Yoshida, Secretary
of IMRE Corporation, a corporation existing under the laws of the State of
Delaware, do hereby certify as follows:
FIRST: The name of the corporation is IMRE Corporation.
SECOND: That the Certificate of Incorporation of said corporation as
heretofore amended, is further amended as follows:
By striking out Article FOURTH thereof as it now exists and inserting in
lieu and instead thereof a new Article FOURTH, reading as follows:
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 25,000,000. The par value of each of such
shares is $.01. All such shares are of one class and are shares of Common
Stock.
THIRD: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of Delaware by the affirmative votes
of the holders of not less than a majority of the outstanding stock of the
Corporation entitled to vote thereon at the annual meeting of stockholders duly
called and held on November 9, 1990, following adoption by the Board of
Directors of a resolution setting forth and declaring the advisability of the
proposed amendment, all in accordance with Section 242 of the General
Corporation Law of Delaware.
IN WITNESS WHEREOF, we have signed this certificate this 9th day of
November, 1990.
Frank R Jones
-------------
Frank R. Jones
Chairman of the Board
ATTEST: Lois Yoshida
------------
Lois Yoshida
Secretary
<PAGE>
BK B - 135 PAGE 123 41282
STATE
OF
DELAWARE
OFFICE OF SECRETARY OF STATE
I, Michael Harkins, Secretary of State of the State of Delaware,
do hereby certify that the attached is a true and correct copy of
the Certificate of Amendment of IMRE Corporation
filed in this office on the 10th day of June, A.D. 1991, at 12:30 O'Clock p.m..
MICHAEL HARKINS
---------------
RECEIVED FOR RECORD Michael Harkins, Secretary of State
June 11 A.D. 1991 Authentication: *3073953
Michael T. Scuae Date: 06/10/1991
RECORDER
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS BK B - 135 PG 124
FILED 12:30 PM 06/10/1991
681161050 - 924824
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IMRE CORPORATION
__________________________________________________________
Adopted in accordance with the provisions
of Section 242 of the Law of the General Corporation
Law of the State of Delaware
__________________________________________________________
We, Frank R. Jones, Chairman of the Board, and Lois H.
Yoshida, Secretary, of IMRE Corporation, a corporation existing
under the laws of the State of Delaware, do hereby certify as
follows:
FIRST: The name of the corporation is IMRE
Corporation.
SECOND: That the Certificate of Incorporation of said
corporation as heretofore amended, is further amended as follows:
By striking out Article FOURTH thereof as it now exists
and inserting in lieu and instead thereof a new Article FOURTH,
reading as follows:
The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 25,000,000. The
par value of each share is $ .02. All such shares are of one class
and are shares of Common Stock. All shares of Common Stock, par
value $ .01 per share, issued and outstanding shall be exchanged for
<PAGE>
BK B - 135 PG 124
shares of Common Stock, par value $ .02 per share, on a two for one
basis.
THIRD: That such amendment has been duly adopted in
accordance with the provisions of the General Corporation Law of
Delaware by the affirmative votes of the holders of not less than
a majority of the outstanding stock of the Corporation entitled to
vote thereon at the annual meeting of stockholders duly called and
held on Jun 10, 1991, following adoption by the Board of Directors
of a resolution setting forth and declaring the advisability of the
proposed amendment, all in accordance with Section 242 of the
General Corporation Law of Delaware.
IN WITNESS WHEREOF, we have signed this certificate this
10th day of June, 1991.
Frank R Jones
-------------
Frank R. Jones
Chairman of the Board
ATTEST: Lois Yoshida
-------------
Lois H. Yoshida
Secretary
<PAGE>
PRENTICE -HALL
JOB # 107-91-01118
------------
Ali Mudeen
RECORDED COPY
STATE OF DELAWARE INDEXED
KENT COUNTY
RECORDED In the Office for the Recording of Deeds, ETC
at Dover, In and for the said County of Kent, In Corp.
Record B Vol. 135 Page 123 Etc.
the 11th day of June A.D. 1991
WITNESS my Hand and the Seal of said office.
Michael T. Scuse, Recorder
-----------------
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "IMRE CORPORATION" FILED IN THIS OFFICE ON THE TWENTY FIRST DAY OF
DECEMBER, A.D. 1994, AT 10:30 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
EDWARD J. FREEL
---------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION:
0924824 8100 7347808
DATE:
944251340 12-21-94
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IMRE CORPORATION
Pursuant to Section 242 of the Delaware General Corporation Law, IMRE
CORPORATION, a Delaware corporation (the "Corporation"), does hereby certify:
FIRST: The name of the Corporation is IMRE CORPORATION.
SECOND: The Certificate of Incorporation of the Corporation is hereby
amended as follows:
By striking out Article FOURTH thereof as it now exists and inserting in
lieu and instead thereof a new Article FOURTH, reading as follows:
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 35,000,000, all of which
shall be shares of one class of Common Stock, par value $ .02 per
share.
THIRD: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of Delaware by the affirmative votes
of the holders of not less than a majority of the outstanding stock of the
Corporation entitled to vote thereon at the annual meeting of stockholders duly
called and held on June 24, 1994, following adoption by the Board of Directors
of a resolution setting forth and declaring the advisability of the proposed
amendment, all in accordance with Section 242 of the General Corporation Law of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be duly executed this 20th day of December, 1994.
IMRE CORPORATION
By: Alex P. de Soto
-----------------
ITS: Vice President Chief Financial Officer
---------------------------------------
ATTEST:
By: Lois H. Yoshida STATE OF DELAWARE
SECRETARY SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:30 AM 12/21/1994
944251340 - 924824
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
IMRE CORPORATION
ARTICLE I - OFFICES
The office of the Corporation shall be located in the place determined by the
Board of Directors. The Corporation may also maintain offices at such other
places within or without the United States as the Board of Directors may, from
time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
SECTION 1 - ANNUAL MEETINGS:
The annual meeting of the shareholders of the Corporation shall be held within
six months after the close of the fiscal year of the Corporation for the purpose
of electing directors, and transacting such other business as may properly come
before the meeting.
SECTION 2 - SPECIAL MEETINGS:
Special meetings of the shareholders may be called at any time by the Board of
Directors or by the Chief Executive Officer, and shall be called by the Chief
Executive Officer or the Secretary at the written request of the holders of ten
percent (10%) of the shares then outstanding and entitled to vote thereat, or as
otherwise required under the provisions of the General Corporation Law of
Delaware.
SECTION 3 - PLACE OF MEETINGS:
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
SECTION 4 - NOTICE OF MEETINGS:
(a) Except as otherwise provided by statute, written notice of each meeting of
shareholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than fifty days before the meeting, upon each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle shareholders to receive payment for their shares
pursuant to statute, the notice of such meeting shall include a statement of
that purpose and to that effect. If mailed, such notice shall be directed to
each such shareholder at his address, as it appears on the
<PAGE>
By-Laws of IMRE Corporation Page 2 of 12
records of the shareholders of the Corporation, unless he shall have previously
filed with the Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which case, it shall be
mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by statute.
SECTION 5 - QUORUM:
(a) Except as otherwise provided herein, or by statute, or in the Certificate
of Incorporation (such Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record one-third of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
at the meeting as originally called if a quorum had been present.
SECTION 6 - VOTING:
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors, to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without
a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
shareholder himself, or by his attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven months from the
date of its execution, unless the person executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the records of
the Corporation.
<PAGE>
By-Laws of IMRE Corporation Page 3 of 12
(d) Except as otherwise provided by the Certificate of Incorporation, whenever
the vote of stockholders at a meeting is required or permitted to be taken in
connection with any corporate action, such action may be taken without a
meeting, without prior notice and without a vote, if one or more consents in
writing, setting forth the action so taken, shall be signed and dated by the
holders of the outstanding stock having not less than the minimum number of
votes that would be necessary to authorize such action at a meeting at which all
shares entitled to vote thereon were present and voted and shall be delivered to
the Secretary of the Corporation for inclusion in the minutes or filing with the
corporate records within sixty (60) days of the earliest dated consent so
delivered. Prompt notice of the taking of such corporate action without a
meeting shall be given to those stockholders who have not consented in writing.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1 - NUMBER, ELECTION AND TERM OF OFFICE:
(a) The number of the directors of the Corporation shall be not less than three
(3) nor more than nine (9) as determined from time to time by a majority of the
Board of Directors.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares, present in person or by
proxy, entitled to vote in the election.
(c) There shall be a classified Board of Directors composed of three classes.
The term of director(s) in each class shall be three years. The terms of each
of the three classes shall be staggered so that the election of directors in
only one class occurs in any given year.
SECTION 2 - DUTIES AND POWERS:
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the shareholders.
SECTION 3 - ANNUAL AND REGULAR MEETINGS; NOTICE:
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders, at the place of
such annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution for
the holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, written, oral or any
<PAGE>
By-Laws of IMRE Corporation Page 4 of 12
other mode of notice of such action shall be given to each director who shall
not have been present at the meeting at which such action was taken.
(d) Attendance of any director at any regular meeting shall constitute waiver
of notice of such meeting, except when a director attends the regular meeting
with the express purpose of objecting, at the beginning of the regular meeting,
to the transaction of any business because the regular meeting is not lawfully
called or convened.
SECTION 4 - SPECIAL MEETINGS; NOTICE:
(a) Special meetings of the Board of Directors may be called by or at the
direction of the Chief Executive Officer or by any director, at such time and
place as may be specified in the respective notices or waiver of notice thereof.
(b) Except as otherwise required by statute, written, oral or any other mode of
notice of the time and place of special meetings shall be given in sufficient
time for the convenient assembly of the directors thereat. A notice, or waiver
of notice, except as required by Section 8 of this Article III, need not specify
the purpose of the meeting.
(c) Attendance of any director at any special meeting shall constitute waiver
of notice of such meeting, except when a director attends the special meeting
with the express purpose of objecting, at the beginning of the special meeting,
to the transaction of any business because the special meeting is not lawfully
called or convened.
SECTION 5 - CHAIRMAN:
At all meetings of the Board of Directors, the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be
absent, then the Chief Executive Officer shall preside, and in his absence, a
Chairman chosen by the directors shall preside.
SECTION 6 - QUORUM AND ADJOURNMENTS:
(a) At all meetings of the Board of Directors, the presence of a majority of
the entire Board shall be necessary and sufficient to constitute a quorum for
the transaction of business, except as otherwise provided by law, by the
Certificate of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.
SECTION 7 - MANNER OF ACTING:
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is
<PAGE>
By-Laws of IMRE Corporation Page 5 of 12
present shall be the act of the Board of Directors. Any action authorized, in
writing, by all of the directors entitled to vote thereon and filed with the
minutes of the Corporation shall be the act of the Board of Directors with the
same force and effect as if the same had been passed by unanimous vote at a duly
called meeting of the Board.
SECTION 8 - VACANCIES:
Any vacancy in the Board of Directors, occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless a vacancy created by the removal of a director by the
shareholders shall be filled by the shareholders at the meeting at which the
removal was effected) or inability to act of any director, or otherwise, shall
be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
SECTION 9 - RESIGNATION:
Any director may resign at any time by giving written notice to the Board of
Directors, the Chief Executive Officer or the Secretary of the Corporation.
Unless otherwise specified in such written notice, such resignation shall take
effect upon receipt thereof by the Board of Directors or such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 10 - REMOVAL:
Any director may be removed with or without cause at any time by the affirmative
vote of shareholders holding of record in the aggregate at least a majority of
the outstanding shares of the Corporation at a special meeting of the
shareholders called for that purpose, and may be removed for cause by action of
the Board.
SECTION 11 - SALARY:
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 12 - CONTRACTS:
(a) No contract or other transaction between this Corporation and any other
corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that any one or more of the directors
of this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other corporation, provided that such facts are
disclosed or made known to the Board of Directors.
<PAGE>
By-Laws of IMRE Corporation Page 6 of 12
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be
counted in determining the presence of a quorum at such meeting. This Section
shall not be construed to impair or invalidate or in any way affect any contract
or other transaction which would otherwise be valid under the law (common,
statutory or otherwise) applicable thereto.
SECTION 13 - COMMITTEES:
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members such committees, and
alternate members thereof, as they may deem desirable, each consisting of one or
more members, with such powers and authority (to the extent permitted by law) as
may be provided in such resolution. Each such committee shall serve at the
pleasure of the Board.
ARTICLE IV - OFFICERS
SECTION 1 - NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE:
(a) The officers of the Corporation shall consist of a Chief Executive Officer,
a Secretary, a Treasurer, and such other officers, including a Chairman of the
Board of Directors, a President and one or more Vice Presidents, as the Board of
Directors may from time to time deem advisable. Any officer other than the
Chairman of the Board of Directors may be, but is not required to be, a director
of the Corporation. Any two or more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified, or until his death, resignation or removal.
SECTION 2 - RESIGNATION:
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the Chief Executive Officer or the Secretary of
the Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
<PAGE>
By-Laws of IMRE Corporation Page 7 of 12
SECTION 3 - REMOVAL:
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
SECTION 4 - VACANCIES:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
SECTION 5 - DUTIES OF OFFICERS:
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these By-Laws, or may from time to time be specifically conferred or imposed by
the Board of Directors.
SECTION 6 - SURETIES AND BONDS:
In case the Board of Directors shall so require, any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
SECTION 7 - SHARES OF OTHER CORPORATIONS:
Whenever the Corporation is the holder of shares of any other corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the Chief Executive Officer, any Vice President, or such other person as the
Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
SECTION 1 - CERTIFICATE OF STOCK:
(a) The certificates representing shares of the Corporation shall be in such
form as shall be adopted by the Board of Directors, and shall be numbered and
registered in the order issued. They shall bear the holder's name and the
number of shares, and shall be signed by (i) the Chairman of the Board or the
Chief Executive Officer or the President or a Vice President, and (ii) the
Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and
shall bear the corporate seal.
(b) No certificate representing shares shall be issued until the full amount
of consideration therefor has been paid, except as otherwise permitted by law.
<PAGE>
By-Laws of IMRE Corporation Page 8 of 12
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share which shall entitle the holder
to exercise voting rights, receive dividends and participate in liquidating
distributions, in proportion to the fractional holdings; or it may authorize the
payment in cash of the fair value of fractions of a share as of the time when
those entitled to receive such fractions are determined; or it may authorize the
issuance, subject to such conditions as may be permitted by law, of scrip in
registered or bearer form over the signature of an officer or agent of the
Corporation, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder, except as therein
provided.
SECTION 2 - LOST OR DESTROYED CERTIFICATES:
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board
of Directors in its discretion may require, the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper to do so.
SECTION 3 - TRANSFERS OF SHARES:
(a) Transfers of shares of the Corporation shall be made on the share records
of the Corporation only by the holder of record thereof, in person or by his
duly authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer and of payment to
transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and, accordingly,
shall not be bound to recognize any legal, equitable or other claim to, or
interest in, such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise expressly
provided by law.
SECTION 4 - RECORD DATE:
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days, as
the record date for the determination of shareholders entitled to receive notice
of, or to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends, or allotment of any rights, or for the purpose
of any other
<PAGE>
By-Laws of IMRE Corporation Page 9 of 12
action. If no record date is fixed, the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if no notice is given, the day on which the meeting is held; the
record date for determining shareholders for any other purpose shall be at the
close of business on the day on which the resolution of the directors relating
thereto is adopted. When a determination of shareholders of record entitled to
notice of or to vote at any meeting of shareholders has been made as provided
for herein, such determination shall apply to any adjournment thereof, unless
the directors fix a new record date for the adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of Directors from
time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
SECTION 1 - BY SHAREHOLDERS:
All by-laws of the Corporation shall be subject to alteration or repeal, and new
By-Laws may be made, by the affirmative vote of shareholders holding of record
in the aggregate at least a majority of the outstanding shares entitled to vote
in the election of directors at any annual or special meeting of shareholders,
provided that the notice or waiver of notice of such meeting shall have
summarized or set forth in full therein, the proposed amendment.
SECTION 2 - BY DIRECTORS:
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, by-laws of the Corporation; provided, however, that the
shareholders entitled to vote with respect thereto as in this Article IX above
provided may alter, amend or repeal by-laws made by the Board of Directors,
except that the Board of Directors shall have no power to change the quorum for
meetings of shareholders or of the Board of Directors, or to change any
provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
<PAGE>
By-Laws of IMRE Corporation Page 10 of 12
ARTICLE X - INDEMNITY
SECTION 1 - GENERAL POWERS:
(a) The Corporation may indemnify and hold harmless, to the fullest extent
permitted by applicable law as it presently exists or may hereafter be amended,
any person who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether civil, criminal,
derivative, administrative or investigative (a "proceeding") by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation or, being or having been such a director, officer, employee or
agent, he or she is or was serving at the request of the Corporation as a
director, officer, employee, agent, trustee, or in any other capacity of another
company or of a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether the basis of such
proceeding is alleged action or omission in an official capacity or in any other
capacity while serving as a director, officer, employee, agent, trustee or in
any other capacity, against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts to be paid in settlement) actually or reasonably incurred or
suffered by such person in connection therewith. The Corporation may indemnify
a person in connection with a proceeding (or part thereof) initiated by such
person only if the proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
(b) The Corporation may, in its discretion, pay the expenses (including
attorneys' fees) incurred in defending any proceeding in advance of its final
disposition, provided, however, that the payment of expenses incurred by a
director, officer, employee or agent of the Corporation in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by such director, officer, employee or agent to repay all amounts advanced if it
should be ultimately determined that such director, officer, employee or agent
is not entitled to be indemnified under this Article X or otherwise.
(c) The Corporation may enter into contracts with any person who is or was a
director, officer, employee or agent of the Corporation in furtherance of the
provisions of this Article X and may create a trust fund, grant a security
interest in property of the Corporation, or use other means (including, without
limitation, a letter of credit) to ensure the payment of such amounts as may be
necessary to effect indemnification as provided in this Article X.
SECTION 2 - DIRECTORS AND OFFICERS:
The Corporation shall indemnify and hold harmless any person who is or was a
director or officer of the Corporation, and pay all expenses in advance of a
final disposition of a proceeding, to the full extent the Corporation is
empowered.
SECTION 3 - EMPLOYEES AND AGENTS:
The Corporation may, by action of its Board of Directors from time to time,
indemnify and hold harmless any person who is or was an employee or agent of the
Corporation, and pay expenses in
<PAGE>
By-Laws of IMRE Corporation Page 11 of 12
advance of final disposition of a proceeding, to the full extent to which the
Corporation is empowered, or to a lesser extent which the Board of Directors may
determine.
SECTION 4 - CONTRACT RIGHTS:
The rights to indemnification and payment of expenses in advance of final
disposition of a proceeding conferred by or pursuant to this Article X shall be
contract rights.
SECTION 5 - CLAIMS:
If a claim for indemnification or payment of expenses under this Article X is
not paid in full within sixty (60) days after a written claim therefor has been
received by the Corporation, except in the case of a claim for expenses incurred
in defending a proceeding in advance of its final disposition, in which case the
applicable period shall be twenty (20) days after a written claim therefor and
the undertaking described in subsection 1(b) of this Article X has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving that
the claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.
SECTION 6 - NON-EXCLUSIVITY OF RIGHTS:
The rights conferred on any person by this Article X shall not be exclusive of
any other rights which such person may have or hereafter acquire under any
statute, provision of the certificate of incorporation, these by-laws,
agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 7 - OTHER INDEMNIFICATION:
The Corporation's obligation, if any, to indemnify any person by reason of the
fact that he or she is or has been a director, officer, employee or agent of the
Corporation, he or she is or was serving at the request of the Corporation as a
director, officer, employee, agent, trustee, or in any other capacity of another
company or of a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, shall be reduced by any amount
such person may collect as indemnification from such other company, partnership,
joint venture, trust or other enterprise.
SECTION 8 - AMENDMENT OR REPEAL:
Any repeal or modification of the foregoing provisions of this Article X shall
not adversely affect any right or protection hereunder of any person in respect
of any act or omission occurring prior to the time of such repeal or
modification.
SECTION 9 - SAVINGS CLAUSE:
<PAGE>
By-Laws of IMRE Corporation Page 12 of 12
If any provision of this Article X or any application thereof shall be invalid,
unenforceable or contrary to applicable law, the remainder of this Article X, or
the application of such provision to persons or circumstances other than those
as to which it is held invalid, unenforceable or contrary to applicable law,
shall not be affected thereby and shall continue in full force and effect.
SECTION 10 - DEFINITION OF "APPLICABLE LAW":
For purposes of this Article X, "applicable law" shall at all times be construed
as the applicable law in effect at the date indemnification may be sought, or
the law in effect at the date of the action, omission or other event giving rise
to the situation for which indemnification may be sought, whichever is selected
by the person seeking indemnification. As of the date hereof, applicable law
shall include Section 145 of the Delaware General Corporation Law, as amended.
SECTION 11 - PERSONS SERVING OTHER ENTITIES:
Any person who, while a director, officer, employee or agent of the Corporation,
is or was serving as a director or officer of another foreign or domestic
corporation of which a majority of the shares entitled to vote in the election
of its directors is held by the Corporation shall be deemed to be or have been
so serving "at the request of the Corporation" for purposes of this Article X.
Dated: February 8, 1996
------------------
/s/ Alex P. de Soto
---------------------------------
Secretary
<PAGE>
EXHIBIT 4.10
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). NO TRANSFER OF SUCH SECURITIES WILL BE
PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH
TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE ACT
IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND SUCH
TRANSFER WILL BE IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. IN
CONNECTION WITH SUCH COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES
LAWS, NO TRANSFER OF THE SECURITIES SHALL BE MADE UNLESS THE CONDITIONS
SPECIFIED IN SECTION 8 OF THIS DEBENTURE ARE SATISFIED.
SENIOR CONVERTIBLE DEBENTURE
Maturity Date: July 1, 1996
$250,000
No. 3 Seattle, Washington
IMRE CORPORATION, a Delaware corporation (the "Company"), for value
received, hereby promises to pay to The Aries Trust or its registered assigns
("Holder"), the principal sum of Two Hundred Fifty Thousand Dollars
($250,000) with interest (computed on the basis of a 365-day year) accruing
from the date of issuance to March 1, 1996 at a rate of zero percent (0%) per
annum, and interest (computed on the basis of a 365-day year) accruing from
March 1, 1996 to the date of maturity at the prime rate as quoted from time
to time by the Wall Street Journal or any successor thereto, or at such
lesser rate as shall be the maximum permitted by applicable laws, from the
date hereof, to be paid in the manner provided herein.
1. PAYMENT OF PRINCIPAL AND INTEREST.
1.1 PAYMENTS IN CASH. Subject to the provisions of Section 3 hereof
relating to the conversion of this Debenture, the entire principal sum hereof
shall be due and payable on (i) July 1, 1996; or (ii) upon conversion of this
Debenture pursuant to the provisions of Section 2 hereof as to that portion of
the principal amount so converted. Payments hereunder shall be made by the
Company to the Holder at the address for such holder on the books of the
Company, or at such other place as the Holder may direct the Company in writing,
in lawful money of the United States of America subject to the terms of the next
paragraph.
<PAGE>
2. CONVERSION.
2.1 CONVERSION. (a) The unpaid principal amount of this Debenture
and interest thereon shall be automatically converted to the Qualified Offering
Securities at conversion price equal to the lower of $1.50 or the price for the
Qualified Offering Securities in such Qualified Offering (the "Conversion
Price") on the completion of a Qualified Offering. For purposes of this
Debenture, a Qualified Offering shall mean the next sale or series of sales of
Common Stock of the Company or securities exchangeable, convertible or
exercisable into or for Common Stock of the Company, whether in a public
offering or private placement, raising gross proceeds in excess of $2,500,000
(the "Threshold Amount") and Qualified Offering Securities shall mean the
securities offered in the Qualified Offering. For purposes of clarity, in the
event the Company effects a sale or series of sales of its Common Stock through
a rights offering in which gross proceeds in excess of $2,500,000 are raised,
the unpaid principal amount of this Debenture and interest thereon shall be
automatically converted on the completion of such financing into the Company's
Common Stock at the Conversion Price. Conversion shall be deemed to have been
effected on the date on which the Threshold Amount has been sold. Such
automatic conversion shall require no further action on the part of either the
Company or the Holder and, upon receipt of notice from the Company of such
automatic conversion, the Holder shall surrender this Debenture, fully endorsed,
in accordance with surrender instructions provided by the Company in such
notice. The Company shall, as soon as practicable after the surrender of the
Debenture, issue and deliver to the Holder a certificate or certificates for
the number of shares of securities into which this Debenture is converted,
together with any cash in lieu of any fraction of a share as provided in Section
2.3 hereof. The entity in whose name the certificate or certificates are to be
issued shall be deemed to have become a stockholder of record on the next
succeeding day on which the transfer books are open after the closing of the
Qualified Offering. The Company covenants that all shares issued upon automatic
conversion (if shares of capital stock are issued upon automatic conversion)
and shares of capital stock to be issued upon the exchange, conversion or
exercise of securities other than shares of capital stock issued upon automatic
conversion shall, upon issuance, be fully paid and non-assessable, and all
securities issued upon automatic conversion shall be free from all taxes, liens,
encumbrances and charges caused by or created by the Company with respect to the
issue thereof.
(b) In the event that a Qualified Offering is not consummated by
March 1, 1996, the unpaid principal amount of this Debenture and interest
thereon shall be convertible, in whole, at the option of the Holder at any time
prior to maturity and after
- 2 -
<PAGE>
March 1, 1996, at a conversion price, subject to adjustment as provided in
Section 2.5 hereof, initially equal to $1.50.
2.2 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
covenants that, at the time of the automatic conversion of this Debenture as
provided in Section 2.1(a) hereof, the Company will have authorized and reserved
for the purpose of issuance upon such automatic conversion, a sufficient number
of shares of the securities to be issued in connection with such automatic
conversion. The Company further covenants that the Company has authorized and
reserved for issuance a sufficient number of shares of securities to be issued
in connection with the potential issuance of Common Stock of the Company
pursuant to Section 2.1(b) hereof.
2.3 FRACTIONAL SHARES. No fractional shares of any security shall be
issued upon conversion of this Debenture or in payment of interest. In lieu of
any fractional shares to which the Holder would otherwise be entitled, the
Company shall round up and issue an additional share of such security.
2.4 PAYMENT OF TAXES. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of any
security on conversion of the Debenture pursuant to the terms hereof. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of such security in a
name other than that in which the Debenture so converted was registered, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid the amount of any such tax.
2.5 ADJUSTMENT OF CONVERSION PRICE. (a) In the event the Company
shall at any time after the date of issuance of this Debenture and prior to the
closing date of the Qualified Offering, (i) declare a dividend on the
outstanding Common Stock of the Company payable in shares of its capital stock,
(ii) subdivide the outstanding Common Stock of the Company, (iii) combine the
outstanding Common Stock of the Company into a smaller number of shares, or (iv)
issue any shares of its capital stock by reclassification of the Common Stock of
the Company (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the conversion price set forth in section 2.1 hereof, and
the number of shares of the security issuable upon conversion of these
Debentures, pursuant to Section 2.1 hereof, in effect at the time of the record
date for such dividend or of the effective date of such subdivision, combination
or reclassification, shall be proportionately adjusted so that the Holder of the
Debentures after such time shall be entitled to receive the aggregate number and
kind of shares which the Holder of the Debentures would have held, if
- 3 -
<PAGE>
this Debenture had been converted immediately prior to such time and the
shares the Holder of the Debentures would have received upon such exercise had
such shares been subject to such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Whenever there shall be an adjustment as provided in this
Section 2.5, the Company shall promptly cause written notice thereof to be sent
to the Holder of the Debentures which notice shall be accompanied by an
officer's certificate setting forth the number of the shares of the security
issuable upon conversion of this Debenture and the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment and the computation thereof, which officer's certificate shall be
conclusive evidence of the correctness of any such adjustment absent manifest
error.
3. REGISTRATION, EXCHANGE AND TRANSFER. The Company will keep a register
in which, subject to such reasonable regulations as it may prescribe, it will
register all Debentures. No transfer of this Debenture shall be valid against
the Company unless made upon such register. This Debenture is subject to the
restrictions on transfer set forth on the face hereof. Upon surrender for
transfer of this Debenture and compliance with said restrictions on transfer,
the Company shall execute and deliver in the name of the transferee or
transferees a new Debenture or Debentures for a like principal amount.
This Debenture may be exchanged for a like aggregate principal amount
in other denominations. To be exchanged, this Debenture shall be surrendered
for that purpose at the principal office of the Company, and the Company shall
execute and deliver in exchange therefor the Debenture or Debentures which the
holder making the exchange shall be entitled to receive, bearing serial numbers
not contemporaneously outstanding.
This Debenture, if presented for transfer, exchange, conversion or
payment shall (if so permitted by the Company), be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the registered Holder or by his duly authorized attorney.
Any exchange or transfer shall be without charge, except that the
Company may require payment of the sum sufficient to cover any tax or
governmental charge that may be imposed in relation thereto.
The Company may deem and treat the registered Holder hereof as the
absolute owner hereof (whether or not this Debenture shall be overdue and
notwithstanding any notation of ownership or other writing hereon by anyone
other than the
- 4 -
<PAGE>
Company), for the purpose of receiving payment of or on account of the principal
and interest hereof, for the conversion hereof and for all other purposes, and
the Company shall not be affected by any notice to the contrary.
4. REGISTRATION
4.1 DEFINITIONS. As used herein:
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act") and the
declaration or ordering of the effectiveness of such registration statement.
For purposes hereof, the term "Registrable Securities" means any
Common Stock issuable upon conversion of the Debentures as provided in Section 2
hereof.
The terms "Holder" or "Holders" mean any person or persons to whom
Registrable Securities were originally issued or any qualified transferee under
Section 7 hereof who holds Registrable Securities.
4.2 FILING OF REGISTRATION STATEMENT. Within thirty (30) days of the
closing of the Qualified Offering, but in any event no later than April 15,
1996, the Company will file a Registration Statement with the Securities and
Exchange Commission registering the Registrable Securities along with any
securities issued in such Qualified Offering, and the Company will use its best
efforts to obtain a declaration of effectiveness of such Registration Statement
in compliance with all applicable federal and state laws. The Company further
agrees to take all actions incidental thereof (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with exemptive regulations issued under the Act and any
other governmental requirements or regulations) as may be necessary to permit or
facilitate the sale and distribution of the Registrable Securities by the
Holders, in the jurisdictions and in the manner that such Holders may reasonably
request, provided, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such state or jurisdiction in which
the Company is not qualified to do business.
4.3 EXPENSES OF REGISTRATION. All expenses incurred in connection
with any registration pursuant to this Section 4,
- 5 -
<PAGE>
including without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for the Company and
expenses of any comfort letters or special audits of the Company's financial
statements incidental to or required by such registration (excluding discounts
and commissions and fees of Holders' counsel) shall be borne by the Company.
4.4 REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to Section 4, the Company will, at its expense:
(i) keep such registration statement effective and file any
necessary post-effective amendments and use its best efforts to maintain
the effectiveness thereof for a period of thirty-six (36) months from the
date of initial filing.
(ii) furnish such number of preliminary and final
prospectuses and other documents incident thereto as a Holder from time to
time may reasonably request.
(iii) take any other action which may be necessary or
desirable to enable the Holders to consummate the public sale or
disposition of the Registrable Securities in jurisdictions and at such
times (within the 36 month period referred to in Section 4.4(i)) as the
Holders may reasonably request, provided, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any state or
jurisdiction in which the Company is not qualified to do business.
4.5 QUALIFIED OFFERING. In connection with the registration rights
granted to the holder of this Debenture by this Section 4, the Company
acknowledges that it anticipates the consummation of a Qualified Offering around
January 31, 1996 and that it will use its best efforts to consummate such
Qualified Offering by such date.
5. EVENTS OF DEFAULT.
5.1 DEFINITIONS AND EFFECT. In case of one or more of the following
"Events of Default" shall have occurred and be continuing:
(i) default in the payment of principal of or interest upon
this or any other of the Debentures as and when the same shall become due
and payable, and continuance of such default for a period of ten (10) days;
- 6 -
<PAGE>
(ii) default by the Company in the payment of principal or
interest on any Indebtedness (as defined in Section 6.1(b) hereof) for a
period of thirty (30) days after the same shall have become due and
payable, unless such default is duly waived by the holders of such
Indebtedness (as defined in Section 6.1(b) hereof) or is contested in good
faith by the Company by appropriate proceedings;
(iii) failure on the part of the Company to duly observe or
perform any other of the material covenants or agreements on the part of
the Company in this Debenture for a period of thirty (30) days after the
occurrence of such failure;
(iv) the Company shall have admitted in writing its
inability to pay its debts as they mature, or shall have made an assignment
for the benefit of creditors, or shall have been adjudicated bankrupt;
(v) a trustee or receiver of the Company, or for any
substantial part of the assets of the Company, shall have been appointed
and, if appointed in a proceeding brought against the Company, the Company
by any action or failure to act shall have indicated its approval of,
consent of or acquiescence in such appointment, or, within sixty (60) days
after such appointment, such appointment shall not have been vacated, or
stayed on appeal or otherwise, or shall not otherwise have ceased to
continue in effect; or
(vi) proceedings involving the Company shall have been
commenced by or against the Company under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
law or statute of the federal government, or any state government, and, if
such proceedings shall have been instituted against the Company, or the
Company by any action or failure to act shall have indicated its approval
of, consent to, or acquiescence therein, or an order shall have been
entered approving the petition in such proceedings, and within sixty (60)
days after the entry thereof, such order shall not have been vacated or
stayed on appeal or otherwise, or shall not otherwise have ceased to
continue in effect; or
(vii) the termination of employment, whether voluntary or
involuntary, of Dr. Jay Kranzler and Dr. Debby Jo Blank; or
(viii) the issuance of new securities by the Company in a
financing not deemed to be a Qualified Offering;
- 7 -
<PAGE>
then and in each and every such case, the holders of not less than $500,000 in
aggregate principal amount of outstanding Debentures may declare the principal
and accrued but unpaid interest of all the Debentures to be due and payable
immediately, by written notice to the Company, and upon any such declaration the
same shall become and shall be immediately due and payable.
5.2 WAIVER. At any time before the date of any declaration
accelerating the maturity of this Debenture, the holders of at least fifty-one
percent (51%) in aggregate principal amount of outstanding Debentures may waive
any past Event of Default and its consequences pertaining to the payment of the
principal of, or interest on, any of the Debentures and may waive any other
Event of Default hereunder. Such waivers shall be evidenced by written notice
or other documents specifying the Event or Events of Default being waived and
shall be binding on all existing or subsequent holders of outstanding
Debentures.
6. COVENANTS.
6.1 NEGATIVE COVENANTS.
(a) The Company shall not, and shall not permit any of its
subsidiaries to, create or incur or suffer to be created or incurred any
Indebtedness (as defined in Section 6.1(b) hereof) other than:
(i) Indebtedness to any holder of the Debentures arising
hereunder;
(ii) Indebtedness (as defined in Section 6.1(b) hereof) in
respect of taxes, assessments, governmental charges or levies and claims
for labor, materials and supplies to the extent that payment therefor shall
not at the time be required to be made and Indebtedness (as defined in
Section 6.1(b) hereof) of the Company secured by liens of carriers,
warehousemen, mechanics and materialmen;
(iii) Indebtedness in respect of judgments or awards which
have been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which the
Company shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review and in respect of which
the Company has maintained adequate reserves;
PROVIDED, HOWEVER, in each case of (i), (ii), or (iii) above, before and after
giving effect thereto (i) the Company is
- 8 -
<PAGE>
otherwise in compliance with any covenants set forth herein and (ii) there does
not exist an Event of Default.
(b)(i) As used in this Debenture, Indebtedness shall mean all
obligations of the Company or its subsidiaries which would, in accordance
with generally accepted accounting principles consistently applied, be
classified upon its balance sheet as liabilities, including (i) all debt of
the Company or its subsidiaries for borrowed money (and any notes payable
and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money), (ii) any obligation of the
Company or its subsidiaries for all or any part of the purchase price of
property or other assets or for the cost of property or other assets
constructed or of improvements, (iii) any obligation secured by any lien
on or payable out of the proceeds of production from property owned or held
by the Company or its subsidiaries whether or not the Company or its
subsidiaries has assumed or become liable for the payment of such
obligation, (iv) any obligation required to be treated as a Capital Lease
in accordance with generally accepted accounting principles consistently
applied, and (v) any guaranty by the Company or its subsidiaries; but
excluding accounts payable included in current liabilities and incurred in
respect of property purchased in the ordinary course of business and
further excluding current liabilities existing from time to time, other
than for borrowed money, incurred in the ordinary course of business.
(ii) For purposes of this Debenture, Capital Lease shall
mean any lease of any property (whether real, personal or mixed) by the
Company or any subsidiary, as lessee which would, in accordance with
generally accepted accounting principles consistently applied, be required
to be classified and accounted for as a capital lease on the balance sheet
of the Company or any subsidiaries, other than any such lease under which
the Company or a wholly-owned subsidiary is the lessor.
7. RESTRICTIONS ON TRANSFER.
7.1 RESTRICTED SECURITIES. By acceptance hereof, the Holder
understands and agrees that this Debenture and the securities receivable upon
conversion hereof are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, the Holder
represents that it is familiar with Rule 144 promulgated by the Securities and
- 9 -
<PAGE>
Exchange Commission, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
7.2 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, the Holder further agrees not to make any
disposition of all or any portion of this Debenture (or of the securities
issuable upon conversion hereof) except in compliance with applicable state
securities laws and unless and until:
(a) there is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement;
(b) such disposition is made in accordance with Rule 144 under
the Act; or
(c) the Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and, if requested by the
Company, the Holder shall have furnished the Company with an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to the Company, that
such disposition will not require registration under the Act and will be in
compliance with applicable state securities laws.
7.3 LEGENDS. It is understood that this Debenture and each
certificate evidencing the security acquired upon conversion hereof or
evidencing any security issued with respect hereof shall bear the following
legend (in addition to any legends which may be required in the opinion of the
Company's counsel by the securities laws of the state where the Holder is
located):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO TRANSFER OF SUCH
SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE
ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY
IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND SUCH TRANSFER
WILL BE IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
8. NOTICES.
8.1 NOTICES TO HOLDER OF DEBENTURES. Any notice required by the
provisions of this Debenture to be given to the holders of Debentures shall be
in writing and may be delivered by
- 10 -
<PAGE>
personal service or sent by telegraph, cable or fax or sent by registered or
certified mail, return receipt requested, with postage thereon fully prepaid.
All such communications shall be addressed to the Holder of record at its
address appearing on the books of the Company. If sent by telegraph, cable or
fax, a confirmed copy of such telegraphic or cabled notice shall promptly be
sent by mail (in the manner provided above) to the Holder. Service of any such
communications made only by mail shall be deemed complete on the date of actual
delivery as shown by the addressee's registry or certification receipt or the
expiration of the third (3rd) business day after the date of mailing, whichever
is earlier in time.
8.2 NOTICES TO THE COMPANY. Whenever any provision of this Debenture
requires a notice to be given to the Company by the holder of any Debenture, the
holder of any security obtained upon the conversion of this Debenture or the
holder of any security of the Company obtained in connection herewith, then and
in each such case, such notice shall be in writing and may be delivered by
personal service or sent by telegraph, cable or fax or sent by registered or
certified mail, return receipt requested with postage thereon fully prepaid.
All such communications shall be addressed to the Company at its principal place
of business. If sent by telegraph, cable or fax, a confirmed copy of such
telegraphic or cabled notice shall promptly be sent by mail (in the manner
provided above) to the Company. Service of any such communications made only by
mail shall be deemed complete on the date of actual delivery as shown by the
addressee's registry or certification receipt or the expiration of the third
(3rd) business day after the date of mailing, whichever is earlier in time. No
notice under this Section 8.2 shall be valid unless signed by the holder of this
Debenture, the holder of any security obtained upon conversion of this Debenture
or the holders or any security of the Company obtained in connection herewith.
9. NO RIGHTS AS SHAREHOLDER. This Debenture, as such, shall not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
except upon conversion hereof.
10. HEADINGS AND GOVERNING LAW. The descriptive headings in this
Debenture are inserted for convenience only and do not constitute a part of this
Debenture. This Debenture shall be construed under and governed by the laws of
the State of New York applicable to contracts made and to be fully performed
therein.
11. AMENDMENT. With the consent of the holders of thirty percent (30%) of
the aggregate principal amount of outstanding Debentures, the Company may amend
the Debentures to cure any ambiguity, to correct or supplement any provision
therein which may be inconsistent with any other provision therein, or to make
any other provisions with respect to matters or questions arising under the
Debentures which shall not be inconsistent with the
-11-
<PAGE>
provisions of the Debentures; provided such action shall not adversely affect
the interests of the holders of the Debentures.
With the consent of the holders of not less than fifty-one percent
(51%) in aggregate principal amount of outstanding Debentures, the Company may
amend the Debentures for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, the Debentures; provided,
however, that no such amendment shall, without the consent of the holder of each
outstanding Debenture affected thereby:
(a) change; (i) the maturity of the principal of, or any
accretion or accrual of interest on, any Debenture; or (ii) the coin or currency
in which the principal of or interest on any Debenture is payable;
(b) reduce the principal amount hereof or the interest rate
hereon;
(c) increase the Conversion Price hereof; or
(d) reduce the percentage in principal amount of the outstanding
Debentures the consent of whose holders is required for any amendment or waiver
as provided for in the Debentures.
Prompt written notice that this Debenture has been amended or
interpreted in accordance with the terms of this Section shall be given to each
holder of a Debenture. Upon such amendment or interpretation, the Debentures
shall be deemed modified in accordance herewith, such amendment or
interpretation shall form a part of this Debenture for all purposes, and every
subsequent holder of Debentures shall be bound thereby.
IN WITNESS WHEREOF, the Company has duly caused this Debenture to be
signed in its name and on its behalf and its corporate seal to be affixed hereon
by its duly authorized officer as of the date below.
Date of Issue: December 29, 1995
IMRE CORPORATION
401 Queen Anne Avenue North
Seattle, Washington 98109
By: /s/ Alex P. de Soto
------------------------------------------
Chief Financial Officer
-12-
<PAGE>
EXHIBIT 4.11
PURCHASE AGREEMENT
PURCHASE AGREEMENT made as of December 29, 1995 by and between IMRE
CORPORATION, a Delaware corporation (hereinafter referred to as "Seller") and
the purchasers listed on Schedule A hereto (each of which is hereinafter
referred to as "Buyer"). The use of the term Buyer herein shall in all cases
refer to a Buyer severally and not jointly.
WHEREAS, Seller desires to sell and Buyer desires to purchase the
Securities of Seller (as hereinafter defined) subject to the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and conditions hereinafter set forth, the parties hereto
hereby agree as follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES.
1.1 PURCHASE AND SALE OF SECURITIES. In reliance upon the
representations and warranties made herein and subject to the terms and
conditions hereof, each Buyer intending to be legally bound hereby agrees,
severally, to purchase from Seller and Seller agrees to issue and sell to Buyer
at the Closing (as herein defined) that aggregate principal amount of Seller's
Senior Bridge Debentures due July 1, 1996 (the "Debentures") as set forth
opposite each Buyer's name on Schedule A hereto.
The Debentures to be sold and purchased at the Closing under this
Agreement are hereinafter sometimes referred to as the "Securities".
1.2 PURCHASE PRICE AND PAYMENT FOR THE SECURITIES. In consideration
of the sale of the Securities, Buyer agrees that at the Closing, assuming the
conditions specified in Section 6.1 are satisfied or waived, it will pay to
Seller by check or by wire transfer the sum set forth as purchase price next to
Buyer's name on Schedule A hereto.
1.3 TIME AND PLACE CLOSING. The purchase and sale of the Securities
shall take place at such place as may be fixed by Seller (each such closing
herein called "Closing"). The initial Closing of the Securities shall be held
at 11:00 a.m. on December 29, 1995 at such place as may be fixed by mutual
agreement of Buyer and Seller. The Company may sell additional Securities at a
price per Security not less than that of the Securities purchased in the initial
Closing to such other buyer(s) as the Company's Board of Directors shall select.
Any buyer in a subsequent closing shall execute a counterpart signature page to
this Agreement and any additional sales of Securities shall be deemed to be made
hereunder.
<PAGE>
1.4 TRANSFER OF THE SECURITIES. At the Closing, Seller shall deliver
or cause to be delivered to Buyer the Securities free and clear of all
restrictions upon transfer (other than restrictions under federal or state
securities laws) liens, pledges, charges, and encumbrances of any kind.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER.
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. Seller hereby makes
the following representations and warranties contained in this Section 2.
2.2 ORGANIZATION AND QUALIFICATION OF SELLER. Each of Seller and the
subsidiaries of the Seller is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation with
full power and authority to own or lease its properties and to conduct the
business heretofore conducted by it in the manner and in the places where such
properties are owned or leased or such business is conducted by it. The copies
of Seller's corporate charter and of Seller's By-laws as amended to date made
available to Buyer are complete and correct. Seller is duly registered or
qualified to do business as a foreign corporation in the State of Washington and
neither the character or location of the properties owned or leased by Seller
nor the nature of the business transacted by Seller makes registration or
qualification in any other jurisdiction necessary, except where failure to so
qualify would not have a material adverse effect on Seller.
2.3 AUTHORITY OF SELLER; NO CONFLICTS.
(a) Seller has full power and authority to enter into and
perform this Agreement, issue and sell the Securities, and consummate the
transactions contemplated hereby. When issued in accordance with this
Agreement, the Securities will be validly issued, fully paid and nonassessable.
All necessary action, corporate or otherwise, has been taken by Seller to
authorize the execution, delivery, and performance of this Agreement, and the
Agreement is the valid and binding obligation of Seller enforceable in
accordance with its terms.
(b) The execution and delivery of this Agreement by Seller does
not, and the issuance of the Securities and the performance of the terms hereof
by Seller will not, constitute a default or event of default under, or violate,
conflict with, or result in any breach of the terms, conditions, or provisions
of: (i) the corporate charter or By-laws of Seller; (ii) the laws or
regulations of any jurisdiction or any other governmental requirements; or (iii)
any material mortgage, lien, lease, agreement, contract, instrument, order,
arbitration award, injunction, judgment or decision to which Seller is a party
or by which it or its property is bound or materially affected. Except
- 2 -
<PAGE>
for filings with the Securities and Exchange Commission (the "Commission") and
applicable state securities administrators, no approval, authorization, license,
permit or other action by, or filing with, any federal, state, or municipal
commission, board, agency or other governmental authority is required in
connection with the execution and delivery by Seller of this Agreement, the
issuance of the Securities, or the consummation of the transaction contemplated
hereby.
(c) Unless otherwise indicated in the Disclosure Documents (as
defined in Section 2.5 hereof), Seller holds all right, title and interest in
and to the entire equity interest in each subsidiary free and clear of any
liens, claims and encumbrances.
2.4 CAPITAL STOCK OF SELLER.
(a) The authorized capital stock of Seller is as set forth in
the Seller's Information Statement dated November 13, 1995.
(b) Except as described in the Disclosure Documents (as defined
in Section 2.5 hereof) and except as provided in Exhibit 2.4(b) hereof, Seller
does not have outstanding any securities convertible or exchangeable into shares
of its capital stock and Seller is not party to or bound by any outstanding
subscriptions, warrants, calls, options, rights, commitments, or agreements of
any kind calling for the issuance of shares of any class of its capital stock or
for the issuance of any securities convertible or exchangeable, actually or
contingently, into shares of any class of its capital stock. Except as set
forth in the Disclosure Documents, the issuance and sale of the Securities will
not result in the issuance of, or give rise to any obligation of Seller to issue
any additional shares of capital stock pursuant to any such subscriptions,
warrants, calls, options, rights, commitments or agreements.
(c) Except as otherwise stated in the Disclosure Documents (as
defined in Section 2.5 hereof) and except as provided in Exhibit 2.4(c) hereof:
(i) there are no preemptive or similar rights to purchase or otherwise acquire
shares of any class of the capital stock or other securities of Seller pursuant
to any provision of law, Seller's corporate charter or by-laws, or any agreement
to which Seller is a party or by which it is bound; (ii) there are no
agreements, restrictions or encumbrances binding upon Seller with respect to the
sale or voting of any shares of any class of capital stock of Seller (whether
outstanding or issuable upon conversion or exercise of outstanding securities),
other than restrictions on transfer imposed by state and federal securities
laws; and (iii) Seller is not party to or bound by any agreement or arrangement
requiring
- 3 -
<PAGE>
it to repurchase, redeem, or retire any shares of any class of its capital
stock.
(d) All shares of any class of capital stock and all other
securities heretofore issued by Seller have been issued either: (i) pursuant to
an effective registration under the Securities Act of 1933, as amended (the
"1933 Act"), and qualification under applicable state securities laws; or (ii)
in transactions exempt from such registration and qualification. Seller has not
violated the 1933 Act in connection with the issuance of any shares of any class
of capital stock or other securities prior hereto.
(e) Except for the registration rights granted hereunder and
granted to the purchasers of the Company's 7% Convertible Debentures due
March 31, 2001, and except as otherwise stated in the Disclosure Documents (as
defined in Section 2.5 hereof), no person has any right to cause Seller to
effect the registration under the 1933 Act of any shares of Common Stock or any
other securities (including debt securities) of Seller.
(f) All of Seller's stock option plans, and the number of shares
of Common Stock or other securities authorized and reserved for issuance
thereunder, are described in the Disclosure Documents.
2.5 DISCLOSURE DOCUMENTS.
(a) Seller previously furnished to Buyer copies of the Annual
report on Form 10-K (excluding exhibits) for the year ended December 31, 1994,
copies of its Proxy Statement dated May 17, 1995 and copies of its Quarterly
Report on Form 10-Q for the quarterly periods ended March 31, June 30, and
September 30, 1994, and copies of the Company's Information Statement dated
November 13, 1995 and its current report on Form 8-K dated March 28, 1995 and
its Current Report on Form 8-K dated as of November 22, 1995 filed with the
Commission and any other reports filed by Seller with the Commission under the
Securities and Exchange Act of 1934 ("1934 Act") subsequent to September 30,
1995 and prior to the date hereof (collectively the "SEC Reports"). Seller
previously furnished to Buyer copies of the exhibits to Seller's Annual Report
on Form 10-K for the year ended December 31, 1994 and the other agreements and
documents listed on Schedule B attached hereto and made a part hereof (the SEC
Reports and the material listed on Schedule B are sometimes hereinafter
collectively referred to as the "Disclosure Documents"). None of the
information contained in the Disclosure Documents contains any untrue statements
of a material fact or omits to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not
- 4 -
<PAGE>
misleading, which misstatement or omission was not corrected in a subsequent
Disclosure Document.
(b) Each of the balance sheets included in the SEC Reports
(including any related notes and schedules) fairly presents the consolidated
financial position of Seller as of its date, and the other financial statements
included in the SEC Reports (including related notes and schedules), fairly
present the consolidated results of operation or other information included
therein of Seller for the periods or as of the dates therein set forth in
accordance with generally accepted accounting principles consistently applied
during the periods involved (except that the interim reports are subject to
normal recurring adjustments which might be required as a result of year-end
audit, and except as otherwise stated therein). The balance sheet of Seller at
December 31, 1994 included in Seller's Annual Report on Form 10-K for the period
then ended is hereinafter sometimes referred to as the "Balance Sheet."
2.6 TITLE TO PROPERTIES; LIENS; CONDITIONS OF PROPERTIES.
(a) The Seller has good and marketable title to all of its
material assets and properties, and all of its leases of real or personal
property are valid and subsisting, and no default exists under any provision
thereof, the existence of which gives rise to a right of termination by the
lessor; and none of Seller's material assets and property is subject to any
title restriction and except as disclosed in the Disclosure Documents, none of
Seller's material assets and property is subject to any mortgage, pledge, lien,
conditional sale agreement, security interest, encumbrance or other charge.
(b) All machinery and equipment used in Seller's business are in
working order and have been properly maintained, and to the best of Seller's
knowledge, its use of the premises occupied by it is in compliance in all
material respects with all ordinances, rules, regulations, zoning, business and
fire codes, and all other laws and requirements of governmental authorities.
(c) To the best of Seller's knowledge, Seller's use of the
properties occupied by Seller is not in material violation of any law, and no
notice from any governmental body has been served upon Seller or upon any
property occupied by Seller claiming any violation of any such law, ordinance,
code or regulation or requiring, or calling attention to the need for, any work,
repairs, construction, alterations, or installation on or in connection with
said properties which has not been complied with. To the best of Seller's
knowledge, it has the right to use such properties occupied by it for the
operations presently therein conducted.
- 5 -
<PAGE>
(d) Seller has not to its knowledge, illegally released or
disposed of any hazardous or toxic waste, substance, or materials on any
property occupied by it, and Seller does not know of any such release or
disposal by any other party of any such property.
2.7 PAYMENT OF TAXES. Seller has filed, or obtained extension of the
time to file all federal, state and to the best of Seller's knowledge, all local
income, withholding, exercise or franchise tax returns, real estate and personal
property tax returns, sales and use tax returns and other tax returns required
to be filed by it, has accrued or paid all taxes owing by it, except taxes which
have not yet accrued or otherwise become due.
2.8 ABSENCE OF UNDISCLOSED LIABILITIES. As of the date hereof,
Seller has no material liabilities of any nature, whether accrued, absolute,
contingent or otherwise (including without limitation liabilities as guarantor
or otherwise with respect to obligations of others, or liabilities for taxes due
or then accrued or to become due) except liabilities fully reflected or reserved
against in the Balance Sheet or disclosed in the Disclosure Documents. To the
best of Seller's knowledge, there is no threatened material claim, debt,
liability or obligation (including unpaid federal, state, or local taxes) of any
nature or in any amount not fully reserved against in the Balance Sheet or not
fully reflected in the Disclosure Documents.
Except as disclosed in the Disclosure Documents, Seller has no notes
or accounts payable to any person, firm, or corporation which is affiliated with
Seller or to any director, officer, or principal stockholder of Seller.
2.9 CHANGES. Except as set forth in the Disclosure Documents, since
December 31, 1994:
(a) except for continuing operating losses through the date
hereof, there has been no material adverse change in the business, property,
financial condition or results of operations of Seller;
(b) there has not been any direct or indirect redemption,
purchase or other acquisition of any shares of Seller's capital stock by Seller,
or any declaration, setting aside or payment of any dividend or other
distribution by Seller in respect of its capital stock;
(c) except for the transaction contemplated hereby, Seller has
not incurred any material obligation or liability other than in the ordinary
course of its business, has not incurred any contingent liability (as guarantor
or otherwise) with respect to the obligations of others, has not transferred or
otherwise disposed of any material assets other than in the
- 6 -
<PAGE>
ordinary course of business, and has in all other respects conducted its
business in the ordinary course;
(d) there has been no damage, destruction or casualty loss
(whether or not covered by insurance) materially and adversely affecting the
business, property, financial condition or results of operations of Seller; and
(e) Seller has not incurred any obligation or liability to any
stockholder, director, or officer of Seller other than in the ordinary course of
Seller's business and Seller has not made any loans or advances to any of its
stockholders, directors, or officers, except for normal advances or reimbursable
expenses.
2.10 PATENTS, TRADE NAMES, TRADEMARKS AND COPYRIGHTS. All patents,
patent applications, trade names, service marks, registered trademarks,
trademark applications, and copyrights of Seller referred to in the Disclosure
Documents have been duly registered in, filed in or issued by the United States
Patent Office, the United States Register of Copyrights or the corresponding
offices of the other countries indicated, and have been properly maintained and
renewed in accordance with all applicable provisions of law and administrative
regulations in the United States and each such country and are either owned by
Seller or licensed to Seller under license agreements. Seller represents and
warrants that, except as set forth in the Disclosure Documents:
(a) to the best of Seller's knowledge, no other person has an
interest in or right or license to use, or the right to license others to use
said patents, patent applications, trade names, service marks, registered
trademarks, trademark applications, or copyrights;
(b) there are no material claims or demands of any other person
pertaining thereto, and no proceedings have been instituted, or any pending or,
to the best of its knowledge, threatened, which challenge the rights of Seller
in respect thereof;
(c) to the best of Seller's knowledge, none of its patents,
trade names, service marks, trademarks or copyrights is being infringed by
others, or is subject to any outstanding order, decree, judgment or stipulation;
(d) no proceeding charging Seller with infringement of any
adversely held patent, trade name, service mark, or copyright has been filed or
to the best of Seller's knowledge, is threatened to be filed; and
- 7 -
<PAGE>
(e) Seller does not, and is not required to, pay any license fee
or royalty to any person for the use of any such patent, trade name, service
mark, trademark or copyright.
2.11 TRADE SECRETS AND CUSTOMER LISTS. Except as otherwise stated in
the Disclosure Documents, Seller owns or has the exclusive right to use, all
trade secrets, proprietary information, customer lists, formulas, engineering
drawings, research, engineering, marketing and other data, and engineering,
manufacturing, and production methods, processes, technology, and know-how
(collectively, the "Proprietary Information") required for or incidental to the
business of Seller. Seller has taken all steps necessary or desirable to keep
any confidential information or trade secrets confidential. Seller is not using
or in any way making use of any confidential information or trade secrets of any
third party, including, without limitation, a former employer or any present or
past employee of Seller. Seller represents and warrants that, except as set
forth in the Disclosure Documents:
(a) to the best of Seller's knowledge, no other person has an
interest in or right or license to use, or the right to license others to use,
any of the Proprietary Information.
(b) there are no material claims or demands of any other person
pertaining thereto, threatened, which challenge the rights of Seller in respect
thereto;
(c) to the best of Seller's knowledge, none of the Proprietary
Information is being infringed by others, or is subject to any outstanding
order, decree, judgment or stipulation;
(d) no proceeding charging Seller with infringement of any
adversely held Proprietary Information has been filed, or to the best of
Seller's knowledge, is threatened to be filed; and
(e) Seller does not, and is not required to, pay any license fee
or royalty to any person for the use of any Proprietary Information.
2.12 CONTRACTS. Except as set forth in the Disclosure Documents,
Seller is not in material default under any contract, commitment, plan,
agreement, instrument, license or lease or under any purchase order or sales
order, which default would have a materially adverse effect on the business or
financial condition of Seller.
2.13 UNIONS. The employees of Seller are not now, and never have
been, in their capacity as employees of Sellers,
- 8 -
<PAGE>
represented by any labor union for collective bargaining or any other purpose.
To the best of Seller's knowledge, there is no union organizational activity
involving Seller or its employees.
2.14 EMPLOYEE BENEFIT PLAN. Except as set forth in the Disclosure
Documents, Seller does not have, and has never had, any pension or profit
sharing, savings, thrift or other retirement plans (including multi-employer
plans).
2.15 LITIGATION. Except as described in the Disclosure Documents,
there is no suit, action, or legal, administrative or other proceeding or
governmental investigation pending, or, to the best of Seller's knowledge,
threatened, anticipated or contemplated against Seller or any of its properties,
which, in any single case or in the aggregate, challenges or questions in any
respect, the validity of, or would prevent or hinder the consummation of, the
transactions contemplated by this Agreement or which, if adversely determined,
would have a material adverse effect on the properties, assets, condition
(financial or otherwise) and business of Seller, and there are no unsatisfied or
outstanding judgments, orders, decrees or stipulations which would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
Seller does not know or have grounds to know of any basis for any action or of
any governmental investigation relating to or affecting the properties, assets,
condition (financial or otherwise) and business of Seller.
There are no claims or proceedings against Seller pending, or to the
best of Seller's knowledge, threatened, anticipated or contemplated which, if
valid, would constitute or result in a breach of any representation, warranty or
agreement set forth herein.
2.16 COMPLIANCE WITH LAWS. To the best of its knowledge, except as
otherwise stated in the Disclosure Documents, Seller is in compliance in all
material respects with all laws, ordinances, rules, regulations and other
governmental requirements which apply to the conduct of its business, including,
without limitation, all laws and regulations relating to (i) employment and
labor relations (including all provisions thereof relating to wages, hours,
equal opportunity, discrimination, collective bargaining, and the withholding
and payment of social security and all other taxes), (ii) the pollution of the
environment and the use or disposal of hazardous or toxic wastes, substances or
materials and (iii) government contracts.
Based upon the representations and warranties of Buyer contained in
Section 3 of this Agreement and in the Investor Questionnaire delivered by Buyer
to Seller contemporaneously herewith, the offer and sale of the Securities
pursuant to this
- 9 -
<PAGE>
Agreement are exempt from the registration requirements of the 1933 Act and do
not require registration of the Securities under any state securities or "blue
sky" laws.
2.17 INSURANCE. With respect to its properties and assets, Seller has
in full force and effect insurance against such risks in such amounts as is
customary for similar businesses, including, without limitation, products
liability insurance. Except as described in the Disclosure Documents, to the
best of Seller's knowledge, all sales of products and performance of services by
Seller at all times heretofore were in compliance of all material respects with
all of Seller's representations, warranties and agreements, express or implied,
and laws, rules, regulations, and requirements of governmental authorities.
2.18 WARRANTY OR OTHER CLAIM. Except as described in the Disclosure
Documents, there are no existing, or to the best of Seller's knowledge,
threatened, anticipated or contemplated claims against Seller, for products
which are defective or fail to meet any product warranties.
2.19 LICENSES AND PERMITS. Except as described in the Disclosure
Documents, Seller holds in good standing, or has applied for, all licenses,
permits, authorizations, franchises, consents and orders of all federal, state,
local, and foreign governmental bodies necessary to carry on its business as
reflected or contemplated in the Disclosure Documents and Seller has no reason
to believe that any such licenses, permits, authorizations, franchises, consents
or orders will be revoked, terminated or suspended.
2.20 BURDENSOME AGREEMENTS. Seller is not subject to or bound by any
consent decree, agreement, judgment, decree or order, and, except as otherwise
stated in the Disclosure Documents, does not know of or have grounds to know of
any basis for any action or governmental proceedings, which may materially and
adversely affect the properties, assets, business, prospects or condition,
financial or otherwise, of Seller, or result in the revocation or limitation of
any license, permit or franchise held by the Company.
2.21 TRANSACTIONS WITH INTERESTED PERSONS. Except as described in the
Disclosure Documents, no officer or director of Seller owns directly or
indirectly, on an individual or joint basis, any interest (other than a stock or
other equity interest of less than 5%) in, or serves as an officer or director
of, any customer, competitor or supplier of Seller or any organization which has
a contract or arrangement with Seller.
2.22 MISSTATEMENTS AND OMISSIONS. Seller has not made any material
misstatements of fact or omitted to state any
- 10 -
<PAGE>
material fact necessary or desirable to make complete, accurate and not
misleading every representation, warranty and agreement set forth herein.
2.23 CHANGES IN BUSINESS RELATIONSHIPS. Except as otherwise stated in
the Disclosure Documents, Seller does not know, or have reason to know, of any
changes or threatened changes in the customer or supplier relationships of
Seller, including, without limitation, any discontinuance of contractual
relationships.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
3.1 MAKING OF REPRESENTATIONS AND WARRANTIES. Buyer hereby makes the
representations and warranties contained in this Section 3.
3.2 Buyer (A) has been provided with a copy of the Disclosure
Documents and has carefully reviewed the same, (B) has been provided with such
additional information with respect to Seller as Buyer or Buyer's agent or
attorney has requested, and (C) has had the opportunity to discuss such
information with members of the management of Seller and any questions that
Buyer had with respect thereto have been answered to the full satisfaction of
Buyer. Notwithstanding the foregoing, Seller acknowledges that the
representations and warranties provided by Seller in Section 2 hereof have been
relied upon by Buyer in connection herewith.
3.3 Buyer has reviewed the merits and risks of an investment in the
Securities with tax and legal counsel and with an investment advisor to the
extent deemed advisable by Buyer.
3.4 Buyer recognizes that an investment in the Securities involves a
number of significant risks, including, without limitation, any set forth in the
Disclosure Documents; and Buyer, or Buyer's agent or other third party
representative of Buyer, if any, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment therein.
3.5 Buyer is not relying on Seller with respect to the economic, tax
and other considerations to be considered by Buyer relating to this investment.
With respect to such considerations, Buyer has relied on the advice of his own
qualified advisors to the extent Buyer has deemed appropriate.
3.6 ACCREDITED INVESTOR; CONFIDENTIAL INVESTOR QUESTIONNAIRE. Buyer
is an "accredited investor" within the definition set forth in Rule 501(a) under
the 1933 Act. All information included in the Confidential Investor
Questionnaire
- 11 -
<PAGE>
is complete and accurate. Buyer understands that Seller is relying on all such
information.
3.7 SECURITIES NOT REGISTERED. Buyer understands that (i) the
Securities have not been registered for sale under federal or state securities
laws and that the Securities are being offered and sold to Buyer pursuant to one
or more exemptions from the registration requirements of such securities laws;
(ii) in order to satisfy such requirements, Buyer must be acquiring the
Securities for its own account for investment and not with a view to
distribution thereof except in accordance with applicable securities laws and
that the representations and warranties contained in this Section 3 are given
with the intention that Seller may rely thereon for purposes of claiming such
exemption; and (iii) the Securities cannot be sold unless subsequently
registered under such laws or unless an exemption from such registration is
available.
3.8 SECURITIES ACQUIRED FOR INVESTMENT; LIMITATION ON DISPOSITION.
Buyer agrees that the Securities will not be sold or otherwise transferred
unless (i) a registration statement with respect thereto has become effective
under the 1933 Act; or (ii) there is presented to Seller an opinion of counsel
reasonably satisfactory to Seller that registration under federal and state
securities is not required; or (iii) pursuant to the provisions of Rule 144
promulgated under the 1933 Act (and, in the case of (i) and (iii), there is
presented to Seller an opinion of counsel reasonably satisfactory to Seller that
the sale or transfer will not subject Seller to any liability under applicable
state securities laws). Buyer consents that any transfer agent of Seller may be
instructed not to transfer any Securities, unless it receives satisfactory
evidence of compliance with the foregoing provisions, and that there may be
endorsed upon any certificate or other instrument representing the Securities
(and any certificates or instruments issued in substitution therefor), a legend
calling attention to the foregoing restrictions on transferability of such
Securities stating in substance:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNLESS: (1) IN THE OPINION OF COUNSEL, SATISFACTORY TO THE
ISSUER, REGISTRATION IS NOT REQUIRED, OR (2) THE SECURITIES ARE SOLD
IN COMPLIANCE WITH AND PURSUANT TO THE PROVISIONS OF SECURITIES AND
EXCHANGE COMMISSION RULE 144, IF APPLICABLE. ANY PERSON TO OR FROM
WHOM THE WITHIN SECURITIES ARE PLEDGED OR HYPOTHECATED SHALL BE
SUBJECT TO THESE RESTRICTIONS."
- 12 -
<PAGE>
3.9 ACCESS TO INFORMATION. Buyer acknowledges receipt from Seller of
the information referred to in Section 2.5 hereof and access to information if
requested.
SECTION 4. COVENANTS OF SELLER.
4.1 MAKING OF COVENANTS AND AGREEMENTS. Seller makes the covenants
and agreements set forth in this Section 4.
4.2 CONSUMMATION OF AGREEMENT. Seller shall perform and fulfill all
conditions and obligations on its part to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement shall
be carried out. To this end, Seller will obtain all necessary authorizations or
approvals of its Board of Directors to the execution and performance of this
Agreement, which shall include as integral parts thereof the issuance to Buyer
of the Securities upon the terms and conditions set forth in this Agreement.
4.3 CURRENT PUBLIC INFORMATION. Seller will file all reports
required to be filed by it under the 1933 Act or the Securities and Exchange Act
of 1934 (the "1934 Act") and the rules and regulations adopted by the Commission
thereunder, and will take such further action as any Buyer may reasonably
request all to the extent required to enable each such Buyer to sell the
Securities pursuant to (i) Rule 144 adopted by the Commission under the 1933
Act, as such rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the Commission.
4.4 COMPLIANCE WITH REGULATION D. Seller agrees to file five copies
of a Form D with the Securities and Exchange Commission within fifteen days of
the date of the Closing and to file, on a timely basis, any amendments or
supplements to such Form D as may be required under Regulation D promulgated
under the 1933 Act. Seller also agrees to comply with the filing requirements
of state securities laws applicable to the sale of the Securities hereunder.
SECTION 5. COVENANTS OF BUYER.
5.1 MAKING OF COVENANTS AND AGREEMENTS. Buyer makes the covenants
and agreements set forth in this Section.
5.2 CONSUMMATION OF AGREEMENT. Buyer shall perform and fulfill all
conditions and obligations on its part to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement shall
be carried out.
5.3 CURRENT PUBLIC INFORMATION. Buyer shall file all reports
required to be filed by it under the 1934 Act and the rules and regulations
adopted by the Commissioner thereunder,
- 13 -
<PAGE>
including without limitation, as applicable, Schedules 13G, 13D, Form 3, Form 4,
and Form 5.
5.4 FURNISHING OF INFORMATION. Buyer shall furnish to Seller all
information, questionnaires and statements reasonably requested by Seller in
connection with Seller's preparation of reports, Disclosure Documents, proxy
materials and other filings under the 1933 Act and the 1934 Act. Buyer shall
further furnish to Seller any other written information and statements
reasonably requested by Seller.
SECTION 6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
6.1 CONDITIONS. The obligations of Buyer to consummate this
Agreement and the transactions contemplated hereby are subject to the
satisfaction of the following conditions on or prior to the Closing Date except
to the extent that any such condition can be and is waived by Buyer:
(a) BOARD OF DIRECTOR AUTHORIZATION. This Agreement and the
transactions contemplated hereby shall have been duly approved by a majority
vote of Seller's Board of Directors.
(b) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of Seller contained in Section 2 hereof shall be
true and correct in all material respects as though made at the time of and as
of the Closing; Seller shall, at or before the Closing, have performed all of
its obligations hereunder which by the terms hereof are to be performed on or
before the Closing, and Seller shall have delivered to Buyer a Certificate of
its Chief Executive Officer, President or Vice President dated as of the Closing
Date to the foregoing effect.
(c) EXPENSES OF COUNSEL. At the Closing, the Seller shall pay,
for services rendered, the reasonable fees and expenses of Werbel McMillin &
Carnelutti, P.C., which has from time to time serves as special counsel to the
Company, acting in connection herewith as counsel to Allen & Company
Incorporated, a buyer of the Securities.
(d) NEW MANAGEMENT. Each of Dr. Jay Kranzler and Dr. Debby Jo
Blank shall be appointed Chief Executive Officer and President of the Seller
respectively.
SECTION 7. TERMINATION OF AGREEMENT.
7.1 TERMINATION. At any time prior to the Closing this Agreement may
be terminated (i) by mutual consent of the parties; (ii) by either party, upon
written notice to the other, if there has been a material misrepresentation,
breach of
- 14 -
<PAGE>
warranty or breach of covenant by the other party in its representations,
warranties and covenants set forth herein; or (iii) by Buyer, if the
conditions stated in Section 6.1 have not been satisfied or waived at or
prior to the Closing.
7.2 EFFECT OF TERMINATION. If this Agreement is terminated as above
provided, all obligations of the parties to be performed on or subsequent to the
effective date of termination as above provided hereof which shall survive
termination) shall terminate without further liability of either party to the
other. In the event that this Agreement is terminated, each party will return
all papers, documents, financial statements and other data furnished to it by or
with respect to each other party to such party (including any copies thereof
made by the first party).
SECTION 8. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
8.1 SURVIVAL OF WARRANTIES. All representations, warranties,
agreements, covenants and obligations herein or in any schedule, exhibit,
certificate or financial statement delivered by Seller to Buyer incident to the
transactions contemplated hereby shall be deemed to have been relied upon by the
other party hereto, and with respect to representations and warranties, shall
survive for a period of one (1) year following the Closing. All agreements,
covenants and obligations shall survive the Closing regardless of any
investigation made by or on behalf of either party hereto and shall not merge in
the performance of any obligation by either party hereto.
SECTION 9. MISCELLANEOUS.
9.1 LAW GOVERNING. This Agreement shall be construed under and
governed by the laws of the State of New York applicable to contracts made and
to be fully performed therein.
9.2 FINDER'S FEES.
(a) The Seller (i) represents and warrants that, except for
Merrill Weber & Co., Inc., Allen & Company Incorporated and Paramount Capital,
Inc., it has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and hold
harmless the Buyers of and from any liability for commission or compensation in
the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted liability)
for which the Seller, or any of its employees or representatives, are
responsible.
(b) Each Buyer (i) represents and warrants that it has retained
no finder or broker in connection with the
- 15 -
<PAGE>
transactions contemplated by this Agreement and (ii) hereby agrees to indemnify
and hold harmless the Seller and the other Buyers of and from any liability for
any commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which Buyer, or any of Buyers' employees or
representatives, are responsible.
(c) Seller agrees that as payment for services provided as
broker hereunder each of Merrill Weber & Co., Inc., Allen & Company Incorporated
and Paramount Capital, Inc. (or their designees) shall, upon conversion of the
Debentures, at such broker's option, either (a) be issued such number of shares
of the security in which the Debentures are converted calculated in accordance
with the following formula:
.06 x total number of shares issued upon
conversion of the Debentures for which each such
holder is identified as broker on
Schedule A hereto
-------------------------------------------------
$1.50
or (b) be paid a fee equal to six percent (6%) of the principal amount of any
Debenture converted in accordance with its terms for which Merrill Weber & Co.,
Inc., Allen & Company Incorporated or Paramount Capital, Inc. is indicated as
Broker on Schedule A hereto. In addition, Paramount Capital, Inc. may direct
any commissions otherwise owed to it pursuant to this paragraph 9.2(c) to any
other party, including to purchasers of the Debentures, provided that such
action is not in contravention of the rules of the NASD.
9.3 NOTICES. All notices, requests, demands or other communications
hereunder shall be deemed to have been duly given if delivered or mailed by
certified or registered mail.
To Seller:
Mr. Alex P. de Soto
Chief Financial Officer
Imre Corporation
401 Queen Anne Avenue North
Seattle, Washington 98109
With a copy to:
Cooley Godward Castro Huddleson & Tatum
4365 Executive Drive
Suite 1200
San Diego, California 92121-2128
- 16 -
<PAGE>
To Buyer:
At the address set forth on
the signature page hereof
or to such other address or addresses of which either party may notify the other
party.
9.4 ENTIRE AGREEMENT. This Agreement, including the Exhibits
referred to herein, is complete and all promises, representations,
understandings, warranties and agreements with reference to the subject matter
hereof, and all inducements to the making of this Agreement relied upon by
either party hereto, have been expressed herein or in such Exhibits.
9.5 ASSIGNABILITY. This Agreement may not be assigned by either
Buyer or Seller without the prior written consent of the other party.
Notwithstanding the foregoing, Buyer may assign its rights under this Agreement
in connection with the transfer of its interest in the underlying Securities
provided that with respect to any such assignment by Buyer, (a) the buyer is an
"accredited investor" as defined in Section 501(a) of Regulation D under the
1933 Act; (b) such buyer acquires such Securities from Buyer in a privately
negotiated, non-market transaction pursuant to the so called 4 (1/2) exemption
under the 1933 Act or other available exemption under the 1933 Act; and (c) such
buyer executes and delivers to Seller a writing evidencing such buyer's
agreement to be bound by the terms of this Agreement and such questionnaires as
Seller may request. Buyer may also assign his rights under this Agreement to
members of his immediate family or trusts for his own benefit or to other
entities which own or control, or are owned or controlled by, Buyer; provided
that such transfers meet the conditions of clauses (b) and (c) of the
immediately preceding sentence. Assignees to which assignment is made in
accordance with this Section are hereinafter referred to as "Permitted
Assignees". This Agreement shall be enforceable by and shall inure to the
benefit of and be binding upon the parties hereto and their successors and
Permitted Assignees and no others.
9.6 FEES AND EXPENSES. Except for the fees and disbursements of
counsel to the Buyers of the Securities as provided in Section 6.1(d) hereof,
each of the parties will bear its own expenses in connection with the
negotiation and consummation of the transactions contemplated by this Agreement.
9.7 PUBLICITY AND DISCLOSURE. Except as may be required by federal
securities laws, no press release or public disclosure, either written or oral,
of the transactions contemplated by this Agreement, shall be made by Buyer
hereto without the prior approval of the Seller.
- 17 -
<PAGE>
9.8 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
9.9 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, any
provision in any of the Purchase Agreements may be amended or waived only if the
Seller shall obtain the written consent of the holders of a majority in interest
of the securities purchased from Seller pursuant to the Purchase Agreements.
9.10 ADDITIONAL COVENANT. The Company hereby agrees and acknowledges
that it will use its best efforts to consummate a sale of Common Stock of the
Company or securities exchangeable, convertible or exercisable into or for
Common Stock of the Company prior to March 1, 1996 to the extent a purchaser or
purchasers acceptable to the Company offer(s) to purchase a minimum of
$2,500,000 of such security at (i) a price of no less than $1.50 per share if
the security sold is Common Stock of the Company or (ii) a conversion price of
no less than $1.50 per share if the security sold is a security that is
exchangeable, convertible or exercisable into or for Common Stock of the
Company.
- 18 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date set forth above.
IMRE CORPORATION
By: Alex P. de Soto
-------------------------------
Chief Financial Officer
ALLEN & COMPANY INCORPORATED
----------------------------------
Print Name of Buyer
------------------------------------
Signature of Buyer
Address for Notice:
711 Fifth Avenue
9th Floor
New York, New York 10022
Attn: Ms. Lauren M. Tyler
With a copy to:
Robert H. Werbel, Esq.
Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, New York 10022
- 19 -
<PAGE>
THE ARIES DOMESTIC FUND, L.P.
------------------------------------
Print Name of Buyer
------------------------------------
Signature of Buyer
Address for Notice:
With a copy to:
THE ARIES TRUST
------------------------------------
Print Name of Buyer
------------------------------------
Signature of Buyer
Address for Notice:
With a copy to:
------------------------------------
Print Name of Buyer
------------------------------------
Signature of Buyer
Address for Notice:
With a copy to:
Steven H. Shapiro, Esq.
Holeb & Coff
55 East Monroe Street
Suite 4100
Chicago, IL 60603-5896
- 20 -
<PAGE>
SCHEDULE A
BUYERS PRINCIPAL AMOUNT PURCHASE PRICE BROKER
- ------ ---------------- -------------- ------
Allen & Company $500,000 $500,000 Allen & Company
Incorporated Incorporated
The Aries Domestic $250,000 $250,000 Paramount
Fund L.P. Capital, Inc.
The Aries Trust $250,000 $250,000 Paramount
Capital, Inc.
Drobny/Fischer $250,000 $250,000 Merrill Weber &
Partnership Co., Inc.
Stewart A. Shiman $125,000 $125,000 Merrill Weber &
Co., Inc.
Howard "Buzz" Simons $125,000 $125,000 Merrill Weber &
Co., Inc.
- 21 -
<PAGE>
SCHEDULE B
ADDITIONAL DOCUMENTS OR INFORMATION FURNISHED BY SELLER
The Confidential Offering Memorandum dated December 28, 1995 along with all
exhibits, schedules and annexes attached thereto.
- 22 -
<PAGE>
EXHIBIT 1.1(A)
- 23 -
<PAGE>
EXHIBIT 1.1(B)
- 24 -
<PAGE>
EXHIBIT 2.4(B)
- 25 -
<PAGE>
EXHIBIT 2.4(C)
- 26 -
<PAGE>
PURCHASE AGREEMENT
<PAGE>
PURCHASE AGREEMENT
This PURCHASE AGREEMENT ("AGREEMENT") is made as of January __, 1996
between IMRE CORPORATION, a Delaware corporation with its principal place of
business at 401 Queen Anne Avenue North, Seattle, Washington 98109 (the
"COMPANY"), and the purchaser whose name and address is set forth on the
signature page hereof (the "PURCHASER").
IN CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and the Purchaser agree as follows:
1. AUTHORIZATION OF SALE OF THE SHARES. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale of up to nine
million five hundred thousand (9,500,000) shares of Common Stock of the Company
(the "Shares") at a price of $1.50 per Share.
2. AGREEMENT TO SELL AND PURCHASE THE SHARES. At the Closing (as defined
in Section 3), the Company will sell to the Purchaser, and the Purchaser will
buy from the Company, upon the terms and conditions hereinafter set forth, the
number of Shares (at the purchase price) shown below:
NUMBER TO BE PRICE PER SHARE AGGREGATE
PURCHASED IN DOLLARS PRICE
------------ --------------- ----------
The Company proposes to enter into this same form of purchase agreement
with certain other investors (the "Other Purchasers") and expects to complete
sales of Shares to them. The Purchaser and the Other Purchasers are hereinafter
sometimes collectively referred to as the "Purchasers," and this Agreement and
the agreements executed by the Other Purchasers are hereinafter sometimes
collectively referred to as the "Agreements."
3. DELIVERY OF THE SHARES AT THE CLOSING. The completion of the purchase
and sale of the Shares to be issued pursuant to this Agreement (the "CLOSING")
shall occur on January __, 1996 or on such other date as may be agreed to by the
Company and the Purchaser. At the Closing, the Company shall deliver to the
Purchaser one or more stock certificates registered in the name of the
Purchaser, or in such nominee name(s) as designated by the Purchaser,
representing the number of Shares set forth in Section 2 above. The name(s) in
which the stock certificates are to be issued are set forth in the Stock
Certificate and Funds Transfer Questionnaire attached hereto as part of
Appendix I. The Company's obligation to complete the purchase and sale of the
Shares and deliver such stock certificate(s) to the Purchaser at the Closing
shall be subject to the following conditions, any one or more of which may be
waived by the Company:
<PAGE>
(a) receipt by the Company of immediately available funds, by check or wire
transfer, in the full amount of the purchase price for the Shares being
purchased hereunder; (b) receipt by the Company of a signed and dated Investor
Qualification Questionnaire attached as Appendix II hereto; (c) the accuracy of
the representations and warranties made by the Purchaser herein as of the
Closing; and (d) the fulfillment of those undertakings of the Purchaser to be
fulfilled prior to the Closing. The Purchaser's obligation to accept delivery
of such stock certificate(s) and to pay for the Shares evidenced thereby shall
be subject to the following conditions: (i) the accuracy of the representations
and warranties made by the Company herein as of the Closing; and (ii) the
fulfillment in all material respects of those undertakings of the Company to be
fulfilled prior to the Closing. The Purchaser's obligations hereunder are
expressly not conditioned on the purchase by any or all of the Other Purchasers
of the Shares that they have agreed to purchase from the Company.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Company hereby
represents and warrants to, and covenants with, the Purchaser as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as currently conducted.
4.2 DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENTS. The
Company's execution, delivery and performance of the Agreements (a) have been
duly authorized under Delaware law by all requisite corporate action by the
Company, and (b) will not violate any law or the Certificate of Incorporation or
By-laws of the Company or any provision of any material indenture, mortgage,
agreement, contract or other material instrument to which the Company or any
subsidiary is a party or by which the Company or any subsidiary or any of their
respective properties or assets is bound as of the date hereof, or result in a
breach of or constitute (upon notice or lapse of time or both) a default under
any such indenture, mortgage, agreement, contract or other material instrument
or result in the creation or imposition of any lien, security interest,
mortgage, pledge, charge or other encumbrance, of any material nature
whatsoever, upon any properties or assets of the Company or any subsidiary.
Upon their execution and delivery, and assuming the valid execution thereof by
the respective Purchasers, the Agreements will constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
the indemnification agreements of the Company in Section 7.3 hereof may be
legally unenforceable.
2.
<PAGE>
4.3 ISSUANCE, SALE AND DELIVERY OF THE SHARES. When issued and paid for,
the Shares to be sold hereunder by the Company will be validly issued and
outstanding, fully paid and non-assessable.
4.4 ADDITIONAL INFORMATION. The Company represents and warrants that the
information contained in the following documents, which the Company has
furnished to the Purchaser, or will furnish if requested by the Purchaser prior
to the Closing, is or will be true and correct in all material respects as of
their respective final dates:
(a) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (without exhibits);
(b) the Company's Quarterly Reports on Form 10-Q for the periods
ended March 31, June 30 and September 30, 1995;
(c) the Company's Current Report on Form 8-K dated as of March 28,
1995;
(d) the Company's Proxy Statement dated May 17, 1995 for the
Company's 1995 Annual Meeting of Stockholders;
(e) the Company's Information Statement dated November 17, 1995;
(f) the Company's Current Report on Form 8-K dated November 22, 1995;
and
(g) the Company's Private Placement Memorandum dated January 4, 1996
(the "Memorandum").
4.5 NO MATERIAL CHANGE. As of the date hereof, except as may be reflected
in the Memorandum, there has been no material adverse change in the financial
condition or results of operations of the Company since September 30, 1995.
3.
<PAGE>
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
(a) The Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser, taking into account the personnel and
resources it can practically bring to bear on the purchase of the Shares
contemplated hereby, is knowledgeable, sophisticated and experienced in making,
and is qualified to make, decisions with respect to investments in shares
presenting an investment decision like that involved in the purchase of the
Shares, including investments in securities issued by the Company, and has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to purchase the Shares; (ii) the Purchaser is
acquiring the number of Shares set forth in Section 2 above in the ordinary
course of its business and for its own account for investment (as defined for
purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the
regulations thereunder) only and with no present intention of distributing any
of such Shares or any arrangement or understanding with any other persons
regarding the distribution of such Shares (this representation and warranty not
limiting the Purchaser's right to sell in the future); (iii) the Purchaser will
not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares except in compliance with the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and the rules and regulations promulgated
thereunder; (iv) the Purchaser has completed or caused to be completed the
Registration Statement Questionnaire and the Stock Certificate and Funds
Transfer Questionnaire, both attached hereto as Appendix I, for use in
preparation of the registration statement to be filed by the Company pursuant to
Section 7.1 (the "REGISTRATION STATEMENT") and the answers thereto are true and
correct to the best knowledge of the Purchaser as of the date hereof and will be
true and correct as of the effective date of the Registration Statement
(provided that the Purchaser shall be entitled to update such information by
providing notice thereof to the Company prior to the effective date of the
Registration Statement); (v) the Purchaser has, in connection with its decision
to purchase the number of Shares set forth in Section 2 above, relied solely
upon the information delivered to the Purchaser as described in Section 4.4
above and the representations and warranties of the Company contained herein;
and (vi) the Purchaser is an "accredited investor" within the meaning of Rule
501 of Regulation D promulgated under the Securities Act and has completed or
caused to be completed the Investor Qualification Questionnaire attached hereto
as Appendix II.
(b) The Purchaser hereby covenants with the Company as follows: (i)
prior to the effective date of the Registration Statement (the "EFFECTIVE
DATE"), the Purchaser shall not transfer any Shares except in compliance with
the Securities Act and the rules and regulations promulgated thereunder, and any
transferee of Shares prior to the Effective Date shall agree in advance in a
writing acceptable to the Company to be subject to all of the provision of this
Agreement with respect to the Shares; and (ii) commencing as of the Effective
Date, the Purchaser shall not make any sale of the Shares without effectively
causing the prospectus delivery requirement under the
4.
<PAGE>
Securities Act to be satisfied, and the Purchaser acknowledges and agrees that
on and after the Effective Date, such Shares are not transferable on the books
of the Company unless the certificate submitted to the transfer agent evidencing
the Shares is accompanied by a separate purchaser's certificate: (i) in the
form of Appendix III hereto, (ii) executed by the Purchaser or by an officer of,
or other authorized person designated by, the Purchaser, and (iii) to the effect
that (A) the Shares have been sold in accordance with the Registration Statement
and (B) the requirement of delivering a current prospectus has been satisfied.
The Purchaser acknowledges that there may occasionally be times when the Company
must suspend the use of the prospectus forming a part of the Registration
Statement until such time as an amendment to the Registration Statement has been
filed by the Company and declared effective by the Securities and Exchange
Commission (the "COMMISSION"), or until such time as the Company has filed an
appropriate report with the Commission pursuant to the Securities Exchange Act
of 1934, as amended, which suspension shall endure for such period as deemed
necessary by the Company upon advice of counsel. The Purchaser hereby covenants
that it will not sell any Shares pursuant to said prospectus during the period
commencing at the time at which the Company gives the Purchaser notice of the
suspension of the use of said prospectus and ending at the time the Company
gives the Purchaser notice that the Purchaser may thereafter effect sales
pursuant to said prospectus. The Purchaser further covenants to notify the
Company promptly of the sale of all of its Shares.
(c) The Purchaser further represents and warrants to, and covenants
with, the Company that (i) the Purchaser has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
the indemnification agreements of the Purchaser in Section 7.3 hereof may be
legally unenforceable.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates for the Shares delivered pursuant
hereto shall survive the execution of this Agreement, the delivery to the
Purchaser of the Shares being purchased and the payment therefor.
5.
<PAGE>
7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.
7.1 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:
(a) within 30 days following the Closing, prepare and file with the
Commission a Registration Statement in order to register with the Commission the
sale of Shares by the Purchaser from time to time through the automated
quotation system of the Nasdaq National Market or the facilities of any national
securities exchange on which the Company's common stock is then traded or in
privately negotiated transactions;
(b) use its best efforts, subject to the receipt of necessary
information from the Purchasers, to cause the Registration Statement to become
effective within 60 days after the Registration Statement is filed by the
Company;
(c) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement effective for a
period of three years following the Closing or, if earlier, until all of the
Shares have been sold pursuant thereto;
(d) furnish to the Purchaser with respect to the Shares registered
under the Registration Statement such number of copies of prospectuses and
preliminary prospectuses in conformity with the requirements of the Securities
Act, in order to facilitate the public sale or other disposition of all or any
of the Shares by the Purchaser; PROVIDED, HOWEVER, that the obligation of the
Company to deliver copies of prospectuses or preliminary prospectuses to the
Purchaser shall be subject to the receipt by the Company of reasonable
assurances from the Purchaser that the Purchaser will comply with the applicable
provisions of the Securities Act and of such other securities or blue sky laws
as may be applicable in connection with any use of such prospectuses or
preliminary prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Purchaser; PROVIDED, HOWEVER,
that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented; and
(f) bear all expenses in connection with the procedures in paragraphs
(a) through (e) of this Section 7.1 and the registration of the Shares pursuant
to the Registration Statement, other than fees and expenses, if any, of counsel
or other advisers to the Purchaser or the Other Purchasers.
7.2 TRANSFER OF SHARES AFTER REGISTRATION. The Purchaser agrees that it
will not effect any disposition of the Shares or its right to purchase the
Shares that
6.
<PAGE>
would constitute a sale within the meaning of the Securities Act except as
contemplated in Section 7.1 and thereafter pursuant to Rule 144 (including Rule
144(k)) and that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding the Purchaser or
its Plan of Distribution.
7.3 INDEMNIFICATION.
(a) the term "SELLING SHAREHOLDER" shall mean the Purchaser;
(b) the term "REGISTRATION STATEMENT" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1; and
(c) the term "UNTRUE STATEMENT" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling Shareholder
from and against any losses, claims, damages or liabilities to which such
Selling Shareholder may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement of a material fact contained in the Registration Statement on the
effective date thereof, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement, and the Company will
reimburse such Selling Shareholder for any reasonable legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that such loss, claim, damage or liability
arises out of, or is based upon, an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Selling Shareholder specifically for use
in preparation of the Registration Statement, or the failure of such Selling
Shareholder to comply with the covenants and agreements contained in Section
5(b) or 7.2 hereof respecting sale of the Shares or any statement or omission in
any prospectus that is corrected in any subsequent prospectus that was delivered
to the Purchaser prior to the pertinent sale or sales by the Purchaser.
The Purchaser agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or
7.
<PAGE>
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any failure to comply with the covenants and agreements contained in
Section 5(b) or 7.2 hereof respecting sale of the Shares, or any untrue
statement of a material fact contained in the Registration Statement on the
Effective Date if such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Purchaser
specifically for use in preparation of the Registration Statement, and the
Purchaser will reimburse the Company (or such officer, director or controlling
person), as the case may be, for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action, proceeding
or claim. In no event shall the liability of the Purchaser hereunder be greater
in amount than the dollar amount of the proceeds received by the Purchaser upon
the sale of Shares giving rise to such indemnification obligation.
Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 7.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall have been notified thereof, such indemnifying person
shall be entitled to participate therein, and, to the extent it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof; PROVIDED, HOWEVER, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; PROVIDED, HOWEVER, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel for all indemnified parties.
7.4 TERMINATION OF CONDITIONS AND OBLIGATIONS. Notwithstanding anything
stated herein to the contrary, the conditions precedent imposed by Section 5 or
this Section 7 upon the transferability of the Shares shall cease and terminate
as to any particular number of the Shares when such Shares shall have been
effectively registered under the Securities Act and sold or otherwise disposed
of in accordance with the intended method of disposition set forth in the
Registration Statement covering such Shares or at such time as an opinion of
counsel satisfactory to the Company shall have been rendered to the effect that
such conditions are not necessary in order to comply with the Securities Act.
8.
<PAGE>
7.5 INFORMATION AVAILABLE. So long as the Registration Statement is
effective covering the resale of Shares owned by the Purchaser, the Company will
furnish to the Purchaser:
(a) as soon as practicable after available (but, in the case of the
Company's Annual Report to Stockholders, within 120 days after the end of each
fiscal year of the Company), one copy of (i) its Annual Report to Stockholders
(which Annual Report shall contain financial statements audited in accordance
with generally accepted accounting principles by a national firm of certified
public accountants), (ii) its Annual Report on Form 10-K, (iii) its quarterly
reports on Form 10-Q, and (iv) a full copy of the particular Registration
Statement covering the Shares (the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of the Purchaser, all exhibits
excluded by the parenthetical to paragraph (a) of this Section 7.5; and
(c) upon the reasonable request of the Purchaser, an adequate number
of copies of the prospectuses to supply to any other party requiring such
prospectuses.
8. BROKER'S FEE.
(a) Each of the parties hereto hereby represents that, except as
provided in Section 8(b), on the basis of any actions and agreements by it,
there are no brokers or finders entitled to compensation in connection with the
sale of Shares to the Purchaser; and
(b) The Company shall pay to Allen and Company Incorporated, Merrill
Weber & Co., Inc., Paramount Capital Incorporated, Brean Murray, Foster
Securities Inc., and Stifel Nicolaus and Company (each a "Broker") a fee in an
amount equal to six percent (6%) of the total sales price of any Shares sold by
such Broker.
9. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be sent by facsimile or mailed by first
class registered or certified airmail, or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so sent by
facsimile or mailed and shall be delivered as follows:
9.
<PAGE>
(a) if to the Company, to:
IMRE Corporation
401 Queen Anne Avenue North
Seattle, Washington 98109
Attention: Chief Financial Officer
with a copy so mailed to:
Cooley Godward Castro Huddleson & Tatum
Executive Drive, Suite 1200
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
or to such other person at such other place as the Company shall
designate to the Purchaser in writing; and
(b) if to the Purchaser, at its address as set forth at the end of
this Agreement, or at such other address or addresses as may have been furnished
to the Company in writing.
10. CHANGES. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Purchaser.
11. HEADINGS. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
12. SEVERABILITY. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware as applied to contracts
entered into and performed entirely in Delaware by Delaware residents.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
10.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
IMRE CORPORATION PURCHASER
Print or Type Name of Purchaser
(Individual or Institution):
By
----------------------------
Title
------------------------ -----------------------------------------
Name and Title of Individual representing
Purchaser (if an Institution):
-----------------------------------------
-----------------------------------------
Signature by:
Individual Purchaser or Individual
representing Purchaser:
----------------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Telecopier:
------------------------------
11.
<PAGE>
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(TO BE READ IN CONJUNCTION WITH THE ENTIRE
PURCHASE AGREEMENT WHICH FOLLOWS)
A. Complete the following items on the Purchase Agreement:
1. Page 10 - Signature:
i. Name of Purchaser (Individual or Institution)
ii. Name of Individual representing Purchaser (if an Institution)
iii. Title of Individual representing Purchaser (if an Institution)
iv. Signature of Individual Purchaser or Individual representing
Purchaser
2. Appendix I - Stock Certificate and Funds Transfer Questionnaire and
the Registration Statement Questionnaire:
Provide the information requested by the Stock Certificate and
Funds Transfer Questionnaire and the Registration Statement
Questionnaire.
3. Appendix II - Investor Qualification Questionnaire:
Provide the information requested by the Investor Qualification
Questionnaire.
4. Return the properly completed and signed Purchase Agreement including
properly completed Appendix I and Appendix II to:
IMRE Corporation
401 Queen Anne Avenue North
Seattle, Washington 98109
Attn: Jay D. Kranzler
T: (206) 298-9400
F: (206) 298-9494
PLEASE RETURN THE COMPLETED AND SIGNED AGREEMENT BY FACSIMILE WITH THE
ORIGINAL FOLLOWING BY OVERNIGHT COURIER.
<PAGE>
B. Upon the resale of the Shares by the Purchasers after the Registration
Statement covering the Shares is effective, as described in the
Purchase Agreement, the Purchaser:
i. must deliver a current prospectus, and annual and quarterly
reports of the Company (Forms 10-K and 10-Q) to the buyer
(prospectuses and annual and quarterly reports must be
obtained from the Company at the Purchaser's request); and
ii. must send a letter in the form of Appendix III to the
Company so that the Shares may be properly transferred.
<PAGE>
APPENDIX I
IMRE CORPORATION
STOCK CERTIFICATE AND FUNDS TRANSFER QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be __________________
registered in (this is the name that will appear on
your stock certificate(s)). You may use a nominee
name if appropriate:
2. The relationship between the Purchaser of the __________________
Shares and the Registered Holder listed in response
to item 1 above:
3. The mailing address of the Registered Holder __________________
listed in response to item 1 above:
4. The Social Security Number or Tax __________________
Identification Number of the Registered Holder
listed in the response to item 1 above:
5. Whether you will be making payment for the Check / /
Shares with a check or wire transfer (check Wire Transfer/ /
appropriate box). If you will be sending a wire Name of your bank___
transfer, please provide the name of your bank and ____________________
the proposed initiation date of the wire: ____________________
Date of initiation___
____________________
<PAGE>
APPENDIX I
IMRE CORPORATION
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Please state your or your organization's name exactly as it should
appear in the Registration Statement:__________________________________________.
2. Please provide the following information, as of ______________, 1995:
(1) (2)
Number of Shares,
if any, which will
Number of Shares be owned after
which are being completion of sale
included in the of Shares included
Registration in the Registration
Statement Statement
---------------- -------------------
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Proxy Statement prepared in
connection with the Company's 1995 Annual Meeting of Stockholders?
Yes No
---- ----
If yes, please indicate the nature of any such relationships below:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX II
IMRE CORPORATION
INVESTOR QUALIFICATION QUESTIONNAIRE
[INDIVIDUALS]
In connection with a proposed offer to the undersigned of securities of
IMRE Corporation, a Delaware corporation (the "Company"), the undersigned makes
the following representations on which the Company shall be entitled to rely:
1. The undersigned makes on the following representations regarding his or
her net worth and/or income, AND HAS CHECKED THE APPLICABLE REPRESENTATION:
( ) a. The undersigned has a net worth, either individually or upon a
joint basis with the undersigned's spouse, of at least
$1,000,000.
( ) b. The undersigned has had an individual income in excess of
$200,000 for each of the two most recent years, or joint income
with the undersigned's spouse in excess of $300,000 in each of
those years, and has a reasonable expectation of reaching the
same income level in the current year.
( ) c. The undersigned is a director or executive officer of the
Company.
( ) d. The undersigned cannot make any of the representations set
forth above.
In addition, the undersigned represents as follows:
2. My full name and primary business address and phone number are
- --------------------------------------------------------------------------------
3. I am a resident of the state of .
--------------------------------
<PAGE>
4. I am acquiring the securities solely for my own account and not
directly or indirectly for the account of any other person whatsoever, for
investment and not with a view to, or for sale in connection with, any
distribution of the securities. I do not have any contract, undertaking or
arrangement with any person to sell, transfer or grant a participation to any
person with respect to the securities.
-------------------------------
(Signature)
-------------------------------
(Date)
<PAGE>
APPENDIX II
IMRE CORPORATION
INVESTOR QUALIFICATION QUESTIONNAIRE
[PARTNERSHIP, TRUST OR OTHER ENTITY]
In connection with a proposed offer to the undersigned of securities of
IMRE Corporation, a Delaware corporation (the "Company"), the undersigned makes
the following representations on which the Company shall be entitled to rely:
1. The undersigned makes one of the following representations
regarding its net worth and certain related matters, AND HAS CHECKED THE
APPLICABLE REPRESENTATION:
( ) a. The undersigned is a trust with total assets in excess of
$5,000,000, whose purchase is directed by a person with such
knowledge and experience in financial and business matters that
he is capable of evaluating the merits and risks of the
prospective investment.
( ) b. The undersigned represents that it is a bank, insurance
company, investment company registered under the Investment
Company Act of 1940, a business development company, Small
Business Investment Company licensed by the U.S. Small Business
Administration, or a private business development company.
( ) c. If the undersigned is an employee benefit plan, the undersigned
represents EITHER that all investment decisions are made by a
bank, insurance company, or registered investment advisor, OR
that the undersigned has total assets in excess of $5,000,000.
( ) d. If the undersigned is a corporation, partnership or business
trust, the undersigned represents that it has total assets in
excess of $5,000,000.
( ) e. If the undersigned is not an entity described in paragraphs "a"
through "d", the undersigned represents that each of its equity
owners is either (i) an entity described in paragraphs "b"
through "d"; or (ii) an individual who (A) has an individual
net worth, or a joint net worth with such individual's spouse,
in excess of $1,000,000, or (B) has had an individual income in
excess of $200,000 in each of the two most recent years and
reasonably expects an income in excess of $200,000 in the
current year, or (C) is a director or executive officer of the
Company.
<PAGE>
( ) f. The undersigned cannot make any of the representations set
forth in paragraphs "a" through "e" above.
In addition, the undersigned represents as follows:
2. Its full name and primary business address and phone number
are:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Its form, state and date of organization are (i.e., partnership,
corporation or trust, state where organized, date of organization):
- --------------------------------------------------------------------------------
4. The entity has sufficient profits and net assets that it does not
contemplate disposing of any investment in the Company to satisfy other
undertakings or indebtedness. It has made other investments in early stage
privately-held companies and the person(s) making the investment decision on its
behalf understand the risks attendant with such investments. The knowledge and
experience in financial and business matters of the person(s) making the
investment decision on its behalf are such that he/she/they are capable of
evaluating the merits and risks of an investment in the Company. It is able to
bear the economic risk of an investment in the Company as well as the
restriction on its ability to sell or transfer the investment for an indefinite
period of time. It has had access to such information concerning the Company
and the securities as it considered necessary to make an informed decision
concerning the proposed investment.
5. It was not formed for the specific purpose of making an investment
in the Company.
<PAGE>
6. It is acquiring the securities solely for its own account and not
directly or indirectly for the account of any other person whatsoever, for
investment and not with a view to, or for sale in connection with, any
distribution of the securities. It does not have any contract, undertaking or
arrangement with any person to sell, transfer or grant a participation to any
person with respect to the securities.
Name of Entity:
By:
---------------------------
(Signature)
---------------------------
(Name)
---------------------------
(Title)
---------------------------
(Date)
<PAGE>
APPENDIX III
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, an officer of, or other person duly authorized by ________
[fill in
____________________________________________ hereby certifies that he/she [said
official name of individual or institution]
is the Purchaser of the shares evidenced by the attached certificate, and as
such, sold such shares on [date] in accordance with registration statement
number__________________________________________________________________________
[fill in the number of or otherwise identify registration statement]
and the requirement of delivering a current prospectus and current annual and
quarterly reports (Forms 10-K and 10-Q) by the Company has been complied with in
connection with such sale.
PRINT OR TYPE:
Name of Purchaser (Individual or Institution):
---------------------------------
Name of Individual representing Purchaser
(if an Institution)
---------------------------------
Title of Individual representing Purchaser
(if an Institution):
---------------------------------
SIGNATURE BY:
Individual Purchaser or Individual
representing Purchaser:
---------------------------------
<PAGE>
Exhibit 10.6
EXECUTION COPY
SEVERANCE AGREEMENT
THIS AGREEMENT, made as of this 28th day of December 1995 by and
between IMRE Corporation, a Delaware corporation having its principal office at
401 Queen Anne Avenue North, Seattle, Washington 98109 (the "Company") and
Martin D. Cleary (the "Employee").
WHEREAS, the Company has employed Employee and Employee has provided
services to the Company as Chief Executive Officer pursuant to the terms of that
certain Employment Agreement dated as of September 30, 1994 (the "Employment
Agreement") between the Company and the Employee;
WHEREAS, the parties have agreed that Employee's employment
arrangements with the Company shall cease, effective as of December 31, 1995 and
in connection therewith Employee shall resign as Chief Executive Officer and
Director of the Company; and
WHEREAS, the parties hereto desire to set forth their respective
rights and obligations with respect to the termination of the employment of
Employee and their agreement on certain related matters.
NOW, THEREFORE, in consideration of the covenants and conditions set
forth herein, the parties hereto, intending to be legally bound, agree as
follows:
1. TERMINATION OF EMPLOYMENT. The parties hereby agree that the
employment arrangement between Employee and the Company and the Employment
Agreement evidencing such arrangement shall be terminated as of December 31,
1995 (the "Termination Date") and, except as expressly provided in this
Agreement, all rights and obligations of Employee and the Company with respect
to such employment, are duly and effectively terminated as of the date hereof.
Employee acknowledges and agrees that the Company's obligations hereunder shall
replace in their entirety the Company's obligations under the Employment
Agreement. Employee hereby further resigns as a director of the Company.
2. CASH PAYMENT TO EMPLOYEE.
(a) The Company shall pay to Employee the sum of $225,000
representing Employee's annual Base Salary (as defined in the Employment
Agreement) for the 1995 fiscal year. The Company shall pay such $225,000 to
Employee in the following installments: (i) $110,000 by January 10, 1996; (ii)
the remaining $115,000 within ten (10) business days of the closing
<PAGE>
of its next equity offering, whether in a public offering or private placement,
raising gross proceeds in excess of $4,500,000 (the "Qualified Offering"), or in
the event such Qualified Offering does not close by April 1, 1996, in monthly
installments, on the same basis and in the same amount as Employee is currently
paid his annual base salary of $225,000 for so long as any portion of the
$115,000 due to Employee is outstanding or (a) until such time as the Company
determines, in its sole discretion, to pay IN TOTO the balance of such $115,000
owing to Employee at the time of such payment hereunder or (b) upon the closing
of a Qualified Offering in which event the unpaid portion of the $115,000 shall
be paid withing ten (10) days of such closing.
(b) The Company shall pay to Employee an additional $168,750 on
December 31, 1997 or such earlier date as the Company may, in its sole
discretion, determine to pay such amount.
(c) Payment by the Company to Employee of amounts described in
(a) and (b) of this Section 2 shall constitute full satisfaction of the payment
obligations arising under this Agreement.
3. OPTIONS. It is acknowledged and agreed that pursuant to the
Employment Agreement, Employee was granted 750,000 options to purchase the
Common Stock of the Company which options will expire or be cancelled as
provided in the Employment Agreement.
4. BENEFITS.
(a) The Company shall, at its expense, provide the Employee
during the period commencing on the Termination Date and ending at the close of
business on the date which is twelve months after the Termination Date, with the
same group, health, accident and hospitalization insurance plans as were in
effect with respect to the Employee on the Termination Date.
(b) Employee hereby waives the Company's obligation pursuant to
the Employment Agreement to provide Employee, during the period ending at the
close of business on the date which is twelve months after the Termination Date,
with at least the same life and disability insurance plans as were in effect
with respect to the Employee on the Termination Date.
5. OFFICE FURNITURE.
(a) Employee shall be entitled to possession of such existing
office furniture in Employee's office in Princeton, New Jersey (the "Office
Furniture") as he elects, it being understood that any equipment (including, but
not limited to,
-2-
<PAGE>
telecopiers, telephones, computer systems and software, typewriters, etc.) shall
under no circumstances be deemed "Office Furniture" for purposes of this
paragraph.
(b) Office Furniture which Employee elects not to retain shall
be transported, at the Company's expense, to the Company's headquarters in
Seattle, Washington or sold, in either case, at the direction of the Board of
Directors of the Company.
6. NON-COMPETITION. The Employee shall not, for a two year period
commencing December 31, 1995, directly or indirectly, (a) be employed by,
engaged in or participate in the ownership, management, operation or control of,
or act in any advisory or other capacity for, any Competing Entity which
conducts its business within the Territory (as the terms Competing Entity and
Territory are hereinafter defined); provided, however, that notwithstanding the
foregoing, the Employee may make solely passive investments in any Competing
Entity the common stock of which is "publicly held" and of which the Employee
shall not own or control, directly or indirectly, in the aggregate securities
which constitute 5% or more of the voting rights or equity ownership of such
Competing Entity; or (b) solicit or divert any business or any customer from the
Company or assist any person, firm or corporation in doing so or attempting to
do so; or (c) cause or seek to cause any person, firm or corporation to refrain
from dealing or doing business with the Company or assist any person, firm or
corporation in doing so.
For purposes of this Section 6, (i) the term "Competing Entity" shall
mean any entity which presently or hereafter during the period described in this
Section 6 engages in any business activity related to "Protein A" devices, as
such term is generally used in the business of the Company; and (ii) the term
"Territory" shall mean North America.
7. RELEASES.
(a) Employee hereby agrees not to pursue or further any action,
cause of action, right, suit, debt, compensation, expense, liability, contract,
controversy, agreement, promise, damage judgment, demand or claim whatsoever at
law or in equity whether known or unknown which Employee ever had, now has or
hereafter can, shall or may have for, upon or by any reason of any matter, cause
or thing, (collectively, "Employee Claims") whatsoever against the Company, its
successors, assigns, partners, representatives and affiliates (the "the Company
Parties") and hereby releases, acquits and forever absolutely discharges the
Company Parties of and from all of the foregoing, except with respect to the
obligations of the Company set forth in this Agreement. Such Employee Claims
include, but are not limited to, all claims for breach of
-3-
<PAGE>
contract, wrongful discharge, impairment of economic opportunity, intentional
infliction of emotional harm or other torts or employment or age discrimination
under every applicable federal, state or local law, including any and all state
anti-discrimination laws, the Age Discrimination in Employment Act, the Older
Workers Benefit Protection Act, and Title VII of the Civil Rights Act.
Notwithstanding anything herein to the contrary, such Employee Claims will under
no circumstances include any action, cause of action, right, suit, debt,
compensation, expense, liability, contract, controversy, agreement, promise,
damage judgment, demand or claim relating to, arising under or arising in
connection with any (i) violation or alleged violation of any federal or state
securities laws, rules or regulations; (ii) breach of this Agreement; or (iii)
indictment or conviction of a felony. Nothing contained herein shall effect in
any way any current obligation of the Company under state law or as provided in
the By-laws of the Company to indemnify Employee; provided, however, that
nothing herein shall limit in any manner the Company's right to amend its By-
laws in accordance with applicable laws.
(b) The Company hereby agrees not to pursue or further any
action, cause of action, right, suit, debt, compensation, expense, liability,
contract, controversy, agreement, promise, damage judgment, demand or claim
whatsoever at law or in equity whether known or unknown which the Company ever
had, now has or hereafter can, shall or may have for, upon or by any reason of
any matter, cause or thing, (collectively, "Company Claims") whatsoever against
Employee and hereby releases, acquits and forever absolutely discharges Employee
of and from all of the foregoing, except with respect to the obligations of
Employee set forth in this Agreement. Notwithstanding anything herein to the
contrary, such Company Claims will under no circumstances include any action,
cause of action, right, suit, debt, compensation, expense, liability, contract,
controversy, agreement, promise, damage judgment, demand or claim relating to,
arising under or arising in connection with any (i) violation or alleged
violation of any federal or state securities laws, rules or regulations; (ii)
breach of this Agreement; (iii) breach of fiduciary duty or responsibility; or
(iv) indictment or conviction of a felony.
8. RETURN OF THE COMPANY PROPERTY. Employee covenants and agrees
that on or prior to the execution of this Agreement he shall deliver to the
Company any and all property owned by the Company or in which the Company has a
proprietary interest which is in his possession or under his control, including,
but not limited to, (i) any and all documents and papers and/or copies thereof
which are the property of the Company; (ii) any and all keys or access cards to
the Company's facilities; (iii) any and all credit cards chargeable to the
Company with statements of any amounts incurred and currently
-4-
<PAGE>
outstanding under such credit cards; and (iv) any and all equipment (including,
but not limited to, technical and computer equipment).
9. CONFIDENTIALITY. The parties hereto agree that the terms and
conditions of this Agreement are confidential and further agree that they shall
not divulge the terms of this Agreement to third parties generally, except as
required by applicable law or to enforce this Agreement or to defend against a
claim related thereto and except that the Company may reveal such terms to its
partners, financing sources, accountants, legal counsel, directors and
management employees and such other parties as the Company in good faith shall
deem necessary. In addition, Employee agrees not to make any statement to any
third party (other than Employee's accountants and attorneys) regarding the
Company or its affiliates other than in connection with an employment
application or as may be required by applicable law or to enforce this Agreement
or to defend against a claim related thereto and the Company agrees not to make
any statement to any third party regarding Employee other than as may be
required by applicable law or so enforce this Agreement or to defend against a
claim related thereto other than the fact that Employee was an employee of the
Company during the relevant time period. In the event this covenant of
confidentiality is breached, the Company and Employee will have and may pursue
his legal remedies for any damages arising from a breach of this provision.
Prior to any press release or other public disclosure relating to the contents
of this Agreement, the Company shall confer with Employee on the contents of any
such disclosure. Notwithstanding the foregoing, the Company shall be under no
obligation to reach agreement with Employee on the contents of any such public
announcement or disclosure required by applicable law, rule a regulation,
including, but not limited to, any public announcement or disclosure required by
federal or state securities laws, rules or regulations.
10. VOLUNTARY AGREEMENT. Employee warrants that he is entering into
this Agreement voluntarily, that the payments that the Company will provide
Employee pursuant to this Agreement exceed the sums and consideration to which
Employee is entitled to by virtue of his previous employment, and that, except
as set forth herein, no promises or inducements for this Agreement have been
made, and Employee enters into this Agreement without reliance upon any
statement or representation by the Company, or any other person, concerning any
fact material hereto.
11. AMENDMENTS. This Agreement may only be amended, modified or
supplemented by a writing duly signed by each of the parties hereto.
12. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of
-5-
<PAGE>
Delaware without regard to conflict of law principles. The parties agree and
consent to personal and subject matter jurisdiction in Delaware and venue in the
federal and state courts of Delaware for any and all legal actions brought to
enforce the terms of this Agreement.
13. NO WAIVER. No failure to delay on the part of the Company in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
15. COMPLETE AGREEMENT. This Agreement embodies the complete
agreement and understanding among the parties hereto and supersedes and preempts
any prior understandings, agreements, or representations by or among the
parties, written or oral, which amy have related to the subject matter hereof in
any way, including in every respect the Employment Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date and year first above written.
IMRE CORPORATION
By: /s/ Alex P. de Soto
-----------------------------
Name: Alex P. de Soto
Title: Vice President
Chief Financial Officer
/s/ Martin D. Cleary
---------------------------------
Martin D. Cleary
-6-
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement is made as of December __, 1995, between Imre
Corporation, a Delaware corporation (the "Company"), and Harvey J. Hoyt, M.D.
("Hoyt") based on the following recitals.
R E C I T A L S
A. Hoyt is a key employee, officer and director of the Company, who holds
an option to purchase 42,500 shares of the Company's $.02 par value common stock
("Common Stock") at $1.75 per share pursuant to the terms of the Nonqualified
Stock Option Agreement dated March 31, 1995, as amended, December 28, 1995
between the Company and Hoyt and an option to purchase 5,000 shares of Common
Stock at $2.125 per share pursuant to the terms of the Nonqualified Stock Option
Agreement dated January 13 1995, as amended, December 28, 1995 between the
Company and Hoyt (collectively, the "Stock Options").
B. The Company desires to engage Hoyt as a consultant in lieu of his
current positions as a key employee, officer and director of the Company, and
Hoyt is willing to accept that engagement, on the terms specified in this
Agreement.
T E R M S
Therefore, in consideration of the mutual promises contained in this
Agreement, the parties agree as follows:
1. ENGAGEMENT. Subject to the terms of this Agreement, the Company
engages Hoyt, and Hoyt accepts the engagement, to consult with the Company on
scientific research and development of products on behalf of the Company for up
to two days a month. Notwith-standing this engagement, Hoyt shall be free to
pursue consulting or employment with other persons or entities so long as it
does not interfere the performance of his nonexclusive responsibilities
hereunder.
2. TERM. The term of this Agreement shall commence on January 1, 1996
and continue until June 30, 1996, unless extended by mutual agreement of the
parties.
3. COMPENSATION. As compensation for the consulting services rendered or
to be rendered hereunder, the Company shall pay Hoyt compensation at an annual
rate of $175,000, payable in equal semi-monthly installments in the middle and
at the end of each month, irrespective of whether Hoyt actually renders any
services. It shall also (i) reimburse Hoyt for any reasonable business expenses
he incurs at the request of the Company in accordance with its reimbursement
policies in effect from time to time, and (ii) provide him, at Company expense,
with an office,
<PAGE>
reasonable secretarial assistance, facsimile and copying services, and phone and
voice mail through March 31, 1996.
4. EMPLOYMENT TERMINATION. Subject to the terms of this Agreement,
Hoyt's employment with the Company shall terminate at 12:01 a.m. PST on January
1, 1996, and all employee benefits, including without limitation accrued sick
leave and vacation, retirement and 401(k) plan contributions, and bonus or
profit sharing plans, shall accrue through the end of the calendar year 1995,
and all contributions that depend upon Hoyt's employment on December 31, 1995,
shall be made on his behalf.
5. RESIGNATIONS. Subject to the terms of this Agreement, effective
December 28, 1995, Hoyt resigns as a Director and as the Executive Vice
President of the Company.
6. SEVERANCE. In addition to the consulting engagement specified in this
Agreement, the Company shall pay to or on behalf of Hoyt the following amounts.
6.1 ACCRUED VACATION. Promptly after December 31, 1995, and
notwithstanding any employee benefit policies to the contrary, the Company shall
pay to Hoyt the amount of all accrued but unused vacation on account of his
employment with the Company.
6.2 MEDICAL INSURANCE COVERAGE. During all of calendar year 1996,
the Company shall pay the premiums for continuation, under COBRA or otherwise,
of medical and health insurance coverage for Hoyt on the same basis and to the
same extent that it provides coverage for its key employees, officers and
directors during such period. At Hoyt's request, the Company shall also provide
proof of premium payment and medical insurance coverage hereunder.
7. PRESS RELEASE APPROVAL. The Company and Hoyt approve the joint press
release attached hereto as Exhibit A and agree that neither will make any other
public comment about the termination of Hoyt's employment or his resignation as
an officer and director of the Company without the prior written approval of the
other party.
8. INDEMNIFICATION. After termination of his employment, the Company
shall indemnify, defend, and hold Hoyt harmless from all claims, liabilities,
and expenses (including attorneys' fees) that arise out of actions or omissions
during his employment with the Company or by reason of his position as an
officer or director of the Company. This indemnity shall survive the expiration
or early termination of this Agreement.
9. LEGAL EXPENSES. The Company shall pay or reimburse Hoyt up to $1,000
for the legal expenses of preparing this Agreement.
10. ENFORCEMENT EXPENSES. In any legal proceeding to enforce, interpret,
or recover damages for breach or alleged
<PAGE>
breach of this Agreement, the prevailing party shall be entitled to recover from
the nonprevailing party all of the prevailing party's fees for attorneys,
paralegals, appraisers or other experts and all of the prevailing party's other
legal expenses in addition to any other relief to which the prevailing party is
entitled.
11. MUTUAL RELEASE. The Company and Hoyt does each hereby for
itself/himself, its/his successors, assigns, heirs, executors and
administrators, fully and finally release, acquit and forever discharge the
other and all of its/his shareholders, directors, officers, employees, agents,
successors, assigns, heirs, executors and administrators of and from any and all
claims, actions and liability (collectively "Claims") based upon, arising out of
or in any way connected with the employment of Hoyt by the Company, or his
service as a director of the Company, on or prior to the date hereof other than
Claims based upon, arising out of or in any way connected with gross negligence,
fraud or illegal acts on the part of the other. The Company and Hoyt each
hereby certify that it/he has read and full understands the foregoing release
and that it/he agrees to this release voluntarily and with the advice and
consent of legal counsel.
12. MISCELLANEOUS MATTERS. This Agreement (i) represents the entire
understanding of the parties on the subject matter covered, (ii) supersedes all
prior or contemporaneous understandings on that subject matter, (iii) may only
be amended in a written instrument that is signed by both parties, (iv) shall be
binding on and inure to the benefit of the respective heirs, successors and
assigns of the parties, except that the Stock Options are not assignable,
(v) may be executed in counterparts, each of which shall be considered an
original of the same instrument, and (vi) shall be governed by and construed in
accordance with the laws of the State of Washington.
EXECUTED as of the date first above written.
IMRE CORPORATION
/s/ Harvey J. Hoyt By /s/ Alex P. de Soto
- --------------------------- -------------------------------
HARVEY J. HOYT Its Vice President Chief Financial Officer
--------------------------------------
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this ____ day of December 1995, by and
between IMRE Corporation. a Delaware corporation having its principal office at
401 Queen Anne Avenue North, Seattle, Washington 98109 (the "Company") and
Jay D. Kranzler, M.D., Ph.D. (the "Employee").
WHEREAS, the Company desires to employ the Employee in an executive
capacity as Chief Executive Officer and Vice Chairman on the terms and
conditions set forth herein; and the Employee is willing to accept and undertake
such employment.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, the Company and the Employee agree as follows:
ARTICLE 1
EMPLOYMENT; TERM; DUTIES
1.1 EMPLOYMENT. Upon the terms and conditions hereinafter set forth,
the Company hereby employs the Employee, and the Employee hereby accepts
employment, as Chief Executive Officer of the Company.
1.2 TERM. Unless sooner terminated as provided in Article 5 hereof,
the Employee's employment hereunder shall be for a term commencing on
December 11, 1995 and ending on December 31, 2000. The actual term of
employment hereunder, giving effect to any early termination of employment under
Article 5 hereof, is referred to as the "Term."
1.3 DUTIES. During the Term, the Employee shall perform such
executive duties for the Company and for its subsidiaries, consistent with his
position hereunder and as typically associated with the duties of a Chief
Executive Officer of a publicly-held corporation, as reasonably may be assigned
to him from time to time by the Board of Directors of the Company. Except as
contemplated by Section 1.5, the Employee shall devote his entire business time,
attention and energies to the performance of his duties hereunder. Without
limiting his responsibilities to the Board of Directors of the Company as a
whole, there shall be no subordination of the Employee's authority hereunder to
a Chairman of the Board or to any other individual person.
1.4 EXCLUSIVE AGREEMENT. The Employee represents and warrants to the
Company that he is not a party to any agreement or arrangement, whether written
or oral, in effect which would prevent the Employee from rendering the services
contemplated hereunder to the Company during the Term.
-1-
<PAGE>
1.5 OTHER ACTIVITY. Notwithstanding the foregoing, but subject to
his fiduciary duties to the Company under applicable law, the Company
acknowledges and understands that Employee may serve as a director of other
companies not in competition with the Company in the field of research,
development, manufacture or sales of Protein A Immunoadsorbtion Columns, and may
continue to serve as a consultant to Cytel Corporation; provided, however, that
the performance of such services shall not restrict or limit in any manner the
Employee's ability to perform his duties hereunder; and further provided, that
the Employee agrees, for the period before the Company relocates its offices to
the San Diego metropolitan area, to spend as much time in Seattle, Washington as
reasonably is required for him to perform his duties hereunder.
1.6 INSURANCE. The Company shall obtain, and shall use its
commercially reasonable best efforts to maintain during the Term, Director's and
Officer's Insurance and Product Liability Insurance policies, with full defense
coverage, of at least $3,000,000 and $16,000,000, respectively, with regard to
all actions undertaken by the Employee in his capacity as an officer, director
and employee of the Company. In addition, the Company shall research and use
its commercially reasonable best efforts to obtain and maintain during the Term
additional Director's and Officer's Insurance coverage for the Employee in the
amount of $2,000,000.
ARTICLE 2
COMPENSATION
2.1 BASE SALARY. For all services rendered by the Employee hereunder
and in consideration of all covenants and conditions undertaken by him pursuant
to this Agreement, the Company shall pay the Employee an annual base salary
("Base Salary") of $240,000 per year in equal semi-monthly installments,
retroactive to December 11, 1995. Each year during the Term, the Board of
Directors of the Company shall review the Base Salary with a view to determining
whether it would be appropriate to increase such Base Salary. The annual base
salary payable to the Employee hereunder, as it may be so increased, thereafter
shall constitute the Base Salary.
If the first or last month of the Term is not a full calendar month,
then any calculation of Base Salary for such period shall be prorated for the
number of days in such months during which the Employee was employed.
2.2 BONUSES.
(a) In addition to the Base Salary, the Company may pay the
Employee a cash bonus (the "Bonus Amount") equal to an amount up to 25% of the
Base Salary with respect to a fiscal year within 90 days after the end of such
fiscal
-2-
<PAGE>
year. The Bonus Amount, if any, shall be based on the performance of the
Employee during a fiscal year, as evaluated by the Board of Directors in its
sole discretion. It is acknowledged and agreed that, while no such Bonus Amount
shall be withheld unreasonably, the determination and the payment of the Bonus
Amount to the Employee shall be at the sole discretion of the Board of Directors
of the Company which may consider, among other matters, the financial condition
of the Company at the time. In exercising its discretion pursuant to this
subsection, the Board of Directors shall act in a manner at least as favorable
to the Employee as governs the award of bonuses to other executive officers and
key employees of the Company.
(b) In addition to the Bonus Amount, if any, the Company shall
pay the employee a one-time sign-on bonus payable as follows:
(i) $50,000 on the closing of an approximately $1 million
bridge financing, currently scheduled to occur in December 1995;
(ii) $50,000 on the closing of an anticipated equity
financing (the "Equity Financing"), scheduled to occur in the first calendar
quarter of 1996 and expected to raise gross proceeds of approximately $6 million
(the "Equity Financing Bonus"); and
(iii) $85,000 on December 31, 1996 (the "1996 Signing
Bonus").
(c) In the event of a sale by the Company of all, or
substantially all, of its assets prior to the conversion or redemption of any
classes of outstanding preferred stock of the Company issued in connection with
any equity financing after the date hereof, and provided that the Employee prior
to such time has exercised any and all stock options provided under Section
4.1(a) hereof exercisable by such Employee, the Company shall pay Employee on
the consummation of such sale, a bonus in an amount equal to 8% of the net
proceeds payable to the holders of the preferred stock of the Company of such
sale.
2.3 STOCK OPTIONS. The Company shall issue to the Employee options
to purchase shares of the Company's common stock (the "Common Stock") as
provided in Article 4 of this Agreement.
2.4 DEDUCTIONS. The Company shall deduct from the compensation
described in Sections 2.1 and 2.2 any Federal, state or city withholding taxes,
social security contributions and any other amounts which may be required to be
deducted or withheld by the Company pursuant to any federal, state or city laws,
rules or regulations.
-3-
<PAGE>
2.5 DISABILITY ADJUSTMENTS. Any compensation otherwise payable to
the Employee pursuant to Section 2.1 in respect of any period during which the
Employee is disabled (as contemplated in Section 5.1) shall be reduced by any
amounts paid to the Employee for loss of earnings or the like under any
disability insurance plan or policy, the premiums for which are paid for in
their entirety by the Company.
ARTICLE 3
COMPENSATION
3.1 BENEFITS. During the Term, the Employee shall be entitled to
participate in such compensation and incentive plans and group life, health,
accident, disability and hospitalization insurance plans, pension plans and
retirements plans as the Company may make available to its other executive
officers, including, specifically, a $1 million term life insurance policy, to
be paid for by the Company, provided that the Employee is insurable at
reasonable rates for a person of his age, with the Employee's family as the
designated beneficiaries thereof. In addition, the Employee shall be entitled
to include his family in the Company's life, health and hospitalization plans
under terms applicable to families of its other executive officers.
3.2 EXPENSES. The Company agrees that the Employee is authorized to
incur reasonable and customary expenses in the performance of his duties
hereunder, including travel and entertainment costs, and upon presentation of
appropriate documentation thereof, the Company promptly shall pay or reimburse
the Employee for such reasonable expenses. It is understood and agreed that the
Company intends to relocate its corporate headquarters to San Diego, California,
and that, until such time as such relocation occurs, the reasonable travel and
lodging expenses of Employee relating to the performance of his duties at the
Company's current corporate headquarters in Seattle, Washington shall be deemed
reimbursable expenses of Employee. In the event that any reimbursement by the
Company of expenses of the Employee hereunder is deducted by the Company, and
results in additional taxes due and payable by the Employee, the Company shall
pay to the Employee an additional sum equal to the amount of such additional tax
liability of the Employee.
3.3 VACATIONS. During each full year of the Term, the Employee shall
be entitled to four (4) weeks of paid vacation, to be taken at times determined
by the Employee which do not unreasonably interfere with the performance of his
duties hereunder.
-4-
<PAGE>
ARTICLE 4
STOCK OPTIONS
4.1 STOCK OPTIONS.
(a) Subject to Section 4.1(f) hereof, the Company shall grant to
the Employee, pursuant to an Incentive Stock Option Plan to be adopted by the
Company, ten year incentive stock options (qualified to the extent permitted by
law) to purchase 8% of the Company's Common Stock outstanding on the date
hereof, on a fully diluted basis (after allocation of new options to management,
employees, directors and consultants, and including issued and to-be-issued
warrants) at an exercise price equal to $1.50 per share (the "Options"). The
Options shall contain anti-dilution provisions that prevent dilution of the
percentage of the Company's Common Stock which may be purchased by the Employee
on exercise of the Options as a result of issuance of the Company's securities
subsequent to the occurrence of the Equity Financing by the Company, and all
additional options granted pursuant to such anti-dilution provisions shall be at
the same exercise price as the original Options. Except as provided in clauses
(b), (c) and (d) hereof, 25% of the Options shall vest immediately upon the
granting thereof by the Company and the remainder shall vest ratably and daily
over four (4) years from the date of grant.
(b) In the event of a termination (as described in Article 5),
and except as otherwise provided in Section 4.1(c) and 4.1(d) hereof, all
Options which have not vested as of the Termination Date shall cease vesting and
shall be cancelled as of the Termination Date. All vested Options shall be
cancelled ninety (90) days after the Termination Date, except that, in the event
of a termination pursuant to Section 5.2(b) or 5.4 hereof, the exercise period
for the Options shall be extended, at the election of the Employee in his sole
discretion, for five (5) years following the Termination Date.
(c) Upon the Employee's death or Disability (as defined in
Section 5.1 below), all Options shall vest immediately and all Option rights
provided for under this Agreement shall transfer to the Employee's designated
beneficiary. All Options shall be cancelled ninety (90) days after the
Employee's death or Disability, except that, at the election of the Employee's
designated beneficiary in his or her sole discretion, the exercise period for
the Options shall be extended for five (5) years following the Employee's death
or Disability.
(d) Notwithstanding anything to the contrary in the foregoing,
in the event of a termination of this Agreement in any of the cases identified
in Section 5.2(b) or 5.4 hereof, all Options shall vest immediately upon such
Termination Date. In addition, all Options shall vest immediately upon the
consummation of any merger, consolidation, corporate reorganization or transfer
of
-5-
<PAGE>
all or substantially all the assets of the Company, whether or not the Employee
continues as Chief Executive Officer of the surviving entity.
(e) The Company may grant Employee options to purchase the
Company's Common Stock in addition to the Options at such times and on such
terms as may be decided from time to time by the Board of Directors, in its sole
discretion.
(f) Notwithstanding anything herein to the contrary, it is
understood and agreed that any grant of Options pursuant to the Incentive Stock
Option Plan contemplated by this Article 4 is wholly contingent on the Company's
obtaining shareholder approval subsequent to the date hereof for the adoption of
such Incentive Stock Option Plan and to increase the number of shares of
currently authorized Common Stock of the Company to such number so as to allow
for the grant of the Options (the "Shareholder Consent"). The Company shall use
its best efforts to create such Incentive Stock Option Plan within thirty (30)
days of the date hereof and to obtain the adoption and approval of the Board of
Directors therefor as soon as practicable thereafter, and the Company shall
grant the Options to the Employee simultaneously with the closing of the Equity
Financing; provided, however, that if the Equity Financing has not closed by
February 15, 1996, the Options shall be granted promptly upon the written
request of the Employee. The Company shall use its best efforts to obtain the
Shareholder Consent at the 1996 annual meeting of shareholders. In the event
the Company is unable to obtain the Shareholder Consent, the Company shall use
its best efforts to obtain the Shareholder Consent at the next succeeding annual
meeting of shareholders.
ARTICLE 5
DEATH; DISABILITY; TERMINATION
5.1 DEATH; DISABILITY. The Employee's employment hereunder shall
terminate upon his death or, at the election of the Company, by written notice
to the Employee if the Employee becomes Disabled (as such term is hereinafter
defined). In the event of a termination of the Employee's employment for death
or Disability, the Company shall pay the Employee (or his legal representatives,
as the case may be) an amount equal to Employee's Base Salary for one year,
reduced (but not to a negative number) by any amounts paid or to be paid to the
Employee (or his legal representatives, as the case may be) by insurance
provided by the Company pursuant to Section 3.1 hereof.
For the purposes of this Agreement, the Employee shall be deemed to be
"Disabled" or have a "Disability" if as a result of the occurrence of mental or
physical disability during the Term he has been unable to perform his duties
hereunder for six (6) consecutive months or one hundred eighty (180) days in any
-6-
<PAGE>
twelve (12) consecutive month period, as determined in good faith by the Board
of Directors of the Company; provided, however, that if the Employee develops a
mental or physical disability during the Term, and it is determined, in the
reasonable professional judgment of an independent, objective and qualified
medical expert in the field of such disability, that the Employee will be unable
to perform his duties hereunder and that such disability will continue for six
(6) consecutive months or one hundred eighty (180) days in any twelve (12)
consecutive month period, then the Company shall be permitted to terminate the
Employee's employment immediately, subject to payment by the Company of the
Employee's Base Salary for the full six (6) months or one hundred eighty (180)
days of such Disability in addition to the termination payment by the Company in
an amount equal to Employee's Base Salary for one year as provided above.
In the event that the employment of the Employee hereunder is
terminated by the Company upon the Employee's death or Disability, the
Employee's family, for a period of two (2) years from the Termination Date,
shall be entitled to maintain coverage under the Company's health and
hospitalization insurance plans on the same terms as existed prior to such
Termination Date, subject to the payment of applicable costs therefor by the
Employee's representatives, and further subject to the policies and provisions
of such insurance carriers and applicable law.
The Employee acknowledges that the payments referred to in this
Section 5.1 constitute the only payments to which the Employee (or his legal
representatives, as the case may be) shall be entitled to receive from the
Company under this Agreement in the event of a termination of his employment for
death or Disability, and that except for such payments, and subject to Section
4.1(c) hereof, the Company shall have no further liability or obligation to his
(or his legal representatives, as the case may be) under this Agreement.
The date of any termination of employment under this Section 5.1 or
Section 5.2, 5.3 or 5.4 is referred to herein as the "Termination Date."
5.2 TERMINATION OF EMPLOYMENT BY EMPLOYEE.
(a) Notwithstanding any provision to the contrary herein, unless
otherwise provided herein or unless otherwise provided by law, the Employee at
any time, upon thirty (30) days' written notice to the Company, may terminate
his employment by the Company hereunder. Except as otherwise provided in
Section 5.2(b) below, the Company shall not be liable to Employee for the
payment of any amount on such termination.
(b) In the event that the Employee terminates his employment
following (i) an uncured material breach of this Agreement by the Company,
(ii) the
-7-
<PAGE>
consummation of a merger, consolidation, corporate reorganization or acquisition
of all or substantially all the assets of the Company which does not provide for
the Employee to assume the duties of Chief Executive Officer of the surviving
entity, (iii) the filing by the Company under any state or Federal bankruptcy or
insolvency laws, (iv) the failure by the Company to relocate its corporate
headquarters to the San Diego, California metropolitan area within one (1) year
from the date hereof, (v) the failure of the Company to consummate the Equity
Financing prior to August 1996, (vi) any action by the Company, Board of
Directors or shareholders which would constitute a demotion of the Employee,
whether formal or de facto (E.G., reduction of his authority or incidents of
office), the failure of necessary action to be taken to elect the Employee as
Chief Executive Officer and Vice Chairman of the Company, or any action being
taken to remove him from either or both such positions), or (vii) the failure of
the Company to institute and adopt an Incentive Stock Option Plan and award the
Options to the Employee as provided in Article 4 hereof, or the failure of the
Company to obtain the Shareholder Consent as provided in Section 4.1(f) hereof
within thirty (30) days after the date of the 1997 annual meeting of
shareholders established by the By-laws of the Company, then such termination by
the Employee shall be deemed for all purposes, including for purposes of
severance payments and benefits provided under Section 5.4 hereof, to be a
termination by the Company of the employment of the Employee hereunder without
cause pursuant to Section 5.4. The Company shall have thirty (30) days
following receipt of written notice by the Employee to the Company of the
material breach described in item (i) above, setting forth in reasonable detail
the matters constituting such breach, to cure such breach.
5.3 TERMINATION OF EMPLOYMENT WITH CAUSE. In addition
to any other remedies available to it at law, in equity or as set forth in this
Agreement, the Company shall have the right, upon written notice to the
Employee, to immediately terminate his employment hereunder if the Employee
(a) evidences a pattern of willful breach in any material respect of any
material provision of this Agreement or a pattern of willful violation of any
reasonable policies or orders of the Board of Directors and such pattern of
willful breach or violation does not cease within thirty (30) days after the
Employee's receipt of written notice thereof from the Board of Directors of the
Company setting forth in reasonable detail the matters constituting such
pattern; or (b) has been convicted of a felony.
5.4 TERMINATION OF EMPLOYMENT WITHOUT CAUSE.
(a) Notwithstanding any provision to the contrary herein and
unless otherwise provided by law, the Company, at any time upon thirty (30)
days' written notice to the Employee, in its sole and absolute discretion and
for any or no reason, may terminate the employment of the Employee hereunder
without cause. In such event, the Company shall pay the Employee, within ten
(10) days following
-8-
<PAGE>
the Termination Date, an amount equal to the Employee's Base Salary less
(i) $50,000, if the Equity Financing Bonus has been paid prior to the
Termination Date and (ii) $85,000, if the 1996 Signing Bonus has been paid prior
to the Termination Date.
(b) In the event that the employment of the Employee hereunder
is terminated by the Company without cause, all Options shall vest immediately
upon the Termination Date as provided in Section 4.1(d) hereof. If the Options
have not been granted to the Employee as of the Termination Date, the Company
shall pay to the Employee, within ten (10) days following the Termination Date,
an additional payment equal to the Employee's Base Salary, I.E., in addition to
the payment described in Section 5.4(a).
(c) In the event that the employment of the Employee hereunder
is terminated by the Company without cause, the Company, at no cost to the
Employee and for a period of two (2) years from the Termination Date, shall
continue to provide the Employee with at least the same group life, health,
accident, disability and hospitalization insurance plans as were in effect with
respect to the Employee on the date of such termination, and shall continue to
provide coverage for the Employee's family on the same terms as existed prior to
such Termination Date.
(d) The Employee acknowledges that the payments referred to in
Section 5.2 and this Section 5.4 constitute the only payments which the Employee
shall be entitled to receive from the Company under this Agreement in the event
of any termination pursuant to Section 5.2, 5.3 and this Section 5.4, and that
except for such payments and such other obligations as are expressly provided
herein the Company shall have no further liability or obligation to him under
this Agreement.
(e) The Employee shall have no duty to mitigate damages in order
to receive any severance payments and benefits provided in this Section 5.4.
ARTICLE 6
TAG-ALONG RIGHTS
6.1 TAG-ALONG RIGHTS. The Company shall grant the Employee such
rights to participate in sales by principal stockholders or the Company of the
Common Stock, as shall be set forth in that certain Tag-Along Rights Agreement
being executed concurrently herewith.
-9-
<PAGE>
ARTICLE 7
REGISTRATION RIGHTS
7.1 REGISTRATION OF EMPLOYEE STOCK.
(a) As soon as practicable after the consummation of the Equity
Financing, but in no event later than September 30, 1996, the Company, upon the
Employee's written request, shall use all reasonable efforts to prepare and file
with the Securities and Exchange Commission a registration statement and such
other documents, if then required, as may be necessary to permit a public
offering and sale of shares of the Common Stock acquired by the Employee prior
to the date hereof or granted to the Employee pursuant to the terms hereof or
granted to the Employee in connection with the Options (the "Registrable Stock")
in compliance with the provisions of the Securities Act of 1933, as amended (the
"Securities Act"). If the Employee does not sell the Registrable Stock within a
reasonable period of time after such registration, the Company need not maintain
the effectiveness of such registration; provided, however, if the Company fails
to maintain the effectiveness of such registration, the Employee thereafter may
re-exercise his rights under this subsection, without limitation, but he may not
do so earlier than ninety (90) days after the applicable registration statement
has become ineffective. If the Employee is no longer employed by the Company at
the time of his request for registration hereunder, the Employee must provide
written notice to the Company that he intends to sell the Registrable Stock
within a reasonable period of time after such registration.
(b) The Company shall have the right to include in any
registration statement filed pursuant to this Section 7.1 other securities of
the Company then proposed to be distributed.
7.2 PIGGYBACK REGISTRATION.
(a) If the Company proposes to register shares of Common Stock
or securities convertible into or exercisable for Common Stock under the
Securities Act (other than pursuant to a registration statement on Form S-4 or
S-8 or any successor form, or filed in connection with an exchange offer or an
offering of securities solely to the existing shareholders or employees of the
Company), solely where such sale will be both for the Company's account and for
the account of a selling shareholder, then the Company shall give written notice
of such proposed filing to the Employee at least ten (10) days before the
anticipated filing date, and such notice shall offer the Employee the
opportunity to register such number of shares of Registrable Stock as the
Employee may request. The Employee shall notify the Company in writing
specifying whether or not it elects to include any Registrable Stock in such
registration statement within five (5) days after delivery of the Company's
notice to the Employee. The Company shall use its best efforts to
-10-
<PAGE>
cause the managing underwriter or underwriters of a proposed underwritten
offering to permit the Employee to include such securities in such offering on
the same terms and conditions as any similar securities of the Company included
therein; provided, however, that if the managing underwriter or underwriters of
such offering determines that the total amount or kind of securities which it or
the Company, and any other persons or entities, intend to include in such
offering is such as to materially and adversely affect the success of such
offering, then the amount of Registrable Stock requested to be offered for the
account of the Employee shall be reduced or limited, on a pro rata basis with
the securities of all persons and entities other than the Company participating
in the offering, to the extent required by such managing underwriter.
Notwithstanding the foregoing, if, at any time after giving written notice of
its intention to register Common Stock or other securities convertible into or
exercisable for Common Stock and prior to the effectiveness of the registration
statement filed in connection with such registration, the Company determines for
any reason either not to effect such registration or to delay such registration,
the Company, at its election, by delivery or written notice to the Employee,
(i) in the case of a determination not to effect registration, may relieve
itself of its obligations to register any Registrable Stock in connection with
such registration, or (ii) in the case of determination to delay the
registration, may delay the registration of such Registrable stock for the same
period as the delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
(b) Notwithstanding anything to the contrary herein, if the
Company registers shares of Common Stock or securities convertible into or
exercisable for Common Stock under the Securities Act in an underwritten public
offering and
(i) the Employee owns unregistered Registrable Stock at the
time such underwritten public offering is registered under the Securities Act,
the Employee shall agree to refrain from exercising the registration rights
granted in this Article 7 with respect to such Registrable Stock for such period
of time as the managing underwriter of such underwritten public offering deems
reasonable; or
(ii) the Employee owns Registrable Stock which has been
registered under the Securities Act pursuant to Section 7.1 or this Section 7.2
hereof prior to the time such underwritten public offering is registered under
the Securities Act, the Employee shall agree that it will not sell, distribute,
offer to sell, contract to sell, agree to sell, grant any option to purchase, or
agree to offer, sell or otherwise transfer or dispose of (nor announce any
offer, sale, grant of an option to purchase or otherwise dispose of), directly
or indirectly, any such registered Registrable Stock for such period of time as
the managing underwriter of such underwritten public offering deems reasonable.
-11-
<PAGE>
(c) FURNISH INFORMATION. The Employee shall furnish to the
Company such reasonable information regarding the Employee, the Registrable
Stock, and the intended method of disposition of such securities as are required
to effect the registration of Registrable Stock as to which the Employee has
requested registration.
(d) EXPENSES OF REGISTRATION. All expenses incident to the
Company's performance of or compliance with this Article 7 including, without
limitation, all registration and filing fees, fees and expenses of complying
with state securities or blue sky laws, printing expenses and fees and
disbursements of counsel for the Company and of independent public accountants
(including the expense of any special audit), but excluding underwriting
commissions and discounts and the fees and disbursements of counsel for the
Employee, shall be borne by the Company. The Employee shall bear his own pro
rata share (calculated according to the number of his shares as a fraction of
the total number of shares covered by such registration statement) of all
underwriting commissions and discounts incurred in connection with any offering
of Registrable Stock with respect to a registration pursuant to this Article 7,
as well as his expenses if he has counsel separate from counsel for the Company.
The fees and expenses of complying with state blue sky laws shall be borne by
the sellers of securities included in such registration if and to the extent
that the appropriate administrative official of such state requires that such
sellers (rather than the Company) pay such fees and expenses.
(e) INDEMNIFICATION AND CONTRIBUTION. In the event any shares
of Registrable Stock are included in a registration statement under this
Article 7:
(i) To the extent permitted by law, the Company shall
indemnify, defend and hold harmless the Employee, any underwriter (as defined in
the Securities Act), any other person or entity selling securities in such
registration statement, and each director and officer of, and person, if any,
who controls such underwriter or such other person or entity within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; provided, however, that the indemnity agreement
contained in this subsection (i) shall not apply to amounts paid in settlement
of any such loss, claim,
-12-
<PAGE>
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by, or which results from
the bad faith or gross negligence of, the Employee or any underwriter for the
Employee.
(ii) To the extent permitted by law, the Employee shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other person or entity selling securities in such registration statement,
and each director and officer of, and person, if any, who controls such
underwriter or such other person or entity, against any losses, claims, damages
or liabilities (joint or several) to which the Company or any such director,
officer, controlling person, or underwriter or controlling person, or such other
person or entity or director, officer or controlling person may become subject,
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs as a result of
written information furnished by the Employee in his capacity as a shareholder
of the Company (as distinguished from information provided by the Employee in
his capacity as an officer or director of the Company) expressly for use in
connection with such registration or results from the bad faith or gross
negligence of the Employee; provided, however, that the Employee's
indemnification obligation hereunder shall be limited to an amount equal to the
net proceeds received by the Employee pursuant to the registration of
Registrable Securities hereunder; and further provided, that the indemnity
agreement contained in this subsection shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Employee, which consent shall
not be unreasonably withheld.
(iii) Promptly after receipt by an indemnified party under
this Section 7.2(e) of notice of the commencement of any action (including any
governmental action), such indemnified party shall deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof wit counsel mutually satisfactory to the parties.
An indemnified party shall have the right to retain its own counsel, however,
but the fees and expenses of such counsel shall be at the expense of the
indemnified party, unless (x) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, (y) the
indemnifying party has failed timely to assume the
-13-
<PAGE>
defense and employ counsel, or (z) the named parties to any such action
(including any impleaded parties) include both the indemnified party and the
indemnifying party, and the indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of such indemnified party, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all indemnified parties). The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 7.2(e), but the omission so to deliver written notice to the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 7.2(e).
(iv) If the indemnification provided for in subsection (i)
and (ii) of this Section 7.2(e) is unavailable or insufficient to hold harmless
an indemnified party under such subsection in respect of any losses, claims,
damages or liabilities or action in respect thereof or referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as is
appropriate to reflect the relative fault of the Company, on the one hand, and
the Employee on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well as any
other relevant equitable considerations, including the failure to give the
notice required under such subsections. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the Company on
the one hand, or the Employee, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Employee agree that it would
not be just and equitable if contribution pursuant to this Section 7.2(e)(iv)
were determined by pro rata allocation or by any other method of allocation
which did not take account of the equitable considerations referred to above in
this subsection. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
-14-
<PAGE>
(v) The obligations of the Company and the Employee under
this Section 7.2(e) shall survive the completion of any offering of Registrable
Stock in a registration statement under this Article 7.
ARTICLE 8
INVENTIONS; NON-DISCLOSURE
8.1 INVENTIONS. Subject to the provisions of Section 2870 of the
California Labor Code, all processes, technologies and inventions (collectively,
"Inventions"), including new contributions, improvements, discoveries,
trademarks and trade names, conceived, developed, invented, made or found by the
Employee, alone or with others, during the Term of his employment by the
Company, whether or not patentable and whether or not conceived, developed,
invented, made or found on the Company's time or with the use of the Company's
facilities or materials, and which relate to the business of the Company, shall
be the property of the Company and shall be promptly and fully disclosed by the
Employee to the Company. The Employee shall perform all necessary acts
(including, without limitation, executing and delivering any confirmatory
assignments, documents or instruments requested by the Company) to vest title to
any such Invention in the Company and to enable the Company, at its expense, to
secure and maintain domestic and/or foreign patents or any other rights for such
Inventions.
8.2 NON-DISCLOSURE. The Employee, at any time during the Term and
thereafter, shall not, directly or indirectly, use, disclose or furnish to any
other person, firm or corporation except in the course of the proper performance
of his duties hereunder (a) any information of a confidential nature relating to
any process, technique or procedure of the Company; or (b) any information of a
confidential nature obtained as a result of his current or future relationship
with the Company, which information is not specifically a matter of public
record; or (c) any other trade secrets of the Company; except that the Employee
shall not be liable under the terms of this Section 8.2 for using, disclosing or
furnishing any of the foregoing which: (1) are or become generally available to
the public other than as a result of a disclosure in violation of this
Agreement; or (2) are generally known in any industry in which the Company is or
may become involved; or (3) are required to be disclosed by the Employee
pursuant to law or the order of a court of competent jurisdiction, or other
legal process or authority, it being understood, however, that the Employee
shall provide the Company with prompt notice of the requirement for such
disclosure as soon as practical after the Employee is notified thereof and prior
to its disclosure thereof so as to enable the Company to challenge the order
compelling such disclosure if the Company so desires. Promptly upon the
expiration or termination of the Employee's employment hereunder for any reason,
the Employee shall surrender to the Company all documents, drawings, work
-15-
<PAGE>
papers, lists, memoranda, records and other data (including all copies)
constituting or disclosing any of the foregoing information.
8.3 BREACH OF NON-DISCLOSURE PROVISION. In the event that the
Employee shall breach Section 8.2 hereof, or in the event that any such breach
is threatened by the Employee, in addition to and without limiting or waiving
any other remedies available to the Company at law or in equity, the Company
shall be entitled to immediate injunctive relief in any court having the
capacity to grant such relief, to restrain any such breach or threatened breach
and to enforce the provisions of Section 8.2. The Employee acknowledges and
agrees that there is no adequate remedy at law for any such breach or threatened
breach and, in the event that any action or proceeding is brought seeking
injunctive relief, the Employee shall not use as a defense thereto that there is
an adequate remedy at law.
8.4 REASONABLE RESTRICTIONS. The parties acknowledge that (a) the
agreements in this Article 8 are essential to protect the business and goodwill
of the Company, and (b) the foregoing restrictions are under all of the
circumstances reasonable and necessary for the protection of the Company and its
business.
ARTICLE 9
MISCELLANEOUS
9.1 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective legal representatives,
heirs, distributees and successors; provided, that the obligations of the
Employee under this Agreement shall not be delegable by him.
9.2 NOTICES. All notices and other communications hereunder and all
legal process in regard hereto shall be validly given, made or served if in
writing, when delivered personally (by courier service or otherwise), or when
actually received when mailed by first-class certified or registered United
States mail, postage-prepaid and return receipt requested, to the address of the
party to receive such notice or other communication set forth below, or at such
other address as any party hereto may from time to time advise the other party
in writing:
If to the Company:
IMRE Corporation
401 Queen Anne Avenue North
Seattle, Washington 98109
Attention: Chairman of the Board of Directors
-16-
<PAGE>
If to the Employee:
Jay D. Kranzler, M.D., Ph.D.
7935 Via Capri
La Jolla, CA 92037
9.3 SEVERABILITY. If any provision of this Agreement, or portion
thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or portion thereof, and shall not in any manner affect or render
invalid or unenforceable any other provision of this Agreement or portion
thereof, and this Agreement shall be carried out as if any such invalid or
unenforceable provision or portion thereof were not contained' herein. In
addition, any such invalid or unenforceable provision or portion thereof shall
be deemed, without further action on the part of the parties hereto, modified,
amended or limited to the extent necessary to render the same valid and
enforceable.
9.4 WAIVER. No waiver by a party hereto of a breach or default
hereunder by the other party shall be considered valid, unless in writing signed
by such first party, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or any other nature.
9.5 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
any and all prior agreements between the Company and the Employee, whether
written or oral, relating to any or all matters covered by and contained or
otherwise dealt with in this Agreement. No representation, warranty,
undertaking or covenant is made by either party hereto except as provided herein
and any representations, warranties undertakings or covenants not set forth
herein are specifically disclaimed. This Agreement does not constitute a
commitment of the Company with regard to the Employee's employment, express or
implied, other than to the extent expressly provided for herein.
9.6 AMENDMENT. No modification, change or amendment of this
Agreement or any of its provisions shall be valid, unless in writing and signed
by the party against whom such claimed modification, change or amendment is
sought to be enforced.
9.7 AUTHORITY. The parties each represent and warrant that they have
the power, authority and right to enter into this Agreement and to carry out and
perform the terms, covenants and conditions hereof.
-17-
<PAGE>
9.8 TITLES. The titles of the Articles and Sections of this
Agreement are inserted merely for convenience and ease of reference and shall
not affect or modify the meaning of any of the terms, covenants or conditions of
this Agreement.
9.9 APPLICABLE LAW. This Agreement, and all of the rights and
obligations of the parties in connection with the employment relationship
established hereby, shall be governed by and construed in accordance with the
internal laws of the State of California without giving effect to principals
relating to conflicts of law.
9.10 EXPENSES. The Company shall pay all costs and expenses,
including reasonable attorneys fees, incurred by the Employee with respect to
the negotiation, drafting and execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
IMRE CORPORATION
By: /s/ Frank R. Jones
-----------------------------
Name: Frank R. Jones
Title: Chairman of the Board
/s/ Jay Kranzler
--------------------------------
Jay D. Kranzler, M.D., Ph.D.
-18-
<PAGE>
Exhibit 10.9
Execution Copy
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 28th day of December 1995, by and
between IMRE Corporation, a Delaware corporation having its principal office at
401 Queen Anne Avenue North, Seattle, Washington 98109 (the "Company") and Debby
Jo Blank, M.D. (the "Employee").
WHEREAS, the Company desires to employ the Employee in an executive
capacity as President and Chief Operating Officer on the terms and conditions
set forth herein; and the Employee is willing to accept and undertake such
employment.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, the Company and the Employee agree as follows:
ARTICLE 1
EMPLOYMENT; TERM; DUTIES
1.1 EMPLOYMENT. Upon the terms and conditions hereinafter set forth,
the Company hereby employs the Employee, and the Employee hereby accepts
employment, as President and Chief Operating Officer of the Company. Also it is
the intention of the Company to cause Employee to be included in the management
slate of directors for election to the Board of Directors, and to be elected as
such, during the first year of the initial Term (as defined in Section 1.2).
1.2 TERM. Unless sooner terminated as provided in Article 5 hereof,
the Employee's employment hereunder shall be for a term commencing on January 8,
1996 and ending on December 31, 2000. The actual term of employment hereunder,
giving effect to any early termination of employment under Article 5 hereof, is
referred to as the "Term".
1.3 DUTIES. During the Term, the Employee shall perform such
executive duties for the Company and for its subsidiaries, consistent with her
position hereunder, and as typically associated with the duties of a President
and Chief Operating Officer of a publicly-held corporation, as reasonably may be
assigned to her from time to time by the Chief Executive Officer of the Company.
Employee shall report directly to the Chief Executive Officer of the Company.
Except as contemplated by Section 1.5, the Employee shall devote her entire
business time, attention and energies to the performance of her duties
hereunder.
1.4 EXCLUSIVE AGREEMENT. The Employee represents and warrants to the
Company that she is not a party to any agreement or arrangement, whether written
or oral, in effect which would
<PAGE>
prevent the Employee from rendering the services contemplated hereunder to the
Company during the Term.
1.5 OTHER ACTIVITY. Notwithstanding the foregoing, but subject to
her fiduciary duties to the Company under applicable law, the Company
acknowledges and understands that Employee may serve as a director or consultant
to other companies and may work on committees of professional or civic
associations or educational institutions not in competition with the Company in
the field of research, development, manufacture or sales of Protein A
Immunoadsorbtion Columns; provided, however, that the performance of such
services shall not restrict or limit in any manner the Employee's ability to
perform her duties hereunder.
1.6 INSURANCE. The Company shall obtain, and shall use its
commercially reasonable best efforts to maintain during the Term, Director's and
Officer's Insurance and Product Liability Insurance policies, with full defense
coverage, of at least $3,000,000 and $16,000,000, respectively, with regard to
all actions undertaken by the Employee in her capacity as an officer, director
and employee of the Company. In addition, the Company shall research and use
its commercially reasonable best efforts to obtain and maintain during the Term
additional Director's and Officer's Insurance coverage for the Employee in the
amount of $2,000,000.
ARTICLE 2
COMPENSATION
2.1 BASE SALARY. For all services rendered by the Employee hereunder
and in consideration of all covenants and conditions undertaken by her pursuant
to this Agreement, the Company shall pay the Employee an annual base salary
("Base Salary") of $210,000 per year in equal semi-monthly installments. Each
year during the Term, the Board of Directors of the Company shall review the
Base Salary with a view to determining whether it would be appropriate to
increase such Base Salary. The annual base salary payable to the Employee
hereunder, as it may be so increased, thereafter shall constitute the Base
Salary.
If the first or last month of the Term is not a full calendar month,
then any calculation of Base Salary for such period shall be prorated for the
number of days in such months during which the Employee was employed.
2.2 BONUSES.
(a) In addition to the Base Salary, the Company may pay the
Employee a cash bonus (the "Bonus Amount") equal to an amount up to 25% of the
Base Salary with respect to a fiscal year within 90 days after the end of such
fiscal year. The Bonus Amount, if any, shall be based on the performance of the
Employee
- 2 -
<PAGE>
during a fiscal year, as evaluated by the Board of Directors, in its sole
discretion. It is acknowledged and agreed that, while no such Bonus Amount
shall be withheld unreasonably, the determination and the payment of the Bonus
Amount to the Employee shall be at the sole discretion of the Board of Directors
of the Company which may consider, among other matters, the financial condition
of the Company at the time. In exercising its discretion pursuant to this
subsection, the Board of Directors shall act in a manner at least as favorable
to the Employee as governs the award of bonuses to other executive officers and
key employees of the Company.
(b) In addition to the Bonus Amount, if any, the Company shall
pay the employee a one-time sign-on bonus payable as follows:
(i) $50,000 on the closing of an approximately $1 million
bridge financing, currently scheduled to occur in December 1995;
(ii) $50,000 on the closing of an anticipated equity
financing (the "Equity Financing"), scheduled to occur in the first fiscal
quarter of 1996 and expected to raise gross proceeds of approximately $6 million
(the "Equity Financing Bonus"); and
(iii) $85,000 on December 31, 1996 (the "1996 Signing
Bonus").
(c) In the event of a sale by the Company of all, or
substantially all, of its assets prior to the conversion or redemption of any
classes of outstanding preferred stock of the Company issued in connection with
any equity financing after the date hereof, and provided that the Employee prior
to such time has exercised any and all stock options provided under Section
4.1(a) hereof exercisable by such Employee, the Company shall pay Employee on
the consummation of such sale, a bonus in an amount equal to 3% of the net
proceeds payable to the holders of the preferred stock of the Company of such
sale.
2.3 STOCK OPTIONS. The Company shall issue to the Employee options
to purchase shares of the Company's common stock (the "Common Stock") as
provided in Article 4 of this Agreement.
2.4 DEDUCTIONS. The Company shall deduct from the compensation
described in Sections 2.1 and 2.2 any Federal, state or city withholding taxes,
social security contributions and any other amounts which may be required to be
deducted or withheld by the Company pursuant to any Federal, state or city laws,
rules or regulations.
- 3 -
<PAGE>
2.5 DISABILITY ADJUSTMENTS. Any compensation otherwise payable to
the Employee pursuant to Section 2.1 in respect of any period during which the
Employee is disabled (as contemplated in Section 5.1) shall be reduced by any
amounts paid to the Employee for loss of earnings or the like under any
disability insurance plan or policy the premiums for which are paid for in their
entirety by the Company.
ARTICLE 3
BENEFITS; EXPENSES
3.1 BENEFITS. During the Term, the Employee shall be entitled to
participate in such compensation and incentive plans and group life, health,
accident, disability and hospitalization insurance plans, pension plans and
retirement plans as the Company may make available to its other executive
officers, including, specifically, a $1 million term life insurance policy, to
be paid for by the Company, provided that the Employee is insurable at
reasonable rates for a person of her age, with the Employee's family as the
designated beneficiaries thereof. In addition, the Employee shall be entitled
to include her family in the Company's life, health and hospitalization plans
under terms applicable to families of its other executive officers.
3.2 EXPENSES. The Company agrees that the Employee is authorized to
incur reasonable and customary expenses in the performance of her duties
hereunder, including travel and entertainment costs, and upon presentation of
appropriate documentation thereof, the Company promptly shall pay or reimburse
the Employee for such reasonable expenses. It is understood and agreed that
Company shall relocate Employee's primary residence (the "Relocation") from
Seattle, Washington to the San Diego, California area prior to or as soon as
practicable after the Company relocates its corporate headquarters to the San
Diego, California area. Employee shall be reimbursed for reasonable and
documented relocation expenses involved in moving to San Diego from Seattle,
including airfares and other usual expenses incurred in connection with up to
two house-hunting trips for Employee and her husband and packing and moving
expenses. In addition, the Company shall reimburse Employee for reasonable,
usual and documented closing costs on the sale of her Seattle home, including
real estate commissions and other usual closing costs, as well as the
reasonable, usual and documented closing costs on the purchase of a home in the
San Diego area within two years after the date of sale of her Seattle house.
The Company shall pay for up to three months of temporary housing in San Diego
or Seattle if required for Employee or her spouse. The Company shall also pay
Employee an additional $5,000 (net after tax) for miscellaneous relocation
expenses. In the event that any reimbursement by the Company of expenses of the
Employee hereunder is deducted by the Company, and results in additional taxes
due and payable by the Employee, the Company shall pay to
- 4 -
<PAGE>
the Employee an additional sum equal to the amount of such additional tax
liability of the Employee.
3.3 VACATIONS. During each full year of the Term, the Employee shall
be entitled to four (4) weeks of paid vacation to be taken at times determined
by the Employee which do not unreasonably interfere with the performance of her
duties hereunder.
3.4 CONSULTING SERVICES. For consulting services provided by
Employee prior to the effective date of this Agreement, the Company agrees to
pay the Employee for 20 days of consulting at the rate of $1,000 per day, plus
reasonable and documented travel expenses.
ARTICLE 4
STOCK OPTIONS
4.1 STOCK OPTIONS.
(a) Subject to Section 4.1(f) hereof, the Company shall grant to
the Employee, pursuant to an Incentive Stock Option Plan to be adopted by the
Company, ten year incentive stock options (qualified to the extent permitted by
law) to purchase 3% of the Company's Common Stock outstanding on the date
hereof, on a fully diluted basis (after allocation of new options to management,
employees, directors and consultants, and including issued and to-be-issued
warrants) at an exercise price equal to $1.50 per share (the "Options"). The
Options shall contain anti-dilution provisions that prevent dilution of the
percentage of the Company's Common Stock which may be purchased by the Employee
on exercise of the Options as a result of issuance of the Company's securities
subsequent to the occurrence of the Equity Financing by the Company, and all
additional options granted pursuant to such anti-dilution provisions shall be at
the same exercise price as the original Options. Except as provided in clauses
(b) and (c) hereof, 25% of the Options shall vest immediately upon the granting
thereof by the Company and the remainder shall vest ratably and daily over four
(4) years from the date of grant.
(b) In the event of a termination (as described in Article 5),
and except as otherwise provided in Section 4.1(c) and 4.1(d) hereof, all
Options which have not vested as of the Termination Date shall cease vesting and
shall be cancelled as of the Termination Date. All vested Options shall be
cancelled ninety (90) days after the Termination Date except that, in the event
of a termination pursuant to Section 5.2(b) or 5.4 hereof, the exercise period
for the Options shall be extended at the election of the Employee in her sole
discretion, for five (5) years following the Termination Date.
- 5 -
<PAGE>
(c) Upon the Employee's death or Disability (as defined in
Section 5.1 below) all Options shall vest immediately and all Option rights
provided for under this Agreement shall transfer to the Employee's designated
beneficiary. All Options shall be cancelled ninety (90) days after the
Employee's death or Disability, except that, at the election of the Employee's
designated beneficiary in his or her sole discretion, the exercise period for
the Options shall be extended for five (5) years following the Employee's death
or Disability.
(d) Notwithstanding anything to the contrary in the foregoing,
in the event of a termination of this Agreement in any of the cases identified
in Section 5.2(b) or 5.4 hereof, all Options shall vest immediately upon such
Termination Date. In addition, all Options shall vest immediately upon the
consummation of any merger, consolidation, corporate reorganization or transfer
of all or substantially all the assets of the Company, whether or not the
Employee continues as President and Chief Operating Officer of the surviving
entity.
(e) The Company may grant Employee options to purchase the
Company's Common Stock in addition to the Options at such times and on such
terms as may be decided from time to time by the Board of Directors, in its sole
discretion.
(f) Notwithstanding anything herein to the contrary, it is
understood and agreed that any grant of Options pursuant to this Article 4 is
wholly contingent on the Company's obtaining shareholder approval subsequent to
the date hereof for the adoption of such Incentive Stock Option Plan and to
increase the number of shares of currently authorized Common Stock of the
Company to such number so as to allow for the grant of the Options (the
"Shareholder Consent"). The Company shall use its best efforts to create such
Incentive Stock Option Plan within thirty (30) days of the date hereof, and to
obtain the adoption and approval of the Board of Directors therefor as soon as
practicable thereafter, and the Company shall grant the Options to the Employee
simultaneously with the closing of the Equity Financing; provided, however, that
if the Equity Financing has not closed by February 15, 1996, the Options shall
be granted promptly upon the written request of the Employee. The Company shall
use its best efforts to obtain the Shareholder Consent at the 1996 annual
meeting of shareholders. In the event the Company is unable to obtain the
Shareholder Consent, the Company shall use its best efforts to obtain the
Shareholder Consent at the next succeeding annual meeting of shareholders.
ARTICLE 5
DEATH; DISABILITY; TERMINATION
5.1 DEATH; DISABILITY. The Employee's employment hereunder shall
terminate upon her death or, at the election of
-6-
<PAGE>
the Company, by written notice to the Employee if the Employee becomes Disabled
(as such term is hereinafter defined). In the event of a termination of the
Employee's employment for death or Disability, the Company shall pay the
Employee (or her legal representatives, as the case may be) an amount equal to
Employee's Base Salary for one year, reduced (but not to a negative number) by
any amounts paid or to be paid to the Employee (or her legal representatives, as
the case may be) by insurance provided by the Company pursuant to Section 3.1
hereof.
For the purposes of this Agreement, the Employee shall be deemed to be
"Disabled" or have a "Disability" if as a result of the occurrence of mental or
physical disability during the Term she has been unable to perform her duties
hereunder for six (6) consecutive months or one hundred eighty (180) days in any
twelve (12) consecutive month period, as determined in good faith by the Board
of Directors of the Company; provided, however, that if Employee develops a
mental or physical disability during the Term, and it is determined, in the
reasonable professional judgment of an independent, objective and qualified
medical expert in the field of such disability, that the Employee will be unable
to perform her duties hereunder and that such disability will continue for six
(6) consecutive months or one hundred eighty (180) days in any twelve (12)
consecutive month period, then the Company shall be permitted to terminate the
Employee's employment immediately, subject to payment by the Company of the
Employee's Base Salary for the full six (6) months or one hundred eighty (180)
days of such Disability in addition to the termination payment by the Company in
an amount equal to Employee's Base Salary for one year as provided above.
In the event that the employment of the Employee hereunder is
terminated by the Company upon the Employee's death or Disability, the
Employee's family, for a period of two (2) years from the Termination Date,
shall be entitled to maintain coverage under the Company's health and
hospitalization insurance plans on the same terms as existed prior to such
Termination Date, subject to the payment of applicable costs therefor by the
Employee's representatives, and further subject to the policies and provisions
of such insurance carriers and applicable law.
The Employee acknowledges that the payments referred to in this
Section 5.1 constitute the only payments to which the Employee (or her legal
representatives, as the case may be) shall be entitled to receive from the
Company under this Agreement in the event of a termination of her employment for
death or Disability, and that except for such payments and subject to Section
4.1(c) hereof, the Company shall have no further liability or obligation to her
(or her legal representatives, as the case may be) under this Agreement.
- 7 -
<PAGE>
The date of any termination of employment under this Section 5.1 or
Sections 5.2, 5.3 or 5.4 is referred to herein as the "Termination Date".
5.2 TERMINATION OF EMPLOYMENT BY EMPLOYEE.
(a) Notwithstanding any provision to the contrary herein,
unless otherwise provided herein or unless otherwise provided by law, the
Employee at any time upon thirty (30) days' written notice to the Company, may
terminate her employment by the Company hereunder. Except as otherwise provided
in Section 5.2(b) below, the Company shall not be liable to Employee for the
payment of any amount on such termination.
(b) In the event that the Employee terminates her employment
following (i) an uncured material breach of this Agreement by the Company, (ii)
the consummation of a merger, consolidation, corporate reorganization or
acquisition of all or substantially all the assets of the Company which does not
provide for the Employee to assume the duties of President and Chief Operating
Officer of the surviving entity, (iii) the filing by the Company under any state
or Federal bankruptcy or insolvency laws, (iv) the failure by the Company to
relocate its corporate headquarters to the San Diego, California metropolitan
area within one (1) year from the date hereof (v) the failure of the Company to
consummate the Equity Financing prior to August 1996, (vi) any action by the
Company, Board of Directors or shareholders which would constitute a demotion of
the Employee, whether formal or de facto (e.g., reduction of her authority or
incidents of office), the failure of necessary action to be taken to elect the
Employee as President and Chief Operating Officer of the Company, or any action
being taken to remove her from either or both such positions, or (vii) the
failure of the Company to institute and adopt an Incentive Stock Option Plan and
award the Options to Employee as provided in Article 4 hereof, or the failure of
the Company to obtain the Shareholder Consent as provided in Section 4.1(f)
hereof within thirty (30) days after the date of the 1997 annual meeting of
shareholders established by the By-laws of the Company, then such termination by
the Employee shall be deemed for all purposes including for purposes of
severance payments and benefits provided under Section 5.4 hereof, to be a
termination by the Company of the employment of the Employee hereunder without
cause pursuant to Section 5.4. The Company shall have thirty (30) days
following receipt of written notice by the Employee to the Company of the
material breach described in item (i) above, setting forth in reasonable detail
the matters constituting such breach, to cure such breach.
5.3 TERMINATION OF EMPLOYMENT WITH CAUSE. In addition to any other
remedies available to it at law, in equity or as set forth in this Agreement,
the Company shall have the right, upon written notice to the Employee, to
immediately terminate her
- 8 -
<PAGE>
employment hereunder if the Employee (a) breaches evidences a pattern of willful
breach in any material respect any material provision of this Agreement or a
pattern of willful violation of any reasonable policies or orders of the Board
of Directors and such pattern of willful breach or violation does not cease
within thirty (30) days after the Employee's receipt of written notice thereof
from the Board of Directors of the Company setting forth in reasonable detail
the matters constituting such pattern; or (b) has been convicted of a felony.
5.4 TERMINATION OF EMPLOYMENT WITHOUT CAUSE.
(a) Notwithstanding any provision to the contrary herein and
unless otherwise provided by law, the Company at any time upon thirty (30) days'
written notice to the Employee, in its sole and absolute discretion and for any
or no reason, may terminate the employment of the Employee hereunder without
cause. In such event, the Company shall pay the Employee, within ten (10) days
following the Termination Date, an amount equal to the Employee's Base Salary
less (i) $50,000, if the Equity Financing Bonus has been paid prior to the
Termination Date and (ii) $85,000, if the 1996 Signing Bonus has been paid prior
to the Termination Date.
(b) In the event that the employment of the Employee hereunder
is terminated by the Company without cause, all Options shall vest immediately
upon the Termination Date as provided in Section 4.1(d) hereof. If the Options
have not been granted to the Employee as of the Termination Date, the Company
shall pay to the Employee, within ten (10) days following the Termination, an
additional payment equal; to the Employee's Base Salary, i.e., in addition to
the payment described in Section 5.4(a).
(c) In the event that the employment of the Employee hereunder
is terminated by the Company without cause, the Company, at no cost to the
Employee; and for a period of two (2) years from the Termination Date shall
continue to provide the Employee with at least the same group life, health,
accident, disability and hospitalization insurance plans as were in effect with
respect to the Employee on the date of such termination, and shall continue to
provide coverage for the Employee's family on the same terms as existed prior to
such Termination Date.
(d) The Employee acknowledges that the payments referred to in
Section 5.2 and this Section 5.4 constitute the only payments which the Employee
shall be entitled to receive from the Company under this Agreement in the event
of any termination pursuant to Section 5.2, 5.3 and this Section 5.4, and that
except for such payments and such other obligations as are expressly provided
herein the Company shall have no further liability or obligation to her under
this Agreement.
- 9 -
<PAGE>
(e) The Employee shall have no duty to mitigate damages in order
to receive any severance payments and benefits provided in this Section 5.4.
ARTICLE 6
TAG-ALONG RIGHTS
6.1 TAG-ALONG RIGHTS. The Company shall grant the Employee such
rights to participate in sales by principal stockholders or the Company of the
Common Stock, as shall be set forth in that certain Tag-Along Rights Agreement
being executed concurrently herewith.
ARTICLE 7
REGISTRATION RIGHTS
7.1 REGISTRATION OF EMPLOYEE STOCK.
(a) As soon as practicable after consummation of the Equity
Financing, but in no event later than September 30, 1996, the Company, upon the
Employee's written request, shall use all reasonable efforts to prepare and file
with the Securities and Exchange Commission a registration statement and such
other documents, if then required, as may be necessary to permit a public
offering and sale of shares of the Common Stock acquired by the Employee prior
to the date hereof or granted to the Employee pursuant to the terms hereof or
granted to the Employee in connection with the Options (the "Registrable Stock")
in compliance with the provisions of the Securities Act of 1933, as amended (the
"Securities Act"). If the Employee does not sell the Registrable Stock within a
reasonable period of time after such registration, the Company need not maintain
the effectiveness of such registration; provided, however, if the Company fails
to maintain the effectiveness of such registration, the Employee thereafter may
re-exercise her rights under this subsection, without limitation, but she may
not do so earlier than ninety (90) days after the applicable registration
statement has become ineffective. If the Employee is no longer employed by the
Company at the time of her request for registration hereunder, the Employee must
provide written notice to the Company that she intends to sell the Registrable
Stock within a reasonable period of time after such registration.
(b) The Company shall have the right to include in any
registration statement filed pursuant to this Section 7.1 other securities of
the Company then proposed to be distributed.
7.2 PIGGYBACK REGISTRATION.
(a) If the Company proposes to register shares of Common Stock
or securities convertible into or exercisable for Common Stock under the
Securities Act (other than pursuant to a
- 10 -
<PAGE>
registration statement on Form S-4 or S-8 or any successor form, or filed in
connection with an exchange offer or an offering of securities solely to the
existing shareholders or employees of the Company), solely where such sale will
be both for the Company's account and for the account of a selling shareholder,
then the Company shall give written notice of such proposed filing to the
Employee at least ten (10) days before the anticipated filing date, and such
notice shall offer the Employee the opportunity to register such number of
shares of Registrable Stock as the Employee may request. The Employee shall
notify the Company in writing specifying whether or not it elects to include any
Registrable Stock in such registration statement within five (5) days after
delivery of the Company's notice to the Employee. The Company shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Employee to include such securities in such
offering on the same terms and conditions as any similar securities of the
Company included therein; provided, however, that if the managing underwriter or
underwriters of such offering determines that the total amount or kind of
securities which it or the Company, and any other persons or entities, intend to
include in such offering is such as to materially and adversely affect the
success of such offering, then the amount of Registrable Stock requested to be
offered for the account of the Employee shall be reduced or limited on a pro
rata basis with the securities of all persons and entities other than the
Company participating in the offering, to the extent required by such managing
underwriter. Notwithstanding the foregoing, if, at any time after giving
written notice of its intention to register Common Stock or other securities
convertible into or exercisable for Common Stock and prior to the effectiveness
of the registration statement filed in connection with such registration, the
Company determines for any reason either not to effect such registration or to
delay such registration, the Company, at its election, by delivery or written
notice to the Employee, (i) in the case of a determination not to effect
registration, may relieve itself of its obligations to register any Registrable
Stock in connection with such registration, or (ii) in the case of determination
to delay the registration, may delay the registration of such Registrable Stock
for the same period as the delay in the registration of such other shares of
Common Stock or other securities convertible into or exercisable for Common
Stock.
(b) Notwithstanding anything to the contrary herein, if the
Company registers shares of Common Stock or securities convertible into or
exercisable for Common Stock under the Securities Act in an underwritten public
offering and
(i) the Employee owns unregistered Registrable Stock at the
time such underwritten public offering is registered under the Securities Act,
the Employee shall agree
- 11 -
<PAGE>
to refrain from exercising the registration rights granted in this Section 7
with respect to such Registrable Stock for such period of time as the managing
underwriter of such underwritten public offering deems reasonable; or
(ii) the Employee owns Registrable Stock which has been
registered under the Securities Act pursuant to Section 7.1 or this 7.2 hereof
prior to the time such underwritten public offering is registered under the
Securities Act, the Employee shall agree that it will not sell, distribute,
offer to sell, contract to sell, agree to sell, grant any option to purchase, or
agree to offer, sell or otherwise transfer or dispose of (nor announce any
offer, sale, grant of an option to purchase or otherwise dispose of), directly
or indirectly, any such registered Registrable Stock for such period of time as
the managing underwriter of such underwritten public offering deems reasonable.
(c) Notwithstanding anything to the contrary herein, the Company
shall have the right to grant registration rights to other parties subsequent to
the date hereof. In such event and in connection with the grant of piggyback
registration rights to other parties, the parties hereto acknowledge and agree
that such other parties shall have the right to participate on a pro rata basis
with the parties hereto in any registration to which such piggyback registration
rights apply.
(d) FURNISH INFORMATION. The Employee shall furnish to the
Company such reasonable information regarding the Employee, the Registrable
Stock, and the intended method of disposition of such securities as are required
to effect the registration of Registrable Stock as to which the Employee has
requested registration.
(e) EXPENSES OF REGISTRATION. All expenses incident to the
Company's performance of or compliance with this Article 7 including, without
limitation, all registration and filing fees, fees and expenses of complying
with state securities or blue sky laws, printing expenses and fees and
disbursements of counsel for the Company and of independent public accountants
(including the expense of any special audit), but excluding underwriting
commissions and discounts and the fees and disbursements of counsel for the
Employee, shall be borne by the Company. The Employee shall bear her own pro
rata share (calculated according to the number of her shares as a fraction of
the total number of shares covered by such registration statement) of all
underwriting commissions and discounts incurred in connection with any offering
of Registrable Stock with respect to a registration pursuant to this Article 7,
as well as her expenses if she has counsel separate from counsel for the
Company. The fees and expenses of complying with state blue sky laws shall be
borne by the sellers of securities included in such
- 12 -
<PAGE>
registration if and to the extent that the appropriate administrative official
of such state requires that such sellers (rather than the Company) pay such fees
and expenses.
(f) INDEMNIFICATION AND CONTRIBUTION. In the event any shares
of Registrable Stock are included in a registration statement under this Article
7:
(i) To the extent permitted by law, the Company shall
indemnify, defend and hold harmless the Employee, any underwriter (as defined in
the Securities Act), any other person or entity selling securities in such
registration statement, and each director and officer of, and person, if any,
who controls such underwriter or such other person or entity within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"); any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; provided, however, that the indemnity agreement
contained in this subsection (i) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by, or which results from the bad faith or gross negligence of, the
Employee, or any underwriter for the Employee.
(ii) To the extent permitted by law, the Employee will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other person or entity selling securities in such registration statement,
and each director and officer of, and person, if any, who controls such
underwriter or such other person or entity, against any losses, claims, damages
or liabilities (joint or several) to which the Company or any such director,
officer, controlling person, or underwriter or
- 13 -
<PAGE>
controlling person, or such other person or entity or director, officer or
controlling person may become subject, under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs as a result of written information furnished by the Employee in
her capacity as a shareholder of the Company (as distinguished from information
provided by the Employee in her capacity as an officer or director of the
Company) expressly for use in connection with such registration or results from
the bad faith or gross negligence of the Employee, provided, however, that
Employee's indemnification obligation hereunder shall be limited to an amount
equal to the net proceeds received by Employee pursuant to the registration of
Registrable Securities hereunder, and, further provided, that the indemnity
agreement contained in this subsection shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Employee, which consent shall
not be unreasonably withheld.
(iii) Promptly after receipt by an indemnified party
under this Section 7.2(e) of notice of the commencement of any action (including
any governmental action), such indemnified party shall deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. An indemnified party shall have the right to
retain its own counsel, however, but the fees and expenses of such counsel shall
be at the expense of the indemnified party, unless (x) the employment of such
counsel has been specifically authorized in writing by the indemnifying party,
(y) the indemnifying party has failed timely to assume the defense and employ
counsel, or (z) the named parties to any such action (including any impleaded
parties) include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of such
indemnified party, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for all indemnified
parties). The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action,
- 14 -
<PAGE>
if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
7.2(e), but the omission so to deliver written notice to the indemnifying party
shall not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 7.2(e).
(iv) If the indemnification provided for in subsection (i)
and (ii) of this Section 7.2(e) is unavailable or insufficient to hold harmless
an indemnified party under such subsection in respect of any losses, claims,
damages or liabilities or action in respect thereof or referred to therein, then
each indemnifying party in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as is
appropriate to reflect the relative fault of the Company, on the one hand, and
the Employee on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well as any
other relevant equitable considerations, including the failure to give the
notice required under such subsections. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the Company on
the one hand, or the Employee, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Employee agree that it would
not be just and equitable if contribution pursuant to this Section 7.2(e)(iv)
were determined by pro rata allocation or by any other method of allocation
which did not take account of the equitable considerations referred to above in
this subsection. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Securities Act), shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(v) The obligations of the Company and the Employee under
this Section 7.2(e) shall survive the completion of any offering of Registrable
Stock in a registration statement under this Article 7.
ARTICLE 8
INVENTIONS; NON-DISCLOSURE,
8.1 INVENTIONS. Subject to the provisions of Section 2870 of the
California Labor Code, all processes, technologies and inventions (collectively,
"Inventions"), including new contributions, improvements, discoveries,
trademarks and trade names, conceived, developed, invented, made or found by the
Employee, alone or with others, during the Term of her employment by the
Company, whether or not patentable and whether or not
- 15 -
<PAGE>
conceived, developed, invented, made or found on the Company's time or with the
use of the Company's facilities or materials and which relate to the business of
the Company, shall be the property of the Company and shall be promptly and
fully disclosed by the Employee to the Company. The Employee shall perform all
necessary acts (including, without limitation, executing and delivering any
confirmatory assignments, documents or instruments requested by the Company) to
vest title to any such Invention in the Company and to enable the Company, at
its expense, to secure and maintain domestic and/or foreign patents or any other
rights for such Inventions.
8.2 NON-DISCLOSURE. The Employee, at any time during the Term and
thereafter, shall not directly or indirectly, use, disclose or furnish to any
other person, firm or corporation except in the course of the proper performance
of her duties hereunder (a) any information of a confidential nature relating to
any process, technique or procedure of the Company; or (b) any information of a
confidential nature obtained as a result of her current or future relationship
with the Company, which information is not specifically a matter of public
record; or (c) any other trade secrets of the Company; except that the Employee
shall not be liable under the terms of this Section 8.2 for using, disclosing or
furnishing any of the foregoing which: (1) are or become generally available to
the public other than as a result of a disclosure in violation of this
Agreement; or (2) are generally known in any industry in which the Company is or
may become involved; or (3) are required to be disclosed by the Employee
pursuant to law or the order of a court of competent jurisdiction, or other
legal process or authority, it being understood, however, that the Employee
shall provide the Company with prompt notice of the requirement for such
disclosure as soon as practical after the Employee is notified thereof and prior
to its disclosure thereof so as to enable the Company to challenge the order
compelling such disclosure if the Company so desires. Promptly upon the
expiration or termination of the Employee's employment hereunder for any reason,
the Employee shall surrender to the Company all documents, drawings, work
papers, lists, memoranda, records and other data (including all copies)
constituting or disclosing any of the foregoing information.
8.3 BREACH OF NON-DISCLOSURE PROVISION. In the event that the
Employee shall breach Section 8.2 hereof, or in the event that any such breach
is threatened by the Employee, in addition to and without limiting or waiving
any other remedies available to the Company at law or in equity, the Company
shall be entitled to immediate injunctive relief in any court having the
capacity to grant such relief, to restrain any such breach or threatened breach
and to enforce the provisions of Section 8.2. The Employee acknowledges and
agrees that there is no adequate remedy at law for any such breach or threatened
breach and, in the event that any action or proceeding is brought seeking
- 16 -
<PAGE>
injunctive relief, the Employee shall not use as a defense thereto that there is
an adequate remedy at law.
8.4 REASONABLE RESTRICTIONS. The parties acknowledge that (a) the
agreements in this Article 8 are essential to protect the business and goodwill
of the Company, and (b) the foregoing restrictions are under all of the
circumstances reasonable and necessary for the protection of the Company and its
business.
ARTICLE 9
MISCELLANEOUS
9.1 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective legal representatives,
heirs, distributees and successors; provided, that the obligations of the
Employee under this Agreement shall not be delegable by her.
9.2 NOTICES. All notices and other communications hereunder and all
legal process in regard hereto shall be validly given, made or served if in
writing, when delivered personally (by courier service or otherwise), or when
actually received when mailed by first-class certified or registered United
States mail, postage-prepaid and return receipt requested, to the address of the
party to receive such notice or other communication set forth below, or at such
other address as any party hereto may from time to time advise the other party
in writing:
If to the Company:
IMRE Corporation
401 Queen Anne Avenue North
Seattle, Washington 98109
Attention: Chairman of the Board of Directors
If to the Employee:
Dr. Debby Jo Blank
186 34th Avenue East
Seattle, Washington 98112
9.3 SEVERABILITY. If any provision of this Agreement, or portion
thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or portion thereof, and shall not in any manner affect or render
invalid or unenforceable any other provision of this Agreement or portion
thereof, and this Agreement shall be carried out as if any such invalid or
unenforceable provision or portion thereof were not contained herein. In
addition, any such invalid or unenforceable
- 17 -
<PAGE>
provision or portion thereof shall be deemed, without further action on the part
of the parties hereto, modified, amended or limited to the extent necessary to
render the same valid and enforceable.
9.4 WAIVER. No waiver by a party hereto of a breach or default
hereunder by the other party shall be considered valid, unless in writing signed
by such first party, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or any other nature.
9.5 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
any and all prior agreements between the Company and the Employee, whether
written or oral, relating to any or all matters covered by and contained or
otherwise dealt with in this Agreement. No representation, warranty,
undertaking or covenant is made by either party hereto except as provided herein
and any representations, warranties undertakings or covenants not set forth
herein are specifically disclaimed. This Agreement does not constitute a
commitment of the Company with regard to the Employee's employment, express or
implied,other than to the extent expressly provided for herein.
9.6 AMENDMENT. No modification, change or amendment of this
Agreement or any of its provisions shall be valid, unless in writing and signed
by the party against whom such claimed modification, change or amendment is
sought to be enforced.
9.7 AUTHORITY. The parties each represent and warrant that they have
the power, authority and right to enter into this Agreement and to carry out and
perform the terms, covenants and conditions hereof.
9.8 TITLES. The titles of the Articles and Sections of this
Agreement are inserted merely for convenience and ease of reference and shall
not affect or modify the meaning of any of the terms, covenants or conditions of
this Agreement.
9.9 APPLICABLE LAW. This Agreement, and all of the rights and
obligations of the parties in connection with the employment relationship
established hereby, shall be governed by and construed in accordance with the
internal laws of the State of California without giving effect to principals
relating to conflicts of law.
9.10 ATTORNEYS' FEES. The cost of Employee's reasonable attorneys'
fees incurred in the negotiation of this Agreement in an amount not to exceed
$5,500 shall be borne by the Company.
- 18 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
IMRE CORPORATION
By: /s/ Frank R. Jones
_______________________________
Name: Frank R. Jones
Title: Chairman of the Board
/s/ Dr. Debby Jo Blank
___________________________________
Dr. Debby Jo Blank
- 19 -
<PAGE>
Exhibit 10.10
IMRE CORPORATION
401 Queen Anne Avenue North
Seattle, Washington 98109
Dr. Frank R. Jones
c/o IMRE Corporation
401 Queen Anne Avenue North
Seattle, Washington 98109
Re: EMPLOYMENT ARRANGEMENT
Dear Dr. Jones:
This serves to confirm our discussion regarding your current at-will
employment arrangement as Chief Scientific Officer of IMRE Corporation (the
"Company"). As you know, as Chief Scientific Officer you have been appointed by
the board of Directors of the Company to serve at the pleasure of the Board.
For your services rendered in such capacity, the Board of Directors of the
Company has determined that you are to receive a salary of $220,000.00 for the
1996 calendar year.
In the event that your employment with the Company terminates within one
year of the date of this letter, for any reason or no reason whatsoever (a
"Termination"), you will be entitled solely to a one time severance payment
equal to your 1996 salary of $220,000.00. Options to purchase shares of the
Company's common stock which have been previously granted to you and which have
vested prior to a Termination shall be either extended or reissued by the
Company (and if so reissued, at a price to be determined at the time of such
reissuance) so as to remain exercisable until the applicable expiration date of
such options. Options which have been granted to you but have not vested as of
the date of a Termination will be automatically cancelled. Warrants granted to
you prior to a Termination shall be either extended or reissued by the Company
(and if so reissued, at a price to be determined at the time of such reissuance)
so as to remain exercisable until the applicable expiration date of such
Warrants.
If the foregoing is acceptable to you please indicate your agreement by
executing this letter in the space provided therefor below.
IMRE Corporation
By: /s/ Alex P. de Soto
----------------------
Name:
Title: Vice President
Chief Financial Officer
Acknowledged and Agreed:
/s/ Frank R. Jones
----------------------
Frank R. Jones
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement, made as of the 8th day of January 1996, by and between IMRE
Corporation, a Delaware corporation having its principal office at 401 Queen
Anne Avenue North, Seattle, Washington 98109 (the "Company") and Alex P. de
Soto, currently the Vice President Chief Financial Officer of the Company (the
"Employee").
Whereas, the Company desires to continue employment of the Employee in an
executive capacity as Vice President Chief Financial Officer on the terms and
conditions set forth herein; and the Employee is willing to accept and undertake
such continued employment.
Now, therefore, in consideration of the premises and the mutual covenants
herein set forth, the Company and the Employee agree as follows:
ARTICLE 1
EMPLOYMENT; TERM; DUTIES
1.1 EMPLOYMENT. Upon the terms and conditions hereinafter set forth, the
Company hereby continues to employ the Employee, and the Employee hereby accepts
continued employment, as Vice President Chief Financial Officer of the Company.
1.2 TERM. The Employee's employment hereunder shall be for a term
commencing on January 1, 1996 and ending on June 30, 1996. The actual term of
employment, including the period included in Section 1.3 below, is referred to
as the "Term".
1.3 OPTION TO EXTEND TERM. Based on the mutual consent of both parties,
the Term may be extended on a month to month basis, beginning July 1, 1996.
1.4 DUTIES. During the Term, the Employee shall perform such executive
duties for the Company and for its subsidiaries, consistent with his position
hereunder, and as typically associated with the duties of a Vice President Chief
Financial Officer of a publicly-held corporation, as reasonably may be assigned
to him from time to time by the Chief Executive Officer and President of the
Company. A preliminary list of such executive duties during the term set out in
Section 1.2 is listed in Appendix A to this Agreement. Employee shall report
directly to the President of the Company. Except as contemplated by Section
1.6, the Employee shall devote his entire business time, attention and energies
to the performance of his duties hereunder.
1.5 EXCLUSIVE AGREEMENT. The Employee represents and warrants to the
Company that he is not a party to any agreement or arrangement, whether written
or oral,
<PAGE>
in effect which would prevent the Employee from rendering the services
contemplated hereunder to the Company during the Term.
1.6 OTHER ACTIVITY. The Company acknowledges and understands that
Employee may, beginning April 2, 1996, take occasional hours off from employment
on any day, with pay, to seek employment with another company; provided,
however, that the time off from employment shall not restrict or limit in any
manner the Employee's ability to perform his duties hereunder.
ARTICLE 2
COMPENSATION
2.1 BASE SALARY. For all services rendered by the Employee hereunder and
in consideration of all covenants and conditions undertaken by him pursuant to
this Agreement, the Company shall pay the Employee a monthly salary ("Base
Salary") of $10,000 per month for the period January 1, 1996 through March 31,
1996 and a monthly salary of $8,000 per month for the remainder of the Term, in
equal semi-monthly installments.
2.2 BONUS. In addition to the Base Salary, the Company will pay the
Employee a $15,000 (the "Bonus") on April 1, 1996, if the Employee has not given
notice to the Company as described in Article 3 as of April 1, 1996.
2.3 SEVERANCE. In addition to the Base Salary and Bonus, the Employee
will be paid $25,000 (the "Severance Amount") if the Employee has not given
notice to the Company as described in Article 3 as of June 1, 1996. Such
payment will be paid on the date notice is given to the Company by the Employee
as described in Article 3 or on the date notice is given to the Employee by the
Company as described in Article 3.
2.4 STOCK OPTIONS. The Company shall issue to the Employee replacement
options ("Replacement Options"), outside the Company's stock option plans, to
purchase 60,000 shares of the Company's common stock at $1.50 per share on the
date ("Grant Date") options are first granted to Jay Kranzler, the Chief
Executive Officer of the Company. Such Replacement Options are to be issued in
replacement of the various stock options currently held by the Employee which
total options to purchase 110,000 shares of the Company's common stock ("Current
Options"). Such Replacement Options shall vest as follows: 30,000 shares will
vest on the Grant Date and 30,000 shares will vest on June 1, if the Employee
has not given notice to the Company as described in Article 3 as of June 1,
1996. Such Replacement Options can be exercised from the date of vesting
through March 31, 1998. Such shares are to be included in a registration
statement expected to be filed in February 1996 for options granted to certain
employees terminated on January 5, 1996 (the "Registration Statement"). Such
grant of Replacement Options is subject to approval by the Stock Option
Committee of the Board of Directors and a concurrent written cancellation of
Current Options by the Employee.
<PAGE>
2.5 DEDUCTIONS. The Company shall deduct from the compensation described
in Sections 2.1, 2.2 and 2.3 any Federal, state or city withholding taxes,
social security contributions and any other amounts which may be required to be
deducted or withheld by the Company pursuant to any Federal, state or city laws,
rules or regulations.
2.6 BENEFITS. During the Term, the Employee shall be entitled to
participate in all employee benefit plans presently available to the Employee.
2.7 EXPENSES. The Company agrees that the Employee is authorized to incur
reasonable and customary expenses in the performance of his duties hereunder,
including travel and entertainment costs, and upon presentation of appropriate
documentation thereof, the Company shall promptly pay or reimburse the Employee
for such reasonable expenses.
ARTICLE 3
NOTICE OF TERMINATION
3.1 TERMINATION OF EMPLOYMENT BY EMPLOYEE. Notwithstanding any provision
to the contrary herein or unless otherwise provided by law, the Employee at any
time upon 21 days written notice to the Company, may terminate his employment by
the Company hereunder. The Company shall be liable to Employee as described in
Sections 2.1, 2.2, 2.3 and 2.4 on such termination based on the date such notice
is given.
3.2 TERMINATION OF EMPLOYMENT BY COMPANY. Notwithstanding any provision to
the contrary herein or unless otherwise provided by law, beginning June 1, 1996,
the Company at any time upon 30 days written notice to the Employee, in its sole
and absolute discretion and for any or no reason, may terminate the employment
of the Employee hereunder without cause. In such event, the Company shall pay
the Employee the Severance Amount as described in Section 2.3 and one month's
Base Salary (i.e. $8,000).
ARTICLE 4
NON-DISCLOSURE
4.1 NON-DISCLOSURE. The Employee, at any time during the Term
and thereafter, shall not directly or indirectly, use, disclose or furnish to
any other person, firm or corporation except in the course of the proper
performance of her duties hereunder (a) any information of a confidential nature
relating to any process, technique or procedure of the Company; or (b) any
information of a confidential nature obtained as a result of her current or
future relationship with the Company, which information is not specifically a
matter of public record; or (c) any other trade secrets of the Company; except
that the Employee shall not be liable under the terms of this Section 4.1 for
using, disclosing or furnishing any of the foregoing which: (1) are or become
generally available
<PAGE>
to the public other than as a result of a disclosure in violation of this
Agreement; or (2) are generally known in any industry in which the Company is
or may become involved; or (3) are required to be disclosed by the Employee
pursuant to law or the order of a court of competent jurisdiction, or other
legal process or authority, it being understood, however, that the Employee
shall provide the Company with prompt notice of the requirement for such
disclosure as soon as practical after the Employee is notified thereof and
prior to its disclosure thereof so as to enable the Company to challenge the
order compelling such disclosure if the Company so desires. Promptly upon the
expiration or termination of the Employee's employment hereunder for any reason,
the Employee shall surrender to the Company all documents, drawings, work
papers, lists, memoranda, records and other data (including all copies)
constituting or disclosing any of the foregoing information.
BREACH OF NON-DISCLOSURE PROVISION. In the event that the
Employee shall breach Section 4.1 hereof, or in the event that any such breach
is threatened by the Employee, in addition to and without limiting or waiving
any other remedies available to the Company at law or in equity, the Company
shall be entitled to immediate injunctive relief in any court having the
capacity to grant such relief, to restrain any such breach or threatened breach
and to enforce the provisions of Section 4.1. The Employee acknowledges and
agrees that there is no adequate remedy at law for any such breach or threatened
breach and, in the event that any action or proceeding is brought seeking
injunctive relief, the Employee shall not use as a defense thereto that there is
an adequate remedy at law.
REASONABLE RESTRICTIONS. The parties acknowledge that (a) the
agreements in this Article 4 are essential to protect the business and goodwill
of the Company, and (b) the foregoing restrictions are under all of the
circumstances reasonable and necessary for the protection of the Company and its
business.
ARTICLE 5
MISCELLANEOUS
5.1 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, heirs, distributees and successors; provided, that the
obligations of the Employee under this Agreement shall not be delegable by him.
5.2 NOTICES. All notices and other communications hereunder and
all legal process in regard hereto shall be validly given, made or served if in
writing, when delivered personally (by courier service or otherwise), or when
actually received when mailed by first-class certified or registered United
States mail, postage-prepaid and return receipt requested, to the address of the
party to receive such notice or other communication set forth below, or at such
other address as any party hereto may from time to time advise the other party
in writing:
<PAGE>
If to the Company:
IMRE Corporation
401 Queen Anne Avenue North
Seattle, Washington 98109
Attention: President and Chief Operating Officer
If to the Employee:
Alex P. de Soto
1808 Terrace Avenue
Snohomish, Washington 98290
5.3 SEVERABILITY. If any provision of this Agreement, or portion
thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or portion thereof, and shall not in any manner affect or render
invalid or unenforceable any other provision of this Agreement or portion
thereof, and this Agreement shall be carried out as if any such invalid or
unenforceable provision or portion thereof were not contained herein. In
addition, any such invalid or unenforceable provision or portion thereof shall
be deemed, without further action on the part of the parties hereto, modified,
amended or limited to the extent necessary to render the same valid and
enforceable.
5.4 WAIVER. No waiver by a party hereto of a breach or default
hereunder by the other party shall be considered valid, unless in writing signed
by such first party, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or any other nature.
5.5 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes any and all prior agreements between the Company and the Employee,
whether written or oral, relating to any or all matters covered by and contained
or otherwise dealt with in this Agreement. No representation, warranty,
undertaking or covenant is made by either party hereto except as provided herein
and any representations, warranties undertakings or covenants not set forth
herein are specifically disclaimed. This Agreement does not constitute a
commitment of the Company with regard to the Employee's employment, express or
implied, other than to the extent expressly provided for herein.
5.6 AMENDMENT. No modification, change or amendment of this
Agreement or any of its provisions shall be valid, unless in writing and signed
by the party against whom such claimed modification, change or amendment is
sought to be enforced.
5.7 AUTHORITY. The parties each represent and warrant that they
have the power, authority and right to enter into this Agreement and to carry
out and perform the terms, covenants and conditions hereof.
<PAGE>
5.8 TITLES. The titles of the Articles and Sections of this
Agreement are inserted merely for convenience and ease of reference and shall
not affect or modify the meaning of any of the terms, covenants or conditions of
this Agreement.
5.9 APPLICABLE LAW. This Agreement, and all of the rights and
obligations of the parties in connection with the employment relationship
established hereby, shall be governed by and construed in accordance with the
internal laws of the State of Washington without giving effect to principals
relating to conflicts of law.
5.10 ATTORNEYS' FEES. The cost of Employee's reasonable
attorneys' fees incurred in the negotiation and review of this Agreement in an
amount not to exceed $500 shall be borne by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
IMRE CORPORATION
By: /s/ DebbyJo Blank
----------------------------
Name: DebbyJo Blank, MD
Title: President and Chief Operating Officer
/s/ Alex P. de Soto
--------------------------------
Alex P. de Soto
<PAGE>
EXHIBIT NO. 23.1
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 33-71278) pertaining to the Warrant Agreement dated as of
August 29, 1991, the Registration Statement (Form S-2 No. 33-49072) pertaining
to stock warrants and options issued to certain directors, officers, employees
and service providers, the Registration Statement (Form S-3 No. 33-64466)
pertaining to resale of 888,900 shares of outstanding common stock, the
Registration Statement (Form S-3 No. 33-79336) pertaining to the Convertible
Debentures issued April 22, 1994, and the Registration Statement (Form S-8
No. 33-20188) pertaining to the Incentive Stock Option and Appreciation Plan
and 1988 Non-qualified Stock Option Plan of IMRE Corporation of our report
dated January 23, 1996, with respect to the consolidated financial statements
of IMRE Corporation as of December 31, 1995 and 1994, and for each year then
ended included in the Annual Report (Form 10-K) for the year ended December
31, 1995.
/s/ Ernst & Young LLP
Seattle, Washington
February 19, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-3 dated February 20, 1996 pertaining to the registration of 9,560,702
shares of common stock, the Registration Statement (Form S-3 No. 33-71278)
pertaining to the Warrant Agreement dated as of August 29, 1991, the
Registration Statement (Form S-2 No. 33-49072) pertaining to stock warrants and
options issued to certain directors, officers, employees and service providers,
the Registration Statement (Form S-3 No. 33-64466) pertaining to resale of
888,900 shares of outstanding common stock, the Registration Statement (Form S-3
No. 33-79336) pertaining to the Convertible Debentures issued April 22, 1994,
and the Registration Statement (Form S-8 No. 33-20188) pertaining to the
Incentive Stock Option and Appreciation Plan and 1988 Non-qualified Stock Option
Plan of IMRE Corporation of our report dated March 15, 1994 on our audit of the
consolidated statements of operations, cash flows and stockholders' equity of
IMRE Corporation for the year ended December 31, 1993, which report is included
in this Annual Report on Form 10-K for the year ended December 31, 1995.
/s/ Coopers & Lybrand L.L.P
Seattle, Washington
February 20, 1996
<PAGE>
Exhibit 23.3
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
IMRE Corporation
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of IMRE Corporation for the year ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
IMRE Corporation for the year ended December 31, 1993, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Seattle, Washington
March 15, 1994
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Jay D. Kranzler and Alex P. de Soto, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments to this Report,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that all said attorneys-in-
fact and agents, or any of them or their or his substitute or substituted, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of Registrant in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JAY D. KRANZLER Chief Executive Officer and February 19, 1996
- ------------------------------ Vice Chairman of the Board of Directors
Jay D. Kranzler, M.D., Ph.D. (Principal Executive Officer)
/s/ DEBBY JO BLANK President, Chief Operating Officer and February 12, 1996
- ------------------------------ Director
Debby Jo Blank, M.D.
/s/ FRANK R. JONES Chairman of the Board of Directors and February 16, 1996
- ------------------------------ Chief Scientific Officer
Frank R. Jones, Ph.D.
/s/ ALEX P. DE SOTO Vice President, Chief Financial Officer February 19, 1996
- ------------------------------ Secretary
Alex P. de Soto (Principal Financial and Accounting Officer)
<PAGE>
/s/ RICHARD M. CROOKS, JR. Director February 12, 1996
- ------------------------------
Richard M. Crooks, Jr.
/s/ PHILIP J. O'REILLY Director February 13, 1996
- ------------------------------
Philip J. O'Reilly
/s/ JACK H. VAUGHN Director February 10, 1996
- ------------------------------
Jack H. Vaughn
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,010
<SECURITIES> 0
<RECEIVABLES> 558
<ALLOWANCES> 0
<INVENTORY> 1,149
<CURRENT-ASSETS> 2,860
<PP&E> 1,961
<DEPRECIATION> 536
<TOTAL-ASSETS> 4,564
<CURRENT-LIABILITIES> 3,549
<BONDS> 1,345
0
0
<COMMON> 43,517
<OTHER-SE> (44,042)
<TOTAL-LIABILITY-AND-EQUITY> 4,564
<SALES> 1,104
<TOTAL-REVENUES> 4,223
<CGS> 2,041
<TOTAL-COSTS> 2,041
<OTHER-EXPENSES> 2,080
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 262
<INCOME-PRETAX> (6,826)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,826)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,826)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> 0
</TABLE>
