FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
Commission File Number 0-15313
BIO-TECHNOLOGY GENERAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3033811
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
70 Wood Avenue South, Iselin, New Jersey 08830
(Address of principal executive offices)
(908) 632-8800
(Registrant's telephone number, including area code)
Former address: Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes[X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, par value $.01 per share,
outstanding as of May 1, 1995 43,194,325
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<PAGE>
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
March 31, 1995 and December 31, 1994 ............... 3
Consolidated Statements of Operations
for the three months ended
March 31, 1995 and 1994............................. 4
Consolidated Statement of Changes in
Stockholders' Equity for the three
months ended March 31, 1995 ........................ 5
Consolidated Statements of Cash Flows
for the three months ended
March 31, 1995 and 1994............................. 6
Notes to Consolidated Financial
Statements .......................................... 7-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................................... 10-17
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K ...................... 18
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, 1995 December
(Unaudited) 31, 1994
------------- --------
ASSETS
Current Assets:
Cash and cash equivalents ......................... $ 17,762 $16,891
Receivables:
Trade and other .................................. 2,854 2,436
Israeli government and other contract
research ....................................... 330 290
Inventories ....................................... 1,833 1,632
Prepaid expenses and other current assets ......... 471 172
------- --------
Total current assets ............................. 23,250 21,421
Equipment and leasehold improvements, net .......... 4,649 4,800
Marketing rights, net .............................. 4,958 5,174
Patents, net ....................................... 384 370
Other assets ....................................... 550 575
-------- --------
Total assets ..................................... $ 33,791 $ 32,340
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank loans ............................. $ 114 $ 64
Current portion of long-term debt ................. 1,251 1,251
Accounts payable .................................. 720 1,091
Other current liabilities ......................... 6,571 5,363
-------- --------
Total current liabilities ........................ 8,656 7,769
-------- --------
Long-term liabilities .............................. 1,165 1,389
-------- --------
Stockholders' equity:
Preferred stock - $.01 par value; 4,000,000
shares authorized; no shares issued .............. -- --
Common stock - $.01 par value; 150,000,000
shares authorized; issued: 43,194,000 (42,876,000
at December 31, 1994) ............................ 432 429
Capital in excess of par value .................... 120,255 120,008
Deficit ........................................... (95,905) (96,307)
Less - treasury stock at cost, 83,000 shares
(67,000 at December 31, 1994) .................... (340) (303)
- deferred compensation .................... (472) (570)
- Common Stock subscriptions receivable .... -- (75)
-------- ---------
Total stockholders' equity ....................... 23,970 23,182
-------- ---------
Total liabilities and stockholders' equity ....... $ 33,791 $ 32,340
======== =========
The accompanying notes are an integral part
of these consolidated balance sheets.
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands except per share data)
Three Months Ended
March 31,
------------------
1995 1994
---- ----
Revenues:
Product sales .......................................... $ 5,183 $ 3,106
Research and development revenues
under collaborative agreements ........................ 188 1,612
Contract fees .......................................... 95 615
Other revenues ......................................... 57 251
Interest income ........................................ 226 97
-------- --------
5,749 5,681
-------- --------
Expenses:
Research and development ............................... 2,741 3,376
Cost of product sales .................................. 652 304
General and administrative ............................. 1,660 2,470
Commissions and royalties .............................. 150 142
Interest and finance expenses .......................... 40 90
Other expenses ......................................... 104 81
-------- --------
5,347 6,463
-------- --------
Income (loss) before extraordinary gain ................. 402 (782)
Extraordinary gain resulting from
debt forgiveness ...................................... -- 1,500
-------- --------
Net income .............................................. $ 402 $ 718
======== ========
Earnings (loss) per share:
Income (loss) per common share before extraordinary
gain ................................................. $ 0.01 ($ 0.02)
Extraordinary gain per common share .................... -- 0.04
-------- --------
Net income per common share ............................ $ 0.01 $ 0.02
======== ========
Shares used in computation
(Includes common stock equivalents) ................... 43,397 39,135
======== ========
The accompanying notes are an integral part of these consolidated statements.
Certain prior period amounts have been reclassified to conform with current
period presentation.
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
<CAPTION>
Common Stock
------------ Capital in Common Stock
Par Excess of Treasury Deferred Subscriptions Stockholders'
Shares Value Par Value Deficit Stock Compensation Receivable Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 42,876 $ 429 $ 120,008 $ (96,307) $ (303) $ (570) $ (75) $ 23,182
Issuance of common stock .. 10 22 22
Exercise of stock options . 202 2 41 43
Issuance of common stock on
Series A note conversions
(including capitalized
interest) ............... 106 1 184 185
Amortization of deferred
compensation ............. 98 98
Purchase of treasury stock (37) (37)
Repayment of common stock
subscriptions ........... 75 75
Net income for three months
ended March 31, 1995 .... 402 402
--------- --------- --------- --------- --------- ------- -------- ---------
Balance, March 31, 1995 ... 43,194 $ 432 $ 120,255 $ (95,905) $ (340) $ (472) $ -- $ 23,970
========= ========= ========= ========= ========= ======= ======== =========
The accompanying notes are an integral part of this consolidated statement.
</TABLE>
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months
Ended March 31,
---------------
1995 1994
---- ----
Cash flows from operating activities:
Net income............................................... $ 402 $ 718
Adjustments to reconcile net income to net
cash used in operating activities:
Extraordinary gain resulting from debt forgiveness..... -- (1,500)
Depreciation and amortization.......................... 782 711
(Gain) on disposal of fixed assets..................... (7) (37)
Common stock as payment for services................... 22 10
Change in: receivables................................. (458) (287)
inventories ......................................... (201) (434)
prepaid expenses and other current assets ........... (299) (298)
accounts payable .................................... (371) 487
other assets ........................................ 25 26
other current liabilities ........................... 1,258 (194)
------- --------
Net cash provided by (used in) operating activities........ 1,153 (798)
------- --------
Cash flows from investing activities:
Capital expenditures..................................... (327) (740)
Change in patents........................................ (22) (56)
Proceeds from sales of fixed assets and investment ...... 25 54
------- --------
Net cash used in investing activities.................... (324) (742)
------- --------
Cash flows from financing activities:
Long-term debt........................................... -- (1,800)
Proceeds from issuance of common stock................... 43 744
Repayment of common stock subscriptions.................. 75 102
Interest on Series A and Series B Notes.................. (8) (8)
Purchase of treasury stock............................... (37) --
Repayment of Series A Notes.............................. (31) --
------- --------
Net cash provided by (used in) financing activities........ 42 (962)
------- --------
Net increase (decrease) in cash and cash equivalents ...... 871 (2,502)
Cash and cash equivalents at beginning of year............. 16,891 16,051
------- --------
Cash and cash equivalents at end of period................. $17,762 $ 13,549
======= ========
Supplementary Information
- -------------------------
Non-cash investing and financing activities:
Series A and Series B note conversions .................. $ 185 $ 2
Other information:
Interest paid ........................................... $ 13 $ 21
The accompanying notes are an integral part of these consolidated statements.
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Statement on Adjustments
In the opinion of management, the condensed consolidated financial statements
include all adjustments, consisting of only normal recurring accruals,
considered necessary for a fair presentation. Due to fluctuations in quarterly
revenues earned, operating results for interim periods are not necessarily
indicative of the results that may be expected for the full year. The accounting
policies continue unchanged from December 31, 1994. For further information,
refer to the Consolidated Financial Statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994.
Note 2: Private Placement Financing
On December 31, 1993, the Company and Bio-Cardia Corporation ("Bio-Cardia")
completed a private placement of 375 units (the "Offering"), each unit ("Unit")
consisting of four shares of common stock of Bio-Cardia and Warrants to purchase
15,000 shares of the Company's common stock. All of the cash proceeds of the
financing are received by Bio-Cardia. In consideration of the Warrants included
in the Units, the Company received from each purchaser of Units an option (the
"Stock Purchase Option"), exercisable at any time on or prior to December 31,
1997, to purchase the Bio-Cardia stock at a purchase price beginning at 125% and
increasing over time to 200% of the cash portion of the price paid for such
stock. Such purchase price may be paid in cash, shares of the Company's common
stock or both, at the Company's discretion. In connection with the closing of
the financing, the Company licensed to Bio-Cardia the right to pursue the
development and commercialization of certain of the Company's products. The
Company and Bio-Cardia have entered into a research and development agreement
pursuant to which the Company will conduct research, development and clinical
testing of these products.
Bio-Cardia and the Company had originally budgeted approximately $32 million of
the net proceeds of the Offering (less if the Stock Purchase Option was
exercised prior to January 1, 1997) to fund development and commercialization of
the products licensed to Bio-Cardia over a period of four years and to reimburse
BTG for previously incurred research and development expenses. However, holders
of 218 Units failed to make the required July 1, 1994 payment of $10,000 per
Unit, which resulted in Bio-Cardia being unable to pay certain amounts due BTG
in respect of research and development conducted by BTG on behalf of Bio-Cardia
and in reimbursement of previously incurred research and development expenses.
In October 1994 Bio-Cardia reached settlements with certain of the defaulting
stockholders, holding an aggregate of 178 Units, who surrendered to Bio-Cardia
their Bio-Cardia stock and Warrants to purchase an aggregate of 2,670,000 shares
of BTG common stock (the "Surrendered Warrants") in exchange for a release from
their future funding obligations to Bio-Cardia. The net effect of this
settlement was to reduce the funding expected by Bio-Cardia by approximately
$14,240,000. In addition, Bio-Cardia commenced legal action against the
remaining defaulting stockholders, holding an aggregate of 40 Units, who owe an
aggregate of $3,200,000. Accordingly, Bio-Cardia will not be in a position to
fund the up to $32 million research and development program originally
contemplated by Bio-Cardia and BTG. As a result, BTG has the right to terminate
the Technology License Agreement and repossess all rights to the technology
licensed or sublicensed to Bio-Cardia without the payment of any amounts to
Bio-Cardia other than a royalty on all Improvements
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
(as defined in the Technology License Agreement) to the Products developed
pursuant to the development program conducted by BTG on behalf of Bio-Cardia. At
March 31, 1995, Bio-Cardia owed BTG approximately $3,660,000 for research and
development performed by BTG on behalf of Bio-Cardia during 1994 and the three
months ended March 31, 1995, as well as $1,330,000 in reimbursement of
previously incurred research and development expenses. The Company did not
recognize as revenues the amounts due from Bio-Cardia in respect of research and
development performed by the Company on behalf of Bio-Cardia during the three
months ended March 31, 1995. For the three months ended March 31, 1994, the
Company recognized $1,373,000 of research and development revenues under
collaborative agreements from Bio-Cardia.
The Company has agreed not to terminate the Technology License Agreement in 1995
as a result of the Bio-Cardia defaults in 1994 and has further agreed to fund a
revised research and development budget for 1995 aggregating approximately $6.2
million to the extent Bio-Cardia does not have sufficient funds and to advance
to Bio-Cardia amounts required by Bio-Cardia for general and administrative
expenses. Bio-Cardia anticipates that it will receive $900,000 in 1995 from
third parties (of which $400,000 was received in January 1995), and up to
$3,140,000 from its existing stockholders under the Investor Notes, subject to
the Exchange Offer described below. However, because the Company has not at this
time committed to fund any research and development for Bio-Cardia in 1996 or
1997 or to exercise the Stock Purchase Option, and, therefore, because there can
be no assurance that Bio-Cardia will have the funds needed to fund research and
development after December 31, 1995, Bio-Cardia, with the Company's consent, has
offered to the current Bio-Cardia stockholders the ability to avoid having to
make any additional payments to Bio-Cardia under their Investor Note (the
"Exchange Offer"). Under the terms of the Exchange Offer, Bio-Cardia has offered
to exchange $4,250 in cash (together with interest on $2,500 from the date
Bio-Cardia received such funds) and forgiveness of $17,500 principal amount of
the Investor Note remaining outstanding for each one share of Bio-Cardia common
stock and an unconditional release. The Company has agreed to return to
Bio-Cardia the cash necessary to make the Exchange Offer. The cash to be
returned includes $1,920,000 received from Bio-Cardia in 1994 and the three
months ended March 31, 1995 but not recognized as revenues, which are included
in other current liabilities on the December 31, 1994 balance sheet ($1,710,000)
and the March 31, 1995 balance sheet ($1,920,000). If all Bio-Cardia
stockholders who are not in default accept the Exchange Offer, BTG will advance
to Bio-Cardia an aggregate of $2,639,000 (plus the amount of interest to be
paid), for which BTG will recognize an expense of approximately $800,000 in the
second quarter of 1995. In addition, Bio-Cardia has agreed that if by December
15, 1995 (i) the average daily price of the Company's common stock for any 20
trading days in any 30 consecutive trading day period did not exceed $3.50, (ii)
the best closing bid price of the Warrants did not exceed $1.10 during any 20
trading days, and (iii) the exercise price of the Warrants had not been reduced
in connection with the sale of BTG, then Bio-Cardia will distribute to the
Bio-Cardia stockholders accepting the Exchange Offer some or all of the
Surrendered Warrants such that, in the aggregate, the Warrants issued in the
Offering, together with the Surrendered Warrants distributed by Bio-Cardia, have
a value of $16,500 per Unit as determined using the Black Scholes option pricing
formula using an assumption of no dividends and a volatility of 70%. The
Exchange Offer is conditioned upon acceptance by holders of at least 139 Units
(constituting approximately 90% of the Units held by non-defaulting Bio-Cardia
stockholders), although this condition can be waived. The Company has agreed
that if the Exchange Offer is consummated, it will amend the Warrants to provide
that if the Company enters into certain transactions which would result in the
sale of the Company for cash at a price per share of the Company's common stock
less than $6.59, then the exercise price of the Warrants will automatically be
reduced to a price per share equal to the difference between the sale price and
$1.10. The Company's agreement to fund the Exchange Offer and Bio-Cardia's
operations in 1995 to the extent Bio-Cardia does not have sufficient funds will
adversely affect BTG's results of operations for the year ended December 31,
1995.
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
Note 3: Income Taxes
The Company has not provided any income taxes for the three months ended March
31, 1995 and 1994 as any interim tax provision would be offset by available net
operating loss carryforwards.
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three months ended March 31, 1995
compared with three months ended March 31, 1994
Results of Operations:
The Company has been principally engaged in research and product development
activities since it commenced operation in October 1980 and has incurred
substantial net losses from inception through December 31, 1994.
The Company reported net income of approximately $0.4 million or $0.01 per share
in the three months ended March 31, 1995 compared to a net income after
extraordinary gain resulting from debt forgiveness of approximately $0.72
million or $0.02 per share in the three months ended March 31, 1994. The net
income after extraordinary gain for the three months ended March 31, 1994
includes an extraordinary gain of $1.5 million or $0.04 per share. The Company
had approximately 4.3 million additional shares outstanding for the three months
ended March 31 1995, as compared to the same period in 1994.
The Company's revenues are classified in five categories: product sales,
research and development revenues under collaborative agreements, contract fees
(representing licensing and option fees), other revenues (substantially all of
which is funding from the Chief Scientist of the Israeli government) and
interest income. Revenues from each of these categories have fluctuated, and are
expected to continue to fluctuate, from period to period as new licensing and
research and development relationships are established and milestones attained,
scheduled payments under existing arrangements become due and products are
commercialized.
Revenues from product sales, derived primarily from the Company's human growth
hormone ("hGH"), pharmaceutical grade hyaluronic acid ("BioLon(R)") and
injectable testosterone ("Delatestryl(R)") amounted to $5,183,000 and
$3,106,000, or 94% and 56% of revenues (exclusive of interest income), for the
three month periods ended March 31, 1995 and 1994, respectively. Sales of hGH
were $3,840,000 and $2,310,000 in the three months ended March 31, 1995 and
1994, or 75% and 74% of product sales, respectively. The increase in sales of
hGH was primarily the result of increased sales to JCR Pharmaceuticals Co.,
Ltd., the Company's exclusive distributor in Japan. Sales of BioLon were
$726,000 and $380,000, or 14% and 12% of product sales, in the three month
period ended March 31, 1995 and 1994, respectively. The increase in sales of
BioLon was due to new product launches in the first quarter of 1995 as well as
increased sales to its distributors who had launched the product prior to the
first quarter of 1995. In the three month periods ended March 31, 1995 and 1994,
sales of Delatestryl were $172,000 and $193,000, or 3% and 6% of product sales,
respectively. In aggregate, $445,000 and $223,000 were earned from sales of
other products for the three month periods ended March 31, 1995 and 1994,
respectively.
For the three month periods ended March 31, 1995 and 1994 research and
development revenues under collaborative agreements of $188,000 and $1,612,000,
or 3% and 29%, respectively, of revenues (exclusive of interest income), was
earned. Of the research and development revenues under collaborative agreements
earned in the three months ended March 31, 1994, $1,373,000, or 85% of total
research and development revenues under collaborative agreements, was earned in
respect of research and development activities conducted pursuant to the
research and development agreement which the Company entered into with
Bio-Cardia Corporation ("Bio-Cardia") in December 1993. See "- Liquidity and
Capital Resources." All the research and development revenues under
collaborative agreements earned in the three month period ended March 31, 1995
was earned with respect to AIDS research for the
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
National Institutes of Health ("NIH") as compared with $167,000 or 10% in the
comparable period in 1994. In aggregate, for other projects, $72,000 was earned
in the three months ended March 31, 1994.
For the three month periods ended March 31, 1995 and 1994 contract fees of
$95,000 and $615,000, or 2% and 11%, respectively, of revenues (exclusive of
interest income), were earned. For the three months ended March 31, 1995,
$85,000 or 89% of total contract fees, was earned in respect of the license of
the marketing rights for the Company's hGH in South America. Of the contract
fees earned in the three months ended March 31, 1994, $500,000, or 81% of total
contract fees, was earned in respect of the license of the marketing rights for
Oxandrin(R) (oxandrolone) in Australia and $100,000, or 16%, in respect of
marketing rights for hGH in Canada.
Other revenues, which consist primarily of partial funding of several of the
Company's research and development projects by the Chief Scientist of the
Israeli government ("Chief Scientist"), were $57,000 and $251,000, or 1% and 4%,
respectively, of revenues (exclusive of interest income), during the three
months ended March 31, 1995 and 1994, respectively. For the three months ended
March 31, 1995, Chief Scientist funding represented 88% of other revenues as
compared with 84% in the same period in 1994.
Interest income on the Company's investment portfolio amounted to $226,000 and
$97,000 for the three month periods ended March 31, 1995 and 1994, respectively.
The increase in interest income derived primarily from an increase in cash
balances resulting from $9,000,000 received from financing transactions
consummated in October 1994, as well as higher yield.
The Company conducts research on potential products for which it has retained
future rights for its own account and on behalf of its partners for which it
receives certain current revenues and, if successful, future revenues in the
form of royalties or manufacturing rights. Expenditures for research and
development in the three month periods ended March 31, 1995 and 1994 were
$2,741,000 and $3,376,000, respectively. The decrease in these expenditures
resulted from a change in the focus of the Company's research and development
activities towards the Company's commercialized products and those which are
nearing commercialization and away from early stage research and development
activities, as well as a decrease in research and development activities
conducted on behalf of Bio-Cardia. Expenditures for research and development in
the three months ended March 31, 1995 include $673,000 on behalf of Bio-Cardia,
which were not reimbursed to the Company. In the same period in 1994,
expenditures for research and development on behalf of Bio-Cardia were
$1,003,000, all of which was reimbursed by Bio-Cardia. See "-Liquidity and
Capital Resources."
Cost of product sales, primarily related to commercial sales of hGH, BioLon and
Delatestryl, were $652,000 and $304,000 in the three month periods ended March
31, 1995 and 1994, respectively. Cost of product sales as a percentage of
product sales varies from year to year and quarter to quarter depending on the
quantity and mix of products sold. Cost of product sales as a percentage of
product sales is expected to decrease as the quantity sold increases due to
economies of scale. In addition, certain products, such as hGH, have a lower
cost of sales than other products.
General and administrative expenses for the three month periods ended March 31,
1995 and 1994 were $1,660,000 and $2,470,000, respectively. In the three months
ended March 31, 1994 the Company spent approximately $0.8 million in respect of
the complaint filed by Genentech Inc. ("Genentech") with the United States
International Trade Commission relating to hGH. See "- Liquidity and Capital
Resources."
Commissions and royalties expenses for the three months ended March 31, 1995 and
1994 were approximately $150,000 and $142,000, respectively. These expenses
consist primarily of royalties to the Chief Scientist and to entities from which
the Company licensed certain of its products.
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<PAGE>
BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
For the three month periods ended March 31, 1995 and 1994 the Company recorded
interest and finance expenses of $40,000 and $90,000, respectively. Interest
expense in the three months ended March 31, 1994, derived mainly from interest
on the Company's balance payable to The Du Pont Merck Pharmaceutical Company
("Du Pont Merck") as described below. See "- Liquidity and Capital Resources."
In the three months ended March 31, 1994 the Company recognized an extraordinary
gain of $1,500,000 resulting from the Company's payment, in January 1994, of
$1,500,000 to SmithKline Beecham ("SB") in full satisfaction of its $3,000,000
obligation to SB. See "- Liquidity and Capital Resources."
The Company expects to incur additional operating losses in the coming quarters
at least until more of its products have received all required regulatory
approvals and are being actively marketed.
Liquidity and Capital Resources
The Company's working capital at March 31, 1995 was $14,594,000 as compared to
$13,652,000 at December 31, 1994.
The Company's cash requirements have been and continue to be satisfied primarily
through (i) product sales, (ii) funding of projects through collaborative
research and development arrangements, (iii) contract fees, (iv) government of
Israel funding of a portion of certain research and development projects, and
(v) equity and debt financings. There can be no assurance that these financing
alternatives will be available in the future to satisfy the Company's cash
requirements.
The major portion of the Company's revenues is derived from product sales and
the Company's collaborative arrangements, under which the Company may earn
up-front contract fees, may receive funding for additional research, is
reimbursed for producing certain experimental materials, may be entitled to
certain milestone payments, may sell product at specified prices and may receive
royalties on sales of product. Revenues have in the past displayed and will in
the immediate future continue to display significant variations due to the
obtaining of new research and development contracts and licensing arrangements,
the completion or termination of such contracts and arrangements, the timing and
amounts of milestone payments and the timing of regulatory approvals of
products.
The Company manages its Israeli operations with the object of protecting
against any material net financial loss in U.S. dollars from the impact of
Israeli inflation and currency devaluation on its non-U.S. dollar assets and
liabilities. The Bank of Israel's monetary policy is to manage the exchange rate
while allowing the Consumer Price Index to rise by approximately 11% in 1993,
14% in 1994, and at a 2% annual rate in the three month period ended March 31,
1995. For those expenses linked to the Israeli Shekel, such as salaries and
rent, this resulted in corresponding increases in these costs in U.S. dollars.
In 1993 and 1994 the Shekel was devalued by approximately 8% and 1%,
respectively, against the U.S. dollar. Because of the insignificant devaluation
of the Shekel against the U.S. dollar despite the 14% annual rate of increase in
the Consumer Price Index during 1994, BTG's cost of local goods and services, to
the extent linked in whole or in part to the Consumer Price Index, increased in
U.S. dollar terms in 1994. To the extent that expenses in Shekels exceed the
Company's income in Shekels (which to date have consisted primarily of research
and development funding from the Chief Scientist and sales of Bio-Tropin(TM),
the Company's human growth hormone product in Israel, and BioLon in Israel), the
devaluations of Israeli currency have been and will continue to be a benefit to
the Company's financial condition. However, should the Company's income in
Shekels exceed its expenses in Shekels in any material respect, the devaluation
of the Shekel will adversely affect the Company's financial condition. Further,
to the extent the devaluation of the Shekel with respect to the U.S. dollar does
not substantially offset the increase in the costs of local goods and services
in Israel, the Company's financial results will be adversely affected
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BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
as local expenses expressed in U.S. dollar terms will increase. There can be no
assurance that the government of Israel will continue to devalue the Shekel from
time to time to offset the effects of inflation in Israel.
The Company maintains its funds in money market funds, commercial paper and
other liquid short-term debt instruments. The Company's investment policy is to
preserve principal and to avoid risk.
The cash flows of the Company have fluctuated significantly due to the impact of
net losses, capital spending, and issuance of common stock and other financings.
The Company expects that cash flow in the near future will be primarily
determined by the levels of net income or loss, depreciation and amortization,
and financings, if any, undertaken by the Company. In the three months ended
March 31, 1995 net cash increased by $871,000, primarily as a result of net
income of $402,000, depreciation and amortization of $782,000 and a net increase
in other current liabilities of $1,258,000, which were partially offset by an
increase in current assets of $958,000 and a decrease in accounts payable of
$371,000. Net investing activities during the three months ended March 31, 1995
were $324,000. In the three months ended March 31, 1994 net cash decreased by
$2,502,000, primarily resulting from payment of long-term debt of $1,800,000
(consisting of the payment to SB and to Du Pont Merck), net investing activities
of $742,000, a loss before extraordinary gain of $782,000 and a net increase in
current assets of $1,019,000, which were partially offset by a net increase in
current liabilities of $293,000 and depreciation and amortization of $711,000.
The Company does not currently have any material commitments for capital
expenditures.
In June 1991, the Company concluded an agreement with Du Pont Merck pursuant to
which it reacquired all the rights relating to the Company's hGH it licensed to
Du Pont Merck, together with all rights to all data generated in
pharmacological, toxicological and clinical studies and encompassed in the
Investigational New Drug Application and New Drug Application files currently
pending with the U.S. Food and Drug Administration for the treatment of human
growth hormone deficient children. The Company agreed to pay Du Pont Merck
royalties on net sales of hGH up to a maximum of $5,000,000, including a minimum
royalty of $2,000,000 (using a 10% 1991 present value). Three hundred thousand
dollars of the minimum royalty was due December 31, 1993 and was paid in
February 1994. The remainder of the minimum royalty was to be paid as follows:
$500,000 to be paid by December 31, 1994 (which has not been paid); $500,000 to
be paid by December 31, 1995; $700,000 to be paid by December 31, 1996; and the
remainder to be paid by December 31, 1997. In February 1995 the Company agreed
to pay Du Pont Merck $1,000,000 in July 1995 in full satisfaction of its
obligation to Du Pont Merck. As a result, the Company will record an
extraordinary gain of approximately $1,370,000 in the third quarter of 1995 and
stop accrual of interest on the balance due to Du Pont Merck. However, the
Company may elect to pay Du Pont Merck in the second quarter of 1995, in which
event the Company will record the extraordinary gain in the second quarter of
1995.
In June 1991 the Committee for Proprietary Medicinal Products ("CPMP") of the
European Economic Community ("EEC") approved SB's application for the use of the
Company's hGH for growth hormone deficient children. In November 1992 the
Company and SB entered into an agreement, effective July 17, 1992, whereby the
Company reacquired all rights to its human growth hormone in Europe and certain
other countries previously licensed to SB. The reacquired rights include the EEC
CPMP approval of the use of the Company's hGH for growth hormone deficient
children, together with all individual EEC member country approvals and pricing
approvals obtained by SB. The license agreement was terminated in connection
with the reacquisition of rights. Simultaneous with the execution of the
agreement with SB, the Company entered into an exclusive distribution agreement
with the Ferring Group for the marketing of the Company's human growth hormone
for the enhancement of growth and stature in children. The agreement covers all
of Europe as well as countries comprising the former Soviet Union. Initial
country
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<PAGE>
BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
approvals have been received in Belgium, Denmark, Italy, France, Germany,
Luxembourg, The Netherlands, Spain and the United Kingdom and sales began during
the fourth quarter of 1994 in The Netherlands and Germany. In connection with
the reacquisition of rights from SB, the Company agreed to pay SB an aggregate
of $3,000,000 over a period of up to five years, approximating SB's payments to
the Company under the license agreement. In January 1994 the Company paid SB
$1,500,000 in full satisfaction of its obligation to SB. Accordingly, the
Company recorded an extraordinary gain of $1,500,000 during the first quarter of
1994.
On December 31, 1993, the Company and Bio-Cardia completed a private placement
of 375 units (the "Offering"), each unit ("Unit") consisting of four shares of
common stock of Bio-Cardia and Warrants to purchase 15,000 shares of the
Company's common stock. All of the cash proceeds of the financing are received
by Bio-Cardia. In consideration of the Warrants included in the Units, the
Company received from each purchaser of Units an option (the "Stock Purchase
Option"), exercisable at any time on or prior to December 31, 1997, to purchase
the Bio-Cardia stock at a purchase price beginning at 125% and increasing over
time to 200% of the cash portion of the price paid for such stock. Such purchase
price may be paid in cash, shares of the Company's common stock or both, at the
Company's discretion. In connection with the closing of the financing, the
Company licensed to Bio-Cardia the right to pursue (i) the worldwide development
and commercialization of the Company's Imagex, Bio-Flow, Factorex and Bio-Lase
products for all cardio-vascular indications, the Company's OxSODrol product for
the inhibition of reocclusion of coronary arteries during and after thrombolysis
or angioplasty or in cases of unstable angina, and for the prevention of
restenosis, and the Company's OxSODrol product for the treatment of
bronchopulmonary dysplasia in premature neonates, and (ii) the development and
commercialization of the Company's sodium hyaluronate-based products for
ophthalmic applications in the United States and Japan to protect the corneal
endothelium during intraocular surgery and other pharmaceutical applications
where a shock-absorbing and lubricating material compatible with the human body
is required. The Company and Bio-Cardia have entered into a research and
development agreement pursuant to which the Company will conduct research,
development and clinical testing of these products. Bio-Cardia has determined
not to pursue Bio-Lase for the inhibition of acute reocclusion and treatment of
diabetic thromboembolism, and OxSODrol for the inhibition of reocclusion of
coronary arteries during and after thrombolysis or angioplasty or in cases of
unstable angina, and for the prevention of restenosis, as preliminary studies
were not sufficiently encouraging to justify continued pursuit of these
products.
Bio-Cardia and the Company had originally budgeted approximately $32 million of
the net proceeds of the Offering (less if the Stock Purchase Option was
exercised prior to January 1, 1997) to fund development and commercialization of
the products licensed to Bio-Cardia over a period of four years and to reimburse
BTG for previously incurred research and development expenses. However, holders
of 218 Units failed to make the required July 1, 1994 payment of $10,000 per
Unit, which resulted in Bio-Cardia being unable to pay certain amounts due BTG
in respect of research and development conducted by BTG on behalf of Bio-Cardia
and in reimbursement of previously incurred research and development expenses.
In October 1994 Bio-Cardia reached settlements with certain of the defaulting
stockholders, holding an aggregate of 178 Units, who surrendered to Bio-Cardia
their Bio-Cardia stock and Warrants to purchase an aggregate of 2,670,000 shares
of BTG common stock (the "Surrendered Warrants") in exchange for a release from
their future funding obligations to Bio-Cardia. The net effect of this
settlement was to reduce the funding expected by Bio-Cardia by approximately
$14,240,000. In addition, Bio-Cardia commenced legal action against the
remaining defaulting stockholders, holding an aggregate of 40 Units, who owe an
aggregate of $3,200,000. Accordingly, Bio-Cardia will not be in a position to
fund the up to $32 million research and development program originally
contemplated by Bio-Cardia and BTG. As a result, BTG has the right to terminate
the Technology License Agreement and repossess all rights to the technology
licensed or sublicensed to Bio-Cardia without the payment of any amounts to
Bio-Cardia other than a royalty on all Improvements (as defined in the
Technology License Agreement) to the Products developed pursuant to the
development program conducted by BTG on behalf of Bio-Cardia. At March 31, 1995,
Bio-
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<PAGE>
BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
Cardia owed BTG approximately $3,660,000 for research and development performed
by BTG on behalf of Bio-Cardia during 1994 and the three months ended March 31,
1995, as well as $1,330,000 in reimbursement of previously incurred research and
development expenses. The Company did not recognize as revenues the amounts due
from Bio-Cardia in respect of research and development performed by the Company
on behalf of Bio-Cardia during the three months ended March 31, 1995. For the
three months ended March 31, 1994, the Company recognized $1,373,000 of research
and development revenues under collaborative agreements from Bio-Cardia.
The Company has agreed not to terminate the Technology License Agreement in 1995
as a result of the Bio-Cardia defaults in 1994 and has further agreed to fund a
revised research and development budget for 1995 aggregating approximately $6.2
million to the extent Bio-Cardia does not have sufficient funds and to advance
to Bio-Cardia amounts required by Bio-Cardia for general and administrative
expenses. Bio-Cardia anticipates that it will receive $900,000 in 1995 from
third parties (of which $400,000 was received in January 1995), and up to
$3,140,000 from its existing stockholders under the Investor Notes, subject to
the Exchange Offer described below. However, because the Company has not at this
time committed to fund any research and development for Bio-Cardia in 1996 or
1997 or to exercise the Stock Purchase Option, and, therefore, because there can
be no assurance that Bio-Cardia will have the funds needed to fund research and
development after December 31, 1995, Bio-Cardia, with the Company's consent, has
offered to the current Bio-Cardia stockholders the ability to avoid having to
make any additional payments to Bio-Cardia under their Investor Note (the
"Exchange Offer"). Under the terms of the Exchange Offer, Bio-Cardia has offered
to exchange $4,250 in cash (together with interest on $2,500 from the date
Bio-Cardia received such funds) and forgiveness of $17,500 principal amount of
the Investor Note remaining outstanding for each one share of Bio-Cardia common
stock and an unconditional release. The Company has agreed to return to
Bio-Cardia the cash necessary to make the Exchange Offer. The cash to be
returned includes $1,920,000 received from Bio-Cardia in 1994 and the three
months ended March 31, 1995 but not recognized as revenues, which are included
in other current liabilities on the December 31, 1994 balance sheet ($1,710,000)
and the March 31, 1995 balance sheet ($1,920,000). If all Bio-Cardia
stockholders who are not in default accept the Exchange Offer, BTG will advance
to Bio-Cardia an aggregate of $2,639,000 (plus the amount of interest to be
paid), for which BTG will recognize an expense of approximately $800,000 in the
second quarter of 1995. In addition, Bio-Cardia has agreed that if by December
15, 1995 (i) the average daily price of the Company's common stock for any 20
trading days in any 30 consecutive trading day period did not exceed $3.50, (ii)
the best closing bid price of the Warrants did not exceed $1.10 during any 20
trading days, and (iii) the exercise price of the Warrants had not been reduced
in connection with the sale of BTG, then Bio-Cardia will distribute to the
Bio-Cardia stockholders accepting the Exchange Offer some or all of the
Surrendered Warrants such that, in the aggregate, the Warrants issued in the
Offering, together with the Warrants distributed by Bio-Cardia, have a value of
$16,500 per Unit as determined using the Black Scholes option pricing formula
using an assumption of no dividends and a volatility of 70%. The Exchange Offer
is conditioned upon acceptance by holders of at least 139 Units (constituting
approximately 90% of the Units held by non-defaulting Bio-Cardia stockholders),
although this condition can be waived. The Company has agreed that if the
Exchange Offer is consummated, it will amend the Warrants to provide that if the
Company enters into certain transactions which would result in the sale of the
Company for cash at a price per share of the Company's common stock less than
$6.59, then the exercise price of the Warrants will automatically be reduced to
a price per share equal to the difference between the sale price and $1.10. The
Company's agreement to fund the Exchange Offer and Bio-Cardia's operations in
1995 to the extent Bio-Cardia does not have sufficient funds will adversely
affect BTG's results of operations for the year ended December 31, 1995.
A number of the Company's other products are in the process of gaining approval
from various governmental agencies in the United States and other countries.
While costs associated with this process are generally borne by the Company's
collaborative partners, the approval processes have been
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<PAGE>
BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
considerably longer than the Company expected, thereby resulting in delays in
revenues until such product approvals have been obtained. As a result, the
Company has had to continue to finance its operations through debt and equity
offerings and collaborative research arrangements that provided research
funding. The Company believes that these delays have negatively impacted the
Company's ability to attract funding and that, as a result, the terms of such
financings were less favorable to the Company than they might otherwise have
been had the Company's product revenues provided sufficient funds to finance the
large costs of taking a product from discovery through commercialization. As a
result, the Company has had to license the commercialization of many of its
products to third parties in exchange for research funding and royalties on
product sales; this will result in lower revenues than if the Company had
commercialized the product on its own.
The Company is party to several proceedings relating to patents owned by it or
others. The Company anticipates that the costs of such proceedings will be
significant, and that such expenses could have a material adverse effect on the
Company's results of operations. Should the Company be unsuccessful in any of
these proceedings, it may be unable to commercialize the products which are the
subject of such proceedings in certain countries, and may be unable to produce
the products in Israel, which could have a material adverse effect on the
Company's revenues and results of operations.
On March 16, 1993, Genentech filed a complaint with the U.S. International Trade
Commission (the "ITC") alleging, among other things, that BTG's importation of
hGH into the United States violates Section 337 of the Tariff Act of 1930
because of the existence of certain claims in U.S. patents of Genentech.
Genentech sought an immediate investigation and an order that BTG cease and
desist from importing hGH into the United States. Additionally, Genentech filed
a motion for a temporary exclusion order ("TEO") seeking to exclude the Company
from importing human growth hormone into the United States pending the outcome
of the investigation. On February 25, 1994, the ITC adopted the initial
determination of the administrative judge hearing this matter denying the motion
for a TEO. The trial on the Genentech complaint was held in April 1994. In
January 1995 the ITC issued a final decision dismissing the complaint with
prejudice as a sanction for Genentech's conduct which resulted in an incomplete
record and violated the due process rights of BTG and Novo-Nordisk A/S, another
respondent in the proceeding. The ITC also found no violation by BTG of Section
337 of the Tariff Act of 1930. In March 1995 Genentech filed a notice of appeal
of the ITC decision in the United States Court of Appeals for the Federal
Circuit. During 1993 and 1994, BTG incurred total legal fees of approximately
$4,200,000 relating to the ITC proceeding.
On December 1, 1994, Genentech filed a lawsuit against BTG in the United States
District Court for the District of Delaware alleging that BTG's hGH infringed
two Genentech patents. In January 1995, BTG commenced an action against
Genentech in the United States District Court for the Southern District of New
York seeking, among other things, declaratory judgment as to the
non-infringement, invalidity and unenforceability of such Genentech patents as
well as damages resulting from Genentech's actions in the ITC proceedings.
Genentech's lawsuit in Delaware has been transferred to New York, and BTG is
seeking to have the cases consolidated. BTG believes that it does not infringe
any valid Genentech patent, although there can be no assurance that BTG will not
be found to be infringing Genentech's patents. If BTG is found by the district
court to infringe one or more claims in U.S. patents of Genentech, it likely
will be precluded from selling its hGH in the United States. The Company expects
to incur substantial legal fees in defending and prosecuting these lawsuits.
The Company believes that its remaining cash resources as of March 31, 1995,
together with anticipated product sales, scheduled payments to be made to BTG
under its current agreements with pharmaceutical partners and third parties, the
anticipated research and development revenues under collaborative agreements,
the proceeds from sales of equity and continued funding from the Chief Scientist
at current levels, will be sufficient to fund the Company's ongoing operations
until the end of 1996. There can, however, be no assurance that product sales
will occur as anticipated, that scheduled payments will be
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<PAGE>
BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
made by third parties, that current agreements will not be canceled, that
committed payments under collaborative agreements will be received, that the
Chief Scientist will continue to provide funding at current levels, or that
unanticipated events requiring the expenditure of funds will not occur. The
satisfaction of the Company's future cash requirements will depend in large part
on the status of commercialization of the Company's products, the Company's
ability to enter into additional research and development and licensing
arrangements, and the Company's ability to obtain additional equity investments.
The Company expects to seek, from time to time, additional sources of funds, the
form of which will vary depending upon prevailing market and other conditions
and may include short- or long-term borrowings or the issuance of debt or equity
securities. However, there can be no assurance that the Company will be able to
obtain additional funds or, if such funds are available, that such funding will
be on favorable terms. In addition, the indentures under which the Company's
debt securities were issued limit the ability of the Company to satisfy its cash
requirements through borrowings or the issuance of debt securities, and prohibit
the sale of equity securities at a price per share of less than $1.00 (as
adjusted under certain circumstances). The Company continues to seek additional
collaborative research and development and licensing arrangements, in order to
provide revenue from sales of certain products and funding for a portion of the
research and development expenses relating to the products covered, although
there can be no assurance that the Company will be able to obtain such
agreements.
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<PAGE>
BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on form 8-K
a) Exhibits:
10.1 Employment Agreement, dated as of April 24, 1995,
between Bio-Technology General Corp. and
William Pursley.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
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<PAGE>
BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIO-TECHNOLOGY GENERAL CORP.
(Registrant)
By:
/s/ SIM FASS
--------------------------------
Sim Fass
President/CEO,
Principal Executive Officer
/s/ YEHUDA STERNLICHT
--------------------------------
Yehuda Sternlicht
Chief Financial Officer,
Principal Financial and
Accounting Officer
Dated: May 3, 1995
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EMPLOYMENT AGREEMENT
AGREEMENT made as of April 24, 1995, between BIO-TECHNOLOGY GENERAL CORP.,
a Delaware corporation with an office at 70 Wood Avenue South, Iselin, New
Jersey 08830 (the "Company"), and William Pursley, 31 Orchard Drive, Hollis, New
Hampshire 03049 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of Senior Vice President-Marketing, Sales and Commercial
Development, reporting to the President and Chief Executive Officer of the
Company.
2. TERM.
The initial term of employment under this Agreement shall begin on the date
hereof (the "Employment Date") and shall continue for a period of two (2) years
from that date, subject to prior termination in accordance with the terms
hereof. Thereafter, this Agreement shall automatically be renewed for successive
two year terms unless either party shall give the other ninety (90) days prior
written notice of its intent not to renew this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay, or cause to be paid, to
Executive, and Executive agrees to accept, payable in equal installments in
accordance with Company practice, an initial annual salary of $175,000.
Executive's annual salary hereunder for the remaining years of employment shall
be determined by the Board of Directors in its sole discretion; provided,
however, that Executive's salary shall be increased each year (on the date of
the annual meeting of the Board of Directors of the Company),
<PAGE>
commencing with the 1996 annual meeting of the Board of Directors, by at
least six percent (6%). In addition, Executive shall be entitled to bonuses from
time to time in such amounts as may be determined by the Board of Directors in
its sole discretion.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Executive in connection with his employment hereunder. Executive
shall comply with such restrictions and shall keep such records as the Company
may deem necessary to meet the requirements of the Internal Revenue Code of
1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS.
Executive shall be entitled to a vacation allowance of not less than four
(4) weeks per annum and to participate in and receive any other benefits
customarily provided by the Company to its senior management personnel
(including any profit sharing, pension, short and long-term disability
insurance, hospital, major medical insurance and group life insurance plans in
accordance with the terms of such plans) and including stock option and/or stock
purchase plans, all as determined from time to time by the Board of Directors of
the Company. Unused annual vacations may not be carried over to other years
without the consent of the Board of Directors excepting those instances in which
Executive has been unable to utilize fully his annual vacation entitlement due
to exigencies of Company business matters and needs.
6. RELOCATION TO ISELIN, NEW JERSEY METROPOLITAN AREA.
(a) Executive hereby agrees to relocate to the Iselin, New Jersey
metropolitan area within six months of the Employment Date. Executive hereby
acknowledges that the Company is entering into this Agreement in reliance upon
Executive's covenant to relocate to the Iselin, New Jersey metropolitan area
within six months of the Employment Date.
(b) Executive hereby agrees that prior to his relocation to the Iselin, New
Jersey metropolitan area, he will spend that number of days each week at the
Company's executive offices as the President and Chief Executive Officer of the
Company may direct.
7. STOCK OPTIONS.
(a) The Company will recommend to the Compensation and Stock Option
Committee of the Board of Directors (the "Committee") that Executive be granted
an incentive stock option, pursuant to an incentive stock option agreement
substantially in the form of Exhibit 7(a) hereto, to purchase 75,000 shares of
the Company's Common Stock (the "Options"), at an exercise price per share equal
to the
2
<PAGE>
fair market value of the Company's Common Stock on the date of grant, such
Options to become exercisable as to 18,750 shares on the first anniversary date
of this Agreement and as to an additional 18,750 shares on each successive
anniversary date of this Agreement.
(b) The Company will also recommend to the Committee that the Options
become exercisable upon the termination of Executive's employment (i) pursuant
to Sections 10(a)(i) or 10(b) herein or (ii) by reason of the Company's failure
to renew this Agreement.
(c) In addition, Executive shall be entitled to the grant of additional
options from time to time in such amounts as may be determined by the Committee
in its sole discretion. Any future grant of stock options shall be subject to
such terms as the Committee in its sole discretion shall specify at the time of
grant.
8. LOANS.
(a) On the Employment Date the Company shall loan to the Executive $40,000
(the "First Loan") pursuant to the terms of a promissory note in the form
attached hereto as Exhibit 8(a). The First Loan will be due and payable on the
first anniversary of the Employment Date; provided, however, that the Company
shall forgive repayment of the First Loan, and shall forgive payment of all
accrued interest thereon, on the first anniversary of the Employment Date if
Executive is still an employee on such date. In addition, the Company shall
forgive repayment of the First Loan, and all accrued interest thereon, if prior
to the first anniversary of the Employment Date any of the following shall
occur: (i) Executive's employment with the Company is terminated by the Company
for any reason which would not constitute justifiable cause (as defined in
Section 10(d) hereof) following a Change in Control of the Company (as defined
in Section 8(c) hereof); (ii) if the Executive's employment with the Company
terminates by reason of the death or disability (as defined in Section 10(c)
hereof) of Executive; or (iii) if the Company shall terminate Executive's
employment for any reason which would not constitute justifiable cause (as
defined in Section 10(d) hereof).
(b) In addition, on the Employment Date the Company shall loan to the
Executive an additional $40,000 (the "Second Loan") pursuant to the terms of a
promissory note in the form attached hereto as Exhibit 8(b). The Second Loan
will become due and payable, with all accrued interest thereon, on the earliest
to occur of the following: (i) June 30, 1997; (ii) if the Company shall
terminate Executive's employment for justifiable cause (as defined in Section
10(d) hereof), on such date; or (iii) if the Executive shall resign from his
position with the Company, on the effective date of such resignation.
Notwithstanding the foregoing, the Company shall forgive repayment of the Second
Loan, and all accrued interest thereon, if prior to the date such loan becomes
due and payable Executive's employment with the Company is terminated by the
Company for any reason which would not constitute justifiable cause
3
<PAGE>
(as defined in Section 10(d) hereof) following a Change in Control of the
Company (as defined in Section 8(c) hereof).
(c) For purposes of this Section 8, a "Change in Control of the Company"
shall be deemed to occur if (i) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company; (ii)
the stockholders of the Company shall approve any plan or proposal for
liquidation or dissolution of the Company; (iii) any person (as such term is
used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Company; or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.
9. DUTIES.
(a) Executive shall perform such duties and functions as the President and
Chief Executive Officer of the Company shall from time to time determine and
Executive shall comply in the performance of his duties with the policies of the
Board of Directors.
(b) Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and of any of its
subsidiaries by which he may be employed; and Executive shall not, directly or
indirectly, alone or as a member of any partnership or other organization, or as
an officer, director or employee of any other corporation, partnership or other
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties hereunder, or which,
even if non-interfering, may be, in the reasonable determination of the Board of
Directors of the Company in its sole discretion, inimical, or contrary, to the
best interests of the Company.
(c) All fees, compensation or commissions received by Executive during the
term of this Agreement for personal services (including, but not limited to,
commissions and compensation received as a fiduciary or a director, and fees for
4
<PAGE>
lecturing and teaching) rendered at the request of the Company shall be paid to
the Company when received by Executive, except those fees that the Board of
Directors determines may be kept by Executive.
(d) Nothing in this Section 9 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in nonconflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.
(e) The principal location at which the Executive shall perform his duties
hereunder shall be at the Company's offices in Iselin, New Jersey or at such
other location as may be designated from time to time by the Board of Directors
of the Company, provided that if the principal location of Executive's duties is
transferred from Iselin, New Jersey, the new principal location of Executive's
duties shall not be transferred beyond a 50-mile radius of Iselin, New Jersey
without Executive's consent. Notwithstanding the foregoing, Executive shall
perform such services at such other locations as may be required for the proper
performance of his duties hereunder, and Executive recognizes that such duties
may involve significant travel.
10. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive:
(i) upon the determination by the Board of Directors, after Executive
has received notice that his performance is not satisfactory and has failed
to remedy such performance to the satisfaction of the Company, that
Executive's performance of his duties has not been fully satisfactory for
any reason which would not constitute justifiable cause (as hereinafter
defined) upon thirty (30) days' prior written notice to Executive; or
(ii) upon the determination by the Board of Directors that there is
justifiable cause (as hereinafter defined) for such termination upon ten
(10) days' prior written notice to Executive; or
(iii) if Executive has not relocated to the Iselin, New Jersey
metropolitan area within nine months after the Employment Date.
(b) Executive's employment shall terminate upon:
(i) the death of Executive; or
(ii) the "disability" of Executive (as hereinafter defined pursuant to
subsection (c) herein) pursuant to subsection (f) hereof.
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(c) For the purposes of this Agreement, the term "disability" shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, substantially to perform his duties for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement, as reasonably
determined by the Board of Directors of the Company in its sole discretion after
examination of Executive by an independent physician reasonably acceptable to
Executive.
(d) For the purposes hereof, the term "justifiable cause" shall mean and be
limited to: Executive's conviction (which, through lapse of time or otherwise,
is not subject to appeal) of any crime or offense involving money or other
property of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; Executive's performance of any act or his failure to act,
for which it is determined by independent counsel retained by the Board of
Directors (which may be counsel for the Company), after due inquiry in which
Executive is given the opportunity to be heard, that if Executive were
prosecuted and convicted, a crime or offense involving money or property of the
Company or its subsidiaries, or which would constitute a felony in the
jurisdiction involved, would have occurred; any unauthorized disclosure by
Executive to any person, firm or corporation other than the Company, its
subsidiaries and its and their directors, officers and employees, of any
confidential information or trade secret of the Company or any of its
subsidiaries; any attempt by Executive to secure any improper personal profit in
connection with the business of the Company or any of its subsidiaries; the
failure by Executive to devote his full time to the affairs of the Company and
its subsidiaries; Executive's pursuit of activities which in the reasonable
determination of the Board of Directors of the Company are inimical, or
contrary, to the best interests of the Company; the engaging by Executive in any
business other than the business of the Company and its subsidiaries which
interferes with the performance of his duties hereunder; or Executive's repeated
and willful failure to follow the instructions of the Chief Executive Officer of
the Company or the policies established by the Board of Directors and
communicated to Executive (other than instructions or policies which are illegal
or improper) where such conduct shall not have ceased or offense cured within 30
days following written warning from the Company. Upon termination of Executive's
employment for justifiable cause, this Agreement shall terminate immediately and
Executive shall not be entitled to any amounts or benefits hereunder other than
such portion of Executive's annual salary as has been accrued through the date
of his termination of employment and reimbursement of expenses pursuant to
Section 4 hereof.
(e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary as has been accrued through the date of his death and such bonus,
if any, as the Board of Directors in its sole discretion may determine to award
taking into account Executive's contributions to the Company prior to his death.
If Executive's death shall occur while he is on Company business, the estate of
Executive shall be entitled to receive, in
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addition to the other amounts set forth in this subsection (e), an amount
equal to one-half his then annual salary.
(f) Upon Executive's "disability", the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) as provided herein until he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof. Any termination pursuant to this subsection (f) shall be
effective on the date 30 days after which Executive shall have received written
notice of the Company's election to terminate.
(g) Notwithstanding any provision to the contrary contained herein, in the
event that Executive's employment is terminated by the Company at any time for
any reason other than justifiable cause, failure to relocate to the Iselin, New
Jersey metropolitan area within nine months of the Employment Date, disability
or death, or in the event the Company shall fail to renew this Agreement, the
Company shall (i) pay to Executive, in full satisfaction and in lieu of any and
all other payments due and owing to Executive under the terms of this Agreement
(other than any payments constituting reimbursement of expenses pursuant to
Section 4 hereof), a severance payment in an amount equal to his then annual
salary (less all amounts, if any, required to be withheld), payable bi-weekly in
equal installments, and (ii) continue to allow Executive to participate, at the
Company's expense and to the same extent that Executive had participated prior
to termination of his employment, in the Company's health insurance and
disability insurance programs, to the extent permitted under such programs,
until the earlier of (x) one year or (y) Executive becoming eligible to
participate in another employer's group health and disability insurance plans.
Executive shall notify the Company of his acceptance of a position with a new
employer, together with the specific date on which Executive shall become
eligible for coverage in such new employer's health and disability insurance
programs, such notice to be given within 15 days following commencement of such
employment.
(h) Executive may terminate his employment at any time upon 30 days' prior
written notice to the Company. Upon Executive's termination of his employment
hereunder, this Agreement (other than Sections 4, 7, 8, 10, 12, 13, 14 and 15,
which shall survive) shall terminate immediately. In such event, Executive shall
be entitled to receive such portion of Executive's annual salary as has been
accrued to date. Executive shall be entitled to reimbursement of expenses
pursuant to Section 4 hereof and to participate in the Company's benefit plans
to the extent participation by former employees is required by law or permitted
by such plans, with the expense of such participation to be as specified in such
plans for former employees.
11. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
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employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder or requiring him to perform employment, consulting, business related
or similar duties for any other person.
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.
12. NON-INTERFERENCE.
Executive agrees that for a period of one year following the termination of
Executive's employment hereunder, Executive shall not, directly or indirectly,
request or cause any collaborative partners, universities, governmental
agencies, contracting parties, suppliers or customers with whom the Company or
any of its subsidiaries has a business relationship to cancel or terminate any
such business relationship with the Company or any of its subsidiaries or
solicit, interfere with or entice from the Company any employee (or former
employee) of the Company.
13. INVENTIONS AND DISCOVERIES.
(a) Insofar as is related to the principal business activities and products
of the Company and any of its subsidiaries or joint ventures, Executive shall
promptly and fully disclose to the Company, and with all necessary detail for a
complete understanding of the same, all developments, know-how, discoveries,
inventions, improvements, concepts, ideas, writings, formulae, processes and
methods of a financial or other nature (whether copyrightable, patentable or
otherwise) made, received, conceived, acquired or written during working hours,
or otherwise, by Executive (whether or not at the request or upon the suggestion
of the Company) during the period of his employment with, or rendering of
advisory or consulting services to, the Company or any of its subsidiaries,
solely or jointly with others (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $100.00
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per hour (with a minimum of $500 per day), plus out-of-pocket expenses
incurred in rendering such assistance or giving or preparing to give such
testimony if it is required after termination of his employment hereunder.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Executive shall not, during the term of this Agreement, or at any time
following termination of this Agreement, directly or indirectly, disclose or
make accessible (other than as is required in the regular course of his duties
(including without limitation disclosures to the Company's advisors and
consultants) or is required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or with the prior
written consent of the Board of Directors of the Company), to any person, firm
or corporation, any confidential information acquired by him during the course
of, or as an incident to, his employment or the rendering of his advisory or
consulting services hereunder, relating to the Company or any of its
subsidiaries, the directors of the Company or its subsidiaries, any client of
the Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or controlled, directly or indirectly, by any of the foregoing, or
in which any of the foregoing has a beneficial interest, including, but not
limited to, the business affairs of each of the foregoing. Such confidential
information shall include, but shall not be limited to, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
market studies and forecasts, competitive analyses, pricing policies, employee
lists, personnel policies, the substance of agreements with customers and
others, marketing or dealership arrangements, servicing and training programs
and arrangements, customer lists and any other documents embodying such
confidential information. This confidentiality obligation shall not apply to any
confidential information which thereafter becomes publicly available other than
pursuant to a breach of this Section 14(a) by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described shall be the exclusive property of the
Company, and Executive shall use commercially reasonable best efforts to prevent
any publication or disclosure thereof. Upon termination of Executive's
employment with the Company, all documents, records, reports, writings and other
similar documents containing confidential information, including copies thereof,
then in Executive's possession or control shall be returned and left with the
Company.
15. SPECIFIC PERFORMANCE.
Executive agrees that if he breaches, or threatens to commit a
breach of, any of the provisions of Sections 12, 13 or 14 (the "Restrictive
Covenants"), the Company shall have, in addition to, and not in lieu of, any
other rights and remedies available to the Company under law and in equity, the
right to have the Restrictive Covenants specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or threatened breach of
the Restrictive Covenants would cause irreparable injury to the Company and that
money damages would not provide an
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adequate remedy to the Company. Notwithstanding the foregoing, nothing
herein shall constitute a waiver by Executive of his right to contest whether a
breach or threatened breach of any Restrictive Covenant has occurred.
16. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New Jersey
applicable to agreements made and to be performed therein.
18. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
19. NOTICES.
Any notices required or permitted to be given hereunder shall be sufficient
if in writing, and if delivered by hand, or sent by certified mail, return
receipt requested, to the addresses set forth above or such other address as
either party may from time to time designate in writing to the other, and shall
be deemed given as of the date of the delivery or mailing.
20. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
21. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof and shall be binding upon and inure to the benefit of
the parties hereto and their respective legal representatives, heirs,
distributors, successors and assigns. Notwithstanding the foregoing, all prior
agreements between Executive and the Company relating to the confidentiality of
information, trade secrets, patents and stock options shall not be affected by
this Agreement.
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22. SURVIVAL.
The termination of Executive's employment hereunder or the expiration of
this Agreement shall not affect the enforceability of Sections 4, 7, 10, 12, 13,
14 and 15 hereof.
23. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
24. HEADINGS.
The Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
BIO-TECHNOLOGY GENERAL CORP.
By: /s/ SIM FASS
----------------------------
Sim Fass
/s/ WILLIAM PURSLEY
----------------------------
William Pursley
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EXHIBIT 7(A)
STOCK OPTION AGREEMENT
PURSUANT TO
BIO-TECHNOLOGY GENERAL CORP.
1992 STOCK OPTION PLAN
* * *
INCENTIVE STOCK OPTION AGREEMENT made as of the __th day of _____, ____,
between BIO-TECHNOLOGY GENERAL CORP., a Delaware corporation (the "Company"),
and _________________, an employee of the Company or of a subsidiary of the
Company (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company desires, by affording the Optionee an opportunity to
purchase shares of its Common Stock, $.01 par value per share (the "Common
Stock"), as hereinafter provided, to carry out the purpose of the Company's 1992
Stock Option Plan (the "Plan"):
NOW THEREFORE, in consideration of the premises and of the mutual covenants
and agreements hereinafter contained, the parties hereto mutually covenant and
agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee an incentive
stock option (the "Option") to purchase all or any part of an aggregate of
______ shares of Common Stock (such number being subject to adjustment as
provided in Paragraph 6) on the terms and conditions hereinafter set forth.
2. Purchase Price. The purchase price of the shares of Common Stock
issuable upon exercise of the Option (the "Option Price") shall be $______ per
share, which is not less than one hundred percent (100%) of the fair market
value per share of Common Stock on the date hereof. Payment shall be made in
cash, by certified check or in shares of Common Stock in the manner prescribed
in Paragraph 7 hereof.
3. Term of Option. The term of the Option shall be for a period of ten (10)
years from the date hereof, subject to earlier termination as provided in
Paragraph 5. The Option is exercisable during its term only in accordance with
the provisions of Exhibit A attached hereto; provided, however, that if the
Optionee is a citizen of the State of Israel, the Option may not be exercised in
whole or in part unless (i) the
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Optionee can, under applicable Israeli law, purchase the shares of Common
Stock, and (ii) all necessary permits, including but not limited to a specific
permit from the Controller of Foreign Currency of the Bank of Israel, have been
obtained by or on behalf of the Optionee.
Except as provided in Paragraph 5, the Option may not be exercised unless,
at the time the Option is exercised and at all times from the date it was
granted, the Optionee shall then be and shall have been, an employee of the
Company or any subsidiary.
4. Nontransferability. The Option shall not be transferable otherwise than
by will or the laws of descent and distribution to the extent provided in
Paragraph 5, and the Option may be exercised, during the lifetime of the
Optionee, only by him. More particularly (but without limiting the generality of
the foregoing), the Option may not be assigned, transferred (except as provided
above), pledged or hypothecated in any way, shall not be assignable by operation
of law, and shall not be subject to execution, attachment or similar process.
Any attempted assignment, transfer, pledge, hypothecation or other disposition
of the Option contrary to the provisions hereof and of the Plan, and the levy of
any execution, attachment, or similar process upon the Option, shall be null and
void and without effect; provided, however, that if the Optionee shall die while
in the employ of the Company or any subsidiary, his estate, personal
representative, or beneficiary shall have the right to exercise the Option to
the extent provided in Paragraph 5.
5. Termination of Option. If the Optionee shall cease to be employed by the
Company or any subsidiary as the result of his dismissal without cause, then the
Option, to the extent that it is exercisable by him at the time he ceases to be
employed by the Company or any subsidiary, and only to the extent that the
Option is exercisable as of such time, may be exercised by him within three (3)
months after such time; provided, however, that the Compensation and Stock
Option Plan Committee may, in its sole discretion, determine that he has more
than three (3) months from the date he ceases to be employed by the Company or
any subsidiary to exercise the Option.
If the Optionee shall cease to be employed by the Company or any subsidiary
as the result of his dismissal for cause (as determined by the Board of
Directors in its sole discretion), then the Compensation and Stock Option Plan
Committee may, in its sole discretion, determine that the Option, to the extent
that it is exercisable by the Optionee at the time he ceases to be employed by
the Company or any subsidiary, and only to the extent that the Option is
exercisable as of such time, may be exercised by him within thirty (30) days
after such time.
If the Optionee shall cease to be employed by the Company or any subsidiary
as the result of his disability, then the Option, to the extent that it is
exercisable by him at the time he ceases to be employed by the Company or any
subsidiary, and only to the extent that the Option is exercisable as of such
time, may be exercised by him within twelve (12) months after such time.
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If the Optionee shall voluntarily terminate his employment with the Company
or any subsidiary, then the Option, to the extent that it is exercisable by the
Optionee at the time he ceases to be employed by the Company or any subsidiary,
and only to the extent that the Option is exercisable as of such time, may be
exercised by him within three (3) months after such time; provided, however,
that the Compensation and Stock Option Plan Committee may, in its sole
discretion, determine that he has more than three (3) months from the date he
ceases to be employed by the Company or any subsidiary to exercise the Option.
If the Optionee shall die while in the employ of the Company or any
subsidiary, his estate, personal representative, or beneficiary shall have the
right, subject to the provisions of Paragraph 3, to exercise the Option (to the
extent that the Optionee would have been entitled to do so at the time of his
death) at any time within twelve (12) months from the date of his death.
In the event of the institution of any legal proceedings directed to the
validity of the Plan or the Option, the Company may, in its sole discretion, and
without incurring any liability therefor to the Optionee, terminate the Option.
6. Changes in Capital Stock. Upon any readjustment or recapitalization of
the Company's capital stock whereby the character of the Common Stock shall be
changed, appropriate adjustments shall be made so that the capital stock
issuable upon exercise of the Option after such readjustment or recapitalization
shall be the substantial equivalent of the Common Stock issuable upon exercise
of the Option. In the case of a merger, sale of assets or similar transaction
which results in a replacement of the Common Stock with stock of another
corporation, the Company will make a reasonable effort, but shall not be
required, to replace any outstanding Options granted under the Plan with
comparable options to purchase the stock of such other corporation, or will
provide for immediate maturity of all outstanding Options, with all Options not
being exercised within the time period specified by the Board of Directors being
terminated.
7. Method of Exercising Option. Subject to the terms and conditions of this
Agreement, the Option may be exercised by written notice to the Company at its
offices at 70 Wood Avenue South, Iselin, New Jersey 08830 (Attention:
President). Such notice shall state that the Option is being exercised thereby
and the number of shares of Common Stock in respect of which it is being
exercised. It shall be signed by the person or persons so exercising the Option
and shall be accompanied by payment in full of the Option Price for such shares
of Common Stock in cash, by certified check or in shares of Common Stock.
If shares of Common Stock are tendered as payment of the Option Price,
the value of such shares shall be their fair market value as of the date of
exercise. If such tender would result in the issuance of fractional shares of
Common Stock, the Company shall instead return the balance in cash or by check
to the Optionee. The Company shall issue, in the name of the person or persons
exercising the Option, and deliver a
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certificate or certificates representing such shares as soon as practicable
after notice and payment shall be received.
In the event the Option shall be exercised by any person or persons other
than the Optionee, pursuant to Paragraph 5, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
The Optionee shall have no rights of a stockholder with respect to shares
of Common Stock to be acquired by the exercise of the Option until a certificate
or certificates representing such shares are issued to him. All shares of Common
Stock purchased upon the exercise of the Option as provided herein shall be
fully paid and non-assessable.
8. General. The Company shall at all times during the term of the Option
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of this Agreement, shall pay all original
issue taxes, if any, with respect to the issuance of shares of Common Stock
pursuant hereto and all other fees and expenses necessarily incurred by the
Company in connection therewith, and shall, from time to time, use its best
efforts to comply with all laws and regulations which, in the opinion of counsel
for the Company, shall be applicable thereto.
9. Representations of Optionee. The Optionee hereby represents that he and
any related persons or entities, within the meaning of Section 425(d) of the
Internal Revenue Code of 1986, do not own as much as ten percent (10%) of the
total combined voting power of all classes of capital stock of the Company, and
in accepting the Option herein granted to him, agrees to the terms of such
Option as of the date hereof.
10. Notices. Each notice relating to this Agreement shall be in writing and
delivered in person or by first class mail, postage prepaid, to the address as
hereinafter provided. Each notice shall be deemed to have been given on the date
it is received. Each notice to the Company shall be addressed to it at its
offices at 70 Wood Avenue South, Iselin, New Jersey 08830 (Attention:
President). Each notice to the Optionee or other person or persons then entitled
to exercise the Option shall be addressed to the Optionee or such other person
or persons at the Optionee's last known address.
11. Reimbursement of Expenses. If the Optionee is not a citizen or resident
of the United States, the Optionee, as a condition hereof, agrees to reimburse
the Company at its request for any foreign exchange premiums or license,
transfer taxes or similar sums of money payable outside the United States by the
Company in connection with the exercise of the Option under this Agreement.
12. Incorporation of Plan. Notwithstanding the terms and conditions herein,
this Agreement shall be subject to and governed by all the terms and conditions
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of the Plan. A copy of the Plan has been delivered to the Optionee and is
hereby incorporated by reference. In the event of any discrepancy or
inconsistency between the terms and conditions of this Agreement and of the
Plan, the terms and conditions of the Plan shall control.
13. Continuance of Employment. The granting of the Option is in
consideration of the Optionee's continuing employment by the Company or any
subsidiary; provided, however, nothing in this Agreement shall confer upon the
Optionee the right to continue in the employ of the Company or any subsidiary or
affect the right of the Company or any subsidiary to terminate the Optionee's
employment at any time in the sole discretion of the Company or any subsidiary,
with or without cause.
14. Interpretation. The interpretation and construction of any terms or
conditions of the Plan, or of this Agreement or other matters related to the
Plan by the Compensation and Stock Option Plan Committee shall be final and
conclusive.
15. Enforceability. This Agreement shall be binding upon the Optionee, his
estate, his personal representatives and beneficiaries.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
exercised by its officer thereunto duly authorized, and the Optionee has
hereunto set his hand all as of the day and year first above written.
BIO-TECHNOLOGY GENERAL CORP.
By:______________________________
Authorized Officer
OPTIONEE
_________________________________
Address:_________________________
_________________________________
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EXHIBIT A TO
INCENTIVE STOCK OPTION AGREEMENT
The Option is exercisable during its term only in accordance with the
following:
No. of Years
From Date of Percentage Exercisable
Option Agreement Per Time Period Cumulative
- ---------------- --------------- -----------------
One ....................... 25% = ______ sh. 25% = ______ sh.
Two ....................... 25% = ______ sh. 50% = ______ sh.
Three ..................... 25% = ______ sh. 75% = ______ sh.
Four ...................... 25% = ______ sh. 100% = ______ sh.
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EXHIBIT 8(A)
PROMISSORY NOTE
THIS NOTE IS SUBJECT TO CERTAIN TERMS CONTAINED IN AN EMPLOYMENT
AGREEMENT ENTERED INTO BY AND BETWEEN WILLIAM PURSLEY AND
BIO-TECHNOLOGY GENERAL CORP., DATED APRIL __, 1995 (THE "EMPLOYMENT
AGREEMENT").
$40,000.00 April___, 1995
FOR VALUE RECEIVED, the undersigned, William Pursley (the "Maker") hereby
absolutely and unconditionally promises to pay to the order of BIO-TECHNOLOGY
GENERAL CORP. (the "Holder") or its assigns, at the Holder's office at 70 Wood
Avenue South, Iselin, New Jersey or at such other place as the Holder may
designate by written notice to the Maker, the principal sum of Forty Thousand
United States Dollars ($40,000) on or before April ___, 1996 (the "Maturity
Date"), together with simple interest on the unpaid principal balance from time
to time outstanding at the rate of 6.8% per annum from the date hereof to
maturity. The Maker agrees to pay any costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by the Holder in the collection of
interest and/or principal on this Note which is not paid when due. Payments of
both principal and interest shall be made in lawful money of the United States.
The Maker shall have the right to prepay this Note, in whole or in part, at
any time without penalty. Any prepayments shall be applied first to accrued
interest until the entire amount thereof has been paid and next to principal.
The unpaid principal amount shall forthwith mature, together with the
interest accrued thereon, in the event of the happening of any one or more of
the following events: (a) any petition in bankruptcy is filed by or against the
Maker, or any proceedings in bankruptcy, or under any Act of Congress relating
to the relief of debtors, being commenced for the relief or readjustment of any
indebtedness of Maker; (b) the making by Maker of an assignment for the benefit
of creditors or the taking advantage by Maker of any insolvency law; or (c) the
appointment of a receiver of any property of the Maker.
Notwithstanding the forgoing, the Company agrees to forgive repayment of
the principal amount of the loan and all accrued interest thereon, if any one of
the following occurs on or before the Maturity Date: (i) the Maker's employment
with the Holder is terminated by the Holder for any reason which would not
constitute justifiable cause (as defined in Section 10(d) of the Employment
Agreement) following a Change in Control of the Company (as defined in 8(c) of
the Employment Agreement); (ii) the Maker's employment with the Holder
terminates by reason of the death or disability (as defined in Section 10(c) of
the Employment Agreement) of the Maker; or (iii) the Holder shall terminate the
Maker's employment for any reason
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which would not constitute justifiable cause (as defined in Section 10(d)
of the Employment Agreement). Additionally, the Company shall forgive repayment
of the principal amount of the loan and all accrued interest thereon on the
Maturity Date if, on that date, the Maker is still an employee of the Holder.
No failure or delay on the part of the Holder in exercising any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by the Holder of any right hereunder preclude any other or future
exercise thereof or the exercise of any other rights hereunder. No waiver shall
be deemed to be made by the Holder of any of its rights hereunder unless the
same shall be in writing, signed on behalf of the Holder, and each waiver, if
any, shall be a waiver only with respect to the specific instance involved and
shall in no way impair the rights of the Holder or the obligations of the Maker
to the Holder in any other respect at any other time. All amendments hereto must
be in writing.
The Holder may assign all or any part of its interest in this Note and the
transferee(s) shall thereupon be vested with all the powers and rights herein
given to the Holder with respect hereto.
This Note is executed under and is to be construed by the laws of the State
of New Jersey, without giving effect to conflicts of law. Presentment, demand
for payment, notice of dishonor, protest and notice of protest are hereby
expressly waived.
______________________________
William Pursley
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EXHIBIT 8(B)
PROMISSORY NOTE
THIS NOTE IS SUBJECT TO CERTAIN TERMS CONTAINED IN AN EMPLOYMENT
AGREEMENT ENTERED INTO BY AND BETWEEN WILLIAM PURSLEY AND
BIO-TECHNOLOGY GENERAL CORP., DATED APRIL __, 1995 (THE "EMPLOYMENT
AGREEMENT").
$40,000.00 April ___, 1995
FOR VALUE RECEIVED, the undersigned, William Pursley (the "Maker"), hereby
absolutely and unconditionally promises to pay to the order of BIO-TECHNOLOGY
GENERAL CORP. (the "Holder") or its assigns, at the Holder's office at 70 Wood
Avenue South, Iselin, New Jersey or at such other place as the Holder may
designate by written notice to the Maker, the principal sum of Forty Thousand
United States Dollars ($40,000) on or before June 30, 1997 (the "Maturity
Date"), together with simple interest on the unpaid principal balance from time
to time outstanding at the rate of 6.8% per annum from the date hereof to
maturity. The Maker agrees to pay any costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by the Holder in the collection of
interest and/or principal on this Note which is not paid when due. Payments of
both principal and interest shall be made in lawful money of the United States.
Notwithstanding the forgoing, the undersigned agrees that this Note will
become immediately due and payable, with all accrued interest thereon, upon the
occurrence of any of the following: (i) if the Holder shall terminate the
undersigned's employment for justifiable cause (as defined in Section 10(d) of
the Employment Agreement), on such date; (ii) if the undersigned shall resign
from his position with the Holder, on the effective date of such resignation;
(iii) any petition in bankruptcy is filed by or against the Maker, or any
proceedings in bankruptcy, or under any Act of Congress relating to the relief
of debtors, being commenced for the relief or readjustment of any indebtedness
of Maker; (iv) the making by Maker of an assignment for the benefit of creditors
or the taking advantage by Maker of any insolvency law; or (v) the appointment
of a receiver of any property of the Maker. Notwithstanding the foregoing, the
Company shall forgive repayment of this Note, and all accrued interest thereon,
if prior to this Note becoming due and payable the Maker's employment with the
Holder is terminated by the Holder for any reason which would not constitute
justifiable cause (as defined in Section 10(d) of the Employment Agreement)
following a Change in Control of the Company (as defined in 8(c) of the
Employment Agreement).
The Maker shall have the right to prepay this Note, in whole or in part, at
any time without penalty. Any prepayments shall be applied first to accrued
interest until the entire amount thereof has been paid and next to principal.
20
<PAGE>
No failure or delay on the part of the Holder in exercising any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by the Holder of any right hereunder preclude any other or future
exercise thereof or the exercise of any other rights hereunder. No waiver shall
be deemed to be made by the Holder of any of its rights hereunder unless the
same shall be in writing, signed on behalf of the Holder, and each waiver, if
any, shall be a waiver only with respect to the specific instance involved and
shall in no way impair the rights of the Holder or the obligations of the Maker
to the Holder in any other respect at any other time. All amendments hereto must
be in writing.
The Holder may assign all or any part of its interest in this Note and the
transferee(s) shall thereupon be vested with all the powers and rights herein
given to the Holder with respect hereto.
This Note is executed under and is to be construed by the laws of the State
of New Jersey, without giving effect to conflicts of law. Presentment, demand
for payment, notice of dishonor, protest and notice of protest are hereby
expressly waived.
____________________________________
William Pursley
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 17,762
<SECURITIES> 0
<RECEIVABLES> 3,184
<ALLOWANCES> 0
<INVENTORY> 1,833
<CURRENT-ASSETS> 23,250
<PP&E> 4,649
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,791
<CURRENT-LIABILITIES> 8,656
<BONDS> 1,165
<COMMON> 432
0
0
<OTHER-SE> 23,538
<TOTAL-LIABILITY-AND-EQUITY> 33,791
<SALES> 5,183
<TOTAL-REVENUES> 5,749
<CGS> 652
<TOTAL-COSTS> 5,307
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 402
<INCOME-TAX> 0
<INCOME-CONTINUING> 402
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 402
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0
</TABLE>
